Sports marketing is really very simple.  It’s about figuring out ways to put butts in seats.  It’s very different from typical product marketing / branding, which focuses on the product and its inherent benefits.  Sports marketing is all about creating interest, hype & hope -- rallying the fans to pull money out of their wallets and buy a ticket to a particular game.

The unique benefit sports teams have over consumer products is that their customers truly are “fans”.  Fans make deep, emotional connections to the team, very different from being a loyal user of a particular product.  I may be a 100% loyal user of Heinz, but I don’t develop the same kind of emotional bond with my Ketchup bottle as I do with my “team”.

Sports marketing is focused on generating interest in “the collective team”, not a single player or superstar.  Players come and go, but the team – the logo – remain constant.   While a sports marketer should leverage its key players, focusing all efforts on building the brand on the back of a player can backfire when the player’s contract expires and he or she moves on (see Williams, Deron), or when a hamstring gets pulled and the player can’t play (see Boozer, Carlos).

Sports marketing is about pricing the product correctly.  Many sports teams let their Chief Financial Officer drive ticket-pricing decisions.  That’s not the way to do it.  Pricing decisions should be derived from a combination of ticket demand estimation and historical pricing data, as well as a realistic assessment of the team’s chances of success and the competitive environment of the local marketplace.  Just because the Los Angeles Lakers can charge $5,000 for courtside seats doesn’t mean the Golden State Warriors can do the same.  Different markets have different levels of team success, different levels of optimism to account for, and different historical pricing data to analyze.

When I took over the marketing of the Utah Jazz, our season ticket base was around 6,700 seats.  After doing a hefty analysis of our historical pricing data and the competitive environment – and coming off a less-than-stellar 23 game win season -  I convinced Team President Denny Haslam that we needed to drop prices on over 75% of the arena seats.  My analysis had shown that in most of the upper-deck pricing sections, we’d make a lot more money by dropping the prices significantly.  We did so, and within 18 months the Jazz had vaulted to #1 in the NBA in season ticket sales (15,400 seats), and our gross revenue per game increased some 40%.  Once the demand for tickets increased, THEN we slowly increased ticket prices again. 

Sports teams make-or-break their sales on season tickets.  It’s much easier and efficient to sell 43 games than one-at-a-time.  My first season at the Jazz we faced the challenge of selling nearly 13,000 single-game tickets to every game – an impossible task for a great many of the home games, particularly those early in the season against less than stellar opponents (re: New Jersey Nets or Cleveland Cavaliers).  But by more effectively re-pricing the season tickets – many as low as $5.00 per game – we reduced the number of single-game tickets we needed to move to only around 3,500 per game – which is relatively easy to do.  As a result, we sold out 54 or 56 consecutive home games the next season, and for the remainder of my stay with the Jazz, we sold on average about 95% of available tickets.

One single-game ticketing experiment that interests me greatly has been conducted by the San Francisco Giants for the past three seasons.  They partnered with a company called Qcue, which has developed a variable pricing software platform that allows sports teams to charge different single-game ticket prices for different games based on demand.  The Qcue software monitors ticket sales, ticket availability, and demand (as well as a qualitative assessment of opponent, day of week, weather, or other things that could affect demand that the Giants staff can input for each home game).  The Qcue software adjusts priced daily to maximize sales and revenue.  I met with Giants officials when they were entering season 2 of their affiliation with Qcue, and they were extremely happy with the results, seeing a 15% average bump in single-game ticket sales revenues.  The way it worked was very interesting.  For the same seat, pricing could vary from $8.00 for a weekday April game against the Arizona Diamondbacks to $50.00 for a July weekend game against the Dodgers (the Giants hated rivals).  The Qcue system altered prices daily to make sure each section sells out.  The system seems to be working – the Giants have sold out virtually every home game over the past three seasons since they began using the Qcue system.

So how do you sell single-game tickets?  Create hype.  It’s all Ringling Brothers and Barnum and Bailey.  Hype the game like it’s the most important event in team history, that missing it will ruin your life for time and all eternity.  Hype, hype, hype.  It’s OK to leverage the opponent’s assets.  “See the Spurs three-headed monster of Tim Duncan, Tony Parker, and Manu Ginobli”.  It’s very simple.  Use social media to make special offers, especially “late” offers close to game time.  Thirty minutes before tipoff, text out 50% off tickets for all remaining seats.  Those seats are worthless once the game begins. 

_ Did the Jazz and small market teams get any “wins” in the deal?

  Yes.  The new deal includes an increasingly painful luxury tax for teams that habitually stray into taxpayer territory, which should keep the Lakers and Celtics of the world from going significantly over the luxury tax line (as the Lakers, Dallas, Celtics, Bulls and several others do nearly every season).   This should – at some point in the future – begin to level the salary playing field between the big-market, high revenue teams and the smaller market teams.  However, the new luxury tax doesn’t begin to kick in until the 2013-14 season, so until then, it’s business as usual. It will be five years before the real effects of the new, steeper taxes manifest themselves.

An immediate win the Jazz have available to them is the new “amnesty” clause, which allows each team to waive one player prior to any season and have 100% of that players salary removed from their team salary for Cap and Tax purposes.  This new clause will allow teams to dump players that they signed to big contracts and then had buyer’s remorse – as would have been the case with Andrei Kirilenko and his $17 million dollar annual contract the past couple of seasons.   The team still has to pay anyone they dump (unless he’s picked up by another team, in which case they have to pay a portion of the contract instead of all of it).  On the Jazz radar for using the amnesty clause this season is Mehmut Okur and his $11 million salary.  If somebody shows up to camp way-out-of-shape, they also could be on the radar. 

  Will the new deal allow small market teams to compete for the NBA championship more effectively?

No.  The big market teams will continue to be the only ones you’ll see hoisting trophies at the end of the year.  The new deal does nothing to address the “Miami Effect”, with players leveraging their way to the big markets to play with their All-Star buddies.    Before this year is out, you will see Dwight Howard, Kobe Bryant, and Pau Gasol as the “big three” in LA; Amare Stoudamire, Carmelo Anthony and Chris Paul headlining the Knicks; Derrick Rose, Carlos Boozer and Tim Duncan on the Bulls; Dirk Nowitzki, Deron Williams, and Brook Lopez headlining the Mavericks; and of course, LeBron, D-Wade and Bosh in Miami.  Nothing has changed.  The have’s will continue to have.  The smaller market teams will continue to be have-not’s and be in continual rebuilding mode.

Will the Jazz have an easier time signing big-name free agents under the new deal?

  No.  Utah is not a destination where players want to come and form their “big-three’s”.   Once players get to Utah they like it, but it is not a preferred destination, and any free agent player that’s top-tier has multiple options from which to choose.  Major markets, with big opportunities for incremental cash from personal sponsorships and endorsements -- along with nice weather and beaches -- win every time.

Will the Jazz be able to make a profit under the new deal?

Only if they keep their player salaries at or near the salary cap – in the $50 - $55 million dollar range.  As it stands today, the 2011-12 roster is at about $59 million, and they have to sign at least two more players.   

 Will the new CBA keep owners from handing out outrageous contracts?

No.  In fact, they can give out MORE outrageous deals.  The maximum that any single player can make under the old CBA was 25% of the salary cap.  Under the new deal, a max contract can be up to 30% of the cap. 

  The free agent signing period starts next Wednesday, and it will be interesting to see the feeding frenzy.   The New Orleans Hornets only have five players under contract.  Most teams need to add two-to-four players.  It will be a crazy week next week!

Eric D. Schulz is the Co-Director of Strategic Marketing and Brand Management at the Jon M Huntsman School of Business at Utah State University. Prior to joining the University, he spent five years as Vice-President of Marketing for the Utah Jazz (NBA); he previously was VP of Marketing with the XFL Football League, and served as a General Manager in minor league baseball. He can be reached at eric.schulz@usu.edu.

Following last week's blog on the NBA Lockout, several folks emailed me asking what is the best-case and worst-case scenario as far as the Utah Jazz are concerned with the new CBA in terms of luxury tax, salary cap, etc.?

The best case for the Jazz will be three-fold:

1) A hard salary cap, which will force the "have's" (the big market teams like the Lakers, Knicks, Bulls, Heat, Mavericks) to compete on a level playing field with the have-nots.  The big-market teams have such a financial advantage that they ignore the salary cap / luxury tax and consider them a cost of doing business.  For example, the Lakers last season paid total salaries of $110.4 million, including $20 million in luxury taxes.  If you look at the teams with the highest payrolls, they consistently are the teams in the Conference Finals / NBA Finals.

The National Hockey League (NHL) has a hard salary cap, and it appears to have restored competitive balance.  Since their lockout season in 2005-06, of the twelve Stanley Cup Finalists, 10 different teams have appeared.  In the same period in the NBA, the Western Conference champions have been only San Antonio (05-06), Dallas (07-11), and the Lakers (08-09-10).  In the East, Miami (07-11), Boston (09), Orlando (10), Cleveland (06), and Detroit (05).

2) Increased Revenue Sharing:  The NBA has two revenue sharing mechanisms currently.  First, all the monies collected from Luxury Taxes are distributed equally among those teams that do not go over the luxury tax limit.  There is also a pool of money that small-market teams can earn based on a complicated formula that uses "performance & effort" criteria based on the teams sales and marketing efforts.  If the team is deemed to have done all they can do in these areas based on their market size, they receive a portion of the pool -- but its a relatively small amount, one to two million dollars per team on average. And only a handful of small teams get these dollars every year.

The small market teams like the Jazz want to move to an NFL revenue sharing model, where teams get to keep their "premium" seating revenues (luxury boxes, Hollywood "Courtside" seats) and local sponsorship dollars, but the rest of the ticket revenues are pooled together as a league and shared equally. Small market teams also want local TV / Radio rights monies included in the shared pool of as well, since there is such a wide disparity among the values of those in cities like Los Angeles vs. Salt Lake City.

3)  Franchise Player Designations:  The NBA is on a slippery slope, with players now colluding to form their own All-Star teams.  Boston started the trend with the trade for Kevin Garnett, followed by the Lakers acquisition of Pau Gasol.  2010 was the tipping point, when LeBron James, Chris Bosh and DeWayne Wade decided to join forces in Miami, and Carmelo Anthony forced a trade to the Knicks to join Amare Stoudamire, and together they are lobbying hard to get Chris Paul to the Knicks. 

The NFL has Franchise Players, and it has worked well in keeping "stars" put.  Had Cleveland been able to designate LeBron as their franchise player, Denver designated Anthony, and Utah designated Deron Williams, most of what has happened this past season in terms of "star" movement would not have.  But under the current system, the good ol' days of Karl and John playing for a Utah team their entire career is never going to happen again.  The Jazz will be able to do what they did with Deron - re-sign him to his first max contract, then be forced to trade him or watch him walk in year 6 or 7 (just when he is reaching All-Star status).  Small market teams will constantly be in rebuilding mode, unable to compete.

So what is the worst-case scenario for the Jazz?

No salary cap.  In other words, keeping some form or variation of the Luxury Tax, and not reducing the BRI down to at least 50%.  The big market teams have such a huge advantage financially, its akin to Zions Bank trying to compete with Citibank.  As long as the big market teams can "buy" their advantage and have owners like Jerry Buss, Mark Cuban, and other rich fools, the Utah's of the world will never be able to compete.  Sure, they may have a one-year blip like the Jazz run to the Western Conference Finals in 2008, but nothing sustainable.   Money always wins in the NBA.

The other thing that needs to get fixed are the outlandish salaries paid to mid-level players…guys who fill up the roster, but aren't putting butts in seats.  Guys like Al Jefferson ($14 million), Mehmut Okur ($12 million), Andrei Kirilenko ($17 million), and Paul Millsap ($8 million). Sure, these guys are good, but people don't say "Gee, lets go drop a hundred bucks to see Andrei Kirilenko tonight",  they DO say that however for guys like Kobe, Kevin Durant, LeBron, and Dirk. 

To fix it right, a hard salary cap, where the total team salary can't exceed X no matter what, would by default drag down these mid-range guys salaries.  Teams would end up doing what Miami did last year - pay the three "stars" good money, and everybody else makes minimum wage.  That's how it should work – and THAT would restore competitive balance to a league of have's and have nots.