Rates & Barrels - Future of Sports Pt. 1

Episode Date: May 14, 2022

In episode one of the Future of Sports series, The Athletic's Mike Smeltz looks at how the fan experience may change: how going to games, watching games at home and how memorabilia is shifting from physical to digital. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, we've got something special coming up right now. As part of Dell Businesses PodFriends, The Athletic has put together a two-part series on the future of sports, how technology will change the fan and team experience going forward. Coming up is part one. We hope you enjoy. Welcome to our two-part series here on the Athletic Podcast Network. I am Mike Smeltz, and throughout this series, we will dive deep into the cutting edge of sports. How technology is changing the way the games are being played and watched. In this episode, we'll focus on the fan experience. In this episode, we'll focus on the fan experience.

The ticket buying process has changed from a static experience to something more akin to signing up for a membership at a country club. Fans today only have two options. They can buy season tickets or they can brave the wild, wild west, which is trying to navigate resold tickets from brokers and scalpers. And I think what we provide is a very unique alternative. For fans at home, leagues are increasingly investing in alternative broadcasts to tailor presentations for all types of fans.

The tech element is huge. You know, you don't need satellite trucks outside of Peyton Manning's house or outside of Eli Manning's house. It comes off like a television product or like a traditional linear product. And the coin process of buying some baseball cards has gone virtual with the incredible innovations of NFTs. Boy, an easy way to explain NFTs.

It's like, hey, show me a picture of the Loch Ness Monster. On this episode, you'll hear from each of those experts on how the fan experience is changing and will continue to change in the future. First up is Chris Giles, CEO of FanRally, how the fan experience is changing and will continue to change in the future. First up is Chris Giles, CEO of Fan Rally, a unique company that is changing the concept of season tickets. Prior to starting Fan Rally, I ran sports teams. I spent a number of years as the COO of the Oakland A's,

and before that, spent some time at the front office of the 49ers. And during my time at teams, one thing became abundantly clear. Every team today is facing the same challenge, which is that young people don't have any interest in owning season tickets. That is a potentially huge issue for teams. Giles says about 80% of teams' revenue from tickets comes from season tickets. So if younger generations have no interest in season tickets, teams are facing down a hard future. For as much time and energy as I spent selling them in my career, owning season tickets suck. Your schedule never lines up with the games.

Nobody's life operates in these fixed group sizes. You're all going out of your way. You've got four seats, but you only have two of them that can fill. You're making last-minute phone calls. You have to pay ridiculous fees. And what you really get for being a season ticket holder at the end of the day is a bundle of tickets that are readily available on the secondary market and are really nothing special. After Giles' time with the 49ers and the A's,

he created FanRally with his partners to address the same issues that he saw from the inside. FanRally offers fans memberships to go to games instead of season tickets. Essentially, a fan pays a monthly fee that gives them the ability to go to games in a certain area of the stadium whenever they want. We have a partnership with the Brewers. And let's use an example. Jamie and Jeff are subscribers to the Brewers Ballpark Pass Plus program, and they each pay $99 a month,

and they can reserve seats to any game that they want to attend. They can book seats in a group with other members. So other couple friends that they have to get memberships, they can all book seats together. But you can also book seats with non-member guests. So this opens up a ton of flexibility. Each member can hold two games at a time and reserve games as far out as they want. So instead of buying an 81-game package for all of the Brewers' home games,

Fan Rally's membership program offers fans flexibility. Members can pick which games they want to go to. There's an ability to bundle seats together if a member wants to go with a large group of people for a certain game. Most of all for fans, these memberships are less of an overall cash commitment than buying that full season ticket package. For the teams, FanRally gives organizations a direct connection to their fans, a connection that is really hard to get in the era of secondary ticket markets. I mean, it's a fundamentally new business model. So I think overwhelmingly, the number one reason why teams are building programs on our reservations is it's about building direct

relationships with the future customer. So if you think about the way that a team's business works today, 80% of their revenues today are going to traditional season ticket packages. The lion's share are sold to people, you know, in the 50 to 70 age range. Now, a lot of times they're going to get the best seats you have to buy the full season. You know, everybody has a different approach. Some go out and find four to five others to share it with. But basically what happens is all of the supply on the secondary market comes from those people buying really more than they would like to and then reselling it. And so the modern consumer

today is really just circumventing a relationship with the team. They see no value in this rigid book of tickets that they can buy on the secondary market on a one-off basis with very little advance notice. And there's really no value proposition for that modern consumer to buy that bundle of static tickets. Fan Rally works with teams in the NBA, MLB,

NHL, and college sports. And with this system, the change that might be shocking to season ticket holders, a FanRally member does not have a permanent seat. With FanRally, a member's seat will likely change from game to game, so those days of finding that little community of strangers among season ticket holders in the same section would be altered, but not necessarily gone forever. I actually think Fan Rally is helping take that same exact thing, where it is the nostalgia and the community you're building around you, and applying it to the next generation.

So rather than those people kind of being randomly assigned to you, and you build community around them as they kind of move in and out of the seat neighborhood per se. What we're doing is we're allowing the seat ecosystem to be completely flexible so that you can go with one other friend, you can go with your entire neighbor. And so we're really allowing those kind of highly connected moments that sports empowers to really kind of exist in our modern ecosystem today and allow us to apply those experiences to people we care about and we've built relationships that aren't necessarily limited to that community of folks

in the ballpark. For a majority of fans, though, the way they consume their favorite sports or teams is through watching the games at home. And just as traditional TV has been overtaken by streamers, sports broadcasting is beginning to be breached by those same tech companies. This fall, Amazon will be the exclusive home for Thursday Night Football, the NFL's first ever all- all digital package. I don't think Amazon is going to do something as overt as you can buy the football in midair during a play. Although that would be really technologically really, really interesting.

That is Richard Deitch, media reporter for The Athletic, who has covered the behind the scenes drama and intrigue of the sports media business for years. But you will get obviously ads for Prime all over the place. Their interface will allow you to probably have a very easy ability to get out of the game and to shop. I am sure that they'll designate ads that they know would be attractive to football fans. So if you sort of use the traditional ads that advertise in football fans, you know, beer, automobiles, movies, household products that are named products, those kind of things. So I don't think it's going to be super intrusive in terms of the commercialization of, you know, being able to buy something like interrupting the game. I mean, I think they understand very well that the NFL

consumer does not want something so dramatically different than what they're used to. And I think there's already obviously a little bit of cynicism and skepticism when it just comes to the overt selling of anything. It is a radical venture for Amazon to broadcast primetime NFL games. But the way that those games will look will feel very familiar to football fans. The one thing Amazon has made clear is that they're really interested in what traditional NFL viewers are used to when it comes to a quality broadcast. You saw them signal that with their acquisition of Al Michaels. I'm not even sure it's arguably at this point is the greatest play-by-play NFL broadcaster in history. They added Kirk Herbstreit, who, while doesn't have a ton of NFL experience, is again considered a quality professional broadcaster.

And he, I think his college football fans now have called significant major college football games. Behind the scenes, they brought in Fred Godelli, who is a longtime executive producer of Sunday Night Football, a producer who's worked with not only Al Michaels, but John Madden, considered one of the best in history in terms of production. So what Amazon has done, they want to have NFL broadcast at a network quality. Whether they do or not, the consumer will decide, but they've made the initial investment in terms of quality. And I also think you'll see that as they start to put their studio shows and shoulder programming together as well. Amazon's entry into the sports broadcasting arena comes as ESPN,

once an upstart themselves, is working to innovate how fans watch the games by adding high-profile alternative broadcasts like the Manning cast that became an immediate success, offering football fans a totally different viewpoint on the game. Mannings are very unique in that both Peyton and Eli Manning are truly famous people. The show itself is very good. They have great chemistry. These are quarterback savants, so you've actually learned something from them.

They've had very high-profile guests. So it's just an alternative broadcast that would be very, very hard to duplicate, because you can't duplicate brothers or sisters in a laboratory every day. As Deitch said, it is hard to replicate the chemistry of the Mannings, but the technology that it takes to pull off the Manning cast makes it possible to innovate in really exciting ways. I think if you're a smaller sport, I think the idea with alternative telecasts is it just makes your sport that much more attractive. Take the WNBA, for example. You know, that's a league that's willing to do experimentation.

So if you have an alternative broadcast, let's say, where you're watching the game from the point of view of a player on the bench, and the WNBA gives you the access or gives the broadcast the access to do that, whether it's just cameras on a chair or let's say a player, a bench player is wearing some kind of camera microphone. I mean, that's cool. And that's the league now basically getting behind these alternative telecasts. So maybe the major sports in the country might not do that,

but whether it's like an MLS or a WNBA or something that I would fall under niche sports, a lot of these places have actually are working with their media partners to actively come up with more interesting ways to present the game. And so there's a buy-in when it comes from a lot of these leagues that I'm not sure would have been there 10 years ago. The Manicast came along at the perfect moment, a moment that wouldn't be possible without the innovations in technology that made pulling off a television broadcast from a basement look less like something out of Wayne's World and more like what an audience is used to seeing on their TVs, phones, and tablets.

The tech aspect, obviously, is massive in terms of the ability to do alternative broadcasts. And, you know, using the Mannings, for example, you have some kind of camera or studio setup wherever Peyton lives and some kind of studio setup where Eli lives. And now the technology exists where you can see him or fuse those two together where it comes off like a television product or like a traditional linear product. You know, you don't need satellite trucks outside of Peyton Manning's house or outside of Eli Manning's house to do this. So the tech element is huge. Manning's house to do this. So the tech element is huge. You know, I would consider an alternative broadcast, but like, let's even say like some well-known podcast network sitting around watching a game and you're filming the people watching the game talk about the game. You know, obviously you can't rebroadcast the game because you don't have the rights to it, but that's all

done because of tech. I mean, you can now do that because of things like Zoom or YouTube or whatever. So the tech element changed sort of the equation when it comes to the thought process of alternative broadcast. And in the past, there have been alternative broadcasts that we really don't think of as alternative broadcasts. It wasn't all that long ago that if you were a college basketball fan in March, you were left at the mercy of programmers deciding which games during the NCAA tournament you'd have on your local CBS channel. Now, Deitch says March Madness, like current-day alternative broadcasts, are presented in ways to maximize choice for viewers.

You know, having talked to CBS and Turner's executives more than I can count, you know, one of the things that they push, and I think it's accurate, is the NCAA tournament, March Madness in today's form, really allows you to be the director and producer of your own show. You can choose to decide to flip between the four different games at once. You can go from TruTV to CBS to TBS, or you can sit on one game and watch that game. Or you can go online and watch it digitally and then obviously have all the stats surrounding you on your laptop. Where again, the experience for that same consumer 15 years ago relied on a CBS producer to make a decision as to when to kick out of your game to go to another game that was in the last

minute so you might get a buzzer beater. You don't have the access, the ability to watch every single NCAA men's and women's tournament game in full. And that's purely based on giving consumers more choice and more agency when it comes to what they watch. And this is what this is all about. I mean, the amount of money that people now have to spend for multiple streaming services is, quite frankly, anti-fan and absurd, just given the amount of money. So at a base minimum, if you are asking people to go into their pocket to pay for multiple streaming services, if you're one of those streaming services, you better do everything that you can to make that experience as good as possible for a consumer.

The Manning cast, putting cameras on referees and players, stats-centric broadcasts, all of it comes down to one goal. Giving customers, consumers, viewers control and choice. Ultimately, you want to be seen as a place that gives consumers choice. That makes the consumer feel that he or she is directing their own broadcast or producing their own broadcast. And by giving them more choices in terms of how to watch something, you provide that. And I would argue that that's good business because then it makes the consumer, I feel like, more connected to your product. And if the consumer is more connected to your product, the likelihood is the consumer will continue to purchase and pay for your product. Coming back after the break, we'll move from the at-home viewing experience to the world of memorabilia,

where what people buy is moving more from the physical world to digital world. Okay, so this is the part of the episode where I should explain what an NFT is, a non-fungible token. But for someone not steeped in the digital world, it can be difficult. I think overall a limited public understanding of what NFTs are because it is a complex subject. It's very technical.

That is Bill Shea, a senior reporter at The Athletic covering the business of sports. senior reporter at The Athletic covering the business of sports. And as a sports business reporter, Shea is bombarded with public relations emails about how Team X or Player Y has released their newest batch of NFTs. It's kind of like being on the internet in the early 1980s before the internet was even a word people knew. And Top Shot was one of the first to make it really easy. You didn't have to understand gas fees and wallets and stuff like that you could basically just give them your money and you got the little digital collectible for the purpose of this conversation the nfts we are focusing on are a form of digital memorabilia virtual rings trading cards video highlights jerseys hats anything a fan would normally buy

in person they can get a digital version of that same item or piece of history in terms for sports fans you know seeing the like you know digital you know highlights or images still images it's basically data that lives on an encrypted server it can't be replicated there's one so you own the that you know they're, you know, created by an artist or a sweatshop or whomever makes the thing, you know, and then they are minted on a blockchain, which is just a highly technical way of a bunch of computer servers that are really hard or impossible to hack. paypeg or a gif that someone else created but you or i can like right click and copy that make it our twitter avatar and no one would know the dramatic impact of the pandemic forced businesses into a pressure cooker where they had to innovate to survive for sports teams who took a massive financial hit with limited games and no fans many of those organizations dove headfirst into building out alternative revenue streams like nfts you know coming off of 2020 where sports was just completely

mangled by the pandemic um you know we had a 60 game baseball season you know major events all out of whack on the calendar stuff like that um. You know, and teams had to, many teams had to borrow big sums of money. You know, it's something like an average of $100 million across baseball to pay the bills in 2020. So they amounted some debts. Everybody was looking around like, hey, what are some easy ways we can make money that don't require a bunch of COVID stuff, you know, limitations and all that.

And everybody saw what nba top shot was doing and they were like whoa top shot from the company dapper labs is one of the leading creators of sports related nfts shea says top shot exploded on the scene creating a new memorabilia market almost by itself the early sales were in the hundreds of millions. Now, there was the front-end retail sales of X number of millions. And then they have an online marketplace where basically it's like a trading card show. You go in, you have your collection. Someone that's like, oh, I'd like to buy that one. They can make an offer for the one-of-one of LeBron Duncan on somebody. And you agree to a price. And that's where the hundreds and hundreds of one of you know lebron duncan on somebody um and you agree to a price and that's

where the hundreds and hundreds of millions of dollars early on took place with the nba and the union getting a cut of each of those sales even though the sports related nft market is new there's already been different generations of innovations today the higher priced items that are sold connected back to the non-digital space, you know, the real world. One of the ways that teams and organizations give more utility to these things is tying them to real world physical items or experiences. You know, some of them have been attached to like, oh, it's our World Series ring. You can get a real one if you bid enough on this. If you bid, you know, a hundred thousand bucks, you know, you get an actual ring and a trip to the stadium and

be players throughout a first pitch or something like that. Gronkowski did a thing last year where, you know, you buy his NFTs, the high-end ones, you get tickets to a game and a meet and greet with him. So, you know know there are some physical experiences attached but you know the number of zeros on the check gets longer and longer on these things to get to the those exclusive experiences evangelists of nfts declare that they are the future for collectibles and others have absolutely no time and could care less what an nft is so are nfts the future? Shea says anyone that actually knows that answer should be really rich.

If I knew absolutely, I would be bottling my answer and selling it to all the biggest auction houses and sports collectible companies. But it has been really amazing to see the last two years, not just the collectibles, but the digital aspect take over as well. And I will say this,

people often compare NFTs and I've done it in my own research and analysis and writing, to the famous booms of the past, bubbles, like the Dutch tulip bulbs in the 16th century that just exploded the economy. And Beanie Babies in the 1990s, people got crazy for those. People still collect and pay handsome sums for Beanie Babies, but it is a very niche population of people. But I feel like on eBay, there's ones that sell for thousands and thousands of dollars still. Maybe NFTs become this unique club of people because everybody, I mean, they're just everywhere now. And I don't know how you find much value in that, you know, the market has not settled on these things. Each of these stories, membership seating, alternative broadcast, sports related NFTs all

share a common ideal innovations based on what a customer wants creates success the membership seating program being led by fan rally is a sign that sports fans want flexibility in how they go to games the alternative broadcasts are about giving fans choice they can become their own version of an at-home tv producer and sports related nfts are addressing the desire for memorabilia that is personal one of one unique-one, unique, and that is shareable in the digital social media world. But as dramatic as the changing landscape is for fans, for those inside of sports, the change is happening at an even faster pace. Now they can test all the drills that coaches have been doing for years. Now you can say,

okay, we did an assessment, and then we did this one drill, and then after we did another assessment, and it changed your hip shoulder separation. So that drill is a good one. We did an assessment. We did these other drills. They didn't work. Let's stop doing those drills. More on that in next week's episode.

This has been Mike Smeltz from the Athletic Podcast Network. Thank you for listening.