Money Games: Profiting from the Convergence of Sports and Entertainmentby David Carter
The businesses behind Dubai Sports City, the branding of David Beckham, and the presence and popularity of fantasy sports leagues on the internet are unmistakable indicators that the sports and the entertainment industries are quickly becoming one and the same. But, you needn't travel far or be a hard core sports fan to appreciate this fact. Whether you play Madden NFL on the Wii, use Nike+ along with your iPod to monitor your workouts, or channel surf and take note of the number of athlete-driven commercials, evidence of this transformation is ubiquitous in today's sports viewing and consuming experience. In recent years, the rapid convergence of sports and entertainment has been key to the sports business industry's continued growth and financial success. Money Games not only analyzes how industry stakeholders have monetized this convergence, but also provides readers with answers to this core question: how can the sports business continue to profit from the blurring of sports and entertainment? Author David M. Carter considers a wide array of implications for television content, video gaming, athlete branding, the Internet, mobile technology, gambling, sports-anchored real estate development, venue technology, and corporate marketing—in short, those areas where business opportunities exist now that sports and entertainment have become one. Money Games is a must-read for professionals and future leaders of the sports and entertainment industries, and sports fans will also find an intriguing story about the evolution of the games that they cherish and follow.
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MONEY GAMESProfiting from the Convergence of sports and entertainment
By David M. Carter
Stanford University PressCopyright © 2011 Board of Trustees of the Leland Stanford Junior University
All right reserved.
Chapter OneTELEVISION CONTENT
NBC AND THE BEIJING OLYMPICS
As on many Saturday nights in Manhattan, The Gin Mill is packed. Although not necessarily known as a sports bar, the place is transformed into one on the evening of August 16, 2008. Patrons' attention is riveted to numerous high-definition televisions, not because of a Yankees-Red Sox game but rather in anticipation of watching forty-one-year-old Dara Torres swim the 50 meter freestyle at the 2008 Beijing Olympics.
The close race has everyone captivated, but there is collective disappointment as Torres wins the silver medal, finishing .01 seconds behind Germany's Britta Steffen. Not long thereafter, patrons again put down their drinks and watch the women's 4 x 100 meter medley relay with anticipation. Three minutes and fifty-three seconds of nonstop swimming action later, there is again collective disappointment as the team of Torres, Natalie Coughlin, Christine Magnuson, and Rebecca Soni place second to Australia.
Despite the crowd's demonstrated interest, the evening's main event has yet to occur. Then, at approximately 11:00 p.m., the U.S. men's 4 x 100 meter medley relay team of Aaron Perisol, Brendan Hansen, Michael Phelps, and Jason Lezak steps toward the pool. The previous night, more than sixty-six million people had watched Phelps win his dramatic seventh gold medal of these Games, barely edging Serb Milorad Cavic in the 100 meter butterfly. With the victory Phelps had tied the legendary Mark Spitz by winning seven gold medals at one Olympic Games, and was about to compete for an unprecedented eighth gold medal in Beijing. All eyes at The Gin Mill were focused on the pool at the Water Cube.
"Alright, we're going to turn off the music and turn on the commentary so that we can all watch the swimming," a voice says over the bar's loudspeaker—an exceptionally rare respite from the pulsating music normally heard.
Everyone listens to the commentary of Dan Hicks and Rowdy Gaines on the NBC telecast, which is being broadcast live, a half a world away. The race begins and Peirsol gives the U.S. a strong start in the backstroke. Then Hansen takes over on the breaststroke, but he falls behind Japan's Kosuke Kitajima. Phelps dives into the pool and pulls the U.S. ahead on an incredible butterfly sprint. Lezak then finishes with a strong freestyle swim that gives the U.S. the gold medal in a world record time of 3:29.34.
Overflowing with national pride, the patrons at The Gin Mill shout, "U-S-A! U-S-A!" Just two miles south, a large crowd at Times Square erupts with cheers that echo throughout the entire city. And back at The Gin Mill, a TV in the corner shows thousands of fans staying forty-five minutes after the conclusion of a Baltimore Ravens preseason football game at M&T Bank Stadium to watch their local hero, Phelps, swim for the record gold.
More than seventy million people watched at least some portion of the Olympic broadcast on NBC that Saturday night, an evening generally known for modest TV ratings.
Olympic Games on Television
The first televised Olympics in the United States were the 1960 Winter Games in Squaw Valley, California, anchored by Walter Cronkite on CBS. Later that year, CBS aired the 1960 Summer Games in Rome. Since communications satellites were not yet available, CBS had to produce and edit the coverage in Italy, then fly it back to a New York studio, where the events would be described by a young and relatively unknown broadcaster named Jim McKay. Eventually, McKay would move to ABC, where he would become the face of Olympic coverage for much of the next two decades.
Following NBC's airing of the 1964 Summer Games in Tokyo, most of the Olympics for the next twenty years were broadcast on ABC, as network executive Roone Arledge had decided to use the event as a cornerstone of the network's sports coverage.
ABC had developed a strong competency in covering international sporting events through its television program ABC's Wide World of Sports, which started in 1961. The program aired a wide variety of sporting events from around the globe, many of which were unfamiliar to American sports fans. Still, Wide World of Sports proved to be a ratings hit, and it successfully introduced Americans to many periodically held or unique sports, such as gymnastics and logging.
Arledge took advantage of ABC's competencies in international sports coverage to produce high-quality Olympic broadcasts. He believed the Olympics attracted more than just hardcore sports fans, and undertook measures to appeal to more casual fans, including women. Olympic coverage included numerous personal profiles, introducing athletes and their unique stories to the American public. Olympic broadcasts were also a nice change of pace from the typical football-baseball-basketball-dominated sports airwaves. Americans could watch some of the best athletes in the world in track and field, or they could see the grace and composure exhibited in diving or archery.
But the Olympic Games were about more than sports. They were routinely affected by global political strife such as the Cold War, and provided a platform for terrorists to make political statements such as the kidnapping of eleven Israeli athletes at the 1972 Summer Olympic Games in Munich, which resulted in their massacre. Significantly, such events also had an impact on the legacy and broadcast elements of the Games.
NBC Becomes America's Olympic Network
By paying $300 million, NBC won the rights to broadcast the 1988 Olympic Games in Seoul, and have aired the Summer Games in the United States ever since. In 1989, Dick Ebersol became the head of NBC Sports and, like his former mentor, Arledge, sought to make the Olympics a signature part of the network's brand.
Like all Olympic broadcasting networks, NBC faced numerous challenges in covering the Games, many of which were linked to the impact of showing events on a tape-delay basis in the U.S. In addition, the Olympic Games continued to expand their sports offerings, forcing NBC to make difficult decisions about which events to air, and when.
In 1992, NBC paid $401 million for the rights to the Barcelona Olympics. To help defray some of its costs, and to show as many events as possible, NBC partnered with Cablevision to create the "Olympic Triplecast." For a fee of $95–$175, the Triplecast, which consisted of three pay-per-view stations, enabled viewers to watch many events live. Unfortunately for NBC, the Triplecast turned out to be a failure, as few people were willing to pay subscription fees to watch broadcasts that were at odd hours of the day for most Americans. NBC and Cablevision lost almost $100 million on the joint venture. However, all was not lost for NBC. The primetime ratings for the Barcelona Games were very strong; the Games earned an average of 17.1 and a 33 share according to Nielsen data. Of significance, these Games were anchored by Bob Costas, who began to establish himself as the new face of televised Olympics.
NBC enjoyed even greater ratings success with the 1996 Atlanta Summer Games, as 209 million Americans tuned in at some point during the network's seventeen days of coverage. Buoyed by the strong ratings in Atlanta and Barcelona, Ebersol in 1998 led NBC's unprecedented $3.5 billion bid for every Summer and Winter Olympic Games from 2000 to 2008.7 Several years later, NBC spent another $2.2 billion to secure the rights to broadcast the 2010 Winter Games and 2012 Summer Games. To put the numbers in perspective, NBC was paying approximately twice as much for the U.S. rights as all European companies were paying combined. NBC's commitment was such that General Electric, the network's parent company, accounted for more than 25 percent of all International Olympic Committee (IOC) revenues, a fact not likely lost on Comcast, which purchased a controlling interest in the network in late 2009.
Although Ebersol remained bullish on the Olympics, from 2000 through 2006 TV ratings were inconsistent due to disadvantageous time zones and emerging technologies; this was perhaps best evidenced by the 2006 Winter Olympic Games in Turin. At that point, Internet usage was so widespread that the six-to-nine-hour time difference from Italy to the U.S. made it very easy for Americans to learn the results of important competitions prior to NBC airing them on a tape-delayed basis in primetime. Ratings were down 35 percent from 2002, and fell 25 percent from the 1998 Nagano Winter Games, which were the most recent Winter Games held outside the U.S. Further compromising NBC was that several episodes of Fox's hit show American Idol beat Olympic coverage in head-to-head primetime ratings, and an episode of ABC's Lost also topped the Turin Games in ratings among young viewers. In previous years, other networks seldom bothered to compete against Olympic coverage, but this time they were undaunted, given the television landscape in 2006.
As the 2008 Beijing Games approached, many wondered if the Olympics could regain their television luster.
Beijing 2008—The Olympic Games Make a Comeback
In 2001, the IOC awarded the 2008 Games to Beijing over more time-zone-friendly Toronto and Paris. China was an emerging nation on the international scene, both economically and in sports. After Mao Zedong and the Communist Party took control of the country following World War II, the nation had effectively closed its borders and shut itself off from the world. However, in the late 1970s, new leader Deng Xiaoping slowly opened the country's economy and started a national sports program. In 1984, China competed in the Olympic Games for the first time since 1948, and the country rapidly improved its athletic prowess to the point where many predicted it to win the medal count in 2008.
The 2008 Games were seen as an enormous opportunity for China to open its doors to the rest of the world. Economically, the country had already become a superpower, but the 2008 Games enabled China to demonstrate this progress to the world. This demonstration was on full display in the Opening Ceremony, as more than fifteen thousand performers took part in a spectacular show that cost more than $300 million to produce.
"The Olympics are the ultimate unscripted drama, and the athletes and the setting are part of that drama," said David Neal, then executive vice president of NBC Olympics. "Beijing and China were a daily part of that story."
Appreciating NBC's clout given its considerable rights fees, Ebersol persuaded the IOC to move the gymnastics and swimming competitions—two of the highest-rated Olympic sports—to the morning in Beijing so that they could be aired live and in primetime on the East Coast in the U.S., thereby mitigating the time-zone challenge brought about by the twelve-to-fifteen-hour time difference between China and the U.S. According to Neal, NBC began preparations for the broadcast more than five years in advance of the Games, and Neal himself made nearly twenty trips to Beijing in the years leading up to the Opening Ceremony in order to develop a working relationship with his Chinese counterparts and get a proper feel for the environment.
In addition, Ebersol and NBC embraced the Internet, using it to their advantage. While NBCOlympics.com always had comprehensive Olympic coverage, the site was elevated to a new level for the Beijing Games. Most Olympic sporting events were shown live on the website at no cost to the user, allowing NBC to announce it was broadcasting a record 3,600 hours of Olympic coverage (almost one-third of it online), up from 1,210 hours in Athens and 441 hours in Sydney. These Olympic webcasts, which featured the international feed but no broadcasters, provided an opportunity for fans of lesser-profile sports such as water polo, team handball, fencing, and modern pentathlon to catch all of the action live.
By 2008, NBC owned multiple cable stations and was able to broadcast numerous Olympic events on such subsidiaries as MSNBC, CNBC, USA, Oxygen, Universal HD, and Telemundo. In addition, NBC launched high-definition channels dedicated to basketball and soccer that could be seen on DIRECTV and elsewhere.
"More is better," Neal said. "The appetite on the part of the consumer is limitless. The fact that we offered so much was a huge benefit. There wasn't a sport that you couldn't find being broadcast somewhere. The more we could offer, the better."
NBC used 106 broadcasters to cover the Beijing Games and employed nearly three thousand people to help with its coverage, many of whom were working out of temporary offices on the set of Saturday Night Live at 30 Rockefeller Center. Because of its coverage of the Olympics for the past twenty years, NBC had gained considerable experience, and it showed in the excellent production quality. There were numerous technologies that NBC introduced or honed in its coverage, such as allowing viewers to more easily identify swimmers. The network also had used a familiar team of broadcasters, including Hicks for swimming, Al Trautwig for gymnastics, Tom Hammond for track and field, Mike Breen for basketball, and Costas in the studio. NBC's impressive work was rewarded with six Sports Emmys for its Olympic coverage alone, including Costas winning for best studio host.
The results of NBC's efforts proved phenomenal. The network, which had paid an estimated $893 million for the rights to the Beijing Games, sold more than $1 billion in advertising. After initial ratings surpassed expectations, NBC sold its extra ad inventory, generating another $25 million in sales in the twelve days following the Opening Ceremony. General Electric further benefited from the Games, as it is estimated that the Olympics may have helped the corporation generate $700 million in new infrastructure orders in China.
In large part, the ratings for the primetime coverage proved to be high due to the mystique of holding an Olympic Games in China. But also, by airing the swimming and gymnastics events live, NBC allowed Americans to enjoy and celebrate in the shared experience that is often fundamental in any sports broadcast, as evidenced by the atmosphere at The Gin Mill the night Phelps broke the record. It certainly helped NBC that Americans competed extremely well in many events, winning the overall medal count in the process.
Through the first week of coverage, NBC captured an average of more than 30 million viewers a night. That average dipped to 27.7 million by the second week, but it was still a significant increase over Athens. The average Nielsen rating for the entire seventeen-day Olympic Games was 16.2 with a 28 share, and NBC estimated that 214 million people watched at least some of the Games, making it the most watched television event in U.S. history. That figure represented a 2.4 percent increase over the 1996 Atlanta Games and a 5.4 percent increase from the 2004 Athens Games. NBC dominated the competition during the Games—in the first week of coverage alone, the network had more viewers than the next closest twelve networks combined, marking the largest margin of victory for any network during any primetime week in Nielsen history. NBC also showed its greatest gains in viewership among young males, a demographic that many thought was unlikely to grow for Olympic audiences.
The ratings increase trickled over to NBC's other programming as well. NBC's Nightly News, which was broadcast live from Beijing on many nights, saw its biggest lead over ABC and CBS evening news broadcasts since 2004. Ratings for The Today Show also spiked. Cable ratings were similarly strong, as MSNBC's late-afternoon Olympic program saw an increase of 252 percent on one night, and CNBC nearly quadrupled its normal ratings.
"There are only a handful of big events left on TV, but 'Event TV' still works in terms of aggregating a large and diverse audience," Neal says. "They enhance the brand identity of NBC in building a mass audience. 215 million American viewers watched some portion of our coverage from Beijing, which validates and speaks to the identity of NBC as a place to watch a truly big event."
Excerpted from MONEY GAMES by David M. Carter Copyright © 2011 by Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Stanford University Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author
David M. Carter is the Executive Director of the University of Southern California's Sports Business Institute and is a Professor of Sports Business at USC's Marshall School of Business. He is the Principal of the Sports Business Group, which has been a premier provider of strategic marketing and business development services to the sports industry for more than a decade. In this capacity, Carter has consulted for corporations, sports organizations, sports and entertainment venues, law firms, municipalities, and individual athletes. Carter is the author of On the Ball: What You Can Learn About Business From America's Sports Leaders (2003), Keeping $core: An Inside Look At Sports Marketing (1996), and You Can't Play The Game If You Don't Know The Rules (1994).
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