The price cuts aren’t nearly as dramatic as the press was making them out to be — the complimentary tickets will probably have a greater affect. But overall, a pretty good move by the Yankees.
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A look at this year’s Forbes numbers.
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The following was a comment on last Friday’s post, More on Audio, Viral Marketing, by NaOH, otherwise known as Brad Lappin. He hits on some points that I didn’t get to, including the value of marketing to younger customers, and the relative economics of an iPhone app vs. a BlackBerry app. In its entirety:
I agree with your conclusion, but not with how or why you arrived at it.
As of today’s SEC filings, Apple has sold about 40 million devices which run on the iPhone platform (the iPhone and the iPod Touch). These are worldwide numbers, so a very large segment of those users are outside of the US and likely not interested in baseball. For some idea of the difference between US iPhone sales and global sales (this excludes the iPod Touch), Apple sold 3.79 million units this past quarter, but only 1.6 million were domestic sales (based on AT&T’s quarterly report).
On top of that, much of Apple’s US customer base with these products is younger people, not a strong market for MLB. While I lack hard data, I would imagine MLBAM has done very well reaching iPhone platform users who are baseball fans. I say this simply because the type of fan who would use an iPhone and want such a service is a more devoted and informed fan, not someone who is casual about the sport and only occasionally takes in a game.
As for other mobile devices, MLBAM does have a service for some Blackberry models (called MLB Mobile Premium) which is basically the same as the iPhone application. I believe some of the newer Blackberry models are not yet supported, but this discrepancy is expected to be rectified during the season if I remember correctly. While being on the Apple platform is great for marketing purposes due to the attention Apple generates, from a short-term revenue standpoint I would imagine the Blackberry is more important since the Blackberries exist in greater numbers and with a large number of users who frequently travel. In addition, Blackberries are commonly used by people who are older than Apple users, and that aligns better with MLB’s existing core market.
Now, I don’t know the sales numbers for MLB Mobile Premium on the Blackberry platform, and I don’t believe there is a percentage being given to anyone like MLB must give Apple, but the Blackberry service is $5 more than the iPhone application. If there is no cut being taken, MLBAM can sell just under 47,000 Blackberry subscriptions and make as much as they do from 100,00 sales on the iPhone platform. If there is a 30% cut being taken like with Apple, than they need to sell just under 67,000 subscriptions to equal their revenues from 100,000 sales of the iPhone application.
Pushing aside all those numbers, I agree with you that MLBAM would be well served to better utilize new media. But I disagree with you as to why. You put forth that doing so would help attract existing fans who would be customers of the paid applications and services if they only knew of them. I’m confident you’re correct that there is room for growth there (isn’t there always?), but I suspect it may be less than you put forth for the reasons I mentioned above. The main reason I think a new media push would be beneficial is because this would help build the sport’s fan base amongst younger consumers. This is an area where baseball has not been doing well.
The beauty of these new media options are numerous. For one, as you noted, MLB is already strong at developing these types of marketing. On top of that, the costs of development and deployment (for things like Twitter and Facebook), are minimal, but the potential gains are substantial. In baseball’s core demographic of middle-aged men, those who are tech-savvy will also utilize these types of media, but the younger customers expect it. If MLB were to broaden the deployment of their already strong technologies in these ways, they could satisfy existing users and help cultivate a future customer base while also getting a technology-based head start on other sports leagues in delivering content to young viewers.
Successful efforts in these areas are the type of marketing that require commitment, especially when attempting to attract new customers. Simply put, progress can be slow when cultivating a new segment of customers. Fortunately, the cost of deployment for these new media forms is minimal – barely above negligible, in fact – so there’s only good reasons to pursue it.
Baseball has gotten cheaper this year, as long as you don’t live in New York. Team Marketing Report’s annual survey says that the prices of beer, soft drinks, hot dogs, parking, and programs have all gone down this year. Once you take out the Yankees and their $2,625 premium seats — which, oddly enough, seem to be filled with people dressed as empty seats — ticket prices and the overall Fan Cost Index have declined as well.
The cumulative price of the four items listed above falling about three percent (even including the Yankees). As they should, the teams are using these price drops as a PR point, hoping to build some goodwill for when the economy recovers. The Dodgers dropped the prices of their drinks so much, you’d think you were at a Starbucks instead of a baseball game. (Only $3.75 for a bottle of water?) CEO Jamie McCourt said, “We want to make the game more accessible and more affordable.”
But what affect can this really have on gate receipts? Well, not much, at least not based on TMR’s figures going back to the mid-’90s. Changes in the prices of beer, soft drinks, hot dogs, and programs — even bunched together — show no correlation with changes in attendance. That’s not really a surprise; you’re not going to a baseball game just because the team dropped their hot dog prices. There is one item that correlates very well to concession prices, though: the Consumer Price Index, or CPI. In other words, as general prices in the economy go up, so do baseball concessions — although concessions generally rise at about twice the rate.
The moral of this story is that the the only number that is affected by concession prices is concession sales. If teams are lowering prices in order to boost attendance, they’re probably out of luck. But if they’re doing so in order to raise beer sales, they’ll probably see positive results.
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Here’s the headline: Baseball suffers attendance drop in first 2 weeks.
That AP story is comparing this year’s first two weeks to last year’s full season, reporting that average attendance is down 6.9%. It also mentions, towards the bottom, that April and September are the worst months for MLB’s gate, due to the cold weather and schools being open.
Without even knowing what the average attendance was in the first two weeks of 2008, this actually seems like good news. Total attendance is expected to fall six percent this year, to about 75 million. If we’re only down 7% in the first two weeks, despite how cold it’s been in every northern city, this would seem like a somewhat positive indicator.
If someone has a day-by-day attendance database already set up and wants to run the numbers on 3/31 - 4/14 from last year, feel free to drop the results in the comments.
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A few weeks ago, I wrote on BP that MLBN should cut about 80% of its commercials, leaving about 2-4 minutes in the middle or at the end of each program, and running regular spots during game broadcasts. Every time I watch the network, I’m more convinced that this is the right strategy.
Off the top of my head, I would say at least half of the commercials that the network runs are either for MLB, or for Shamwow — and it’s very possible that I’m undershooting. The ads are more conventional during live games, but that’s about it. Even MLB Tonight runs the same MLB / MLBN commercials over and over.
I’m not sure what Shamwow pays, but the MLB commercials are bringing the network exactly zero dollars. Meanwhile, every subscriber brings them about $3, so one extra distribution deal — even a relatively small one — would result in an eight-figure return. Cutting out most of the commercials would allow MLB to market the network as a ‘premium’ basic-cable channel, separating it from the other leagues’ networks. Just imagine an all-baseball channel with almost no commercials. What baseball fan wouldn’t kill for that?
There is a downside — the network is making $50 million on advertising this year, which isn’t nothing. But I would bet they could hold at least $15-20 million of that, making it a $30 million bet. Considering the almost unlimited upside, this still seems like a worthwhile risk.
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If you’re interested in BAM’s new game for the iPhone, Maury has a very good review up today. He also has some numbers on At Bat:
Given a choice between “At Bat 2009” and “World Series 2009”, At Bat is clearly the killer app of the two (it is now the #1 sports-based app on iTunes and has sold over 100,000 copies, ranking it #9 for all apps sold for iPhone and iPod Touch). But, if you’re a baseball geek, and are looking for mindless fun, World Series 2009 is a decent addition to your iPhone or iPod Touch application library.
At $10 a pop, that’s about $700K in revenue, after Apple takes its 30% share. They’re probably looking at well under $5M in revenue from the app this year, which is something, but still a drop in the bucket for a company that should do about $500M total.
So here’s the cunundrum: there are probably millions of people that would pay $10 to have gameday audio on their phones, BAM has a good product on which they can do so, and yet there are (best guess) under 125,000 subscribers, if we count non-iPhone users. If BAM can get around one million people to pay ~$100 per year for MLB.tv, you would think they could get at least two to three times that to pay $10 for Gameday Audio.
The key then, you would think, is how they’re marketing it. The only thing stopping all of those people from signing up is that they’re not aware it exists. I think the suggestions I laid out in the BP article could help (i.e. integrating with Twitter and Facebook). So could developing a native BlackBerry app, although this isn’t so easy, considering all of the different form factors. Audio will never be as much of a cashcow as MLB.tv, but it could make a serious dent ($30-40M isn’t out of the question).
What’s most important is that BAM starts thinking like a new media company in terms of marketing, because they are among the best developers in this space. As well as they’ve done financially, a lot of money is still being left on the table.
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A look at MLB’s lack of viral, or “open source,” marketing. It expands a bit on Gary’s piece from the annual.
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Good for them. SB Nation is the type of company we should all be rooting for: lean (on the production side, at least; tough to say what they’re spending on sales and marketing), smart, valuable — and in the news sector, no less. This deal should help them get some added traffic and SEO juice, and puts them in a good position to make similar deals with other big sites:
Posts from its 29 hockey blogs now appear as linked headlines on the homepage of NHL.com. CEO Jim Bankoff, a former AOL executive, tells me that he is in discussions with other major sports leagues for similar link deals…
SB Nation pulls together what amounts to local sports coverage under a single advertising umbrella (although professional teams have fans everywhere). The wider it can distribute links in places where sports fans might gather online, the more readers it should be able to expose to its various blogs. Last year, SB Nation raised $5 million from Accel Partners, Allen & Company, and Leonsis.
SB Nation is a pretty good example of why you don’t need a massive news bureau and budget to create quality content. The internet is hurting traditional revenue models, but it also allows for incredibly low-cost structures. SBN has leveraged this to a tee, buying already-successful blogs in exchange for equity, and sharing ad revenue. Eventually, their bloggers will have a presence in press boxes, and you can bet they’ll be sharing quotes and stories with each other.
Lots of people are worried that journalism will die once there are no more printed newspapers or magazines. But it’s companies like SB Nation, Baseball Prospectus, the Huffington Post, TechCrunch, the Business Insider, and countless others that make this point moot. The economics are certainly changing — news outlets will never be able to monopolize local advertising again. But the sheer volume of choices is going to drive quality up, even if the companies themselves are making less than their predecessors.
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