So…what’s G?

Last week PepsiCo launched its new ad campaign in an effort to increase sales for its struggling product, Gatorade.

The hook? Convince athletes that Gatorade helps athletes before, during, and after the game.

The campaign, promoting the Purchase, N.Y., food and beverage giant’s new lineup of “G Series” drinks for athletes, aims to demonstrate that Gatorade isn’t just a sports drink that replaces nutrients sweated out during the game, but a system with three steps: a carbohydrate-loaded “Prime” concentrated liquid before play; the traditional “Perform” sports drink during; and a light, protein-rich “Recover” drink after. (via WSJ Online)

Myself, clearly not being at the pinnacle of athletic achievement, am usually quite complacent just drinking regular old Gatorade at various points during my athletic achievements.  I never really thought about different versions of the drink at different times, personally.  If I had to guess, I would assume that a good number of people would have the same mindset.  With Gatorade sales already struggling and assuming that a large amount of money is needed to change mindsets (am I going to spend $7 to buy pre and post Gatorade along with regular Gatorade instead of just buying two regular Gatorades?) its not surprising that this Gatorade project is big…and probably costly.  We just don’t know how much.

While the company wouldn’t disclose the cost of the new campaign, a PepsiCo spokesman said it is the “biggest spend for a launch in our history.”

PepsiCo has struggled to find its footing with Gatorade, which has been in a sales slump for three years. Company executives say they have been paying the price for expanding too rapidly about five years ago, when the drink enjoyed a sales bump due to a string of hot summers, a construction boom and other factors that encouraged consumers to drink Gatorade for activities other than sports.

Gatorade is PepsiCo’s third-biggest selling global beverage brand after Pepsi-Cola and Mountain Dew, so its 14% sales volume decline in the U.S., its biggest market, last year was a concern for executives, analysts and investors.

PepsiCo’s first-quarter earnings, released Thursday, showed that the company has yet to turbo-charge Gatorade, although sales are improving. The company posted a 26% jump in first-quarter earnings, boosted by the February acquisition of its two biggest bottlers. While quarterly revenue in the company’s Pepsi Americas Beverages business, including North America and Latin America, rose 32%, beverage volumes fell 4%. The company declined to provide Gatorade’s quarterly sales volume.

Whenever a company isn’t willing to mention how much their spending on a particular campaign?  Know that they are spending an exorbitant amount of money.  That being said, it looks like PepsiCo needs to take drastic measures to get Gatorade on track, based on those numbers.  A 14% volume decline on something as large as Gatorade is definitely noticeable when looking at the company’s bottom line.  Combine that with a “What is G” campaign that a lot of people didn’t identify with or understand and what I assume were slumping Tiger-Ade sales (remember Gatorade dropped the Woods drink a few days prior to Woods car accident/crap storm last winter) and you were left with a company that needs to make some drastic changes in its marketing schemes.

The result?  Gatorade for all facets of your sporting day; before, during, and after.

If only it made you play better too.

Event Name: NYC Sports Business Networking Event
Date and Time: May 26, 2009 at 6:30PM
Location: Galway Hooker, 7 East 36 St, New York, NY

Come out and network with other sports business professionals that work or live in the New York area. Having a strong network has never been more important, so this is a great time to connect with others that share your passion for working in sports. All backgrounds are welcome, from those just starting out to industry veterans. Make sure to pass this along to any friends and colleagues that would also be interested in attending.

If you have any questions about the event, you can contact me at russell@thebusinessofsports.com. You can visit www.galwayhookernyc.com for more information on the location.

Looks like a great networking opportunity for those either established in the sports business world, or those looking to break in.  May 26th not a good date for you?  Blogs With Balls is on June 13, in the NYC area as well.  You can find more info, including locations and speakers, here.

In the NBA’s never ending quest to expand its league and enhance its brand on a global level, the NBA has partnered with the China Mengniu Dairy Co. and Shandong Satellite TV, to create the NBA’s first reality show, called ‘Mengniu NBA Basketball Disciple’ (because if nothing else, subtle stereo-types involving Asians and martial arts disciplines always work!).  More info from Ad Age,

The show will follow a three-month basketball competition starting with public tryouts in 64 cities in China. The players will compete in a variety of skills competitions and be awarded points based on performance in four rounds.

Following a final all-star game in the last round, the player with the most cumulative points will be crowned the most valuable player of the competition and win an all-expenses-paid trip to the U.S. for a tryout with a team from the NBA’s minor league.

Former NBA players such as Darryl Dawkins, who played with the Philadelphia 76ers and New Jersey Nets, scouts and a coach will appear throughout the series to run competitions, evaluate players, award points and determine which competitors advance to the next round. An NBA mascot and dance team will also be on-site to provide entertainment for NBA fans.

Basketball in China...yes, I like it.

This may just be “Stern-ian” logic at its finest.  One of the hurdles facing Stern with any attempts to expand the NBA league, or to create sub-leagues overseas, is ensuring a basketball economy/marketplace exists in the areas he is seeking expansion.  China already has a large NBA marketplace (Thanks Yao Ming!), but why not try to bolster that marketplace before bringing an NBA team there?  Or, better point, why not put this sort of TV vehicle in a spot where you know it will thrive, so that you can use it as selling point in venues that may not be as receptive to the NBA product (i.e. countries in Europe).  This reality show kills both of those birds with one stone, because if nothing else…people love to follow reality shows with a winner at the end (see any season of American Idol), and the NBA will obviously have its brand plastered all over the show, so they get the brand enhancement and recognition they crave at the same time.

Even if that logic inexplicably fails, and I would be surprised if it would, the show will also help to increase the NBA’s foreign fan base (or bolster it).  The winner gets a shot with a D-League team?  Does anyone else think that a Chinese player who won an American Idol-type competition who now plays on a D-League squad would maybe garner some attention for the D-League?  And with the potentially large number of Chinese people who would follow a Chinese player, could we potentially see the NBA contracting with ESPN or some provider to show D-League games on their network?  Sure, Americans would probably not be that interested, but if you had a few million Chinese people that would definitely tune in to see that one winner of the show…how could the networks pass that up?  The NBA has the ability to create what is possibly a lucrative revenue stream in an area where I’m assuming little revenue is currently being generated…all by expanding their audience on a global scale.

That all being said, how can you argue that sports shouldn’t go global?  And even if you did argue that, how would your argument not fall on deaf ears?  I don’t know if David Stern is going to be able to hear you while he’s diving into his Scrooge McDuck money-swimming pool.

Ad Age — NBA creates its first reality show in China

In da locker room, snuck to post my twitt. We’re playing the Celtics, tie ball game at da half. Coach wants more toughness. I gotta step up.

And apparently, the tweet worked because Villanueva led the Bucks to a win, scoring 19 points to accompany his 7 rebounds.  But wait! Did he tweet during halftime of a game? He must not be focused on the game itself, right?

The firestorm had begun.

Although Villanueva tried to clear up any misconceptions about his tweet with a post game tweet,

By the way, lets just get the record straight, my halftime twitt had no interference with what goes on regularly during the locker room.

It was too late, and the Bucks had banned the use of twitter or any other form of social media while on “company time”.  Questions about Villanueva’s dedication to basketball aside, what did his tweet really show?

That the divide regarding contact between the athlete and the fan, normally mediated by the sports reporter, is beginning to crumble.

Actually, you could argue that the death knell has been sounding for traditional media for quite awhile now.  The advent of blogs brought about the idea that the lay person could at least do the job (write articles, research, etc.) of the traditional sports reporter.  The one thing the average person was missing was the network of access that reporters had.  But these new forms of social media have quickly broken down that divide.  Sure, maybe I can’t interview Tiger Woods directly, like Rick Reilly could, but I can read El Tigre’s blog and possibly have a leg up on even the best reporter as to whether or not he’s going to play next week.  I couldn’t interview Charlie Villanueva about how he felt at half time of the game last week, but thanks to his twitter, I’m connected to his intimate thoughts in a few seconds.  It’s almost like someone turned the light on and revealed the secret…

The sports world does not need so many sports writers.

This social media outbreak really is perfect for sports, when you think about it.  Sports fans want to feel a certain level of intimacy with their sports heroes, and the athletes no longer have to worry about having their words misconstrued (because they’re saying them themselves) or worry about the wrong message getting out there.  The middleman, the sports reporter, is cut out of the loop.

Does this mean the complete death of the sports reporter? No, but if definitely signifies a shift in consumer demand.  Sarcasm and parody over profound prose.  Athlete’s raw, inter-most thoughts over excessive, grammatically correct criticism or accolades.  Adaption is the key if the newspaper, or the traditional sports reporter is to survive.  To their credit, some have recognized the shift, and have done different things to change with the times (i.e. digital content, hiring “average joe” bloggers to write for their sites, etc.) but many are still hesitant about “using the google on the internet machine (c) Will Ferrell.  It is that hesitancy that will spell disaster for traditional media outlets moving forward.

THE FUTURE OF COMMUNICATION

So what does sports communication look like a few years from now? I expect the shift to digital, instaneous, communication to continue, in part because there seems to be nothing present to slow it down.  Players and teams have already started setting up team twitter accounts (some of them are even using Twitter to sell ticket packages), and I could easily envision a future where each player conducts after game interviews using web cams and social media sites.  Viral videos of coaches press conferences? Sure, why not.  Imagine if Denny Green’s “They are who we thought they were” went directly to YouTube, bypassing ESPN and the other sports networks?  Who would lose out? Dennis Green? The Fans? or the reporters and the networks?  And that scenario is certainly far from being impossible, as its already happening (see Lance Armstrong choosing to bypass a post-race interview, and instead twittering his thoughts on the race or Curt Schilling’s retirment announcement on his blog, or even Octagon’s decision to work with Twitter to create Twackle).  The internet has allowed the average person to get the information they so desperately crave without having to pay for or watch the informalities (commercials? skip them. pay premium cable prices to get info from your favorite “inside source” *cough* Jay Glazer *cough*? check out his blog).

So, what’s the question that should be everyone’s mind when it comes to the future of communication and its effect on sports business?

Will anyone pay for this content I just created, or did they already learn about it 10 minutes ago on the internet?

Once you’re able to answer that question, feel free to post the response on Facebook or Twitter…or maybe you can do it the slow way…and send me an email?

These topics and a few others will be covered in the series.  The plan is to look at different aspects of sports business, and discuss the future in that particular field.  All posts will be linked back to this page, as well as their own posts.  Up first, is a look at the future of communication.

Future of Sports & Sports Business: Communication

Future of Sports & Sports Business: Sports Economy

Future of Sports & Sports Business: Drug Testing

Future of Sports & Sports Business: Technology

Future of Sports & Sports Business: Advertising

As if one needed more proof as to whether or not the economic recession is effecting sports, the NBA announced that they will be borrowing $175M, in a private placement deal, to help “bailout” some of the teams in the league.  From the AJC,

…the NBA is set to borrow $175 million on Feb. 26, marking one of the first league financings since the crash of the credit markets last fall.

“In general, the NBA has a league-wide credit facility, just like the other leagues do. The league had already utilized the major portion of that,” Martins said. “The league went out to the 30 teams and asked if they were able to get another line of credit, would we be interested? We said, ‘Yes.’ “

The league surveyed its 30 teams, and 15 were interested in acquiring a loan. Each of the 15 teams can borrow a maximum of $11.7 million from the debt proceeds.

Fifteen out of thirty teams?  Yikes.  Granted, I don’t think there’s any team that is on the verge of filing bankruptcy, but you do have those teams like the Orlando Magic, which are operating at a $15 million dollar loss each season…so obviously, the reasons for the cash are certainly warranted.

As for the borrowing power of the NBA?  It seems to be fairly good considering the situation.  More on the deal from Sports Business Journal,

The private-placement deal was arranged by JPMorgan Chase and Bank of America. In a private placement, non-banking lenders such as pension funds and insurers extend the cash, commonly at fixed rates for five- to seven-year terms and at rates higher than what banks offer for floating-rate loans.

Harvey Benjamin, the NBA’s executive counsel for business and finance, said it’s important not to compare the rates with what the NBA had been paying before the credit market collapse — about 200 to 300 interest points less for similar debt, sources said — but rather, what borrowers of similar standing are paying in today’s environment. In that light, he said, the 8.27 percent the NBA will pay on $100 million of the debt, and the 7.45 percent on the remaining $75 million, is favorable.

While its certainly not surprising that NBA teams borrow money, it is telling that the league has already exhausted a large portion of the league wide credit facility.  It’s also telling, even though favorable when compared with other borrowers in today’s market, that the NBA is borrowing money at an interest rate above 8%.  As both articles point out, the era of cheap money in sports has certainly ended.

EDITORIAL ASIDE — Is it possible that the recession in the NBA could cause a power shift in the NBA itself?  With the trade deadline looming, and the economy in decline, it seems like smaller market teams are willing to make more trades to get big contracts off the books, essentially getting nothing in return (ala Tyson Chandler).  If we had some sort of prolonged recession could we see bigger deals in the NBA and in other sports?  Just a thought.

Atlanta Journal Constitution — 15 teams look to borrow from NBA to offset losses

Sports Business Journal — NBA securing $175M for clubs

The Atlanta Falcons have decided to close their Falcons365 stores in the Lennox Mall and Perimeter Mall areas.  More information from AtlantaFalcons.com,

“While the economy is certainly affecting all retailers, we are making this decision mainly based on our desire to focus our efforts on our online and Georgia Dome sales,” said Falcons President Rich McKay.  “Theses venues allow us to serve the broadest number of Falcons fans, as evidenced by the results of our recent enhancements to falcons365.com, and our sales experience in the Dome this season.”

Okay, I certainly am not the smartest person in the world, but did Rich McKay really just say that the Falcons closed two physical stores not because of the recession, but because they needed to focus more people on the Georgia dome and online sales because they serve more fans that way? Is that about right?  In the recession?  Did some recent internal Altanta Falcons meeting end with this statement?

“Online sales are just too overwhelming. All of you physical store employees need to quit working at these physical stores so you can help fill these online orders!  Um…yes, I know that the online sites basically run themselves, and that you physical store workers won’t be any help but…These online sales are too overwhelming!”

–Rich McKay, Atlanta Falcons President

Seriously, that’s really the excuse they’re gonna use?  Are they really going to insult the fans intelligence?  Apparently, yes.

The decision to close the retail stores was also because the Falcons organization has seen sales increase at the Georgia Dome and at its online store, said Kim Shreckengost, executive vice preisdent [sic] and chief of staff for the Falcons.

“Given our season, it made more sense for us to focus on online sales from our Web site, which has recently been enhanced, and to make sure we were focusing on sales on game days,” Shreckengost said.

Even with the logic posited by Falcons upper management, this still seems like a move predicated on the recession, moreso than a need to focus on an over abundance of online and Georgia Dome sales.  Most football merchandise is sold during the football season, which is inexplicably (or due to the recession, maybe not so much so) the same time that the Falcons chose to close their physical locations…while their team was in the playoffs.  That sounds like a recession issue to me, especially when the Falcons new website has significantly reduced order processing time and the necessity for human labor.

Of course, there has already been a push by professional sports teams to drive fans to their websites for merchandise sales and exclusive content (hence the site re-design of the Falcons, and recent site redesigns by the NHL, NFL, and MLB).  But this move, seems like its little more than the recession claiming yet another victim.

AtlantaFalcons.com:  Falcons 365 stores to close

City of Pittsburgh

As a Pittsburgher for the last 24 some odd years, its always interesting/impressive to see the city on anything that could be considered cutting edge.  Who would expect the blue collar ‘Steel City’ (although we hardly produce that much steel anymore) to bring its sports fans anything that is on the cusp of technology?

I certainly didn’t.  But, I’ve been wrong before.  So, what are they doing?  The Pittsburgh Tribune Review has the answer,

Pittsburgh sports fans who get bored during commercial timeouts and other stoppages in play are getting high-tech options at Heinz Field and Mellon Arena to keep themselves entertained.

Songwhale debuted without fanfare this season at Steelers games as a short-range, digital content service that allows ticket-holders to watch player interviews, music and videos, download ringtones and wallpapers and even get electronic gift cards and concession stand coupons.

The Penguins, meanwhile, are testing a similar but more live action-oriented service for Mellon Arena. [Called the Yinzcam --Ed.]

Anyone who has a phone with Wi-Fi network access at a game will be able to watch replays from a few minutes ago or from a prior game. They can check live scores from National Hockey League games and even choose camera angles, to focus on one section of the ice or on certain players.

There’s more: Yinzcam is designed to allow ticket-holders to view the nearest concession stand or restroom line from their seats, so they can better time their trips.

Both services work through software applications downloaded to a phone or other device that link to limited-range, wireless networks. Tailgaters in the parking lots just outside Heinz Field, as well as fans in their seats, can access Songwhale, Morse said.

According to the article, Songwhale has been well received at Steelers games, and I’m sure that Yinzcam will be fairly well received as well (checking out the line at the bathroom before you go to the bathroom?  Genius!).  Again, I certainly wouldn’t expect the blue collar Pittsburgh sports fans to be the test market for cutting edge technology (The fans in Seattle seemed more suited for this sort of thing), but I’m glad to see that there are more progressive thinkers in my hometown than I originally thought.

Tribune Review — Tech toys bring game to game-goers (via Z’s Newsbits)

Sports Business Digest — Seattle Mariners & Nintendo go “High-Tech” for fans