||36th NACDA Convention|
Salt Lake City, Utah
June 10-13, 2001
NCAA Division I Breakout Session
State of the Web
Monday, June 11, 11:00 - 11:45 a.m.
Good morning. My name is Kim Record and I am the senior associate athletics director at Florida State University and a member of NACDA's Executive Committee. Before we begin our session this morning, we would like to recognize Southwest Recreational Industries who is our audio-visual sponsor. Our session this morning is entitled State of the Web. I know, for some of you who are extremely computer literate, the web has become a very viable vehicle in a number of ways for all of our programs. It's efficient, fairly cost effective and a way that we can celebrate our success. Based on Chris Plonsky's comments this morning and the rest of the panel, we need to be concerned about our message and what the message is and can we control that message. One of the ways to do that is through our web site. It's also an opportunity for incremental revenue. I believe the use of the web is not limited to Division I-A; it crosses the divisions. Each of you on your campuses can find ways to utilize the Internet because that is the wave of the future.
Speaking this morning is Jeff Cravens, general manager at FANSOnly Network. I'd like to welcome Jeff.
Thank you. When I was asked to be on this panel I told my wife that I was excited about talking to this group. She did the usual thing of entertaining me a little bit and then asked me why these people wanted to listen to me. I thought about it for a second and said that I think the reality is that the committee thought they needed to bring somebody in to talk to these people about feeling good about their job. Let's try to find some guy who is still working in the Internet. I'm going to give you an overview of some things I see in college athletics. My first job was working at the University of Kansas in the athletics department. I've been around college athletics my entire 20-year professional career. I know that some people in the audience would term my professional career now would be a big step up. It's been an interesting ride. Now, we have 114 partners in college athletics. We try to get viewpoints from a lot of different areas.
I'd like to start out by saying that nobody is jumping on the Internet bandwagon today. When I tell people I'm working at an Internet company, they ask me how long I'm going to be in business. The reality is that the economics of our business haven't changed, but the perception has. Two years ago, people could go out and get a lot of money because they spent a lot of money and there was a lot of promise in their business. The reality is we've gone back to standard business practices that were more prevalent 10 years ago and are now more in vogue. You need to have a business that works. You can't give things away for nothing.
The big thing I see is that the Internet is not going away. The Internet has grown to a fairly large audience and it continues to grow. It's not measured by the number of people doing business, but by the number of people using the web to interact.
In the last year, it's been a very interesting time, particularly in the sports environment. Talking to people here and listening to the panel before, everybody understands the issues. These are some of the companies that have gone out of business in the last nine months just in the sports areas. Broadband Sports is a company in California. In a little less than two years, they burned through $60 million of cash. When they closed their doors in mid-February, they had to write off about $790 million in tangible assets that company had built. Rivals is another company that many people are aware of. They tried to do a network of beneficial sites, many of which were the bane of an athletics department's existence. They burned through $70 million in capital in a little less than two years. They shut their doors in mid-April. Total Sports is a company that was very high profile, both in the collegiate community as well as in the Olympic community. In December 2000, they reported a net loss of $149 million. In 2000, they had acquired Total Sports, a company that had $63 million of cash into that. They filed for bankruptcy in late April. It's even hit the bigger companies. Disney Internet Group, a high profile spin-off within Disney, disbanded effective March 20. They posted a net loss of $1.1 billion in the year 2000 and operating losses of $242 million.
On the way out here, I was reading an article in Fortune magazine. It featured 20 people who collectively lost $86 billion of net worth in the last nine months. This is staggering that they had it and they lost it. It's definitely been an interesting time to manage a business through that time period. It has major ramifications on even people in this room and will continue as we go forward. Overall, it my view, it's not a bad thing. The economy is back to some normal sense as to where the money is flowing, but it is disconcerting.
Things aren't all bad. Internet usage continues to grow. Internet audiences have grown in that medium faster than any other medium in history. Five years ago, the challenge in our business was to convince an athletics department that they needed to have an Internet presence. Now, it's a mandatory thing no matter what level you're talking about.
E-commerce continues to grow. People continue to transact online. In the first quarter of this year AOL reported $6.7 billion of e-commerce transactions. This is just an AOL. That was a 70 percent increase over the first quarter of the previous year. You look at the economic climate earlier this year and overall, consumers spent a 70 percent increase and that is pretty significant.
There are mature businesses out there that will make it and they will do so by keeping traditional business practices that you all have to follow in your departments. You need to understand what your expenses are and what revenue you need to generate and try to make ends meet.
Why is this important to an athletics administrator? One of the big things I hear now is that the official athletic side of this is mandatory by many of the constituents. One person told me in the hall that we're doing a good job because they hadn't had anybody complain to them about their Internet site for six or seven months. That was a big relief for them and they do get a lot of feedback.
Your online audience continues to grow. It's an easy way to find out what your fan base is. You can identify and communicate to your customer base through your official site, whether that's a fan, whether that's a prospective student-athlete, a parent of a student-athlete, a donor or a corporate partner. It's a great communication vehicle and it's one of the first points people look at.
Finally, your ability to deliver these sponsors and business partners to your fan base in an efficient manner is valuable today and will continue to be valuable as you go forward. We talked earlier about the media fragmentation. The fact is your fan base is not going to go away. It's going to continue to grow every year your school puts out more alumni. If you go through the demographics of college online sports fans, you'll see that's where that's headed.
Why does it work? There is a lot of money put into the online sports business. Consumers respond to sports content online. It's become a way to get information quickly. They can read more information than they can in their daily newspaper. They can get information quicker than in a weekly magazine and they don't have to worry about what they need to know.
People go through official sites. You'll see that consistently, the most traffic sites are the major media brands. There are a lot of reasons for that. The biggest is that fans trust the content that comes on official sites. There is consumer confidence in what they're reading. They may go other places to get information. A certain small segment of the population will go to message boards and get information there. In general, the main sports fan for your university will go to your official site for information. They care about what you say, they care about what your coaches say and they care about how their university is portrayed. They transact in that environment. They can trust you brand and they will transact with it.
The top 10 sports sites for the month of March are on the screen as measured by Media Metrics, which is like the online Neilson Ratings. When you look at this, there are four national media brands out there that have major offline promotional vehicles to deliver an audience online. The rest of them are all official sites, league sites. Our site is all college official sites. That's all our network is, NHL, NBA, NFL, MLB, NASCAR. These are all official sites. Over time, people will say they don't care about the sterilized news that comes from an official site. That is, in fact, wrong. Consumers are telling us every day that they do respond, they do trust that information and it is a valuable place to go on a regular basis to get their information.
People that go online have some certain demographics. When you start looking at people who follow college sports online, we're able to aggregate data from third party people because we have a number of sites. When I have our company's name up there, that's just a frame of reference, that is a college sports fan. This slide shows an index for household income of over $150,000 on an annual basis. An index average is 100. The web average is 100 for household incomes of greater than $150,000. The higher you are above that shows the greater percentage of your audience that is in that demographic. When you look at this slide for a college sports fan, the index for that particular household income, which is very favorable to people who are trying to sell products, is 233. That's roughly 60 points higher than the next highest site. When you go down to the NBA, that's a pretty startling number. When you compare the college online sports fan to the person going to the NBA.com, that will help you understand the value of your audience in the consumer marketplace.
Another one is men 25 to 34 years of age. This is also done like the Neilson Ratings. Anybody can get this information. The online sports fan index is 291, 70 points higher than the next highest area, which is ESPN. The NFL was down 144. A lot of these are February numbers. There is a pretty telling statistic.
In March, we did work with a company called Harris Poll, to do some online polling across several of our official sites. We came up with some pretty interesting results. More than 70 percent of the users are aware of companies who advertise on their own official athletic site. That's a pretty powerful thing, especially in an area when it's pretty vogue to say that online advertising does not work. The fact is, in your environment, advertising does work, that association with your variant does work. Of all of the people surveyed, more than 56 percent said they attempt to support those sponsors who are on the official athletic site.
More than 82 percent of the people said they go to their official athletics site at least once a week, many of them several times more than that. It shows the need and the desire for those people to have up-to-date information. One of the challenges I've seen in the business is that the online sports fan, four or five years ago, was happy when an athletics department just put up the scores and maybe the rosters. Now, the expectation of the online sports fan continues to rise about what information they want about your program. With that, I've seen schools give more and get more engaged. The administrator gets e-mails from people who say they want to see more features about student-athletes. When you listen to Chris Plonsky, you know they want that interaction. They want to be able to ask your athletes questions and give responses. A lot of those people are giving to your program one way or another, whether it's a corporate partner or a donation, they like that interaction. These people have money. People who are your fans are generally college graduates and make a pretty good living.
A question we've had to work through with a lot of schools is, do I outsource or is this something I can do on my own? What do I need to look at? How do I help evaluate that? There's a different answer for every institution. You just need to be aware of what those issues are. One of the big pitfalls we've seen happen is that you can spend a lot of money in a hurry and not get anywhere. I know this firsthand from our business. Our business is extremely difficult to manage. The economics have changed dramatically and not only that, but the technology is always changing and evolving. There is always something new that we could be doing and we could be spending money on. It's hard for us, as a business, to keep that in mind. We need to keep up with the cutting edge, but at the same time understand the impact it has on the bottom line.
The Internet is still very much of evolving media. There are not yet a lot of standard business arrangements. This is actually one of the most maddening things. When I went to the Olympics in Korea in 1988, you couldn't buy anything without bartering. It was expected. As a consumer, I had to work too hard and I didn't want to barter back and forth. I just wanted to know how much it cost and I would decide whether I bought it or not. I found over the last couple of years, if it sounds too good to be true, it probably is. One of the phenomena we had in the business was that these companies were coming in and trying to buy a lot of Olympic sports rights from conferences. Schools were concerned and no one really knew what it meant, but there was a lot of money out there. The common thing I kept hearing back from the administrators was that it didn't make any sense to them. They didn't understand the value. One year later, I don't know that one of those checks was ever written. It goes back to the common sense you have as a person who knows your business.
What are the opportunities? There are a lot of opportunities today on the Internet. Again, it's hard to focus. One of the things on a regular basis dealing with athletics directors is that you have many challenges on campus. You have so many things to worry about. Quite frankly, one of the last things I would worry about as an athletic director is what's going on on the Internet. It's always changing and you've got enough problems to worry about. It can and it will, over the next several years, positively impact almost every area of your business. Not only is it a great communication channel that's going to continue to grow, but you're also going to be able to track what those people want to do and what their habits are. These are the people who are interacting with your department most. One of the interesting things about the demographic slides I showed earlier on the 25 to 34 age bracket is when I started to talk about the ages of the online audience, a lot of athletics administrators say they are the hardest people in our fan base to reach. Usually, you lose track of people when they leave school. That gap is being filled online. You can now understand that demographic.
Over the next several years, you will see the Internet will help you do business more efficiently in a lot of different areas. There are different business functions that can be run more efficiently online. There are some that we haven't thought about yet that will help you handle your business more efficiently. It's going to be good for you to be aware of those and how they will impact you. When I talk to administrators, it's how do we do more with less? There's a revenue shortfall and I've got to build a lot of buildings. Those are the general themes I hear all over the place. The Internet will be able to afford everybody some opportunities to do business more efficiently.
What about broadband? I sat in on the NCAA and CBS presentation yesterday morning and they talked about some potential broadband distribution for NCAA championships. Personally, I think we're a long way from that. The traditional television model we know today is not going away anytime soon. I contend it may not go away in my professional lifetime. There are so many issues right now with broadband distribution. The fact is that audio and video streaming on the Internet is still not a very good experience. My wife will be the first to tell you that I'm a computer nerd. I love going around the net and look for different stuff. I can't watch a lot of audio or video on the net, especially live sports action.
One of the keys for you as an administrator is that one day someone will figure out how to do distribution of media in a different format than we know today. It will probably be called broadband. It may be Internet-based, it may be something else, but there will be opportunities to get more exposure for your programs outside of the nontraditional venue. My belief is that those opportunities will not be funded by sponsors because, at some point, there will be enough sponsorship opportunities out there so that you can't always fall back on the corporate community, especially with the pressures that we see on commercialism. I think it will be more subscription-based. That's what I believe. It's going to be key for college administrators to know their audience and be able to market to that audience in an efficient way to help make that program valuable and available. It will help make those media discussions that you may be having seven, eight or nine years from now more valuable.
When you start looking out seven, eight or nine years, there is going to be the ability to deliver programming. Your key and the value that you're going to have in those discussions is your ability to bring your fan base to that offering. We know that your fan base is going to be the people that will be most likely to transact and buy a premium cable channel. We've seen that consumers will pay for extra programming, direct television, satellite companies. That's a growing business as is digital cable. Premium deals like the ESPN game plan or the NFL package will be bought by people. People will buy that in the future. When you talk about all of the fragmented programming, your ability to deliver specific content to your fan base is going to be key. College athletics, unlike the leagues, are going to have a better opportunity to do a lot of diverse things in that area.
Revenue augmentation is one of the things I've heard the Internet can bring to a department. I actually think that right now the revenue you can generate off the Internet augments current areas of your business. I'll give you an example. Our online store business has really grown. The sale of license merchandise is not a new revenue stream to athletics departments. Licensing is not a new revenue stream. We are able to effectively move a lot of merchandise to the fan who is not able to walk into your bookstore, maybe only comes to one game a year. He may want to buy things for Christmas or if your school wins a championship. Those people who can't get that stuff in a local store will use this method. More and more consumers are getting more confident about buying online. That's particularly so in this environment because they trust your brand. These people trust the brand of your athletics department. They know that if they buy something from a store the athletics department authorizes, it's going to be quality merchandise. We've gotten that back continually from people who do buy in our stores. That's not new revenue. That's just an augmentation of a current revenue string.
It's been effective in the area of online ticketing. That's a two-way thing. One is a way to augment that revenue stream of your box office. The other is it's a way to create a lot more business efficiency within your box office. That will continue to be an area of your business growth.
Online camp registration. We've seen people who have started to offer online camp registration and are widely successful. Not only was it not new revenue, they had the same number of camp spots they had before, but they became three times as efficient in processing them. Therefore, that administrative assistant or part-time person who had to process all those by hand is now not needed or can do other things to help the program. Those are some areas where I think that the revenue that comes in from the Internet augments what you have. I wouldn't call it new revenue, but it is a vehicle to do things more efficiently and to reach consumers that you can't necessarily reach.
The Internet is not going to make you millions of dollars, but it's not going to go away. It's very relevant to you, your business, your fan base. In my view, there are very few areas of your department that are not going to be positively impacted by Internet based applications moving forward. They have nothing to do with the delivery of your stats after a game. It will help your business. As Kim pointed out, it's important for you to understand that you do control this medium through your official athletics site. The consumers come and they want to know what you have to say. Yours is going to be the place they first go to to get information. They will come to you and they will continue to come.
Bob DeCarolis from Oregon State. Given all of the fallout at the beginning of the presentation with all of the dot coms falling apart, what was your secret to your success for FANSOnly to stay in business and how are you capitalized going forward.
It was a challenge. Our partners are conservative people and we had to be conservative. We're careful about where we spend our money. We actually have walked away from a lot of money, which will push us away, and toward the directions that I think are important for our particular business. A lot of our business is service oriented. In 1999, we merged with a company called Student Advantage, who shared our business philosophy at the university level. They had no previous experience with college athletics, but dealt with several other places in the university. They understand the philosophy of working. When they acquired the company, they understood our business plan. They were very supportive as long as we followed our business plan, which we have.
The fallout has been both interesting for us and a challenge. I've actually had athletic departments in almost every meeting I've had in the last four months ask me about our business. Are you guys viable? Are you guys going to make it? Why? Actually, that's been one of the most uncomfortable questions for them to ask, yet, it's one of the easier questions for me to answer. It's a good question. We went through an era where there were a lot of rights fees in this particular business. I actually had people in some of my meetings say they didn't care whether we made it or not. If we weren't willing to pay them, that was the case. Rick Jones from the GEM Group talked about the short-term and long-term greed aspect of how you look at outside business partners. We lost business during that period. I personally like the tough questions. I know that this is an industry that can't really hide. You can only do business in this industry out in the open. That's been refreshing. It's certainly been a challenge to continue to manage our business in a constantly changing environment.
Steve Metcalf from the University of New Hampshire. Can you tell us a little something about online fund raising and what you think about it? Do you think people will do that?
My personal opinion is that eventually there will be online fund raising components. One of the challenges right now is that fund raising is such a one-to-one business. It's important for an athletics administrator who is trying to fund raise to somebody to have that contact, that interaction, that selling on why somebody should donate. That's very important. It's probably a little bit too early on the Internet to get that emotional challenge. People still like to get those calls from people.
Do I think that there will be ways that the Internet will make that business more efficient? Absolutely. Do I think it's going to replace a lot of asking for fund raising? I'm not sure I'm sold on that yet because it's still very emotional and a very emotional give. It's important for someone who really has bought into that department and the vision of that department to have those conversations, especially at the higher level.
The short answer is it's not a huge business today. It's going to be more of a business, but I'm not sure what the give and take of that is.
Mike Hermann from Niagara University. We're one of the schools you pulled out of the soup in April when Total Sports went under and we thank you for that.
One of the companies that was on your list is BroadcastSports.com. Some of us had radio broadcasts on the Internet. What do you see in the future there and what are your recommendations?
Streaming game audio is an important facet for an athletics department. The fact is there are still not a lot of consumer numbers there. I'll give you an example. A really big college football game last year, a major top 10 versus a top 10 school would draw 7,000 unique people. That's not a big number. I think it's a service for your fans, particularly in the Olympic sports. It's a way for parents to follow what's going on. The challenge for that busienss is how do you provide that service in an economic deal what works for everybody. That's one of the bigger challenges we face. I think it's very rare that somebody will sit down at their computer and listen to a game. I'm a big Kansas fan. I may check into a game that I can't get on television maybe three times. I can only sit there for a few minutes and that's about it.
From the Floor
One of the things you pointed out is that the Internet is a good way to identify your fans. What are some of the best methods you've used to identify your specific fans via the Internet?
About a year ago, we invested in the development of a user registration system that can be used across a lot of things that happen on an official athletics site. Whether you register for a weekly newsletter, play an interactive game, we're going to bring the people who purchase in the store into that database. Pretty soon, it's an investment to set that up. It's important to one day be able to look at and see a guy who you never hit up for money has bought in my store seven times in the last year. You'll see he's played every interactive contest and he's sent his kids to my camp and we don't know him. We've never contacted him. That's going to be one of the ways that you'll be able to identify who those important customers are that you can't identify now. If a guy buys in your store, you don't know who he is. That's one of the challenges with trying to bring something in house is to find someone who knows what you need to get out of that.
Doug Ihmels from Cal State-Bakersfield. I was interested in your thoughts on online ticketing.
I think online ticketing is an area that I'm not sure where it's going to end up. I don't know if we have any ticket managers here, but ticket managers are a little touchy about this subject. I think the way ticketing is done is going to continue to evolve over the next few years. People like Paciolan have worked hard to help change with the changing of business, which is important.
People do want to transact online with ticketing. It's more convenient than a box office. I found in most schools that they are not in the marketplace to have the option of a TicketMaster, so they have their box office only. A lot of fans come to games are outside that area and it's difficult for them. That will continue to grow and the Internet will not only help find those fans, but it will also make it more efficient to deal with those fans with everything from season ticket renewals to season exchanges to selling single game tickets. One of the challenges we see is just trying to identify what that opportunity is. A lot of schools have no ticket availability for high demand sports and a lot of ticket availability that is going to be available whether they're sold off line or online. It is a way that consumers want to see.
David Johnson from the U.S. Ski Team here in Salt Lake City. One of the great challenges we've had is what I call the battle for real estate both internally with member services and competitions and externally with sponsors and suppliers. How do you help new clients navigate how they get through strategically what they want to get done and get there.
This is one of the biggest evolutions of our business in the last five years. When we started out, we dealt only with the sports information office. That was the first two years in business. They were the only people we had contact with. We then started getting more involved with the marketing staff when they started realizing the Internet was a way to do marketing. Now, we sometimes deal with seven or eight areas within an athletics department. They are starting to realize the value. They are saying that our department's aggregated this online fan base. Those fans are asking them why it isn't available online. The consumers in our environment are pushing people that way.
People come to your site on a regular basis for athletic competition information. That's why June and July are low traffic months and from September to May, we see spikes around everything you can imagine. It hasn't really been a very big issue within athletics. We've run into it at a time or two. Generally, the marketing people and the sports information staffs don't exactly sync up. We've seen some challenges there. The rest, on the business side, is how can we take advantage of the medium now that our school has aggregated this online base?
When you finally realize it, it's pretty easy to figure out what a customer wants when they deal with an athletics department. You guys know what your fans want. You are also in a very public arena. When the fans aren't getting what they want, you don't go too long without knowing about it. That's going to sort out the curve issues at least in the collegiate environment.
Bill Macriss from Sacramento State University. You talked a little about how effective the advertising can be on the site, yet I'm guessing that a lot of the companies that went belly-up started with their financial plan on being able to sell those ads and get the traffic from that. That's why they weren't charging the institutions. Are you talking more about the banner ads or more about the sponsor support? A lot of our sites have a sponsor section that gets hit which are the people that specifically have a relationship with the university versus a banner ad, for instance, FANSOnly, which is really an ad that may not have a connection to the school, but more to the Internet site. Is there any statistical information about when you talked about the loyalty and when they go to those people and do business with them? Are you talking about the sponsorship ads or the banner ads?
One of the interesting things is how the Internet advertising business has evolved. One of the things that killed the business out of the gate is all the major interactive ad agencies that were created to take advantage of the medium. They spent all of their time talking about how measurable Internet advertising is. The fact is more than 90 percent of all television ad buying is a branding buy. It's not direct response. The Internet thing got in with direct response and that's a whole different deal than a branding deal. There is no way anybody can sit back and tell me that the advertising community was ever going to have that much money to support that many companies at that high level. It just wasn't going to happen.
We see marketing departments and work with them on how to integrate their sponsorships. It may be a sponsored element whether it's an interactive game, whether they are sponsoring Meet the Team, etc. There are also advertising banners. However, that advertiser gets that association and I think it's a combination of the sponsorship, as well as banners. The consumers we polled said they respond. That's the data I have. Were all those direct response companies? No. People who are athletics department partners who advertise on site don't always have a direct response set up. On the regional level, we used to have to go and tell regional advertisers what the Internet was and how it worked. Now, there's an expected Internet component to their overall package.
I'm not sure how that works. I think we're still learning, as a business, how to deliver effective messaging for corporate partners and association with it. People do recognize those people.
Thank you Jeff. Please go visit the exhibitors. There is a wonderful assortment of vendors there. I want to thank Jeff for giving us the State of the Web address and thank you for your questions.