January 19, 2011 - Forbes
It's safe to say that few organizations are as successful as the National Football League. Its games draw more fans on average than any other professional sports league in the world. Its teams earn billions of dollars in revenue from television and radio broadcast rights. Twelve of the top 25 most viewed television programs in U.S. history were Super Bowls; more than 100 million (or one out of three Americans) watched Super Bowl XLIV on Feb. 7, 2010.
Still, the 2010 season brought a dark reminder that not every part of the NFL’s business model is functioning smoothly. In 2009, the NFL blacked out 22 games, a 144% rise from 2008. In 2010, 26 blackouts occurred. NFL attendance peaked back in 2007, when more than 17 million tickets were sold. Since then, attendance has dropped each year, down 2.4% in 2009 to 16.7 million tickets sold. In 2010 paid attendance was flat from 2009, but season ticket sales fell 5%.
The reasons are nothing if not obvious--the economy’s health, poor team performance, competition from HDTV. And if the causes are obvious, the responses have been nothing if not predictable: Focusing on their most profitable customers, teams are trying to beat HDTV at its own game by offering the TV experience at the stadium to its season ticket holders.
What is not so obvious is why this approach is inevitably doomed to fail and the opportunities the NFL is overlooking as a result. The league's problem getting fans off the couch and into the stadium is a classic case of what Harvard Business School professor Clayton Christensen calls "disruptive innovation."
That's a process set in motion when someone invents an alternative to an established product or service that, in some respects, is not really as good, but is nevertheless in some way vastly easier, cheaper or more convenient. Because it's not as good, it tends to draw off the least loyal customer at first, and so established, incumbent players tend to ignore it, as they continue to focus on their best and most profitable customers. But inevitably, the not-quite-good-enough offering becomes better and better, drawing off more and more customers. Typically, by the time the defenders recognize the threat, they are losing customers quickly.
In this case, NFL teams are the defending incumbents and the at-home, HDTV experience is the disruptor. Watching football on television is clearly far more convenient and infinitely less expensive than going to the game. Ten years ago, it was also vastly inferior to seeing the game live. But HDTV now creates a great home-viewing experience, and it's no wonder that more and more fans would rather enjoy that experience than spend roughly $100 a person to sit high up in the stands, watching tiny players from a single vantage point, with no commentary, waiting through dead moments, sometimes in bad weather in an often family-unfriendly environment.
To be fair, football is not really a cut-and-dried case of disruptive innovation, since the savvy NFL has shared in--and profited mightily from--the revenues generated by the televised broadcasts. Still, it is not so savvy as to avoid the most common mistake incumbents make when confronted with disruption. When it comes to its efforts to fill those empty seats, the NFL is falling into all the classic traps--focusing on its most profitable customers and competing head-to-head with the disruptor on its own terms.
Just who are these consumer groups? Let's take a look:
The Super Fan The NFL's most profitable customer is the season ticket holder, the guy--and it is almost always a guy--who loves the emotional high of "being there" and invests heavily in team gear, fantasy football and specialized TV channel subscriptions. Teams, in turn, invest heavily in keeping this fan happy and for good reason: He represents an up-front, long-term revenue commitment.
Like many organizations in many industries, however, teams are taking the wrong approach to understanding this customer. By installing multimillion-dollar screens (some carrying the same specialized TV channels) and handheld devices, they are trying to replicate the at-home experience in the stadium. Christensen, of Harvard, has piles of stats that show that when an incumbent tries to play the game in the same way as a disruptor, it's rarely the incumbent who comes out on top. These fans are not coming to the stadium to get a better home experience. They're coming to find something they can't get at home--unique value that helps them achieve their deeper life motivations.
The Casual Fan But let's leave the super fan in his seat for a moment because that guy is still coming to the stadium. To fill those emptying seats, the NFL has to move beyond the question of what would make people who already love them love them more and focus on why casual fans and nonfans are increasingly reluctant to come out to the games. The Oakland Raiders, home to five of the 16 blackouts this season, have an estimated base of some 24,000 season ticket holders but a stadium that holds more than 60,000. Each Sunday, then, the Raiders need to attract not only the 24,000 super fans, but also more than 36,000 casual fans to fill the Oakland Alameda County Coliseum and prevent a blackout. Bigger stadiums and better technology won't overcome the growing barriers that matter to these casual fan--the cost, the traffic, the lack of restrooms and rowdy fans.
To find out what will, NFL teams have to take a broader view of those people's lives and consider what problems and needs they might have (or, as Professor Christensen thinks of it, “what jobs these people have to do") that could be fulfilled by going to see a football game. With this so-called jobs-to-be-done approach, NFL teams can not only stem the stadium exodus, but win the hearts and wallets of super fans, casual fans and nonfans alike.
A Winning Strategy Rather than segment individuals according to gender, age, income or other traditional demographic category, a jobs-based approach, logically enough, groups people according to the jobs they need to do. For example:
"Convince my family to attend a game."
"Engage my spouse in the game."
"Feel like I am helping the team win."
"Feel like I have access that others do not."
"Demonstrate that I am a super fan."
"Keep others from knowing that I am just a casual fan."
When looked at in this light, it's easier to see that lots of different people have lots of different jobs they need to do (and, in fact, the same person might have more than one job). Consider, for instance, the spouse who wants to share the super fan's interests but doesn't know enough about the finer points of game or its players to follow along or become enthusiastic. Or the family decision-maker (perhaps the same person as the spouse in a different circumstance) who’s seeking to "spend time with family," but concerned about spending too much money and worried about bringing kids to a probably-not-family-friendly stadium environment. Or the super fan, who wants to feel as connected as possible to the team and show others the strength of his/her passion. Or the part-time fan, who only attends a few games a year, but wants to feel like a super fan and convey to others a higher-than-actual level of commitment to the team.
Grouping individuals by the jobs they need done immediately suggests actions NFL teams could take to fulfill those jobs, suggesting ways to attract people's business that grouping them merely by age, gender or the like could never do. Some ideas for these segments include:
Creating more family-friendly experiences through family-only seating, parking and concessions areas.
Developing special online publications featuring novice-level explanations of routes and strategies and stories about players' personal interests and hobbies or workout routines.
Establishing a service that would give fans a personalized recap of game action.
Offering interactive phone applications and games through which fans can attain increasing levels of social networking status by demonstrating their knowledge and commitment to the team.
Creating an immersive, seat-shaking, "In the Action" section in the stadium to make fans feel like part of the team.
The Two-Minute Warning Even the most successful enterprises must continue to innovate, identify ways to improve customer engagement and grow revenue. The "at-home experience" will keep on improving: 3-D video, immersive audio, multiple data streams and expanded interactivity will make the couch increasingly competitive with a hard, cold stadium seat. This is true not only for the NFL but for basketball, Nascar and other sports franchises.
Particularly in a time when owners and players are looking for ways to generate new sources of revenue, NFL teams should follow the approach that has created significant value in many other industries. Get to the root of customers' problems, think more broadly about what motivates not only their most, but their least, loyal customers, develop innovative solutions to solve the fundamental problems within those segments, and grow the revenue opportunity for all involved.