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Industry Insights

As the industry leader in evaluating and measuring marketing investments, Navigate has a wealth of knowledge in the sponsorship and marketing space. This blog shares our knowledge and insights on current events in the sports business, marketing and sponsorship worlds.

Maestas: Expanded playoff would generate millions annually for the schools, increase audience and solve controversies

Navigate Research - Friday, December 06, 2019
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Expanded playoff would generate millions annually for the schools, increase audience and solve controversies
Push the championship game back into January to avoid conflicts with the NFL

*** AJ Maestas, founder and CEO of Navigate Research, a leading data and analytics firm, has agreed to write a regular column for the Hotline on the business and economics of college sports. His November article on declining attendance in college football can be found here.
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Having worked in the sports industry for over 20 years, I’ve had the opportunity to see and experience some of the greatest sporting events across the globe. From witnessing the World Cup games in Russia and Brazil to watching the final stages of the Iditarod and Yukon Quest in Alaska, I’ve become a fan of almost every sport.

However, nothing compares to watching my Washington Huskies play football every Saturday in the fall. There’s something about being an alumnus — being part of a community, creating new memories and remembering old memories — that will always solidify college football as my favorite sport.

As excited as I am about college football moving away from the two-team Bowl Championship Series system to the new four-team College Football Playoff, I can’t help but think about the benefits of expanding the CFP even more.

There are 130 teams in the Football Bowl Subdivision, which is the largest collection of teams or set of competitors in any league in the world by a multiple of four. With only four of those teams getting into the playoff (three percent), that’s an extremely large league with an extremely small playoff. 

As a result, some conferences know they don’t have the strength-of-schedule or level of competition to ever make the playoff. Group of Five administrations, players and fans can only dream about the possibility of winning a national championship.

While the benefits of inclusion would be tremendous, expansion still isn’t an easy decision. There are many factors to weigh and many stakeholders to consider before moving forward.

To dive into this topic with true expert knowledge, data and projections, I turned to Navigate’s Senior Vice President of Analytics, Matt Balvanz.

Balvanz has been leading our secondary research division for over 10 years, developing cutting-edge analysis methodologies and focusing on sponsorship valuation of naming rights deals, sponsorship category research, media-rights and apparel rights analysis, conference realignment and more.

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GLOBAL SPORTS PLAYOFF LANDSCAPE 
Before jumping into the current CFP format, it’s important to compare the postseason structure against other popular U.S. and global sports leagues.

For example, in domestic professional leagues, 30-to-50 percent of teams make the playoffs, which keeps all stakeholders excited about the potential of winning a championship for a much greater part of the season than is the case in major college football.

International soccer leagues like the UEFA Champions League and Premier League offer 20-32 teams the opportunity to win championships using various point systems, group stage round-robin competitions and single-elimination tournaments.

The National Rugby League’s playoffs (Australia) include eight of its 16 teams.

Without question, the CFP is more exclusive than any other league in the world.

CFP CONTROVERSIES
Whether under the BCS model or in the era of the CFP, several worthy teams have been excluded due to the limited berths available in the tournament.
Below is a quick sample of the most controversial selections:
  • 2004 – Auburn finished the year 12-0 but was not selected to be in the BCS national championship game, which instead featured USC (13-0) and Oklahoma (12-1).
  • 2011 – Alabama didn’t win the SEC but was selected to play LSU in the championship instead of an 11-1 Oklahoma State team that won the Big 12. In the end, the rematch between LSU and Alabama was not a competitive game (Alabama won 21-0), but many critics believe the result was the nail in the coffin for the BCS.
  • 2014 – Ohio State was selected for the CFP ahead of TCU and Baylor. All three were one-loss teams at the time; there was no clear-cut reason for selecting Ohio State given schedules and results.
  • 2016 – The Buckeyes were again selected for the CFP. They were not a conference champion and ended up losing in the semifinal to Clemson (31-0). This was the year Group of Five member Western Michigan finished the regular season 13-0 and was still excluded from the CFP.
  • 2017 – Alabama made the semifinals without winning the SEC, and the Big Ten and Pac-12 champions were not selected.

POTENTIAL CHANGES
There are several routes college football could take to improve the current system.

One method wouldn’t require expansion: Create an algorithm-based selection process where the formula is transparent, and the path is clear to all vested parties — thereby eliminating the need for objective selection decisions.

Another potential fix is expanding the playoff to eight, 16 or 32 teams to have more automatic qualifiers and a few at-large teams.

More drastic options could include consolidating all major conferences and have four champions qualify. That would require cutting the FBS pool to 64 teams with true division champions making the CFP. A promotion and relegation system could be installed — the type seen so often in international sports leagues.

While there are many potential fixes, the best course of action, in our opinion, is creating an eight-team format.

It would include five automatic qualifiers — the champions of the Power Five conferences — plus one automatic qualifier from the Group of Five and two at-large teams.
This structure would solve many issues, such as:

*** Conferences could determine their own champions, eliminating the issues of unbalanced conference and non-conference schedules. One conference’s championship game would not impact another conference’s chances of securing a CFP berth.

*** The Group of Five would be given a participant each year, offering the potential for a Cinderella story that would appeal to both existing and potential mass audiences. Imagine what may have been possible had this structure been in place for Boise State and UCF over the past decade.

*** Almost all human bias and inequities would be removed with only two at-large teams selected.

*** And regarding the dates:

The conference championship games could serve as the first round/quarterfinals, negating the need to change the infrastructure. Or the major New Year’s bowls could become the quarterfinal round, with the semifinal moving back a week.

And we would recommend one more adjustment:
Play the championship game the week before the Super Bowl, when there are no NFL games — it’s a perfect opportunity and would likely break historical viewership records for the game.

ESTIMATED IMPACT
Expanding the playoff can have enormous potential financial benefits for competing schools and conferences.

To illustrate, consider that there have been about 25 million television viewers for the CFP championship and 20 million for the semifinals, which totals roughly 65 million TV viewers per year.

If the playoffs expanded to eight teams, four games would be added to the inventory with a likely audience of 15 million viewers each — another 60 million in total.
Based on the average payout by ESPN on a per-TV-viewer basis, we estimate that an expansion to eight teams would bring in at least another $420 million per year, and expansion to 16 teams would add another $560 million annually.

That’s tens of millions of dollars in additional revenue for the conferences — and millions for the individual schools.

Combine that with the current payout for the four-team event, $467 million per year from ESPN, and the total for eight teams would be $887 million per year.
A 16-team event would generate up to $1.45 billion per year.

These estimates don’t include the potential lift in TV viewership from a greater overall interest in each round from fans and non-fans.

There is also precedent for playoff expansion creating more interest and meaningful games, such as:
  • MLB – Since the Wild Card rounds where added, 13 Wild Card teams have reached the World Series and seven have won the World Series, showing that teams not expected to win championships under old formats can still excel in a championship tournament format.
  • FCS – Expanded playoffs from 16 to 20 teams, and then to 24 teams. But the increases have not resulted in too much parity: North Dakota State has won seven of the last eight championships despite having to win more games
  • Rose Bowl – Before the Rose Bowl was part of the playoffs, TV viewership was around 18 million. Since the change to a semifinal game, viewership has risen to well over 20 million, and sometimes over 25 million.
  • Sugar Bowl – Similar to the Rose Bowl, viewership has increased from 16 million to 20+ million as part of a playoff.
CHALLENGES
Expansion or restructuring of the postseason is not as simple as it appears from the outside. With major changes come major challenges for administrations, coaches, and most importantly, student-athletes.

Below are some common objections raised by those who want to maintain the current system, along with some initial counterpoints for each.

*** Since conferences are all independent and control their own rights and TV deals, expanding a playoff would require consolidation and giving up some rights. But with a few dominant TV players and conferences that operate fairly closely to each other, these hurdles can likely be overcome
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*** An extra round would mean extra games for the players, which is important to consider when student-athletes are already spread too thin. But the recommended eight-team playoff really only adds a single, incremental game for a few teams.

*** Some administrators worry that final exams in December would be more complicated if football players have a potential extra game, but even now these same players are completing final exams while juggling bowl games and other events, so this likely wouldn’t create any new problems.

*** Many school presidents and chancellors balk at the thought of the football season crossing into the winter semester, making a championship game the week before the Super Bowl counter to their desires. But many sports, including college basketball, cut across multiple semesters. Again, this is an issue that has been solved before with other sports.

*** The Rose Bowl has a lot of brand equity, and potentially moving the date and significance of the game with an expanded playoff could jeopardize its standing. However, not making an important change in order to protect the history of a single game is not in the best interest in of college football. And the game has remained significant after changes to the BCS and the CFP, so it would likely maintain a very strong reputation under any structure.

Even though college football is one of the most popular leagues in the U.S., the sport has a championship problem.

The good news is that it can be solved with limited challenges; fans are ready and willing to adapt.

For now, the most logical next step is expanding to an eight-team playoff that starts with the conference championship games or the existing New Year’s bowls as the quarterfinals.

Move the championship game to the week before the Super Bowl, and leave open the potential for future expansion to 16 and 32 teams.

The path is clear — and it definitely passes the eye test.

Maestas: Challenges for college sports require “independent, objective” analysis; this column aims to deliver

Navigate Research - Monday, September 16, 2019
AJ Maestas, founder and CEO of Navigate Research, a leading data and analytics firm, has agreed to write a regular column for the Hotline on the business and economics of college sports. The following is his first contribution.

The business side of collegiate athletics is unique, interesting, frustrating, fun, full of political landmines, and often perplexing to fans.

It is growing in some areas, stagnating in others, and ultimately is a space full of arbitrage opportunities and inherent risks.

Even if change can be slower on the collegiate side than the pros, it is never-ending and never dull.

For all of those reasons – and because the on-field product is also my greatest passion – I have decided to write a regular column for the Pac-12 Hotline.

My aim is to take the research, data, and analytics that my firm, Navigate Research, uses to consult in the sports and entertainment world and combine it with my experience to help inform the readers on a variety of topics that impact the universities and the programs they love.

Over the coming months (and hopefully years), this column will cover major topics and questions like:
  • What is the economic reality of someone having control of their Name, Image and Likeness?
  • Will the fragmentation of college sports into different divisions and conferences continue?
  • How does the changing nature of consumption affect college sports?
  • What can be done to optimize revenue at the university level and how does that impact fans?

I hope to engage with readers and tackle additional topics as they rise to the forefront of the regional and/or national conversation.

I’m sure there will be no shortage.

Before we dig in, I want to share a little more background about me and what I do.

What you need to know about me
  • I grew up in Fairbanks, Alaska, obsessed with baseball despite our very short summer season. We were multi-generational Alaskans which put us in a small group of locals. My grandfather was even, reluctantly, considered a pioneer.
  • Attending the University of Washington was a transformational experience — the catalyst for a life that was different from anything I could have imagined.
  • I met my wife at UW and made lifelong friends that I still travel with today. I did a lot of growing up in Seattle, and I’m still bonded to the place that gave me an unbelievable gift.
  • College athletics is an important piece of that connection. A failed attempt to play baseball in college was a stepping-stone experience that altered my life.
  • At Navigate, the research and analytics consulting service I founded in 2006, we have worked with sports teams, leagues, brands, networks and agencies from all over the world, including the NFL, NBA, Big Ten, ESPN, NRL, CAA, IMG, Toyota, Visa and Anheuser-Busch.
    • One of the joys of our work is the people and places that we get to call business. It’s part of our job to be at places like the Super Bowl or Waste Management Open annually on a competing weekend.
The landscape of collegiate athletics

College football is my greatest passion — the reason I’ve decided to write this column.

This is an incredibly challenging time, full of opportunity and risk, for college sports.

Here are these entities, these athletic departments, sitting inside universities that are not-for-profit settings and full of highly risk-averse executives.

The executives are not ill-intentioned, but they find themselves with such a broad range of stakeholders and decision makers and a risk-reward system that can get you fired for a mistake but doesn’t get you a bonus for driving revenue or progressively moving the university forward.

It’s often regressive and reactive.

The irony is that universities are supposed to be safe spaces for innovation, but they’re still opening up textbooks.

If you took a snapshot of a classroom and asked all the students to put their laptops and iPhones away, it would look no different than it did 100 years ago.

And here is where collegiate athletics sits:

To expect the two or three percent of a university’s budget that’s devoted to athletics somehow won’t be influenced by the main campus — that’s crazy.

So, the challenge is:

How do you sit in this environment that is supposed to be this, but is often this other thing, and how do you move it forward?

What you see is that it moves forward very slowly, very carefully, in a reactive way, and only after it has been triple-proven to be safe.

That’s the opposite of what this space should be.

The opportunities are incredible, and that explains some of the things we’re going to address in my forthcoming columns.

We’ll talk about revenue, including revenue for student athletes. It’s not a dirty word, even in a not-for-profit scenario, if it’s serving the ultimate mission.

If you can maximize revenue and apply best practices, that money could serve the mental and physical well-being of the student-athletes.

It could serve to further their education, to protect them in the future from some of the risks they will take, to train them for their roles as a parent or spouse and to be a contributing member of society.

All these things are lagging because college athletics is inside a risk-averse world, which, I should add, is highly fragmented.

How do we move forward to an inevitable future with so many constraints and controls?

When I say inevitable future, I don’t mean that’s necessarily the right place. A solid argument could be made that college athletics should be what it used to be: pure amateurism.

But forces are pulling it toward economic maximization, toward parity and fairness, toward serving the constituents that don’t have a strong voice, the student athletes.

When you hear the public debate about college sports, it’s often from a very biased viewpoint: Someone uses anecdotal evidence to tell their story.

My goal with this column is to represent the material points on either side, backed by objective, independent, third-party insights that will allow readers to draw their own conclusions.

Even if people weren’t promoting their own agendas in the public dialogue, there are a lot of strongly held beliefs that we at Navigate don’t feel are accurate.

This is also true of professional sports, which are commercially a decade or more ahead of collegiate athletics — and pro sports itself is often five or 10 years behind the regular business world.

The plan for this column

We want to take on these major topics and more:

  • What is behind the drop in attendance?
    • Ticket prices and start times are often cited as the reason, but we’ve done extensive research that reveals larger challenges such as traffic, transit and the opportunity cost of time in exchange for the value of what fans are getting in return.
  • Increased benefits and pay for college athletes.
    • What is the economic reality of someone having control of their Name, Image and Likeness? And what does it mean to attract and retain student athletes with the changing legal landscape?
  •  Will the fragmentation of college sports into different divisions and conferences continue?
    • Navigate is often a consultant to universities and conferences on realignment.
  • How does the changing nature of consumption affect college sports?
    • In an increasingly digital world, there are only so many hours in a day. We’ve found that the average fan will spend about eight times as much time reading about their team, posting on social media and interacting with others than consuming the product itself.
  • What can be done to optimize revenue at the university level?
    • There is not a level playing field when it comes to multimedia rights, fundraising, ticket sales, licensing, and concessions.
    • We aim to answer what your university should be doing to compete at the highest level.
  • Rising recruiting investment and socio-economic factors.
    • (We’ll address this topic in advance of the early-signing period in December.)
All the time, we see beliefs held in public that are in direct conflict with data.

Navigate is in a rare position in the middle of the industry: We’re in position to look at what the reality is today and in solid position to predict the future.

Every day, I learn something new that debunks what I held to be true in the past.

Beliefs should evolve over time, and we want to be a catalyst and have a voice to hopefully influence the national debate.

Follow Navigate on Twitter: @Navigate_Res
To contact AJ Maestas directly, email AJ@NavigateResearch.com


Navigate Research Appoints Alexa (Linger) Huchingson as Chief Revenue Officer to Fuel Growth

Navigate Research - Wednesday, September 11, 2019
NEWS RELEASE


Navigate Research Appoints Alexa (Linger) Huchingson 
as Chief Revenue Officer to Fuel Growth

CHICAGO, IL. – September 11, 2019 – Navigate Research, a trusted advisor to leading brands and organizations in sports and entertainment, today announced the promotion of Alexa (Linger) Huchingson as the company’s Chief Revenue Officer (CRO). In this newly created role, Huchingson will be steering sales efforts of the organization.  She will oversee business development, sales strategy and client experience. 

Over the last four years, Huchingson served as Vice President of Business Development at Navigate. Through Huchingson's dedication to deepening relationships, she consistently excelled beyond her sales goals and grew business by over +300%. Before Navigate, Huchingson spent four years at IMG College managing all partner activation, as well as new business development. 

“Alexa has every trait you want in a CRO. She’s smart, hard-working, thoughtful, and people gravitate towards her in rooms big and small,” said Jeff Nelson, President of Navigate Research.  “What’s even more crucial for a business like ours – she has a genuine desire to listen to our clients, craft solutions that will help them succeed, and then contribute to the work as our team delivers.”

“From the day Alexa joined Navigate, she has been an integral part of our evolution from research firm to strategic consultancy, and we are thrilled to have her leading our sales efforts.”


About Navigate Research

Navigate Research is a trusted advisor to leading brands and organizations in sports and entertainment. We are experts in applying business intelligence - through our research and analytics – to measure and value marketing investments, guide major decisions and create strategic partnerships.

Based in Chicago, Navigate provides clients with the insights and consultation necessary to achieve their objectives through best-in-class capabilities. Navigate has measured the impact and ROI of hundreds of sponsorship deals and has valued billions of dollars in sponsorship transactions on behalf of brands, properties, universities and agencies.

Gen Z, Millennials & Sports

Navigate Research - Wednesday, August 28, 2019

By Ally Corbin

Who is Gen Z, and why does it matter that we define them?  Why do generations need to be labeled in the first place?

Generations Defined

Before thinking of Gen Z, or any generation, it’s important to understand the value of labeling generations and why we define groups of people in general. 

People are fascinating – we are all creators, consumers, investors, life-long learners, critical (or not so critical) thinkers, and we’ve been doing such activities since the beginning of human existence.  New and advancing technologies have paved the way for how we gather and share information, but at the core of communication, we’re all doing the same thing to varying degrees, and we’ve been doing so for centuries.  Pending the time period in which you grew up, the way you create, consume, learn, and think are different than your predecessors thanks to technological advances, yet the goal or impetus is usually the same (e.g. communicating across distances, keeping yourself occupied, earning money, etc.).  Generations are a means to group people together by birth years to simply understand them as a collective. 

Generations are typically defined by birth years grouped together of 15-20 years; sources vary with exact dates, but the table below helps to establish general time-frames in which we think about modern Western generations.

Generations, Socially Speaking

From a social science perspective, generations are defined as a cohort who experience the same significant events, thus shaping the way you view the world at a given point in time – e.g. new inventions, modern technologies, war, noteworthy crises, etc.  Generations are beneficial to help individuals relate to other human beings, and they’re also beneficial for businesses to make strategic decisions to reach targeted audiences. 

Entrepreneurs, brands and organizations, are usually seeking ways to better understand patterns of people – how people exist, what they like or don’t like, what motivates them, where they can fill gaps or assist pain-points, etc.  These patterns can be simplified into three categories: (1) time (2) talent and (3) treasure.  

Understanding this information helps businesses inform the bottom line.  The way someone spends their time, talent and treasure is dependent upon their age and life experiences.  It important to understand nuances that exist between generations to ensure the bottom line reaches all audiences. 

Without getting specific, it’s clear that Millennials likely navigate life differently than members of the Interbellum Generation.  It gets tricky, however, when generations border one another.  This is where Gen Z comes into play.  We asked ourselves, “How do Millennials differ from Gen Z?”  And since we’re in the sports and entertainment industry, we also wanted to know, “How does Gen Z fit in to the sports landscape?”

Gen Z Interest 
Many people over the age of 45 tend to think anyone under the age of 30 are Millennials.  The term Millennial has taken on more meaning than the true generation definition – there is stigma with the term that relates to “young people” who are “lazy” or who are treated more leniently than the previous generation, and thus their choices, assumptions and behaviors are different (or less than appreciated by older cohorts).  That topic is a good one, but not so much meant for the purpose of this blog.  Our goal of going deep on generations is to understand the emerging workforce cohort, which are Gen Z, who are  different from Millennials.  

There are quite a few details that exist on Gen Z from other research and exploration, but little information exists when it comes to how Gen Z engages and prioritizes sports.  We chose to conduct a Gen Z study to start to peel back the onion on what makes Gen Z unique and proactively understand how our industry can connect and motivate those in Gen Z to consider sports higher on their preference list.

Navigate Gen Z Study Details
Understanding the nuances among a large group of people is a tall feat.  It’s important to understand our Gen Z study is the first of many, with the initial round meant to scrape the surface to inform the next round of investigation.  Our study was designed to gain input from Gen Z and Millennials, focusing on understanding Gen Z  and comparing their behaviors and preferences to Millenials.  Earlier this year (2019) we surveyed 500 members of Gen Z (ages 13-23) in the U.S. as well as 500 Millennials (ages 24-36), posing nearly 40 questions to both groups.  

What Topics Were Measured?
Before diving into sports and asking the burning questions of, “What leagues do you like most?” or “How often do you watch?” we felt it was important to have context with their interests and what grabs their attention in general.  

We asked about...

  • The local connection to the team(s) nearest the city in which they grew up
  • How they identify as a general fan
  • How they became a fan
  • Their overall rankings of leagues, attributes associated with leagues 
  • Watching and attending habits 
  • Sports content engagement (from TV to microsites)
  • Platform preferences
  • Predictions for the future when it comes to watching and attending

We ended the study on a lighthearted note, asking Gen Z to describe their generation to someone in the Millennial cohort, and we ask the same of the Millennial group to share their perspective to Gen Z.

What Did We Find?
We’re excited to unveil our findings over the coming months, including a macro approach of what we found with Gen Z and sports overall, as well as providing details within pro and college specifically and how the conclusions can provide guidance for decision making.  

As a teaser, it is safe to conclude that Gen Z are not as passionate about sports as Millennials, but there is opportunity to increase their focus by integrating elements that are higher on their priority list.  Pro sports come in at the number 5 (out of 12) overall spot among Gen Z interests.  

35% of Gen Z consider themselves ‘interested to very interested’ in pro sports compared to 48% of Millennials.  We have theories as to why the differences exist, including sports playing history, influence (or lack thereof) by their parents, and increased avenues that can/do grab attention of ‘kids these days’.  Additionally, as much as Gen Z are different from Millennials, there are several overlaps and subtleties that make the groups tricky to differentiate.  

Stay tuned for more insights from our Gen Z study as well as a guest blog post from our Gen Z Consultant, Grace Masback (rising Junior at Princeton University).