Using the Super Bowl to Examine Changing Themes in Sports Advertising
Welcome to the first edition of Chatting Sports Tech with Charles. If you want more background about this newsletter and my background, check out the background edition. Today’s newsletter is a special Super Bowl Edition, using the Big Game to examine some underlying trends in the traditional advertising market.
What is the Super Bowl’s – and the NFL for that matter – significance in the overall media landscape?
There’s a reason the term ‘Super Bowl’ is synonymous with the biggest event in a given field. It’s by far the largest television spectacle of the year, averaging well over 110 million total viewers across the past decade (SB Viewership). For reference, the current population of the United States is around 330 million.
While no one is surprised the Super Bowl is the most watched event, the viewership numbers are quite staggering when compared to other programming. The audience of 2020’s Super Bowl was nearly two and a half times the audience of the next most-viewed program (the NFC Championship game) and four times the most-viewed non sports program (the Oscars)* (2020 Top Rated Shows). (Note – After I finished my draft of this newsletter but before releasing, Sportico published this article Sportico SB Ratings going into depth about the Super Bowl’s reach. Check it out for more details)
When you dive into the list of 2020’s most viewed programming, you quickly realize the NFL is king of traditional linear television. Seven of the top ten and 28 of the top 100 telecasts were NFL games. Remove election coverage and the NFL occupies a significantly higher percentage of the top 100 in a non-election year.
We’ll save more discussion on cord-cutting and the sky-rocketing valuation of NFL media rights for a future newsletter but hopefully these figures illustrate why some media executives speculate that Pay TV’s future is solely as a distribution platform for football.
How does this translate into dollars and cents?
In simplest terms, advertisers pay for eyeballs. Therefore, the Super Bowl commands the highest dollar amount from advertisers given the expectation of the largest audience.
The network pays for the broadcast rights as part of their broader media rights package with the NFL – CBS for this year but rotates among the NFL’s media partners – and then breaks commercial slots into mostly 30 second windows. That inventory of time slots is then sold to brands looking to promote their products and services.
Since the Super Bowl retains a dominant position in the television market even as cord cutting and lack of appointment viewing increases, the amount of a 30-second ad window has skied upward. The chart in this business insider article (SB Ad Cost) shows the exponential rise, from $1 million per slot in 1994 to $3 million per slot in 2010 to $5.6 million per in 2020. Per media reports, CBS is maintaining the 2020 price and selling 2021 Super Bowl ad time slots at ~$5.6 million.
Doing some back of the envelope math and assuming an audience of 112 million for this year’s game, advertisers are spending $50 CPM or cost per thousand viewers, the most common measure in advertising. When compared to the cost of advertising (CPM) through other channels – I’m not an expert but from a quick google search anything above $30 appears to be high – the Super Bowl is incredibly expensive for a marketing department.
Is there anything interesting about this year?
Yes, in my mind. Multiple giant brands are staying in the dugout this year (Warning – I can’t resist a good sports wordplay). Budweiser, whose parent AB-InBev was the largest Super Bowl advertiser last year with $41 million of buys, announced it would not run an advertisement for the first time in 37 years, instead choosing to donate the money toward a COVID vaccine initiative and other charitable causes. Coca-Cola (possibly the most iconic SB ad of all time Coca Cola SB) and Hyundai (smaht pahk) have also announced they’ll be sitting out. But the company that caught my eye was Pepsi.
While Pepsi remains the half-time show sponsor for the 10th year in a row, the company decided not to run any 30 second ads during the game. That’s a big shift for a company that spent $31 million on in-game ads last year and often buys some of the first time slots to deliver a bang (Pepsi Steve Carrell). Instead, the company is choosing to promote the halftime show this year through a multichannel campaign (This commercial played no less than 20 times during the NFL divisional round) and a special website (PepsiHalftime.com) with behind the scenes videos and an augmented reality experience on instagram.
Do you think these actions represent trends that are here to stay?
Let’s highlight three emerging trends in advertising that these companies’ actions illustrate:
1) Greater Marketing Discipline – Whereas the largest marketing budgets would jump at the opportunity to showcase themselves on the grandest stage in the past, more and more companies are re-evaluating this approach given 1) the astronomical cost of an ad buy and 2) challenges introduced by the pandemic this year (marketing costs often dry up as a response to top line revenue pressure). With improving tools to measure ROI on advertising spend and increasing numbers of channels to reach potential customers (e.g., social media), the value proposition of purchasing 30 seconds for $5.6 million – which doesn’t even include the production costs necessary to make a splash – is declining.
2) Experiences > Stories – This touches on Pepsi’s strategy change. Interactive experiences are more likely to shape a customer’s opinion of a brand versus watching a short advertisement, however comical it may be. Sponsors are no longer satisfied with slapping their name or logo on an event. The key becomes what activations make sense with a sponsor’s brand and the event.
3) Importance of Building Goodwill – Company stakeholders are demanding more ESG (environmental, social and corporate governance) responsibility from companies. In addition to being beneficial to society, actions generating goodwill often result in a greater monetary impact than a typical advertisement by increasing customer loyalty and eventually purchasing. This came to my mind with AB InBev. I’d be interested to see if there was an internal profit-loss calculation behind their decision.
All that being said, I still believe there will always be a market for Super Bowl advertisement given you cannot replicate that scale of viewership. But I wouldn’t be surprised if the rapid increase in prices for a 30 second Super Bowl ad spot begins flattening out going forward.
How does this translate to the world of Sports Tech?
I have a lot of thoughts here but to avoid being too long winded, let’s focus on two areas:
First, if you are a sports property, you’ve probably noticed sponsors pushing more activations and experiences to supplement current sponsorships and create memorable moments for fans. Historically, a majority of those activations occurred on-site, on gameday. But the pandemic upended that.
To combat this, I’m really interested in the potential of augmented reality (AR) and virtual reality (VR) to create new sponsorable inventory. For AR, Snap first comes to mind with its use of filters but there are plenty of smaller players adding features to their mobile capabilities focused on the sports industry. Companies like Fanisko (https://fanisko.com/#product_ar) allow fans to show their fandom through an AR lens and then publish to other social media channels. Throw a sponsorship on the filter and that brand will generate impressions across multiple social platforms without much work from their own marketing teams. For VR, companies like LiveLike (https://www.livelike.com/vr/) can build white label apps for sport events to create new virtual experiences. Fans can join in with their own VR headset and enhance the traditional viewing experience. In the process, these VR companies have created new ways to plug sponsors in.
Second, with fans demanding more personalization and individualized experiences and products in general, advertising will also have to adjust. Thankfully for advertisers, technology is creating the potential for dynamic advertising as well as new advertising platforms.
That’s why I’m monitoring companies like FanServ (http://fanserv.com/), which can integrate live scoring data into ads and opens the opportunity to tailor messages depending on how a game is going. Additionally, the rise of streaming and Gen Z flocking to Twitch as a TV replacement has forced brands to strongly consider these platforms for advertising dollars. Companies like StreamHERO (https://streamhero.com/) are enabling this advertising spend with streamers, offering brands the opportunity to reach new audiences.
We could spend all day discussing more emerging sports tech start-ups capitalizing on these trends but I’ll save that for future newsletters.
Last question: What’s your Super Bowl Prediction?
Mahomes gets revenge against Brady for the AFC Championship in 2019. Chiefs 35 – Bucs 27. Not that anyone is asking.
Until next time,
The next newsletter topic will be The Power of Community in Sports: How are Companies Capitalizing on this Trend?
Add me on LinkedIn and follow me on Twitter @ccampisi_EES. Feel free to share some feedback on the newsletter or just pass along interesting findings in the sports tech space via email (firstname.lastname@example.org).
*Excluding the Season 3 The Masked Singer Premiere which received a post Super Bowl bump