Brand Equity: The National Football League, case study help

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For the exclusive use of A. Hdhdckc, 2017. REPRINT H02IW5 PUBLISHED ON HBR.ORG NOVEMBER 26, 2015 ARTICLE BRANDING Why Is the NFL’s Brand More Valuable than Ever? by Weston Anson This document is authorized for use only by Aaa Hdhdckc in 2017. For the exclusive use of A. Hdhdckc, 2017. BRANDING Why Is the NFL’s Brand More Valuable than Ever? by Weston Anson NOVEMBER 26, 2015 Beginning early Thanksgiving Day and ending the following Monday night, the equivalent of every man, woman, and child in America will have turned their televisions on to watch America’s biggest legal monopoly: the National Football League. No other U.S. sport captures the same level of attention or dollars — not baseball, not basketball, not hockey. And while there are corporate brands that may have more international brand awareness than the NFL does, it is unlikely that their consumers – and their sponsors — are filled with such unwavering fervor and forgiveness. Over the past decade, the NFL has been hit with scandals that have dominated the country’s news and public conversation, including cheating (Bountygate, COPYRIGHT © 2015 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. This document is authorized for use only by Aaa Hdhdckc in 2017. 2 For the exclusive use of A. Hdhdckc, 2017. Deflategate, Spygate), systemic disregard for concussions, multiple rape and domestic violence accusations (some of the latter documented on video), animal abuse, even a murder conviction. Although the teams and players involved in the various scandals may have felt some negative repercussions (albeit only briefly in most cases), no scandal seems to have yet hurt the brand itself. In fact, calculations done by my organization show that the NFL brand is worth almost $25 billion — that’s billion with a B — and is growing. It’s unlike anything else we’ve seen in our work as intellectual property valuation and monetization experts. One would expect that after the dozens of incidents tarnishing the image of the NFL and its players that brand would be substantially diminished in value. Instead, what we find is the brand has consistently increased in value year after year. And, today, the NFL is at the height of its power. As shown in our value analysis below, the brand increased in value from $12 billion in 2004 to $24 billion in 2014. To measure the value of something intangible like brand equity, we started by looking at NFL annual revenues, which have risen from about $6 billion in 2004 (as reported by Forbes) to about $12 billion in 2014 (as reported by CNN Money). We then factored in the compound annual growth rate, royalties from licensing deals, and their tax-exempt status to calculate cash flows directly attributable to the brand. We discounted future cash flows at a rate of 10% a year, reflecting the future value of money by 10% per year. Then, a 3% growth rate was applied. From this, we estimate that the value of the brand grew from $12 billion in 2004 to $16 billion in 2008 to $24 billion in 2014. One thing is especially worth calling out. The actual compound annual growth rate over that 10 year period was 7.13% – with growth actually accelerating in recent years. Some of the scandals that took place during that time include: • Beginning in 2008, the controversy over the Washington Redskins name ramped up. The team fought to keep their name, against charges of racism, until finally having their Federal Trademarks cancelled. • Prior to the 2012 season, three coaches and four players of the New Orleans Saints were suspended for a scheme in which players were paid bonuses for injuring opposing team players, commonly referred to as Bountygate. • In February 2014, video surfaced of Baltimore Ravens player Ray Rice dragging his then-fiancee out of an Atlantic City elevator after knocking her unconscious. • In November 2014, Minnesota Vikings player Adrian Peterson pleaded no contest to a reduced charge to resolve his felony child abuse case. • In April 2015, a federal judge approved a settlement brought by more than 5,000 former NFL players who accused the NFL of hiding the dangers of concussions. • In April 2015, New England Patriots player Aaron Hernandez was found guilty of first-degree murder following the death of semi-professional football player Odin Lloyd. Hernandez is serving a sentence of life in prison without the possibility of parole. COPYRIGHT © 2015 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. This document is authorized for use only by Aaa Hdhdckc in 2017. 3 For the exclusive use of A. Hdhdckc, 2017. • In May 2015, the NFL announced it would suspend the Patriots’ Tom Brady for his role in tampering with footballs in the 2014 AFC Championship game, commonly referred to as Deflategate. (A ruling that was later overturned.) • In November 2015, photos were released of the ex-girlfriend of then-Carolina Panthers player Greg Hardy, related to his 2014 arrest for domestic abuse. The big mystery to me is this: what drives the NFL brand to increase in value despite ongoing scandals? This “brand buoyancy” is unlike any other I’ve seen. In comparison, one has only to look at a global brand like Volkswagen to see how a single scandal can reduce a brand’s value immediately. In 2014, the Volkswagen brand had a nominal value of $8 billion as listed by Forbes in its annual list of The World’s Most Valuable Brands. In October 2015, as a consequence of its recent manipulation of emissions control software, sales fell by 3% globally. The value of its stock has fallen in half. By our calculations, the scandal reduced the value of the Volkswagen brand from $8 billion to less than $5 billion in a matter of just a few months. Yet despite multiple scandals, the NFL continues to see increases in both brand value and revenues – from rising ticket sales and prices to increasing TV income to more lucrative merchandising and sponsorship deals. I can see two reasons for this. The first is simply spectacle. The human race thrives on competition. If fans are drawn to the NFL for pure spectacle, then the scandals may even make the show more “entertaining.” That’s the obvious answer. But perhaps the greater force behind what makes the NFL brand so strong is gambling. Gambling has always been a part of football. In the 1930s, it may have just been a small side wager or an office pool. When Las Vegas got involved, the sport had a major stakeholder in sports betting. More recently, we’ve seen phenomenal growth in fantasy betting, today a $2.5 billion industry (although unofficial, unmeasured bets in office pools and other unofficial leagues may be two or three times that total). The emergence of companies like Fan Duel and Draft Kings has taken it to a new level. Both have sponsorship deals with NFL teams, with some owners holding equity stakes. Considering the fact that the daily fantasy sports industry is estimated to grow at 41% annually, reaching over $14 billion in 2020, according to a recent article in Forbes, this is definitely not a shortterm trend. And it helps explain why, in spite of what seemed to be a never ending series of scandals, the NFL brand only continues to grow. Weston Anson is Chairman, CONSOR Intellectual Asset Management. COPYRIGHT © 2015 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. This document is authorized for use only by Aaa Hdhdckc in 2017. 4 How to Write Case 2 • • Buy and read the Harvard Case, “Why Is the NFL’s Brand More Valuable than Ever?” Find information on your own you can apply into the analysis o https://www.forbes.com/sites/kurtbadenhausen/2017/07/12/the-cowboys-andyankees-top-the-worlds-most-valuable-sports-teams-of-2017/#2b656b15018a o https://www.forbes.com/sites/kurtbadenhausen/2017/07/12/full-list-the-worlds-50most-valuable-sports-teams-2017/#1e6ba4b4a05c o https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/deloittefootball-money-league.html • Answer these questions comprehensively and thoroughly. Be prepared to discuss them in class. o Why does the NFL capture more of the public’s attention and dollars than any other sport? o Why are sponsors so willing to invest so much in the NFL (sponsoring stadiums, buying ads, developing promotions and contests) o Describe in detail the factors that contribute to the brand equity of the NFL. Describe and discuss recent trends associated with the NFL. ▪ Trends in Revenues ▪ Trends in Royalties from licensing deals ▪ Trends in Cash Flows ▪ Estimates of the Annual Growth Rate for the next decade o Discuss the concept of brand equity, how brand equity is created, and the ways in which brand equity benefits a company. ▪ Choose any other company (not necessarily in sports) and describe recent changes in their brand equity, based on the factors identified above) o From the list of Recent Scandals associated with the NFL, select 2 recent scandals that affect in some way your perception of the NFL. ▪ Describe the extent to which the scandals you chose are likely to make you or your friends less likely to view the NFL favorably. o Discuss the scandal that recently affected Volkswagen dealing with their falsifying emissions reporting. Discuss how that scandal damaged the brand’s sales, stock prices and brand value. ▪ Discuss why the NFL seems to not suffer brand damage from its scandals while other brands are hit so hard. o Discuss how the public’s fascination with and involvement in sports betting may be fueling the NFL’s growth. ▪ Describe potential dangers the league could suffer from a potential sports betting scandal. ▪ • You might want to search for the Chicago Black Sox Scandal. Discuss whether you believe it is a good strategy for the NFL to embrace or tolerate sports betting, given the potential risks.
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Brand Equity: The National Football League
The NFL is a thrilling sport. The public loves the momentum and the emotion portrayed
by the game. It is a tough competition which attracts big participants. The players are skilled and
the anticipation they bring about gives the public the overwhelming desire to be fans. The public
has associated itself to the participating clubs and almost participate in the game as much as the
players do, albeit in an emotional way. The public is part and parcel of the game. It is almost like
every team brings with it its set of fans who are loyal whether they are in the stands or cheering
from the comfort of their homes.
Sponsors are willing to invest so much in the NFL because it is one industry which has
proved to be unwavering despite the obstacles it has faced. Secondly, it is a form of corporate
social responsibility. It is like giving back to the society, not by means of building communal
infrastructure or supporting nature’s conservation movements but by supporting something
w...


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