Miami Heat leads way to new revenues
by Jonathan Rest
Michael McCullough, chief marketing officer of the NBA’s Miami Heat, talks new revenue opportunities, fan engagement, life after The Big Three and eSports in an exclusive interview with Sportcal Insight. Author
26th May 2017, 09:41

The Miami Heat made NBA history in the 2016-17 season, becoming the first team to rally from more than 12 games below .500 and avoid a losing record. A 110-102 victory over the Washington Wizards in early April ensured a 41:41 win : loss ratio (they were 11:30 at the halfway mark). Yet they still narrowly missed out on the playoffs.

Plans to roll out the Heat’s latest innovation, mobile ticketing, for the playoffs have therefore had to be shelved until the 2017-18 campaign, when the arena will become “a completely paperless building.”

Speaking at the team’s AmericanAirlines Arena in downtown Miami shortly before that season-ending heartbreak, McCullough noted: “Data is king. The only way you’ll be able to get into the Heat arena is on your mobile phone. That enables us to connect with who’s buying the ticket, and hopefully we’ll be able to tailor our marketing strategy to people at the game.

“We have our own data warehouse and our own business intelligence unit that is specifically charged with taking all the data we receive, understanding it, and then spitting it back out to people like me to figure out how we can better use it.”


"You just don’t want to put anyone on that jersey patch. It’s the first time this has happened, so it’s a tremendous opportunity "

Michael McCullough, chief marketing officer, Miami Heat  

 

McCullough is, according to the Heat’s own website, the franchise’s ‘brand architect’, a broad remit that involves overseeing the promotions and advertising, social media, retail operations, broadcasting, events, community affairs and business analytics functions for one of the NBA’s most popular franchises.

He will now spend the Heat’s longer-than-hoped-for off-season finalising talks with prospective jersey sponsors.

Under the terms of a three-year pilot programme, the NBA has permitted the logo of a sponsor to be displayed on a patch measuring approximately 2.5 inches by 2.5 inches opposite the logo of Nike, the US sportswear giant which is taking over as the kit supplier of the league next season.

The 30 NBA teams are responsible for negotiating their own shirt sponsorship deals, but are prohibited from signing up companies from the gambling or alcohol sectors. The sponsor patch will not appear on the retail versions of the player shirts, but the individual teams have the option to sell shirts with sponsor patches in their own retail outlets.

At present, six teams (Philadelphia 76ers, Sacramento Kings, Utah Jazz, Boston Celtics, Brooklyn Nets and Cleveland Cavaliers) have sponsorship deals in place. The Heat are in the process of due diligence.

McCullough says: “You just don’t want to put anyone on that jersey patch. It’s the first time this has happened, so it’s a tremendous opportunity, and we need to make sure we’ve done all the work at the back end to make sure it’s the right partner.”

He argues that the league is taking a “first, but big step” in opening up new revenue streams for its teams.

“It isn’t something that is engrained in any US professional sport. No-one has what we are doing, not baseball, basketball, football, hockey – it is just not a US sports thing,” he says. “Whereas in the UK it is prevalent – the teams have come to expect it, the fans expect it – in the US there has been a lot of resistance around whether the fans are going to accept it. They [the league] had to start small. They couldn’t go where the UK has it now where the team name basically disappears or is secondary to the brand name.

“There has been resistance to change here, but I think the patch is a great starting point. From there everyone can evaluate what the reaction really is. It will be interesting to see.

“For the teams, it should drive some significant revenues.”


When you look at the social media numbers around the world, the NBA is second only really to English Premier League clubs, and it’s mainly an international following

 

According to Forbes’ most recent franchise valuations, published earlier this year, the Heat are worth $1.35 billion with revenues of $210 million, putting them in the top 10 in the NBA.

Those revenues are increasingly being derived from global markets.

The NBA has staged regular season games in London every year since 2011, with pre-season matches played across Europe, Asia and Latin America, and the league has made no secret of its desire to take more of the action to more markets.

McCullough says the Heat “is all for” globalisation, adding: “The NBA is the most global of all the United States professional sports. The players are coming from all over the world to become superstars in our league. The fact you can pick up our game and play it in another country and everyone gets it - you’re not explaining the game, it’s not complex - it’s no surprise our league is the one really taking off internationally. 

“We’ve been really active in those international markets. Our team has played in China, Puerto Rico, France. We are all for that. We think that is a benefit for us. When you look at the social media numbers around the world, the NBA is second only really to English Premier League clubs, and it’s mainly an international following.

“We have 22 million followers on our social media accounts [Twitter, Facebook and Instagram]. That is a huge number. We are number three in the NBA, and the bulk of those followers come from outside the US. That is the result of the league focusing on an international audience.”

NBA commissioner Adam Silver, on his annual visits to London, has often talked of the one major challenge facing his teams, the fact that “99.5 per cent of our fans are never going to have the opportunity to go into an NBA arena.”

So how then do you engage with such a global fan base?

For McCullough, the answer lies in personalisation. He says: “I always tell our social media folk to listen intently to what people are saying, and when people respond to a post or engage with a post, let’s react and let everybody else know that we are reacting. Because the way I look at it, our social media fan base is huge, but they’re all made up of individual people who all want to be tied to the team, so if we respond to your post, everybody else in the audience feels ‘that’s really cool, because they might respond to me’. That is what keeps them engaged.

“We have 22 million followers, we cannot talk to everybody, but if we are strategic with who we reply to, it has a far-reaching effect to the whole audience.”

Strategic how exactly?

McCullough offers up a recent example revolving around ‘Court Culture’, the Heat’s lifestyle apparel brand. “Last year we introduced a line called ‘Moments’, he explains, “the best moments in Heat history that we would put on a shirt. We put the Ray Allen shot on a shirt.” 

Ray Allen's late 3-pointer ties Game 6 of the 2013 NBA Finals
 

Allen’s 3-pointer with 5.2 seconds left in Game 6 of the 2013 NBA Finals sent the Heat to overtime against the San Antonio Spurs in a must-win game, and helped them go on to win the title in Game 7.

“That line was crazy. People loved it,” reminisces McCullough. “People then started suggesting their own ‘moment’. So we picked 10 people at random, and, say your moment was the Alonzo Mourning return [in 2001] after his kidney disease: we made that shirt and sent it just to you. You got in the mail a shirt with just your moment on it. It’s the only one that exists in the world. We made it because you suggested it, and so what do you do? You go on social media and shout about it.

“We took 10 people out of the entire audience and made their shirt. But that has such a far-reaching effect because the response was, everybody thought that was a cool thing, even if it wasn’t their shirt.”

While the Heat won their first NBA title in 2006, it was the four seasons from 2010-11 to 2013-14 that really opened up the franchise to a global audience, thanks principally to the existence of ‘The Big Three.’

It was the era of superstars LeBron James, Dywane Wade and Chris Bosh, the trio that led the Heat to the NBA Finals in each of their four seasons playing together, winning back-to-back championships in 2012 and 2013.

LeBron returned to Cleveland in 2014 while Wade signed with the Chicago Bulls ahead of the 2016-7 season, which Bosh missed in its entirety because of injury.

While the trio ensured that the Heat gained a competitive edge on the court, they also boosted the financial coffers and global appeal of the franchise.

Miami Heat's 'Big Three': Chris Bosh, LeBron James and Dywane Wade
 

The loss of any marquee player, let alone three, would be a tough hit to any commercial department, but McCullough insists the business model has always been focused on “the collective.”

He explains: “There are 15 players I’m charged with promoting, not three. We didn’t need to single out those three guys, because everybody was going to do that on our behalf. The Heat as a team is 15-strong. That was the mantra when we won the first championship in 2006. It is important for us to always talk about the collective, so that when those key players come and those key players go, you don’t deflate your entire business model.

“All three of those are gone now – well, Chris is still here but he’s not able to play. If we’d only been focusing on those three guys, what does that leave me with? I’d have to change my whole focus. But the focus has always been about 15. You’ve never heard us say anything different.

“Now when I have this team that doesn’t have a marquee player, didn’t have anybody that made the All-Star team, nobody at the top of the jersey sales, yet are still the number three team in retail sales in the NBA, number three in ticket sales in the NBA, our TV ratings are in the upper echelons of the NBA, that speaks to the collective. That bears out what we have been selling, and we’ll continue to sell that way.”

What McCullough is also selling now is an eSports proposition.

At the turn of the year, the Heat acquired a stake in the Europe-based Misfits team, joining a long list of major global sports teams to enter the nascent gaming market.

The deal involved a strategic partnership between the two parties, with Miami Heat assisting with the marketing, branding, promotion, retail, digital and sponsorship of Misfits.

It is part of a wider development within the NBA, with the league to launch an eSports competition for its NBA 2K computer game next year. It will be the first eSports competition to be organised by a professional sports league in USA.


What we are finding, and we never thought this would happen, is corporate interest from people in the Heat marketplace who are excited about us being part of eSports

 

McCullough says the Heat-Misfits tie-up had obvious synergies: “The audience and the people that play and follow our sport are young digitally-savvy. We talk about the NBA being the leader in all the professional sports in social media, so we were intrigued to see if there was crossover between those two. Was there an opportunity to turn these digital, millennial eSports fans into Heat fans?”

The answer, even at this early stage, is an unequivocal ‘yes’ – “eSports fans are super excited about having an NBA team support their team” - and from a business point of view the eSports investment is also beginning to pay dividends.

McCullough explains: “What we are finding, and we never thought this would happen, is corporate interest from people in the Heat marketplace who are excited about us being part of eSports and want to sponsor the Heat and Misfits.

“Most of these are people who are not Heat partners but have business interests here in Miami and also have an interest in eSports. We have been taking a lot of calls from, frankly, people we have never even talked to before, who now because we are in the eSports world want to talk to both us and the Misfits about doing something. It’s an exciting, unexpected development.”

Sportcal