How the Orlando Magic Uses Analytics for Growth


March Madness may have focused our attention on the analytics around predicting the selection of teams for the tournament, the performance of those teams, and the outcome of games, but there's a whole other realm of sports analytics that has less to do with the actual game of basketball or football or baseball and more to do with the business. This side of analytics is about sports as entertainment, and it is about engaging with customers -- also known as fans -- as they buy tickets, go to games, eat at affiliated restaurants, and otherwise connect with the team brand.

SAS Global Forum attendees got to hear the story this week of one such program implemented by Anthony Perez, executive vice president of strategy of the Orlando Magic. Perez isn't in charge of player performance, although he admits that the team's record does impact ticket sales. This former analyst for investment banker Goldman Sachs joined the Magic about a decade ago and began an analytics journey with SAS (the sponsor of this site) in 2010.

Back then the team kept the same seat at the same price for the entire season, and Perez was trying to figure out a better way to do it. For instance, if ticket sales were strong, could the team raise prices by 5%? Or could the team model ticket price behavior using secondary market data? What if a strong matchup game was on the schedule? Should the team increase prices for tickets to games that more people wanted to see?

Perez's journey took him down the road of working to enhance the fan experience, particularly the experience of valuable fans like season ticket holders, and also to maximize revenue for the team.

For instance, did season ticket holders buy those tickets for their families, for their friends, or for their businesses? Perez said that in many cases it was a combination of all those things.

The early analytics also sought to resolve questions such as how to allocate different ticket types, for instance, bulk vs. discount vs. rack rate. Which games should cost more and how should the inventory be optimized were a few of the questions Perez wanted to answer.

"Some of those things are obvious now," Perez told SAS VP of Best Practices Jill Dyche, who interviewed Perez on the mainstage at the SAS Global Forum.

Perez acknowledged that season ticket sales are not as popular as they once were among fans, and that may be because fans want more flexibility.

"The idea of buying the same seat for every game is slowly going away," Perez said. "And it's given us a great chance to innovate, and to explore what that means. How do we create the flexibility that fans value?"

Perez said that fans are looking for new adventures. His team is working to figure out the product to fulfill that desire that fans have now. A mobile app introduced two years ago is providing a more interactive experience for fans and more insights for Perez's team.

The Orlando Magic also operates a restaurant that serves meals before games. Perez's team has been observing fan behaviors at the restaurant, and offers a loyalty program for fans, giving them "Magic Money" that they can use for seat upgrades, ticket purchases or Magic Marketplace experiences, including meal credits at the restaurant.

Among observed fan behaviors, the team has found that the restaurant sells better when the Magic plays really good teams. Also, more people go to the restaurant at the end of the season, trying to spend their Magic Money before it expires at the end of the season. Perez says the team has offered menus according to fan behavior, with more expensive and higher-value menus when the Magic plays better teams.

Ultimately the goal is to encourage fans to engage more than they do now.

"If they are coming to one or two games, we want them to come to three or four," Perez said.

Jessica Davis, Senior Editor, Enterprise Apps, Informationweek

Jessica Davis has spent a career covering the intersection of business and technology at titles including IDG's Infoworld, Ziff Davis Enterprise's eWeek and Channel Insider, and Penton Technology's MSPmentor. She's passionate about the practical use of business intelligence, predictive analytics, and big data for smarter business and a better world. In her spare time she enjoys playing Minecraft and other video games with her sons. She's also a student and performer of improvisational comedy. Follow her on Twitter: @jessicadavis.

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Re: Shaq Analytics
  • 4/12/2017 4:04:16 PM
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Interesting challenge that Mr. Perez is addressing for the Magic.  I think he is on the right track as far as customer engagement is concerned.   I know personally that the cost of going to a game is a major concern, not only are good seats expensive but eating at the game can really damage a budget.   So I think "Magic Money" is a great way to show the fan that the team understands the fam's often limited budget.

But there is no denying as many in this tread express, there is no substitution for a good product.  If you build it, they will come and pay the price to be a part of the excitement.

I think of the Lakers situation.  The prices for the best seats are enormous, but they can/could do this because of the product.  Now that the team is rebuilding, they still have the big spenders, but Management understands that these prices will not hold unless the product deserves it.

Teams that are performing worse than their successful counterparts don't have to look too hard to figure out what the difference is - At this level Winning and some sort of star power is the name of the game.

Re: Shaq Analytics
  • 4/11/2017 11:27:16 AM
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@Terry: I think this is true of top teams, too, though.  The Red Sox always get a boost when the Yankees are in town (and vice versa), for instance.  (Of course, there's the rivalry factor, there.)

Is it not just about "better" teams and more about "teams that have strong fan bases" (which, for the most part, but not always, are better teams)?  I wonder...

Re: Shaq Analytics
  • 4/11/2017 11:23:17 AM
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@Seth: Reminds me of a Boston Red Sox @ Montreal Expos (for those who remember the Expos, before they became the Nationals) game I once watched a few years ago, back when the Expos were actively dying.

Depsite it being a home game for the Expos, the stadium was dominated by Red Sox fans who had made the journey to Montreal from Boston.  And the commentators actively commented on this fact as the camera showed the stadium seats.

Re: Shaq Analytics
  • 4/11/2017 11:04:18 AM
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@T Sweeney, sure they have vastly different salaries to pay based on who is playing/performing but the lights are on, the restrooms are open, the vendors are open, security is in place, etc.  I'm sure someone has a cost per seat just to hold an event at the Amway center as a calculation of power, water and staff required.  If that cost is somewhat fixed then you have to justify the additional cost to the customer depending on the event.  If you have a losing professional team can you justify a premium price on tickets compared to a winning minor league team?  The average attendance tends to be considerably lower for the minor league team so each ticket covers a higher percentage of building operating costs but the team is still profitable so there has to be some room for the Magic to fill seats and not go in the red every game. 

Re: Shaq Analytics
  • 4/11/2017 8:39:00 AM
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I'm not sure if as a fan, they might feel comfortable knowing all the data being analyzed about behavior, like being "offered menus according to fan behavior, with more expensive and higher-value menus when the Magic plays better teams." Seems a bit too greedy in what should be a fun atmosphere, but again that's the nature of business.

Re: Shaq Analytics
  • 4/10/2017 10:32:33 AM
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Interesting points, SaneIT... but aren't operating costs per seat going to vary by event, depending on the tenant? Surely the Magic's overhead (payroll, security, etc.) is going to be different than for the hockey team you cite, or even a Justin Bieber concert.

Re: Shaq Analytics
  • 4/10/2017 9:41:16 AM
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"And then there isn't just where the seat is but how comfy it is, how large is it and what services come with it. "

 

I think this is a good example for things like box seats or suites, a little less important for general seating.  I'll mix sports here a little, the Orlando area has a minor league hockey team that is playing well this year.  Those seats in the same arena with the same ammonites are 1/3 the cost.  Most people around the area have no idea that the team even exists but their attendance is climbing.  When you consider that you're in the same arena, same seats, same vendors just a different sport you start to wonder what the operating cost per seat is for the arena.

 

Re: Shaq Analytics
  • 4/9/2017 12:45:47 PM
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Thanks for stating the glaringly obvious, @tomsg. People aren't going to pay -- and certainly not pay a premium -- to watch a less-than team go through the motions. The telling part here is how much of a bump the Magic get when a better team visits and fills the arena more. The Magic have much bigger problems than seat prices, comfort or amenities.

Re: Shaq Analytics
  • 4/6/2017 9:51:48 PM
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Analytics for seating and pricing is a little tricky because it isn't only about maximizing revenue.   You also need a full house for broadcasting because no one wants to watch a game and see on T.V. that barely anyone showed up. 

And then there isn't just where the seat is but how comfy it is, how large is it and what services come with it. 

Re: Shaq Analytics
  • 4/6/2017 4:11:40 PM
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@bkb: I read this as the "better" teams of the NBA.  Obviously, the Magic's front office would not want to be caught describing other teams as "better" than the Magic.

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