Posted: October 26, 2020
Three years ago, the NFL was in the midst of a 3% attendance decline that would ultimately lead to a six-year low-water mark. At the same time, top league executives decided they had a data problem. In an age in which Netflix and Amazon are able to predict a consumer’s next purchase, NFL teams didn’t even know the names of many fans sitting in their own stadiums — much less what to offer them next.
The first part of the solution was a groundbreaking deal announced that October with longtime vendor Ticketmaster to digitize tickets and gain access to secondary market sales data. But the second part — actually putting all that information to use — would require a massive analytics function, which the NFL had little interest in building in-house.
Not long after the Ticketmaster deal was announced, Brian Lafemina, the NFL’s senior vice president of club business development at the time, mentioned the challenge to an old friend, MIT Sloan Analytics Conference co-founder Jessica Gelman. She thought she could help. Lafemina didn’t want to wait a day longer.
“I remember saying, ‘OK, what are you doing tomorrow?’” Lafemina said. “And I got on a train and went to New England and sat down with her for several hours and went through the plan.”
The solution was to hire KAGR, the analytics firm of which Gelman is CEO and that was spun out of the Kraft Sports & Entertainment’s strategy division one year earlier, after owner Robert Kraft realized outsiders would pay for their work. Gelman, who had spent her previous six years as vice president of customer marketing and strategy, helped develop the business plan behind the Patriots’ variable ticket pricing and the team’s hugely successful “Do Your Job” slogan.
Three years after that initial meeting between Gelman and Lafemina, KAGR is deeply embedded across the business of the NFL and most of its teams. Its data warehouses and data visualization tools inform everything from local sales calls to the C-suite strategy meetings.
The NFL is just one of about 20 major KAGR clients signed since its 2016 launch, a period in which it has averaged 165% annual growth. Its 10-person workforce at launch has expanded to 48 as it becomes an employer-of-choice for the elite data scientists interested in sports. Today amid the pandemic uncertainty, it’s become even more critical to strategic planners, multiple senior sports executives said.
The key to KAGR’s growth has been its roots inside the Patriots and Kraft Sports, said Lafemina, who is now the chief business officer of Los Angeles 2028. KAGR was the first major analytics company to carry both advanced computing expertise and firsthand knowledge of team and venue operation — a company as interested in the end result as the numbers themselves.
“They were onto something different than anyone else had done,” Lafemina said. “They were born out of a team, so they didn’t look at things like a traditional data company. They had a unique perspective that allowed them to look at the challenge and the opportunity from a league and team perspective.”
KAGR — both an acronym for Kraft Analytics Group and a reference to the all-important business metric compound annual growth rate — traces its founding to the early days of the Patriots dynasty. The organization had recruited Gelman, a former Harvard point guard, as something of an all-purpose strategic consultant as she finished Harvard Business School in the 2001-02 school year.
While still in school, Gelman did a project to help develop a business plan around multifunction premium spaces within the new Gillette Stadium — field-view rooms with relatively few fixed seats, which could flex from game suite to year-round meeting and event rooms. At the time an unconventional concept, the rooms sold well with 10-year terms, based in part on Gelman’s data-backed market segmentation.
Then in 2006, Gelman asked for Kraft’s permission to launch the MIT Sloan Sports Analytics Conference with her friend, Daryl Morey, who had recently left the Celtics front office to become assistant general manager with the Houston Rockets. For nearly another decade, Gelman toiled inside the Kraft organization.
By 2015, the growth of the Sloan conference — combined with Gelman’s general eagerness to help when asked — put her expertise in high demand. The business opportunity was obvious to the Kraft family, and the company launched one year later. It remains wholly owned by Kraft, but apart from Kraft Sports & Entertainment, which runs the Patriots and the MLS New England Revolution.
“We’ve invested internally over the years, and people have approached us from other leagues, teams and entertainment organizations to help them,” said Robert Kraft at the time it launched. “And people were looking to hire her, so we saw the need to finally start a new company and see it as a way to differentiate ourselves.”
Originally, the company’s big priority was a joint venture with Learfield to pursue college athletic departments, which were thought to be a ripe place for big data to drive efficiency gains. But that business ended after just one year in part because athletic departments struggled to share data internally with university development offices and lacked business systems sophisticated enough to take advantage.
KAGR’s earliest clients were Mississippi State University and Harris Blitzer Sports & Entertainment. After Fanatics co-founder and Harris Blitzer investor Michael Rubin introduced Gelman to CEO Scott O’Neil, KAGR has acted as the strategic glue unifying business intelligence across every part of the company.
Often team marketing divisions are more branding than revenue-driving, and business intelligence is heavily project-based, O’Neil said. KAGR’s data warehouse and visualization functions put all of the data needed in one place.
“For an organization like ours that works with StubHub, Paciolan and Ticketmaster, sometimes it can get a little complicated,” O’Neil said. “For them it was really turnkey. [Gelman] is an incredible executive, as smart as they come and as driven as anyone I’ve ever met and has built a really nice company.”
That integration is the biggest challenge in sports data, business intelligence experts say. Compared to the data-heavy goliaths in health insurance or big finance, sports companies generally handle a comparatively small amount of data. But it tends to be decentralized, and underutilized.
Take Gelman’s work inside Kraft Sports & Entertainment before KAGR — they had separate databases for the Patriots, Patriot Place, the Revolution and Gillette Stadium itself. Simply streamlining those databases so employees could see a single customer’s entire history across the business led to hugely important insights. But it’s crucial that the people doing that analysis are well-versed in the ultimate goal of the business, and that’s where clients say KAGR distinguishes itself.
One simple example of KAGR’s work came out of the NFL in 2019, when the league saw a 170% increase in the number of customer satisfaction surveys completed and returned. The surveys go to every single-game ticket buyer and some season-ticket holders for every game. But because so many seats are ultimately used by someone other than the original buyer, a lot of those surveys went to people who weren’t actually there.
With the new digital-mobile ticketing program created by Ticketmaster, the league has an eye on the entire chain of custody, which alone has helped it find 5 million people who attended an NFL game it didn’t previously have in its records.
KAGR made a simple suggestion: Connect the survey distribution list to the end user of the tickets, not the buyer.
“Obviously higher response rates lead to better outcomes, and allows us to further cut the data on satisfaction,” said Executive Vice President Peter O’Reilly, who attended Harvard Business School with Gelman. “That may feel like a tactical example, but it’s about connecting dots.” With better and more feedback, teams can make fast tweaks to game-day operations, and the NFL hit all-time highs on game-day satisfaction last year, though total attendance declined again.
Two popular analyses that KAGR’s data visualizations generate include 1.) a ticketing health index, which uses both internal and external data to gauge how likely a customer is to renew, and spot stadium seating that may be underperforming, and 2.) customer lifetime value of a given fan — how much revenue a given consumer might generate over the long term.
Armed with that data, the sales team can optimize its time and effort on its biggest upside clients or its biggest risks. But KAGR also strategizes with the NFL on the biggest long-term issues of the moment.
“That ability to toggle between the really micro, and the data we’re crunching with them on a weekly basis to make decisions, and then pull back, would be the dynamic that’s really powerful,” O’Reilly said.
KAGR’s one-two punch of superior analytics capabilities and sports-specific expertise can be a business development burden. Before they signed KAGR to a five-year deal in 2017, NFL owners had to be convinced they wouldn’t be handing over sensitive data to a competitor. Cautious about being seen as too close to the company, the Krafts declined on-the-record interviews about KAGR for this story.
Before the pandemic hit, KAGR’s work tended to be focused on the tactics and details: how to make stadium retail a little bit more profitable, for instance, or how to boost a season-ticket retention rate from 85% to 90%.
Today, its most valuable and in-demand work aims to answer the biggest strategic questions in the industry: When will consumers be ready to come back to large venues? Have spending patterns or preferences changed permanently? It’s added a new importance to their relationships.
“I think we always did [strategic work], but it’s likely more pronounced to our clients because there’s a deficit of information,” Gelman said. “Because during the pandemic, the need for real-time information to make adjustments as insights and knowledge are changing is more important than ever.”
KAGR launched a product called the Fan Demand Index in May, a scoring system that tries to measure fans’ preparedness for normalcy by local market. It might be intuitive that fans in Dallas are more eager to resume the status quo than fans in New York, but there’s a difference between intuition and facts — and KAGR brings a trove of demographic, historical and real-time data to the equation.
That level of detail is critical to longtime client On Location Experiences, said CEO Paul Caine. The near-total shutdown of live events and hospitality during the pandemic was a major challenge to the NFL-founded company, of which Endeavor acquired a controlling stake on Jan. 1.
Caine said he’s confident all consumers want to get back to live events, but “it’s the pace of return, or the types of events people want to go to, that may shift by market or by personal experience.”
He continued: “You have to understand that there’s no macro view of consumers. You have to look at it on a micro view, which is why I value what KAGR’s doing. They look at it from all levels.”
Last winter, before the pandemic started, the Philadelphia Flyers and the Wells Fargo Center signed a major contract with KAGR for its warehousing and data visualization tools. Their remit was a classic use case: develop a custom data warehouse to store all internal data and whatever external data KAGR can get that’s relevant, with an eye toward three particular visualization products — ticket sales and reporting, customer behavioral and demographic trends, and stadium operations (food, beverage and retail).
Valerie Camillo, president of business operations for the Flyers and their arena, said KAGR’s ability to adjust the analysis based on near real-time changes is critical as the world adjusts to COVID-19.
Camillo said her team operates on the assumption that sports consumer behavior will, eventually, mostly rebound to pre-pandemic levels. But KAGR’s machine-learning software makes no assumptions, so it’s acting as a check on their instincts.
“There’s no fixed results when you run the numbers,” Camillo said. “For the machine-learning modelings, if the data is showing that the factors we assume are no longer holding, it will adjust. Even if we’re wrong about things coming back eventually in roughly the same way, they’ll be with us on that journey.”
(To rebut any concern about KAGR sharing sensitive data with its owners or other clients, Camillo notes that KAGR also won their business because it met parent company Comcast’s high data-protection standards.)
Generous with her time and eager for a challenge, Gelman starts to discuss the pandemic challenges by saying: “It’s actually really fun. It’s really hard.”
She says many planners struggle with a “false sense of security” that “historical precedent is what the future holds,” and data can help explain what’s really happening when those precedents don’t hold.
Consider, for example, the NFL’s attendance so far this season. Throughout the summer, experts presumed there was pent-up demand for tickets and that teams would easily sell out a sharply reduced supply. But for many games, there have been tickets unsold. Explaining why reality diverges from expectations, not just theorizing why, is KAGR’s goal. And in a world full of opinion polls about fan behavior, actual consumer data tells the real story.
“There’s tons of feelings, but the truest reality is: What are they actually doing?” Gelman said. “The data is more important than ever right now.”
KAGR’s growth has been steady, but it was not immune to pandemic slowdown pressures. Gelman said they were fortunate to have recently landed new clients, like the Flyers, to occupy them during the early days of the pandemic shutdown. “We’re busy,” Gelman said. “We have been very focused on our ability to scale our business, and one of the benefits of how we’ve evolved is we’ve been able to grow organically.”
That track record, combined with its recurring revenue/software-as-a-service business model, would make it a prime candidate for external growth capital, even one of the sports-minded special purpose acquisition companies now on the hunt for a purchase.
But KAGR is capable of meeting the moment with backing from the Kraft Group and organic revenue, Gelman said, while not ruling anything out.
“We are well-capitalized and fortunately, do not need to do deals for growth or working capital,” Gelman said. “We are always open to synergistic strategic partnerships, but to date, nothing has risen to that level.”
The pandemic creates another opportunity for KAGR: more data to analyze. The safety-driven charge toward contactless fan experience is pushing all-digital transactions, and their data paper trails are coming to all sports faster than expected.
Said Camillo, “The wealth of information is going to be sitting there, and the teams that figure out how to act on it are going to win.”
— Ben Fischer, SBJ