It’s safe to say that few organizations are as successful as the National Football League. Its games draw more fans on average than any other professional sports league in the world. Its teams earn billions of dollars in revenue from television and radio broadcast rights. Twelve of the top 25 most viewed television programs in U.S. history were Super Bowls; more than 100 million (or one out of three Americans) watched Super Bowl XLIV on Feb. 7, 2010.
Still, the 2010 season brought a dark reminder that not every part of the NFL’s business model is functioning smoothly. In 2009, the NFL blacked out 22 games, a 144% rise from 2008. In 2010, 26 blackouts occurred. NFL attendance peaked back in 2007, when more than 17 million tickets were sold. Since then, attendance has dropped each year, down 2.4% in 2009 to 16.7 million tickets sold. In 2010 paid attendance was flat from 2009, but season ticket sales fell 5%.
The reasons are nothing if not obvious–the economy’s health, poor team performance, competition from HDTV. And if the causes are obvious, the responses have been nothing if not predictable: Focusing on their most profitable customers, teams are trying to beat HDTV at its own game by offering the TV experience at the stadium to its season ticket holders.
What is not so obvious is why this approach is inevitably doomed to fail and the opportunities the NFL is overlooking as a result. The league’s problem getting fans off the couch and into the stadium is a classic case of what Harvard Business School professor Clayton Christensen calls “disruptive innovation.”
That’s a process set in motion when someone invents an alternative to an established product or service that, in some respects, is not really as good, but is nevertheless in some way vastly easier, cheaper or more convenient. Because it’s not as good, it tends to draw off the least loyal customer at first, and so established, incumbent players tend to ignore it, as they continue to focus on their best and most profitable customers. But inevitably, the not-quite-good-enough offering becomes better and better, drawing off more and more customers. Typically, by the time the defenders recognize the threat, they are losing customers quickly.