The magic behind the Magic
In their 25th season, the Orlando Magic celebrate how analytics helps them fill seats and win games
The Orlando Magic have come a long way since their inaugural season in 1989. There weren’t many wins in those early years, but the franchise has weathered the ups and downs to compete at the highest levels of the NBA.
Professional sports teams in smaller markets often struggle to build a big enough revenue base to compete against their larger market rivals. By using SAS® Analytics, the Orlando Magic are among the top revenue earners in the NBA, despite being in the 20th-largest market.
The Magic accomplish this feat by studying the resale ticket market to price tickets better, to predict season ticket holders at risk of defection (and lure them back), and to analyze concession and product merchandise sales to make sure the organization has what the fans want every time they enter the arena. The club has even used SAS to help coaches put together the best lineup.
“Our biggest challenge is to customize the fan experience, and SAS helps us manage all that in a robust way,” says Alex Martins, CEO of the Orlando Magic. Having been with the Magic since the beginning (working his way up from PR Director to President to CEO), Martins has seen it all and knows the value that analytics adds. Under Martins’ leadership, the season-ticket base has grown as large as 14,200, and the corporate sales department has seen tremendous growth.1
The challenge: Filling every seat
But like all professional sports teams, the Magic are constantly looking for new strategies that will keep the seats filled at each of the 41 yearly home games. “Generating new revenue streams in this day of escalating player salaries and escalating expenses is important,” says Anthony Perez, Vice President of Business Strategy. But with the advent of a robust online secondary market for tickets, reaching the industry benchmark of 90 percent renewal of season tickets has become more difficult.
Perez’s group takes a holistic approach by combining data from all revenue streams (concession, merchandise and ticket sales) with outside data (secondary ticket market) to develop models that benefit the whole enterprise. “We’re like an in-house consulting group,” explains Perez.
In the case of season ticket-holders, the team uses historical purchasing data and renewal patterns to build decision tree models that place subscribers into three categories: most likely to renew, least likely to renew, and fence sitters. The fence sitters then get the customer service department’s attention come renewal time, Perez says.
“We can’t afford to wait till the end of the day to know what we need to do to sell tickets for a game that’s in just a few days. SAS allows us to use that data as quickly as possible,” Perez explains.
Ease of use helps spread analytics message
Perez likes how easy it is to use SAS – it was a factor in opting to do the work in-house rather than outsourcing it. Perez’s team has set up recurring processes and automated them. Data manipulation is minimal, “allowing us more time to interpret rather than just manually crunching the numbers.” Business users throughout the organization, including executives, have instant access to information via portals. “It’s not just that we’re using the tools daily; we’re using them throughout the day to make decisions,” Perez says.
The ‘Moneyball’ approach
“We adopted an analytics approach years ago, and we’re seeing it transform our entire organization,” says Martins. “Analytics helps us understand customers better, helps in business planning (ticket pricing, etc.), and provides game-to-game and year-to-year data on demand by game and even by seat.
“Analytics has helped transform the game itself. Moneyball is truly at play in professional sports now. GMs and analytics teams look at every aspect of the game, including movements of players on the court, to transform data to predict defense against certain teams. We can now ask ourselves, ‘What are the most efficient lineups in a game? Which team can produce more points vs. another lineup? Which team is better defensively than another?’
“We used to produce a series of reports manually, but now we can do it with five clicks of a mouse (instead of five hours overnight in anticipation of tomorrow’s game). We can have dozens of reports available to staff in minutes. Analytics has made us smarter,” says Martins.
“Getting real-time data is the next step for us in our analytical growth process,” says Martins. “On game day, getting real-time data to track what tickets are available and how to maximize yield of those tickets is critical. Additionally, you’re going to see major technological changes and acceptance of the technology on the bench to see how the games are played moving forward. Maybe as soon as next season you’ll see our assistant coaches with iPad® tablets getting real-time data, learning what the opponent is doing and what plays are working.
“We’re setting ourselves up to be successful moving forward. And in the very near future, we’ll be in a position again to compete for a conference championship and an NBA championship,” says Martins. “All of the moves made this
year and the ones to come in the future will be done in order to build success on [and off] the court.’’2
Who are the top three players in Orlando Magic history?
- Shaquille O’Neal. O’Neal’s dominance on the court and charisma off of it spawned global recognition. Aside from all his power and skill, which eventually helped propel the Magic to the NBA Finals in 1995, Shaq was larger than life in Orlando during his four years with the franchise.
- Dwight Howard. As a result of his tumultuous exodus and offensive limitations, Howard’s defensive prowess and freakish athleticism probably weren’t enough to surpass Shaq in all-time Magic allure.
- Penny Hardaway. It’s easy to forget just how spectacular Penny was prior to his sudden knee problems. A perennial NBA All-Star from 1995-98 and two-time All-NBA First Team honoree, Hardaway formed a magnificent duo with Shaq.
How do they predict season ticket renewals?
When analytics showed the team that 80 percent of revenue was from season ticket holders, they decided to take a proactive approach to renewals and “at-risk” accounts. The Magic don’t have a crystal ball, but they do have SAS® Enterprise Miner™, which helped them develop three pillars for predicting season ticket holder renewals:
How long had the customer been a ticket holder?
Did the customer actually attend the games?
Secondary market activity
Were the unused tickets successfully sold on secondary sites?
Using these tools allowed the team to accomplish more accurate scoring that led to a difference – and marked improvement – in the way it approached customer retention and marketing.