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Entering 1989 SportsBand had 13 full-time employees, including engineers, operations coordinators, and marketers. Most of the on-air and production people remained contracted through Rathe's company, and Carol Mann had become the company spokesperson. Everybody connected with SportsBand had been given a portion of stock.
Twenty tournaments were scheduled. Eight sponsors, including Nabisco and Gatorade, had signed on for packages of commercials at $36,000 to $65,000 each, about $400,000 collectively.
But for the most part the business plan wasn't falling into place. The title sponsorship was unsold, and by June only two presenting sponsors had signed on. SportsBand was fighting an uphill battle, says Mitchell, because "when people first hear of it, they think 'radio,' which translates into a tiny media buy. They don't initially understand the system."
In addition, no agreement had been reached with radio networks for update sales. And after a couple of tournaments, Mitchell and Rice even concluded that receivers were not going to be as easy to rent as anticipated. "We had to educate people," says Rice, "and the only thing that seems to sell SportsBand is SportsBand." They began offering free receivers on Fridays, and charging just $2 rental on Saturdays and Sundays.
By March Mitchell and Rice decided that revenues were not going to be anywhere near what they'd anticipated for the year, and began reevaluating their plans. First, they'd need to raise an additional $2.5 million to make up the 1989 shortfall and continue operations. Second, they began to look at alternate ways to market the receivers in the future. Could tournament directors be talked into including receivers in the price of their tickets? That would solve the rental problem and make the network more attractive to sponsors by ensuring spectator usage.
At a meeting that month of the American Golf Sponsors (the directors who work year-round to plan their tournaments), Mitchell, Rice, and the Tour made their proposal: here's a service that your attendees will love, they argued, but we need your help to get the receivers into their hands. Why not raise ticket prices $5 to incorporate SportsBand into the price of entry? We'll take the first $30,000, and split the rest with you. And we'll all be partners: you'll have this great service at your event, we'll have our service at least somewhat premarketed, and we'll all share the profits -- the PGA Tour will pass on part of its portion of SportsBand revenues to each tournament that signs on.
Some tournaments expressed skepticism at the plan. "I'm not receptive to raising prices," says Jim Lyle, tournament chairman for the 1990 Nissan Los Angeles Open. "Some companies buy 500 or 600 tickets, and if you raise them $5 each, you're talking about a substantial amount of money." Others seemed affronted that SportsBand assumed they'd raise prices just to pay for a radio program instead of to make capital improvements or increase their purse. Still others raised a different question: what if we like SportsBand enough to promote it and include it in our tickets, but want to pass on the cost to a corporate sponsor? How do we figure out how much to pay you?
By June Mitchell and Rice had revamped the plan again, and this time the difference was more dramatic. Go ahead and find the money however you want, SportsBand said, but we'll need a minimum of about $100,000 to broadcast at your events.
In a letter to tournament directors in late June, Mitchell explained that from each tournament, SportsBand would need $75,000 for production costs, $22,500 to help recover "a portion of the Network's general and administration expenses," and $1.50 for each receiver distributed. If, for example, the tournament wanted to incorporate receivers into 20,000 of its most expensive tickets, it would pay SportsBand $127,500. If the tournament got a sponsor to pick up the tab, SportsBand might offer the company airtime as part of the deal.
It was an abrupt switch, shifting the bill from sponsors to tournament directors and making SportsBand's presence contingent on tournaments' participation as marketers and partners. "Frank and I always dreamed of being part of the ticket. We always knew life would be easier that way," says Rice. But now, they'd decided that an arrangement they'd once thought would be nice had become necessary.
"We had thought that by hanging out our shingle and putting out a bunch of these receivers, we could develop, slowly but surely, a following of spectators," says Rice. "We thought that word of mouth and the press coupled together would generate some pretty good penetration. And we weren't really right about that."
What's more, he says, the company had found it couldn't afford to grow slowly. "We're in a market for three or four days," says Rice, "and we don't get to come back for a full year. So if you convince somebody to use it this time, it's not the same as convincing somebody to use it today and then 10 days from now. It's pretty critical to become part of the ticket."
Under the new strategy, SportsBand's break-even revenues would be virtually guaranteed up front by the tournament directors. All the sponsorships, at-the-door receiver rentals, and ancillary broadcast sales, though, would be gravy -- potentially a lot of it. Next year's projections call for the company to have expenses of $2.3 million against revenues of almost $5 million -- 37% of which, or the bulk of the margin, is still expected from sponsorships.
As of July Rice and Mitchell planned to spend the summer meeting with tournament directors and corporate sponsors, trying to sell them on the idea. Not until the tournaments fall into place will SportsBand go back to actively pursuing sponsors.
The SportsBand operation, meanwhile, went through a serious retrenchment as the new plan was being unveiled. Having done nine broadcasts between January and June, Mitchell and Rice decided to halt the rest that were scheduled and resume broadcasting only at tournaments accepting some variation of the proposal. "We've done enough broadcasts to demonstrate what this is, its reliability, its consistency," says Mitchell. "If SportsBand's going to be done, this is the level we insist it be done at, or else it's not worth doing. It's just hard to keep justifying losing money at tournaments." In negotiating, though, Mitchell says he's "not going to be hard-nosed about it," expecting to cut deals with each tournament to accommodate individual operations.
