Reinventing Football-Fortune Magazine

Thursday, October 31, 2013

By Brian O’Keefe, Fortune Magazine

“You want a 49ers Dog? How about a drink with that?”
Doug Garland pulls out his iPhone and gets ready to take my order. After I confirm that, yes, thank you, I’d like a hot dog and Coke, the general manager of stadium experience and technology for the San Francisco 49ers taps his screen and waits. We’re sitting on the 45-yard line, five rows up from the sideline, during a recent game. With 12:50 to go in the second quarter, the 49ers are leading 10-0, but the Minnesota Vikings have the ball. The home crowd groans as Vikings backup running back Toby Gerhart barrels around right end for a six-yard gain — then cheers when the play is wiped out by a holding penalty.
Neither of us is eager to make a run to the concession stand. And Garland is about to show me why — today and in the future at 49ers games — it won’t be necessary. Using the new app that his group has been developing, he’s going to order food to be delivered right to our seats. There’s just one small problem — the app won’t load. Instead, it offers a message: “No data connection.” Undeterred, Garland borrows a phone from one of the other dozen or so team employees who are testing the app’s functionality on this chilly Sunday evening at San Francisco’s Candlestick Park, and successfully places the order. Minutes later, with 8:17 left before halftime, a runner arrives with our hot dogs and Cokes, nicely wrapped and bagged. So what if we’re missing straws?
“Hey, not bad, right?” says Garland, 53, a veteran of Yahoo, Google, and Shazam who joined the Niners this year. “This is version 1.0 of the app we’re testing here. But we’re already on to 2.0 back in the office. Like any startup, we’re trying to rapidly iterate.”
Imagine if Silicon Valley created a football franchise. The owner/CEO would be barely more than 30, and he would talk a lot about learning to embrace failure. The president would be a veteran of Facebook, Yahoo, and YouTube. The coach would be interested in what analytics could tell him about his two-minute offense. The COO would be finding ways to harness the power of Big Data when negotiating contracts. And, of course, the team would play in a brand-new, solar-powered football palace with Wi-Fi robust enough to make folks in the Googleplex jealous — enabling fans to use a mind-blowing mobile app that might just redefine the live sports experience.
Welcome to the San Francisco 49ers, startup edition. With a history dating back to 1946 and a glorious past that includes five Super Bowl victories, the Niners are one of the National Football League’s most venerable franchises. But under the leadership of owner Jed York, 32, the team has undergone a complete reboot over the past few years.
The most obvious change has been a dramatic on-field renaissance. Since York hired GM Trent Baalke and coach Jim Harbaugh before the 2011 season, the 49ers have an overall regular-season record of 30-9-1. This after the team had posted sub-.500 records seven of the eight previous seasons. The team’s rising star is quarterback Colin Kaepernick, a tattooed, charismatic figure who has already spawned a verb (“Kaepernicking,” the act of kissing one’s biceps after scoring a touchdown) and whose No. 7 jersey is the NFL’s bestseller despite the fact that he wasn’t the starter until midway through last season. A lean but sturdy 6-foot-4, the 26-year-old runs like Jerry Rice and throws almost as accurately as Joe Montana — but with more zip. Kaepernick led the 49ers to the Super Bowl last season, where they lost 34-31 to the Baltimore Ravens.
That success has created high expectations. Las Vegas oddsmakers made the 49ers, along with the Denver Broncos, preseason favorites to win it all this year. After some early stumbles, San Francisco has begun to look like a title contender again, trouncing its opponents in five straight games as of presstime.
But even as the 49ers build toward another playoff run, the organization is looking forward to 2014 and the opening of its new $1.3 billion stadium in the city of Santa Clara, about 40 miles south of San Francisco. The construction of what will be known — thanks to a $220 million naming-rights deal — as Levi’s Stadium is the culmination of a decade-plus quest by York’s family to build a new home for their football team. Unable to work out a deal with San Francisco, the team ultimately decided to partner with Santa Clara and build the stadium adjacent to the practice facilities and offices it has had there since the late 1980s. The site also happens to be in the heart of Silicon Valley, a short drive from the headquarters of companies such as Hewlett-Packard and Apple, and down the road from Intel.
The stadium, which has already been awarded the 2016 Super Bowl, is a test case for the future of the league. Needless to say, the NFL is a big business, with a reported $9.5 billion in total revenue last year. But it still fundamentally relies on drawing people to live events — if for no other reason than to make the games exciting to watch on TV. As the multiscreen home-viewing experience evolves, sports franchises need to know they will still be able to lure fans to pay premium ticket prices to attend the games. The 49ers “are being watched carefully by the rest of the league,” says Eric Grubman, executive vice president of NFL ventures and business operations. “People are rooting for their success. They know they’re going to raise the bar. But they’re also going to show how to vault that bar.”
For York and his executives, that means not only building in unprecedented technology infrastructure but also establishing the new normal for attending professional sporting events. “We’re really trying to go for big here,” says 49ers president Gideon Yu, 42, who joined the team in 2011 after stints as CFO of Facebook and YouTube. “And if we do it right, we can change the way live sports is experienced. And that’s very Silicon Valley. That is, you know, there’s a situation right now that needs to be massively fixed. It’s run by incumbents. How do we go in there and use IT to fix it or to make it better?”
On a morning in early March, some 2,700 sports-obsessed brainiacs packed into the Boston Convention and Exhibition Center for the seventh annual MIT Sloan Sports Analytics Conference. The event was co-founded by Daryl Morey, a former Boston Celtics executive who is now the GM of the Houston Rockets, as a way for sports enthusiasts bookish enough to know the meaning of the word “sabermetrics” to share ideas. It barely filled a lecture hall the first time. This year the conference drew executives from most NBA teams and more than a dozen franchises from the NFL and Major League Baseball. With Ph.D.-level analysis of performance data rapidly gaining mainstream acceptance in sports, it has become almost a must-go event.
The program began with Moneyball author Michael Lewis leading a panel called “Revenge of the Nerds” that featured Morey, election- and baseball-prediction superstar Nate Silver, Dallas Mavericks owner Mark Cuban — and Paraag Marathe, the 49ers’ chief operating officer, described by Lewis as the team’s “brain trust.” Years earlier Marathe had explained to the author why left tackles, who protect the quarterback from elite pass rushers, were so highly valued. “If I had not had that conversation with Paraag,” Lewis told the crowd, “I never would have written The Blind Side.”
Marathe, 36, embodies the new geek chic in the NFL. He grew up in nearby Saratoga, Calif., watching Niners games. In 2001, when Marathe was a junior consultant at Bain, the legendary late 49ers coach and executive Bill Walsh hired the firm to help analyze the draft. The Niners then hired Marathe, and he’s been with the team ever since. Today, as COO, he oversees everything from the design of the 15,000-square-foot team store in the new stadium to negotiating player contracts.
He also manages two teams of high-level number crunchers. One four-man team — its most recent hire is a former hedge fund bond trader — concentrates on football analytics projects, such as, say, why time in the pocket matters to quarterback success. More recently he created an eight-person business analytics crew, made up of former bankers, consultants, and private equity guys, to look, for instance, at how to maximize the customer experience, and thus team revenues, at the new stadium. “We think there’s a lot of low-hanging fruit in areas like understanding customer lifetime value and share of wallet,” says Marathe.
For York, investing major resources in this kind of data-driven operation is tied into making sure the team gets the best return on its biggest investment — Levi’s Stadium. “You want to make that $1.3 billion last for a very, very long time,” says York. “And the only way that you can accomplish that is to build a smarter, more forward-looking team than most other teams have in professional sports.”
A good example of how analytics provides insight can be found in the team’s approach to negotiating contracts. In studying the salary-cap era, which began in 1994, Marathe found that the No. 1 factor correlated to sustained success was having an elite quarterback, something the team hopes it has in Kaepernick. The second-biggest factor is less obvious: continuity in the system — the fewer big changes in the roster or management, the better.
So the 49ers have been aggressive about trying to lock up top players by signing them to contract extensions early, before they reach the free agent market. They’re willing to pay a premium — Marathe won’t divulge how much — to keep their own players over free agents. One example is Patrick Willis, the Niners’ all-pro middle linebacker. In 2010, with a year left on his contract, the 49ers signed him to a new $10 million-per-year deal that made him the highest-paid middle linebacker at the time. If Willis had waited for free agency, he might have landed a bigger deal. (He also might have gotten injured and seen his value drop.) Since Willis signed the contract, a few other middle linebackers have obtained higher salaries, making him a relative bargain. Says Marathe: “I’d rather set the precedent than follow somebody else’s.”
How do the 49ers use analytics to modify in-game strategy? That, apparently, is classified. York, Yu, and Marathe all describe their coach as highly intellectual and open to input from the analytics team. He is also a typically paranoid NFL coach, wary of divulging any information that might find its way to a rival. When I met Harbaugh in his office this summer, he had the dazed, rumpled look of a man who’d been studying film. He stood to shake my hand and looked at me like I was there to sell him insurance. Asked if he considered it an advantage to have access to a group of tech-savvy analysts, he answered by pointing at a sign hanging on the wall behind his desk that read: JUST COACH THE TEAM. Then he said he had to go to a doctor’s appointment.
Away from the field, the team continues to find ways to leverage technology to gain advantages. For example, when GM Baalke asked if there was a way to improve the database for storing scouting reports on college and pro players, the 49ers turned to SAP, a sponsor on the stadium project. The business software giant helped the team build a new centralized system for scouts to record, share, and sort their evaluations. Now SAP is working with the team on a Big Data system for analyzing salary-cap information. “It’s about being able to pull up whatever I want, whenever I want it, at the click of a button,” says Marathe. “If I wanted to pull up every team that included a certain contractual clause based on playing time and Pro Bowls, I could get that easily. It’s about packaging information, which is valuable.”
Since the 49ers broke ground on Levi’s Stadium in April 2012, they’ve had less than a week of workdays rained out. Unlike Candlestick, which, through the vagaries of its microclimate, manages to feel cold and damp year-round, it’s almost always sunny in Santa Clara. That doesn’t mean the stadium project hasn’t had its share of trouble and tragedy: Two workers have been killed this year in accidents at the site.
Other than winning a Super Bowl, getting a new stadium built was York’s top priority when he left a job as an analyst at Guggenheim Partners to join the family football business in 2005. York’s grandfather, a shopping mall magnate named Edward DeBartolo, bought the team in 1977 and handed it to his son Eddie Jr. to run. It was DeBartolo Jr. who hired coach Walsh and oversaw the franchise’s 1980s glory days. DeBartolo Jr. was on the cusp of getting a new stadium built in San Francisco in 1997. But the plan fell apart after he pleaded guilty in federal court to a felony for failing to report that a former governor of Louisiana had extorted $400,000 from him for help with a casino project. DeBartolo Jr. served a one-year suspension from the NFL and in 2000 turned over control of the team to his sister Denise, Jed York’s mother.
When York finally locked up the financing for the new stadium in early 2012 — including some $100 million from the city of Santa Clara, a $200 million loan from the NFL, and $850 million in bank loans — it was time to turn his full attention to creating the stadium experience. He was determined to push the boundaries. “It was really as simple as, ‘If I had my ideal stadium — forget about whatever restrictions exist — what would I want to have?’ ” says York.
To satisfy Northern California’s environmental values, York decided to push for the structure to be LEED certified. It will use recycled water. Solar panels on the roof provided by NRG Energy, a sponsor, will feed enough power back into the grid year-round to offset the stadium’s intense use during the team’s 10 home games and make it power-neutral. The 49ers have also come up with creative new ways to market premium seating beyond the traditional suites (though it does have 176 of them). There will be a variety of hospitality areas and clubs in the stadium. One level of premium seats will include an area where ticket holders mix and observe from the field level. Another will allow fans to watch the game from the stadium’s landscaped “green roof.” In a final California touch, there are plans for bicycle valet parking on game days.
But the biggest focus is using technology to transform the stadium experience. The challenge is significant. Anyone who has attended large sporting events in the smartphone era has almost certainly had the frustrating experience of slow or nonexistent data service. The basic reason is that cellular networks are designed to serve people moving around spread-out areas, not huge clusters actively using data in one spot.
The NFL has decreed that all stadiums should provide Wi-Fi, but progress is uneven, in part because every team other than the 49ers is dealing with a need to retrofit existing facilities. Advances in Wi-Fi technology, combined with the 49ers’ innovative network design, says Garland, will allow the stadium to offer speedy service to all 68,500 fans at each game — a big leap compared with anything else in pro sports.
To hardcore fans, the picture the 49ers paint of the tech-enabled game day is tantalizing. To begin with, everyone in the stadium will be able to order food from smartphones or tablets for pickup or in-seat delivery. If you’re feeling the need for a pit stop, you can check the wait times at the closest restroom. If Colin Kaepernick runs for a touchdown, your app can access video replays from both the stadium’s cameras and those of the TV broadcast. If there’s a controversial call, you can listen to what the 49ers radio team is saying about it, then switch over to the other team’s broadcast. If your daughter wears you down and persuades you to buy her a Kaepernick jersey, you can order it from your seat, and have it waiting at the team store for you to pick up on the way out.
The cost of creating this is huge, of course. The stadium budget has risen recently from $1.2 billion to $1.3 billion, largely due to the tech ramp-up. And the pressure is intense. Unlike most startups, the stadium won’t have a soft launch. When San Francisco tees the ball up in its first home game next season, a stadium full of fans will be forming strong opinions about the experience. So the 49ers have boosted the limited Wi-Fi at Candlestick and will spend the team’s final season there doing as many trial runs as possible.
At halftime of the game against the Vikings, the team’s last preseason home contest, Garland and 15 other staffers working on the app test gather around a conference table in a windowless room in the stadium operations center for a debriefing. They rip into the problems mercilessly. “The app is really slow in stat view,” points out one. “And it’s not intuitive to get back to the game feed.” Some food orders are taking too long to process or not going through at all. But the group seems excited by its progress, and Garland concludes with a pep talk. “We need to go as fast as we can through the Super Bowl, guys, and we’ll have time to breathe in March,” he says.
Down on the field a short time later, Garland talks about the potential for exporting the team’s technology to other sports franchises. They’ve even discussed forming a new company to do that. “We think what we’re building is pretty cool and there might be a market for it,” Garland says. “But, of course, we have to make it work for the 49ers first. Otherwise we’re all in trouble.” Just then a 49ers running back dives into the end zone, the crowd erupts, music blares, and the cheerleaders begin to dance. It’ll soon be a made-for- app moment.

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