Session Transcript: Brett Yormark, President & Chief Executive Officer, Nets Sports and Entertainment

Available for download here.

2009 Leadership in Hospitality & Leisure Forum (New York)

Thursday, April 16, 2009

Session Transcript:

Brett Yormark, President & Chief Executive Officer, Nets Sports and Entertainment

[Brett Yormark]: …important area and we’ve been pretty successful in doing that and I’m going to speak to that a little bit more in a couple of minutes. And then lastly, the value player. It truly is a differentiator for us. I heard – I came in late but I heard the word value being used and for us, it’s truly about the value proposition: how can we provide more value for less? And it’s critical we do that right now.

So on the customer first mentality, I’m not going to walk you through all these but I’m going to top-line a couple things. Obviously you’ve got to hire the right people. That’s critical for us and you’ll realize that we truly are in the hospitality business. About two years ago, we hired someone from the Four Seasons to oversee all of our season ticket holders to try to give them that ‘white glove’ hospitality that we felt was missing in our value proposition, provide customers with direct access to your people. We truly need to be transparent with all of our customers and we did some things this year which were a little different than we’ve done in the past. You’ll see there direct on-line chats with our Nets rep, representatives. Those are the people that manage the season ticket holders. We interface with our season ticket holders all the time. We do it via the Web. We do it at our games. It’s truly about the touch points. And then like most of you, the response time is critical and we mandate a twenty-four hour response time. Giving customers a voice, something that we think is truly critical. Like you, we segment our fan base. We’ve got your high-end ticket holders and then you’ve got your volume buyers that are coming in at ten dollars a night. But they’re all very important for us and we want to give them a voice. So this year we formed a fan advisory board for the first time and it was terrific. They meet with management, at my level, our ownership, folks from the basketball side of the team and we truly engage with them and we’re asking them questions and we want them to come with their concerns and it’s made us much better and publically celebrate the most dedicated customers. We never did this up until a couple of years ago but we have a lot of tenured customers. Probably like you guys, we have an awards program and you value those people that keep coming back. Well we’re starting to do that but we do it more through a recognition program. So each night, we represent a fan of the game and recognize them, both on radio, TV and in the arena and it’s done really, really well for us.

Providing the customer access, truly for us access is key and we sell access everyday. And when I say access, I don’t mean just to the front office but I mean our players and we’re very engaged in the community doing lots of different things. So from a community initiative standpoint, we do job fairs, resume programs. Basketball is a major fundraising event where we interface our players with our fans in a bowling environment which is very unique and different. But the job fair and resume program truly was something that was very new this year. It got a lot of PR across the country and we decided we wanted to invest in our fans before they invest in us. And obviously we’re all suffering from the unemployment craze that’s going on especially in New Jersey. It’s one of the highest throughout the country and we developed a resume bank for our fans. And received over three thousand within a weeks time and we offered them that if they send us their resume, one free game during the course of the season. And we thought that if we invest in them now, maybe they would invest in us later.

We passed those resumes on to our season ticket holders; those that are hiring, that are owners of companies and managers as well as our corporate partners and we’ve been very successful in placing some of our best fans in new jobs. And it’s been a terrific ‘feel good’ and hopefully later on, we can monetize it but those are the types of things that we’re doing to truly be part of the community and engage with our fans. Influencer events, we host house parties believe it or not. Tiffany’s which I’m sure many of you interface with came to us and said we want to meet your high-end season ticket holders. So we decided to do something a little different and we wanted to host backyard barbecues. And we’ve done that for the last three years and it’s been the biggest driver of new full season tickets for us since then. And we literally go to a high net worth individual and say, ‘Find us more people just like you.’ And we go into their backyard and we host a party with our players and our coaching staff, our dance team and other Net celebrities and it’s been terrific. It’s humanized the players; it’s gotten them to really relate you know to our fan base and at the same time we’ve been able to monetize it.

Town hall meetings, we host one each quarter where we invite all of our season ticket holders in to address myself, our principle owner and Rod Thorn who oversees basketball. We give them a voice in a very big way and then we stream that live on the Internet. So not only can our season ticket holders understand what’s going on in Nets basketball, and some of the things we’re thinking about, but our fans can think about it, those that are at home and can’t make and that’s been a great tool. And it’s all communicating to your best customers.

And then open practices. That’s something that we also do which, all NBA teams are mandating to do at the beginning of the season just to give their fans a little flavor for what’s in store for the season where we host an open practice where they can meet our players and understand what the plan is for the year.

The value player, for us it’s really about two things. It’s about connecting with the consumer in a relevant way, probably like most of you. It’s also giving them more value for less and understanding what they’re going through and thinking and how we can connect to them. So over the course of last year, we’ve done a lot of different things from a standpoint of selling our season tickets and our partial plans. Last, I guess it was last June when we went through that craze with gas prices and we were especially hit hard here in the northeast, we did a free gas for new season ticket holders and we gave them a rebate on their season ticket invoice if they purchased during the month of June and we gave them that rebate back for gas. And it was very, very successful for us.

In the credit crunch in the fall when it really bottomed out, we did a buy-now, pay-later program which was terrific. So we said, buy now in the fourth quarter, and don’t pay until the New Year. Hopefully things will settle in and the default and all those buys were 3%. So it was a great driver for us but it was a relevant offer and one that really connected to the consumer.

Toys R Us gift card, again doing something that’s relevant to the customer. Obviously when we’re selling our holiday plans, people are now trying to decide you know where do they go to shop for holiday gifts and as I’ve said you know publically, many times before there’s one big bucket now. There’s no longer the vacation bucket or your season ticket budget or your dining out budget. We all lumped together. All of us compete believe it or not. Okay, so we decide well how can we, how can we limit that, that competitive by packaging in a Toys R Us gift card with the season ticket holder plan and it worked very, very well for us.

Something when you talk about creating value, the snowbird ticket exchange. During the holiday, a lot of our fans aren’t in the New York metropolitan area. They’re traveling. In many cases, they’re going south to, to South Florida. Fortunately for me, I have a twin brother who looks very much like me, does exactly what I do; runs the Florida Panther’s hockey team in the Bell-Atlantic Center, so we decide if you’re not here in New Jersey and you happen to be in Florida, those tickets are good for a Florida Panthers game. And if you’re in Florida and coming here, you know what? Those tickets are really good to come see a Nets game. So it was great value creation. Obviously we have the inside track but was very well received by our season ticket holders. Those are the types of things that we’re exploring now that we never even considered in the past.

And then this year the more affordable lower-level season ticket. I mean the ticket, it’s a very great buy. We’re selling a bunch of them right now. It’s all about being transactional. So we’re letting people buy a season ticket for twenty-five dollars a night in the lower bowl right now and giving them a great NBA experience. So these are some of the things that we’re doing to position ourselves as the value player in the marketplace. I’m not sure some of our competitors in the marketplace are doing this. Maybe they don’t need to. But we think we need to be relevant to today’s consumer and today’s consumer has certainly changed.

So how do we create a best-in-class experience? We do it three ways: VIP All-Access Experience, which really is our retention area. Once we sell a season ticket, it then, it gets managed by our VIP department and they’re supposed to give that white glove hospitality. That’s where the value truly is created and then controlling the arena environment. Unlike some of our colleagues not only in this market but outside this market, we don’t own our arena. We’re a tenant so the people that are truly touching the consumer every night, the ushers, the parking attendants, the folks behind the concession line, we don’t manage that. So the question is how do you control your environment? How do you control the experience? Probably many of you deal with the same thing. Ours is somewhat challenging and I’ll speak to that momentarily and then lastly, the all inclusive offering. Obviously people want more, they just don’t want to come to a game anymore and see a, you know a bunch of guys running up and down the court. There needs to be more when they’re investing lots on money. So now we have an all inclusive offering.

So let’s speak to the VIP All-Access Experience for a minute. As I said earlier, we went out and decided that we want white glove hospitality, okay? We liked what everyone in this room was doing so we hired a young lady from the Four Seasons to bring that to us and she’s been terrific. It’s all about making experiences more memorable, right? No different than what you guys think about every day. Court-side access, free seat upgrades, post-game autograph sessions with our players. She’s responsible on our team for doing all of that; creating more value for that buyer. Shop talks with Net executives. My mother once told me when I was young, she said, ‘Everything matters’ and she’s absolutely right. It’s also the little things that matter most. So we do in-seat, visits, phone calls, and birthday recognition, anything you can think of to create value and to recognize our best customers.

And then lastly, added value. Even though we can’t, we don’t own the arena and we can’t really afford them; opportunities and access to other events at the building, beyond sports, we’re doing the best that we can to do that. So we buy suites in the marketplace and we offer up tickets to concerts and football events. So we truly give them a year round experience outside of Nets basketball.

So controlling the arena environment, that’s something that’s key for us. Something that, you know I’ve been with the Nets now for about four years and one of the first things I did my first home game. I met with all the ushers, all the security guards, and said, ‘Guys you’re a part of our team now.’ We host a kick-off party for them; we give them and their families gift bags. We do the same at the end of the season. We meet with them every month. We let them know they are a part of the family. They control the experience. Okay, without them, I mean really you know there’s no Nets basketball. They touch the consumer from the time they enter the parking lot until the time they finally leave and we need to control that.

I was recently at a hotel and I’ll tell you that I had a bad experience. I was down in a new property south, in South Florida two weeks ago and I could tell you that they didn’t control the experience for me. And it made me come back and work harder for our fans because it’s critical. You might have the most luxurious hotel rooms, you might have the best food, but if you look at someone the wrong way, if you address them the wrong way, during that first encounter, everything else doesn’t matter. So that’s pretty much what we do there with controlling the arena environment.

The All-inclusive experience is something that we never offered. Most of the teams do but we’re in an antiquated building but that’s not a good enough excuse so we went out there and manufactured the All-inclusive experience and we do that in lots of different ways. We opened up business lounges. We introduced a new business center this year where people could come before the game and truly have all the access they need in a business environment for networking, to meet other season ticket holders and it was truly, truly, enjoyable not only for them but for us because it gave us a chance to interface with our customers in a non-traditional way.

We have new season ticket holder club, the Exclusive VIP clubs, court-side suites and [inaudible] as you can see here, it’s no longer just about the game. It’s all the other things that make that experience really grand and that’s up to us to deliver it, night in and night out.

So how do we keep the customers coming back? That’s a critical, critical question; one we ask ourselves all the time and I think really comes down to two things. Make Nets basketball more than a game. I like to say, insulate yourself if the product goes south because unfortunately, and probably no different than your business when things are going well and the team is winning, boy people buy tickets because they want to be a part of you. But when they’re not, okay, it’s a little tougher. So what we’re trying to do is create that all-encompassing experience. So yes, they’re coming for the game but they’re getting so much more and that is our marking tag line, ‘Nets basketball, more than a game.’

And then lastly, offer something for everyone. Make sure you can reach the masses by not isolating and insulating your offer for one consumer segment but being something to everyone. So for us, Nets basketball is more than a game. And these are some great visual representations. We have more dance teams than any team in the NBA right now. We have a senior dance team reaching the older demographic. Okay, we have a kids dance team reaching the younger demographic. We’ve got the regular dance team, reaching that 18 to 34 demographic. I mean we’ve got everything for everyone but we’re really making it into a big time experience with post-game concerts, major performances by some of the biggest people in the music industry. We’re fortunate enough to have Jay Z as one of our investors so he helps us to connect to the entertainment industry and we’re able to really bring those people out on a nightly basis and give our fans a big-time treat.

And then also offering something for everyone. That’s a very important part of what we do. You know you hear about sports right now out pricing themselves. You know you hear a lot about the Yankees who are opening up today, the legion seats. They’re $2,500; people don’t want to be seen in those seats now. They can’t sell them on a full season basis, now they’re going to partial plans. Now, listen we all want to sell premium seats but it’s tough right now, okay? So we’ll continue to do that but do it a little differently but we’ll also have some other offerings as well. And these are just a little sampling of some of the things we do and like you, we do segment our consumers so when you look at corporate customers, we have our premium packages whether they be partial plans or season-long plans. Young singles, Bud Light Night Out that attracts the young, singles crowd, both females and males. Families, big part of what we do, McDonald’s family plans. I heard earlier one of the, the panelists talk about kids and their sales were up a little bit over the last month or so. Well, we’re all about kids because one thing that we’ve, we’ve learned and research tells us, that the last thing you’re going to deny is your kids in a downturn in the economy. So we’ve really elevated our kid’s marketing effort not only in the last couple of months but moving forward. Recently you know we had a Disney on Ice program, Toys R Us and you’ll see later on that we also do a Nickelodeon program which was huge for us. Sponge Bob came out the other night and the kids loved Sponge Bob as many of you probably know if you’re parents and we’re going to be doing more of that next year.

Now, we’ve defined ourselves I think, hopefully with respect to the All-inclusive experience, the value proposition, the best-in-class service but the question is, without huge marketing budgets, how can you tell the world? How do you let them know who you are and what differentiates Nets basketball from the Garden or from the Yankees or the New York Giants? And if you know anything about the Nets, we drive business PR. That’s what we do. We’ve got a young man who runs our business communications department and his responsibility is every day to get a press release out. Let everyone know who we are and what we’re all about and if they can’t buy now, that’s okay but pre-dispose them to the culture and to what we do and why we think we’re different and over the course of the last year or so, we have been everywhere from USA Today to local newspapers, to Wall Street Journal, to CNN Fox, to CNBC, ESPN Fox. Not only are you building your fan base, but you’re building your brand at the same time. So for some of you, you know that play on both sides, this has been a terrific way for us to truly elevate a halo over Nets basketball and get people a reason to buy us.

And what I’d like to do now is show a quick video. It’s a great example of some of the things we’ve done over the course of the last couple of months and why people are talking about us. Let’s take a look.

It’s all right, take your time. It’s worth the wait; really nice little video. No, that’s all right, okay.

[Video]

So that gives you a little flavor for kind of how we do what we do and why. It really truly becomes all about the customer, not that it wasn’t before but more so now given the current states of affairs that we’re all experiencing.

I’m going to leave you with what I call my ten point plan to winning. It’s something that I put together probably eight or nine months ago and when I speak to a student, audiences like today, I usually just kind of give you a little insight into what we’re thinking about. These ten point plans of winning, this is posted throughout our office. Many of our corporate partners now use them and it’s just a little insight for you. But it’s about reinventing your organizational culture and I say that because for you, for you to communicate the right customer experience, it has to come internally at your companies. You’ve got to get everyone on the same page thinking about it all the time. And these are just some of the things we’re thinking about.

First and foremost, it’s about communication. That’s critical. It’s the first thing we think about when we come into our offices every day. Two, mandate buy-in from top to bottom. If the people at my level, at the senior management people, if they’re not living it and doing it every day, no way will someone at middle management level do it. So it’s important for us to lead by example and to mandate buy-in at the highest level. Streamline functions can challenge your people to do more. Listen, we are all in a tough time right now. I’m sure some of you have experienced layoffs. We have too, a bit of a downsizing. But that’s okay because our numbers are as good as they’ve been outpacing our numbers from this time last year; we’re about forty-one people lower than we were. Because of those cost reductions, all I’ve challenged my people to do is, do more with less and they’re answering the bell every day.

Stay true to who you are and what you are in your market. I heard a question about, will you be changing your group cancellation policy? Well if you didn’t do that before, there’s no need necessarily to do it now. Know who you are, know what got you to where you are today and stick to it if you can. And that’s what we’re doing.

One thing that did change for us is we identify a new consumer segment which is kids and we’re going after it and we’ve defined that as our sweet spot. Taking risks and going where you’re never done before. I encourage my, my hundred plus employees to do that every day. Okay, it’s okay. Live out of the box. Do things differently. I read something – it might have been Starwood Hotels, if it wasn’t, excuse me. I read something earlier in the week about, stay three nights; the third night is based on when you were born. If you were born in 1948, you get $48 on that third night. Well you know what? We took that idea and we’re going to launch that around a Father’s Day plan and a Mother’s Day plan and that’s a little out of the box for us but we’re going to do it and I applaud Starwood and any other companies that are thinking out of the box in creating value because I thought that was a terrific idea.

Staying transactional, that’s the key in a time like now. And when we talk about the value buy, I’ve got to give my season ticket holders something to sell every day. It’s all about reinforcing them as employees just as much it is going out there and selling to the consumer. Value creation, that is the buzz word. We live it every day; I know you do too. Measurement, very key for us. Our business on the corporate side has gone from business-to-consumer, to now business-to-business and why do you say that? Well, we say that because from a business–to-business standpoint, we can truly measure success for a corporate partner. This is more sponsorship than ticket sales. We had the CEO in today from Willis, big insurance broker and they’re looking to getting into sports but it’s all based on measurement and business-to-business and that’s something that we’ve done and we’ll continue to do.

Celebrate success; I know it’s a tough time and I need to do it more personally when it comes to my employees. But we all need to pause a little bit and even though the numbers might not be as good as we want them to be, they’re still pretty good relatively speaking and you need to celebrate the success of all your employees and all the hard work that they’re doing every day.

And then lastly, I’ll leave you with, everything does matter, especially now. It’s critical. Every stone you need to turn over, every employee you need to say hello to. I mean everything matters.

And with that, I appreciate the time today. I know I was a little animated and passionate but that’s who I am and if you have any questions, I’m more than happy to answer them. Okay?

[Question]: [Inaudible].

[Brett Yormark]: Oh, I don’t know. Listen, we all have our problems, right? They do; we do. We’re all in it together. I’m sure they’ll fix it. They’ve got a good management team there.

Yes?

[Question]: [Inaudible].

[Brett Yormark]: Well that’s a great question. I mean one of the things – I’d have to say to some degree. For us, it’s all about hiring on the court now in the product cycle, character guys. Guys that understand they’ve got to go the extra mile if they want to work for the Nets and play for the Nets. That’s just a part of the deal. In most sports environments on the team side, basketball and business are not seamless. In our world, they’re very integrated and they’re very seamless. It’s the only way we can draw our business forward.

So we do take into consideration the character as most teams do. But for us, it’s paramount. So that’s a great question.

[Question]: Just curious, is Jay Z still committed to getting into the hotel industry?

[Brett Yormark]: You know what? I know he was and I’m not sure. I mean obviously I think he was close to trying to break ground or something in lower Manhattan and I’m not sure where he is with that. I know he’d like to but I guess financing, the economy, it’s dictating some of his interests right now. But he’d be good at it, to be sure.

[Question]: A few people in this room may want to talk to him about that.

[Brett Yormark]: Okay, all right. I’m not sure if that was a good thing or a bad thing. But, all right.

[Question]: What percentage of your business is, are season ticket holders versus transient and you talk a lot about customer and rewarding current customer and branding and loyalty but is there an opportunity like in the hospitality business to integrate the Nets, and extra tickets or….do you spend much time – is it very profitable for you in the transient seats that aren’t sold?

[Brett Yormark]: Well, for us, well that’s a great question. We – couple things. About half of our attendance is, are your full season seat holders and partial plan holders and then we rely on, on individual tickets, group programs and projects, much like you. And then other community related programs to fill that house every night, or at least try to fill it. But for us, it’s about safeguarding the brand. So even if we have to discount to get people in, we need to do that because if you walk around Manhattan, and for many of you who live here or for that matter come here to visit you typically don’t find yourselves in restaurants where there’s no people. Okay, you gravitate to people, to restaurant where you know people go to; they’re having fun; it’s a vibrant atmosphere. And we feel the same way. We can’t discount to the point of compromising you know what a season ticket holder has paid. So we’ve made a little bit of a shift. You’ll never see us in print or just verbally discuss discounting; it’s more about value. Value versus discounting, I think there’s a differential between the two so we’re going more towards value than discounting because I think based on our advisory board, our, some of our full time season ticket holders, people that are paying you know the ticket price, they were somewhat taken aback by some of the discounting they were reading about or hearing about. So we changed that and it was a great comment by our season ticket holders and – so that’s, hopefully that answers your question.

Yes?

[Question]: What’s the strategy for the move to Brooklyn? Is it considered more, you guys are moving the team completely with the season ticket holders? Are you looking for new season ticket holders when you make that move?

[Brett Yormark]: That’s a great question. We — obviously those of you that know or follow the Atlantic Yards Project, it’s been delayed. Hopefully we’re within striking distance of this last litigation ruling and I think we’ll hear something very favorable in the next couple of weeks. But with that being said, we’ve been in a very challenging environment because we were open and honest with our fans saying that we are leaving New Jersey and we’ve been saying it for five years and then you’ve got, you know this other consumer base on the other side of the river that you want to create some sampling environment for. So how do you stay true to your core fan base but create a sampling environment across the river? And I think we’ve been able to do it. In New Jersey, we have a very distinct message. The message is, don’t go with your wallets yet, okay? Pause, we’re going to be here for a couple of years. We’re going to market this thing as if we’re going to be here for twenty years. We’re going to investment spend in all the right areas as you’ve seen and hopefully when we get ready for Brooklyn, if you can, you’ll follow us. For the folks across the river, we’ve been saying, hey, sample us now. Buy an insurance policy so when we relocate to Brooklyn, you’ll be in front of the line to get those season seats.

I think the reality of the situation is you’re not going to have a lot of people from New Jersey following us just because even though it’s twelve miles from the IZOD Center, it’s a very challenging trip. I mean it could take you twenty minutes or two hours. But I do think those old time season ticket holders will buy partial plans. Maybe it’s a weekend plan because hopefully we’ve given them enough reason to follow us. Obviously the people in the five boroughs on this side of the river –I mean our trading area of influence is massive. I mean we have ten subway lines and the Long Island Railroad converging at the foot of our new building, the Barkley Center in Brooklyn. So we can market those season tickets to a lot of people.

So hopefully that answers your question but we’re doing everything we can to get the folks from Jersey to follow us. If they do, great and if they don’t, that’s okay.

Any other questions? All right, listen I was able to come here today because unfortunately we’re not planning, planning for the playoffs. But maybe if I get invited back next year, I will have to you know gracefully decline because we’re going to be in the playoffs.

But anyway, you guys enjoy your stay here in New York for those of you who are out-of-towners. Thank you very much.

[Applause]

[End of Transcription]

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