Source: forbes.com
“They say that ‘data is the new oil’ because it’s the world’s most valuable commodity,” says Matthew Jafarian, Miami Heat Executive Vice President of Business Strategy, “and we collect a lot of it.”
Jafarian and Edson Crevecoeur, Miami’s Vice President of Strategy and Data Analytics, lead a small, in-house group of innovative minds that works for the Heat. Their goal is to change the way that NBA teams use newer technologies to make data-driven decisions to increase revenue. To that end, they have developed a new platform that gathers data on everything from attendance numbers to sales of tickets and food and beverage items, and processes that information more quickly than ever before.
Jafarian and Crevecoeur have branded that platform as part of a start-up LLC, 601 Analytics, named for the address of the AmericanAirlines Arena, 601 Biscayne Boulevard in Miami. The Heat have been utilizing the platform to improve business operations behind-the-scenes, every bit as successful as the team on the court has been in winning multiple championships over the last 15 years.
The platform ties together the different systems at work at the AAA, then compiles and correlates the data to provide a “real time view into business operations,” per Jafarian. That information can be used in the short term to measure game-to-game performance, or for long-term initiatives like calculating annual sales of season ticket packages or premium seats throughout the Arena.
The analysis is so precise, in fact, that the 601 team has been able to predict attendance at each Heat home game almost exactly since before the season even began. Miami fans are a late-arriving crowd for a number of reasons – traffic, lack of centralized transit options and reasonable parking among them. Check in at tipoff and attendance numbers, which the platform updates to the second on how many people are in the arena and where they’re entering from, are likely well below predicted estimates. “But check the data again throughout the game,” Jafarian says with a smile, “and you’ll see those numbers start to rise.” Predictions have been within a range of 3% accuracy throughout the 2019-20 season.
The platform also helps save the team money by measuring when attendance is at its highest. Because the data was so accurate regarding typically late arrivals, Crevecoeur was able to suggest a shift change for some members of the arena staff, an increment as small as 15 minutes to reflect when crowds would actually start to build. The change resulted in an annual savings of over a million dollars.
Developing the data-mining tool was borne out of necessity, explains Jafarian. “If LeBron James, Chris Bosh and Dwyane Wade were still here, they wouldn’t need us,” he says, referring to the formation of the superstar core in 2010 that ended four years later with James’ departure to Cleveland, followed by the subsequent retirement of Bosh and Wade. “When that era ended, the Heat, unlike other teams that have gone through the same situations, doubled down and invested, built up the staff, and we’ve done everything we can to build a business because we’re unique, in sports, in that we cannot control the product that we output.”
Miami continues to be one of the most profitable teams in the NBA, despite having missed the postseason twice in three seasons. Their jersey sales, particularly their “Vice Edition” line of brightly-colored apparel, typically outsells all 29 other teams combined. “We’ve had record years, even though we haven’t had record-setting teams. We wouldn’t even be here if the business side would have just followed the basketball side. This time, the business side is leading.”
Use of the platform has led to such success, the group has been talking with teams around the NBA and across other sports to begin licensing their product. In an exclusive to Forbes, the Milwaukee Bucks have become the first team to enter into groundbreaking licensing agreement with 601 Analytics, a multi-year, six-figure agreement that will be officially announced on January 13.
“The best vote of confidence that we are doing this right,” explains Jafarian, “is when teams go to the NBA league offices and say, ‘We need to get our data warehouse and capabilities in order,’ and the NBA tells them to talk to us.” The Bucks began the first phase of the platform’s implementation in June and went live in October at the start of the NBA regular season.
Robert Cordova, the Bucks’ Chief Technology and Strategy Officer, explained the decision via a phone interview. The Bucks own and operate Fiserv Forum, a state-of-the-art arena that opened in 2018. They were gathering data from attendees from dozens of events every year and realized they could be utilizing that information to significantly improve operations. “We knew we wanted to bring all that data together, correlate it and understand what was going on as close to real time as possible, and get that data to the right people at the right time so they can work with it. We knew we had that need and wanted to be a data-driven organization.” That led them to the Heat, one of a handful of teams that they met with to take the next step in data optimization.
Because Miami operates the AmericanAirlines Arena just as the Bucks do Fiserv Forum, there was a shared approach that laid the groundwork for an eventual agreement. “The fact that they had already [used the platform] was great,” added Cordova, “as well as the fact that it took them five years to get it going. I didn’t want to do it myself and take five years, so it was a great win-win where the Bucks could leverage all of their lessons learned and their platform and get there in a much faster time frame.”
Of course there were kinks to work through. There are certain codes used to indicate ticket sales that vary from team-to-team and required modifications to the platform. Cordova and the Bucks worked together with the Heat, who provides tech support throughout the length of the agreement between both teams. But even out of conflict there are opportunities to learn lessons that benefit Miami and any future clients. “You have to have flexibility to adapt,” says Cordova, “but if there’s a way that you can do these things that might be more effective or produce greater results, it could be a win-win for everybody.”
Jafarian credits a cultural compatibility for the partnership’s success and, as such, 601 Analytics is being “selective” about finding their next client. They will be presenting to every NBA team on January 13 during the league’s annual sales and marketing meeting and they have the capacity to work with at least one another client almost immediately. “We’re not a startup that is beholden to investors and needs to make money,” says Jafarian. “We want to be a boutique shop that takes care of a few select customers.”
The ultimate prize is to have the NBA be that client or a similar entity in any sport around the world. The rationale, says Crevecoeur, is “because it would allow us to standardize the quality of information that’s coming from all 30 teams.” While other teams may have something similar to 601’s platform, there’s a belief that their product is the most comprehensive and that their in-house team expedites services that have heretofore been provided by outside vendors. “We control the solution. We can control the direction of the product evolution. We dictate the pace. We can impact priorities a lot faster than other teams that are working with a vendor.”
While the Heat and Bucks struggle for dominance in the NBA’s Eastern Conference, there was no hesitancy about working with an on-court rival from either organization. Cordova insists there was a level of trust that was virtually immediate. “[The Heat] knew what they were doing and they could help the Bucks get as close as to what they are as soon as possible,”
Jafarian agrees. “We’re not a vendor that’s trying to sink our teeth into your business for the next 10 years. We just know what we’re doing and can help. Our leadership believes that a rising tide lifts all ships. If you want to do this on your own, you’re going to have to find an Edson, build out a team like his, and it’s going to take you years. Or you can come do it with us and you can have it in three months like we did for the Bucks for a heck of a lot less money.”