The chili is cooking. The beer is chilling. The humiliating terms of bets are being finalized. Everyone’s geared up to watch the Denver Broncos and Carolina Panthers collide in Silicon Valley’s Levi’s Stadium for Super Bowl 50. So are we, but not in the same way as most people.
When most people think of the NFL, images of incredible athletes making extraordinary plays come to mind, as they should. But when we think of the NFL, we think – now that’s a great example of a platform business. (Sad I know, but that is what over a decade of working at eBay for one of us will do to you!)
Because the NFL is a platform. And it’s not that different from the other top platform businesses out there – Amazon, Apple, Google, eBay, Facebook – in complexity and success. So in honor of the Super Bowl being played in the tech industry’s backyard, let’s set aside point spreads and playmakers for a moment and examine the NFL, Silicon Valley-style: as a platform. Which could help answer why – for the nearly 100 years it’s been in business – the NFL itself has performed so well.
But first, a little platform 101
Simply put, a platform is a place that engages multiple constituents, each with their own agenda and motivations, in the same place or arena. At eBay, the platform constituents are buyers and sellers. At Facebook, it’s users, advertisers, and developers. For the NFL, the major constituents in its platform are fans, players, owners, broadcasters, and sponsors.
The key to the success of any platform – whether eBay, Facebook, NFL, or something else – is that someone manages the evolving needs of constituents and makes changes accordingly.
Through that lens, the NFL actually has a long history of actively (not just passively) managing its platform, in the form of rule changes that dial up engagement around the game and further the needs of constituents. For example, the NFL made a rule change in 2015 that increased the point-after-touchdown (PAT) distance, which brought fans to their feet more often. After all, scoring plays in football are what the game is all about.
You call that exciting. We call that good platform management.
Before we share more about why this rule change was so impactful, it’s useful to look at a far simpler platform than the NFL to make the whole concept of platform management clear. Especially because in many cases people don’t know they are really managing a platform.
In the old-school taxi ecosystem, the primary constituents are drivers and passengers (and local governments). But the motivations of the primary constituents aren’t always aligned: Drivers want to make as much money in as little time as possible, while passengers want to get to their destination in as little time and money as possible. And of course, as safely and cleanly as possible as well (without having to pick gum – or worse – out of their clothes afterwards).
No wonder ride-sharing platforms like Lyft and Uber drove away with the business; they put in place incentives and penalties to optimize the experience and align incentives for both drivers and passengers. For example, both parties are penalized with a cancellation fee or similar if they cancel a ride after making or accepting the request. And then there are the ratings of course, on both sides; if someone falls below a threshold they can be kicked off the platform.
The byproduct of all this is that the relationship among constituents shifts from a very short-term, transitory transaction between just drivers and passengers to a much longer-termrelationship between drivers/passengers and the platform. So far, the resulting platform dynamics have led to lower prices for passengers, more business for drivers, and better service.
So what does this have to do with the NFL as a platform? As with the traditional taxi model, the first step is not only identifying the key constituents, but understanding their motivations and rationale for using the “platform” … even if their constituents don’t know that’s what it really is. Knowing this can help explain – and predict – constituent behaviors when changes come to the platform.
More than just the rules of the game, but the rules of the platform
The table below lays out the five key constituents that operate within the NFL platform, as well as their motivations. The most important one is clearly the fans; it’s their money (directly) and their eyeballs (indirectly) that power the economics of the platform. Keeping them engaged and attracted to the game is the primary goal of the platform.
Fans want more excitement; players want to get paid to play while avoiding career-ending injuries; broadcasters and sponsors want attention; and owners want to balance the motivations of those groups, obviously while also making money.
You can see how NFL leadership has managed its platform by tracking rule changes over time and what constituents it’s targeting with each change. Here are a few examples:
- For the fans: At one point in time-forward passes had to be thrown from five yards or more behind the line of scrimmage, offensively restricting and making it harder to put up points.
- For the players: The goal posts were once located at the front of the end zone, which was dangerous for players when making or defending against a touchdown play. So the NFL moved them past the rear of the end zone and just beyond the field of play.
- For the fans and the players: The NFL has adjusted the kickoff point three times since 1974. Initially it was moved back to increase the excitement of potential kickoff returns, and then it was moved up in order to avoid the incidence of bone crushing and increase player safety. This is an example of balancing needs of constituents as awareness of issues on the platform evolves.
- For owners and sponsors: Once, getting “good seats” meant just getting a seat, period. There were no such thing as “luxury boxes” before. Now, however, you can imagine the margin on corporate-sponsored skyboxes and the joy sponsors feel in being able to access them. They’re also popular ways of bringing in friends-of-friend networks, thus growing the reach of the game.
- For owners: The NFL began “rewarding” owners and cities that built new stadiums by bringing the Super Bowl to their shiny new venue (hello, Levi’s Stadium!). Officially speaking, this is more of a League practice than it is a rule. But it’s a very smart move regardless since it encourages stadium upgrades all around.
- For all: By changing the sudden-death rules – in effect making death not quite so sudden – the NFL increased the fairness (and perception of fairness) of the game. This was a positive change since previously, it felt as random as a coin flip. Fans hated it, players hated it.
Which brings us back to the NFL’s most recent rule change – the distance of the extra point kick – and why, according to good platform management it was inevitable. Let’s break the rule change down…
After scoring a touchdown, teams typically lined up for the extra point – or PAT – where kicking it through the goal posts would give them a total of seven points on the drive. But let’s take a look back at the previous five seasons: Something that should have been exciting was actually not very exciting at all; there’s a reason there’s no such thing as an extra-point dance:
The 2014 regular season saw only eight misses in 1,230 PAT attempts, and 26 of the 32 teams did not miss a PAT throughout the whole season. The New England Patriots hadn’t missed a PAT since the 2010 season! Patriots head coach Bill Belichick even referred to them as a “non-play” (after this year’s AFC Championship I bet he’s changed his tune).
For comparison, the league-wide free-throw percentage of the National Basketball Association (NBA) for the 2014-15 season was 75%. Even the game’s best shooter, Stephen Curry, clocks in at 91% from the charity stripe, far from the near-perfect conversion of the NFL PAT.
With near-perfect predictability in the PAT, the drama and engagement in the game was falling after touchdowns were scored – in other words, it was boring. Broadcasters sometimes didn’t even show those extra points, and when they did, announcers would often talk over it.
And if broadcasters cared so little, fans cared even less. For fans the PAT amounted to the ideal time to take a bathroom break or grab a beer. And if fans – the platform’s most important constituent– aren’t looking at the TV because extra points are essentially gimmes, theneveryone loses.
The new game plan
All well-managed platforms (Apple, eBay, Facebook, etc.) have oversight by a person or group that monitors the evolving needs of their constituents and makes changes accordingly. The NFL’s version is the Competition Committee – composed of head coaches and league managers – who evaluate proposals and make recommendations to NFL owners to make the game fairer, safer, and more entertaining. With the PAT the Competition Committee saw an entertainment problem, or rather, lack of entertainment.
So this season, based on the committee’s recommendation, the league moved the PAT attempt back from the two-yard-line (the spot where the ball gets snapped) to the 15-yard-line. That 13-yard change turned an automatic chip shot into a more challenging 33-yard attempt.
The first-order effect was to lower the PAT conversion rate. In 2015, there were 1,217 PATs attempted with a 94.2% conversion rate. That’s 71 misses on the season; nearly a 9x increase from the prior year. What’s more, all but five teams missed at least one PAT this season.
Moving from a 99.3% rate to a 94.2% rate objectively is a 5% increase in drama/engagement. Since kickers now stood a chance of missing it, you could also argue this rule change made 100% of PAT attempts more dramatic – and that’s a win for all of the constituents.
Beyond the increased PAT drama, however, there was a second-order effect of the rule change – it motivated coaches to go for the two-point conversion more often, which is even more exciting. If there was already some risk your kicker might blow it, why not add a bit more risk for twice the points?
In 2014, NFL teams attempted the two-point conversion 4.6% of the time (59 attempts). In 2015 that number increased to 7.2% (94 attempts), an increase of 57%. This increase in engagement is an even bigger win for fans and other constituents of the NFL.
Another way to view the change is that today’s two-point conversion now has a higher expected value than the PAT. In 2015, teams successfully completed 47.8% of two-point attempts. With the PAT rate falling to 94.2%, the expected value now favors teams who go for two after a touchdown. It wouldn’t be surprising if we see the number of two-point attempts increase as a result in the coming years.
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The PAT change is only the most recent by the NFL. As with any well-managed platform, change is continuous. So what might we see the NFL do next?
Since the PAT move was positive for all constituents at zero cost, the league would do well to consider pushing it back even further.
Meanwhile, there has been a lot of focus on advancing player safety in recent years, and we expect this trend to accelerate (the game loses appeal if your heroes are constantly nursing injuries on the sidelines or retiring from the game at a young age). Finally, the NFL will obviously go deep with fantasy football, which may represent the NFL’s most engaged users.
What the NFL won’t do is introduce some version of basketball’s three-point shot – say, a 10-point play. Ultimately, platform management – especially management of a nearly century-old platform like the NFL – is about tweaks. The game needs to evolve in a way that is recognizable as the thing that fans love, but not in a way that changes the definition of the game itself. It’s about balancing necessary evolution against the tradition of football.
And the tradition is all about watching it. So enjoy the big game. Who knows, it could be determined by a platform management decision – I mean Point-After-Touchdown – the AFC Championship certainly was.
This post originally appeared in Business Insider.
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