As we diligently rub metal on metal, producing the stuff that makes the wheels roll smoothly, the big money in the economy continues to flow to the world of ideas, entertainment and health.
A few thoughts to connect.
Monday Amazon agreed to buy Twitch for $970 million. Google thought they were going to get it but Amazon swooped in at the last minute. Twitch is a site that broadcasts online video game competitions. They aspire to be the ESPN of video gaming. Who knew?
But this is a big business and growing fast. Twitch is in the top 15 most trafficked Websites. It gets 55 million unique viewers a month as a three-year-old company. The number of hours users spend on Twitch is the same spent on MTV and a tad behind CNN. For Amazon it means an advertising vehicle for the company and a big opportunity for growing ad revenue to reach a prime demographic that is hard to reach – young men.
One of the video game competitions Twitch broadcasts is Madden NFL, which came out with its 15th edition Monday. The 25-year history of this game is fascinating. The game’s creator, Trip Hawkins, was a football player at Harvard. He wanted to combine his love of the game with his passion for computers. As a child he had played the board game Strat-O-Matic and wanted to bring a version of it to the Apple II, the computer gaming platform of the day. While he was not banging helmets on the field for the Crimson, he worked on the code for his video game, which became the genesis of his multi-billion dollar firm, Electronic Arts. Hawkins admired John Madden as a student of football and wanted to get his input and possibly even his name and voice for the game. John Madden was famous for his fear of flying and traveled to every game on a land conveyance. Through a friend of a friend, Hawkins located Madden traveling on an Amtrak train in 1984. He bought a ticket and found the famous coach and commentator in the club car. He introduced himself and told Madden about his project in the hope that Madden would buy into the idea even though he was not computer savvy.
The game’s popularity has grown steadily through the years, with total sales of $4 billion since its inception. They have an estimated 6 million active players today. Madden receives $2 million a year from Electronic Arts, a nice royalty but paltry compared to the $50 million Electronic Arts pays the NFL and NFL Players Union for the exclusive gaming rights. With Twitch under Amazon’s flag I can imagine those numbers rising significantly.
Meanwhile, Kevin Durant, the NBA’s Most Valuable Player last season, weighs shoe offers from Under Armour and Nike. Under Armour has offered him a $265 million 10-year deal to endorse its shoes. Current shoe endorsement Nike probably will not match it. Kevin Plank started Under Armour in his basement and has come a long way toward challenging Nike in athletic apparel. He is hoping that Kevin Durant will be his Michael Jordan, or his Madden.
But the Durants and the Maddens are the tiny exception. Consider the lock the NCAA and its schools have had on their huge cash cows, the college football and basketball players who have always worked for nothing except their scholarships. The NCAA cartel has really taken advantage of its players. The organization rakes in billions of bucks each year and then terrorizes the players if they get a hamburger from an alum.
The era of athletic serfdom is beginning to end now with smart lawyers blitzing the NCAA from all directions. Some players will be getting a little money soon, and considerably more of the pie down the road.
A side note. The Libman family, which owns a 118-year-old cleaning products family business that started with brooms manufactured in downtown Chicago in 1896, recently signed a smart endorsement deal with the Big Ten Conference. Libman is the exclusive floor mop at all 12 of the conference’s schools.
Every time a kid swoops onto the basketball court of an Indiana vs. Ohio State game to mop up sweat, you see the Libman brand. It’s a nice branding device for the company and another piece of money for the colleges. Of course, the players don’t see a penny.
What these disparate dots on the economic map illustrate is that money gravitates to good ideas and where we spend our time and cash. When we go to IMTS in a few days, the emphasis will be on better machines to make things, which is crucial in the machining business. There will be a little booth in the corner where a geeky young woman or man will have a better idea for your business, like Trip Hawkins offered John Madden on the Amtrak train in 1984. Maybe you will feel a twitch when you see it.
Question: Should college athletes be paid?