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Well Connected: When it comes to sports, Cisco is wired-in

March 12, 2009 | Chris Payatagool


The floor of the NBA Jam Session, the league's annual All-Star fan experience, was buzzing at its usual cacophonous din last month in Phoenix, even amid the depressing economic climate that cast a pall upon the entire weekend.

Dunks and jump shots were constant amid dozens of baskets spread across a convention hall floor. Autograph and souvenir seekers waited in lines to meet their heroes and collect their wares. Video game stations were busy, and NBA TV and had set up shop.

cisco_nba.jpgKevin Durant of the Oklahoma City Thunder answers questions from fans at the Cisco TelePresence booth during NBA All-Star Weekend.

But perhaps the most popular attraction at Jam Session was a video conferencing system, Cisco's TelePresence, that through high-definition video and lifelike rendering turns what used to be a somewhat run-of-the-mill office product into something closer to "Star Trek."

Crowds gathered to talk with players such as Oklahoma City's Kevin Durant and Toronto's Jason Kapono via TelePresence, conducting more relaxed, one-to-one conversations that generally are impossible these days between player and fan in the closely guarded worlds of pro athletes.

On the morning of the dunk and three-point shooting contests, Cisco Vice President David Hsieh excitedly told the story of a 12-year-old fan who had just aced a series of basketball trivia contests also being conducted via TelePresence.

"It was the most amazing thing. He knew just the most obscure stuff, things that basically no adult would know," Hsieh said. "So now we have him at the other [end of the TelePresence link-up] and he's firing off questions to other fans. We've helped create a new fan experience."

The path to sports

Cisco's path to get to this point of euphoria in Phoenix, a repeat of similarly joyous fandom at the NHL All-Star events a few weeks prior in Montreal, was an altogether unlikely one. The San Jose-based company best known for Internet routers and switchers -- essentially online plumbing -- had no core competency in sports just a few years ago. And with Cisco annual revenue generated through a wide spectrum of back-end technology products and services now approaching $40 billion a year, focusing corporate attention on a smaller revenue opportunity such as sports would be impossible in many other companies.

But through a heavy focus on next-generation digital video and communication technologies, a dramatic realignment of its management structure, and the opportunistic execution of a few early partnerships, Cisco is now rapidly forging a major name for itself in the world of sports.

cardinals_cisco.jpgThe company now holds deep league-level pacts with both the NBA and NHL that encompass a range of technology and video services, similar to a recent deal with AEG for its battery of owned and affiliated venues. A fast-growing list of individual team and facility clients including the Arizona Cardinals, Churchill Downs and Munich's Allianz Arena have used Cisco products [see story] such as StadiumVision and remote venue management systems to increasing effect. Media outlets such as ESPN and regional sports networks represent a newer wave of Cisco partnership.

And perhaps the most prominent public showcase of Cisco's march into the sports industry will arrive next month with the opening of the new Yankee Stadium. The Yankees and Cisco last fall signed an extensive vendor pact worth in excess of $15 million that calls for the installation of the StadiumVision system with more than 1,100 high-definition monitors around the ballpark; IPTV phones in the luxury suites that will enable touch-screen ordering of concessions and accessing of on-demand video replays and statistics; computers within player lockers; and wireless access throughout the building, among other high-end digital amenities.

"We're deadly serious about this business," said Ron Ricci, Cisco vice president of corporate positioning. "This is an industry undergoing a lot of transition and disruption, and we're at a position where a lot of key functions and content are heading to network IT. So that represents a major opportunity for us."

Seeing an opportunity

The Cisco sports story holds its key origins in Fremont, Calif., a Bay Area suburb between Oakland and San Jose where it controlled a parcel of land eyed for potential expansion. Oakland A's owner Lew Wolff in 2005 began looking seriously at the town, and that particular piece of property, for a new ballpark to replace the aging and outmoded Oakland-Alameda County Coliseum.

But negotiations between Wolff, a veteran real estate developer, and Cisco quickly morphed from simple property talks to a much larger discussion about next-generation ballparks where digital content and services are at the core of the fan experience. The following year, the A's and Cisco announced plans for Cisco Field, a futuristic ballpark incorporating many of the company's products and buttressed in part by a 30-year, $120 million naming-rights deal.

"It started with a simple question of what does the stadium of the future look like, so it very quickly became a really interesting visioning exercise," Ricci said. "From there, we saw right away we could turn this into a business."

Within 12 months of the November 2006 announcement of the Cisco Field plan, the company had signed many of its current mainstays in its sports portfolio, including the NBA. The relationships are a blend of vendor-related services and traditional sponsorships.

But Cisco Field itself now exists only on paper. Strident community opposition and likely legal challenges last month compelled Wolff to pull the plug on the Fremont plan. The club wants to stay in Northern California, but whether that will become a long-term reality remains uncertain, as no alternative is in active development. The Cisco alignment, however, remains intact.

"Right after the announcement, I got a great call from [Cisco Chairman and Chief Executive] John Chambers, reiterating his support and that when they have a partnership, it's for life," Wolff said. "We've got this great design, and we're going to do great things together, but where we go from here, that's for another day."

Streamlined decisions

Cisco is by no means alone in the technology, digital content, and video services fields, particularly as it relates to sports. Depending on the individual products, the company's competitors include Nortel, Microsoft and Sun Microsystems, among others.

Cisco's approach to the sports industry, however, arrives out of a decentralized management structure where new lines of business are devised by internal councils and boards. These councils and boards are smaller interdisciplinary groups of senior executives tasked to specific business priorities, and are empowered to execute initiatives without layer after layer of traditional corporate oversight.

cisco_stadium.jpgCisco's ties to sports gathered steam when the company worked with the Oakland A's on a land deal for the proposed Cisco Field in Fremont, Calif. The team has since abandoned plans for the site, but Cisco has vowed to continue its partnership with the team.

First formed eight years ago by Chambers, the horizontal structure now includes 26 corporate priorities, including sports and entertainment. And far more than an organizational flow chart or recipe card to devise meetings, the system is backed by an extensive series of blogging and social-networking utilities actively employed by many of Cisco's 64,000 employees -- both internally and on public forums such as Facebook, Twitter and YouTube. "There were several issues at play here," Ricci said. "How is the best way to achieve scale? How do we move more people to decision-making and democratize strategy? You still have to be accountable, but for us, this structure of constant collaboration is vital."

The system also allows for a sharper focus on sports business, which for Cisco still accounts for less than $100 million a year, or roughly one-quarter of 1 percent of total company revenue. The company believes sports can shoot to $1 billion in yearly revenue. But Hsieh added, "there's a value to this beyond direct revenue. Sports business can be a significant opportunity because it often leads to other things," citing the public nature of the teams and leagues and the interconnected business circles in which sports executives travel.

More recently, the financial news has been less kind to Cisco, as it has for nearly every other business in the global economic meltdown. The company last month began a wave of layoffs that could amount to 2,000 people. Sales in its most recent fiscal quarter declined 7.5 percent to $9.1 billion compared with a year ago, and profits slid 27 percent to $1.5 billion.

But with more than $30 billion in cash in reserve, the search for new business in sports, or plenty of other places, will not be winnowed, company executives say.

"As team and building owners begin to focus more attention on bigger-picture things like fan experience, expense reduction, energy conservation, systems management, these are areas where we think we can be a big answer," Hsieh said.

Deepening ties

With Cisco's sports structure in place, the company is becoming heavily focused on deepening its relationships with the industry beyond a mere service or infrastructure provider into an innovator and thought leader sitting at the table with leading executives.

Cisco's latest stab in that direction occurred two weeks ago in Los Angeles in the form of a closed-door summit held with AEG for more than 125 high-level officials, including current or former league bosses David Stern, Gary Bettman and Paul Tagliabue.

The session focused on big-picture issues such as fan empowerment, next-generation facilities and globalization as it relates to technology and digital content, Ricci said. The information exchange has become a two-way street as executives at teams and properties are similarly mining Cisco's knowledge base in search of new revenue and deeper fan loyalty.

"They've been a tremendous partner already. We're obviously so much about video, and there's a big well there we're tapping into with them," said André Mika, NHL senior vice president for new media programming. The league announced its Cisco partnership just before the All-Star events in Montreal. "One of the big things we're doing right away with them is getting video efficiently from venue to venue and having highlights from other games in progress show up on arena video boards. Things like this can help go a long way to deepening the relationship our fans have with us."

Despite trading in a far more emotional sector than its core router and switcher business, Cisco has no near-term plans to become a big consumer-facing brand. And while many of the company's sports alignments have some sponsorship or media buy component to them, those elements are secondary to the core hardware, software and service solutions.

But that doesn't mean Cisco has no interest in creating more "wow" moments like those at Jam Session and the NHL All-Star Game. During a recent tour of the nearly completed Yankee Stadium, club Chief Operating Officer Lonn Trost gushed about the raft of infrastructure deployed by Cisco throughout the facility.

"I look at that stuff, and I'm still absolutely flabbergasted," he said.

[via SportsBusiness Journal]


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