Cisco (NASDAQ:CSCO) is currently in the throes of drastic internal restructuring and product cycle transitions under the tutelage of chief executive John Chambers. The networking equipment maker has, as a result, been struggling to find a regular cadence of revenue as it continues to evolve its product portfolio. Not surprisingly, the company has been looking for new revenue streams to replace its rapidly fading ones.
One of these involves offering added connectivity, such as HD Wi-Fi access, to stadiums to help lure back young fans. According to a recent Cisco report, one out of three college students and young professionals consider Internet access as important as food and shelter. According to the report, 57% of young fans prefer watching games at home since they view stadiums as a black hole of connectivity with limited Internet access.
Stadiums are increasingly using Wi-Fi as a churn-reduction strategy to attract and retain young fans. Cisco, together with companies such as Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T) is at the forefront of digitizing stadiums and concert halls both in the U.S. and abroad.
According to AT&T, the demand for high-speed Internet in stadiums has grown exponentially over the last four years.
From the stadiums' viewpoint, increasing connectivity makes great business sense. Denis Taylor, CIO of AEG, said that a connected stadium with an HD Wi-Fi solution helps the stadium learn more about fans. Data collected can then be used to narrowly target fans with the right products. Additionally, a connected stadium is capable of offering services such as in-seat food and drink ordering via mobile devices, which would help stadiums generate even more revenue.
Huge opportunity for Cisco
The opportunity for Cisco is huge. According to worldstadiums.com, there are 2,478 stadiums in the U.S., with 248 sporting a capacity of 20,000 or more seats.
AT&T VP of Antenna Solutions, Chad Towne, pointed out during an interview two years ago that the company has a list of 5,000 venues, including stadiums and concert halls, where it's looking to build out Distributed Antenna Systems, or DAS, to support Wi-Fi systems from companies like Cisco.
Cisco has been digitizing both new and older ballparks. The New York Yankees, Dallas Cowboys, Toronto Blue Jays, Denver Broncos, and Kansas City Royals have all connected their stadiums using Cisco's infrastructure and technologies.
Cisco's biggest Wi-Fi project to date is the Barclays Center, home to the Brooklyn Nets. The 17,500-seat arena is considered the world's most connected stadium. All the networking equipment used in the Barclays Center is Cisco's.
Comcast, on the other hand, has also been helping the country's stadiums get connected. The company recently did a 100Mbps ethernet upgrade in the Celtics' stadium. But, its biggest Wi-Fi project is the ongoing 10-gigabit San Francisco 49ers' Levi Stadium, which will open in July.
The Levi Stadium will steal the spotlight from Barclays Center as the world's most connected stadium when it opens its doors this summer.
Bringing it together for Cisco
The immediate revenue benefits for Cisco are substantial. It costs approximately $20 million to provide HD Wi-Fi coverage for a large stadium with 400-500 access points. Wi-Fi installation in one stadium might not be enough to move the needle for a company the size of Cisco, but multiply that by a few hundred, or thousands, and the math begins to work.
The explosion in mobile data will help drive demand for Cisco's new cloud. The company estimates that global mobile video traffic grew by 81% last year, exceeding 50% for the first time. All that video and data generated in stadiums, homes, at work, and elsewhere is handled in the cloud, and Cisco's giant intercloud seems to have come at a good time.
Cisco's channel partners and resellers will build their own clouds atop Cisco's giant one, which will help to expand the available cloud capacity in readiness for the Internet of things, or IoT. Cisco is ahead of the pack with regard to the IoT, and unveiled an IoT router last September. The company is, perhaps, the best-positioned to reap the benefits of the $14 trillion industry.
How AT&T benefits
AT&T provides Distributed Antenna Systems, which help keep fans' mobile phones connected in high-density environments. DAS is used in stadiums, racetracks, casinos, airports, and high-rise buildings.
AT&T serves as a neutral host that provides carrier-agnostic DAS for all frequency bands, with a data-loss target of less than 1% during peak hours. AT&T has DAS coverage in 90% of all NFL stadiums, and 75% of NHL, NBA, and MLB stadiums across the country. The company's goal is to provide full DAS coverage to 100% of domestic baseball stadiums by 2015.
Foolish bottom line
Cisco is busy finding new, non-traditional revenue streams as it continues to restructure. The huge explosion of data, especially mobile data, not only provides a new market for Cisco's traditional networking equipment, but also for the giant cloud it's planning to build.
Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.