Here, Murray Barnett, former Head of Global Sponsorship and Commercial Partnerships at F1 and Chief Commercial Officer for World Rugby, says don’t believe everything you hear.
The media, mainstream and social, is full of the dire implications this crisis will have on the multi-billion dollar sports business. Much reporting is wide of the mark, fuelled by those with vested interests or with the need to fill column inches. As with the action on the field, court, ring or circuit, there will be winners and losers. Those quick and willing to adapt and change stand the best chance of coming out on top. We don't yet know what the final score is going to be, but below is an attempt to make (common) sense of the myths which have been circulating.
Myth 1. The sports business will wane
Many sports represent the ultimate capitalist business model. In the relentless pursuit for increased revenues, sports are shaped and grown. Sports with very traditional environments such as rugby, struggle to cope, whereas those who accept and experiment with ways to better commercialise, see new audiences (and revenues) as the reward. Witness experimentation with faster game play and less breaks by NFL and MLB, which have been driven by declining and/or ageing audiences, as well as the pursuit of better commercialisation opportunities. They point a direction for others to consider.
US major leagues have always had symbiotic relationships with key commercial stakeholders, ultimately because they have a clear shared purpose - making more money.
In the post-COVID world, partnering with commercial entities such as sponsors and broadcasters will be key. It takes a crisis to force change in the much more entrenched European-centric sports world, but ultimately, treating sport as a team game behind the scenes as well as on the field of play (by involving commercial partners amongst others) will be the way forward to ride this economic and societal storm. For second tier sports, the short-term is quite bleak – however, it is also a chance to take radical steps to reshape the way they are run, marketed and promoted.
The next few weeks and months could see changes that in any other period would take five years.
There is also a lot of readily available cash in the market (albeit with strings attached) to accelerate game changing innovations. The longer-term future is more rosy for those that embrace change and activate with innovation.
Myth 2. The commercial value of sports rights will collapse
The value of sports rights has always been based on what the competitor is perceived to be willing to pay. In a bull market, fees for sponsorship, media, hospitality etc grow with bets on returns getting bigger and bigger. In a bear market, there will always be some retrenchment. Pre-COVID, sports media rights were starting to plateau, so no doubt a post-COVID world will see this trend continue. In sponsorship, brands have generally been supportive of existing relationships - for now. Wait until the latest round of earnings calls have finished to see how solid this support is.
The hard conversations between right owners and sponsors is only starting now. Hence the increasing proliferation of plans and counter plans, and new plans, and crazy plans (hey, let’s play on a deserted island!).
The truth is we still don't know when sport will come back properly. In the meantime the patience of partners is being tested. Generally, the longer (and bigger) the partnership, the more likelihood it will present a united and strong front. What should give the business some comfort is that sport is such a unique asset in the promotion of goods and services. Commercial partners will return, selling subscriptions or soap powder, but into a market with more choice and more diverse opportunities. Everyone will have to work harder for the commercial dollars. In media, the fees will stabilise compared to the big increases of previous rights cycles. The main danger across the board will be polarisation in fees leading to the richer sports and clubs getting richer, and the smaller sports and clubs getting poorer. Those with the ability to fully appreciate and embrace the needs of commercial partners will be the winners. In essence, adapt or die.
Myth 3. Archive has grown in value
Archive is consumed in the absence of live sports content, period. There have been some fine examples of creative use of archive matches and content throughout the crisis. Notably, BBC’s Match of the Day and World Rugby have innovated across their social and digital media – however, the notion that this crisis will spark a rise in archive value is incorrect. ESPN Classic Sports channel consistently failed to garner significant audiences, either in the US or its international expansion. Its success was in offering a more robust 'media bundle' when packaged with other (live sports) channels. ESPN is notable for having launched the greatest ever sporting documentary series - 30/30. The influence of this series is still felt today with the hugely successful ESPN/NBA/Netflix “The Last Dance” on the Chicago Bulls' sixth NBA title run. What sets these documentaries apart is their budget and treatment by some of the greatest filmmakers in the world. Even then it’s hard to envisage as big a success for The Last Dance if there was live sport on TV. Certainly, unadulterated replays of archive events will not gain traction post-COVID.
Myth 4. Esports is a viable alternative to traditional sports
In the absence of any live sport, with sports channels desperate for content, and rights-owners desperate to placate them, eSports can offer some slight respite. Whilst there have been some good examples of strong (COVID-induced) audiences (such as eNASCAR series), these are largely because there is no other live content and eSports have been made available free of charge to rights-holders to mitigate provision of real sport. The monetisation model for eSports to replace traditional sport is still largely unproven.
Esports is not an alternative to live sport. At its core, it is a complimentary product.
It has a role to play in broadening brand reach across wider demographics and interests. Additionally, many in the sports business still confuse eSports and eGaming. Focusing on eSports - replications of existing 'real world' sports a la Madden or FIFA - as the average age of traditional sports fans remains older, eSports allow brand extensions and opportunities to reach different demos. Younger generations absorb eSports in a way that can lead to them becoming a fan of (traditional) sports. Indeed, it’s a way of life for them. It leads to a completely different profile. They tend to be more player-focused and want 'more of the highlights'. Sports marketing continues to obsess with conversion of eSports fans to their core product rather than developing a separate profile and attention to eSports fans. This crisis has certainly shone a spotlight on eSports and hopefully will encourage rights-owners to invest resources in growing their unique audiences.
Myth 5. Mass participation sports are dead
A pre-COVID world saw a substantial increase and commercialisation of mass participation sports and events. This pandemic will have huge impact on this sector. That being said, this crisis has also amplified how much humans fundamentally need to interact and, in many cases, has engendered a positive community spirit (who knew all their neighbours before the Thursday night pot banging and hand clapping?). Mass participation events serve these needs of community and togetherness as well as exercise (which has also been sorely missed for those unable to go out). Already an increasingly saturated category, there will be substantial reductions in the number of events for both practical and financial reasons. Solving the hygiene/health-related issues will be of paramount importance. If someone can also figure out ‘remote participation’, cracking the code (in an engaging way) on how to interact and take part without actually being there in a crowd of 5,000 joggers, the future could actually look promising for mass participation sports.
Myth 6. Attending sports events will be a thing of the past
Obviously, the slowest recovery will be in large audience spectator sports. The Cheltenham Festival became the scapegoat and poster child for how dangerous large events can be in the spread of a virus. In a post-COVID world, no sport wants to jump the gun and most, if not all, will need to rely on government advice (if only to protect their insurance policies) before opening their doors. Plans are already afoot for staging events without spectators, but this can only be a stop gap for many who rely on spectators for revenues as well as atmosphere.
Live sport is often eulogised as a cathartic or religious experience. For many of us, to adapt a phrase, it's more important than that.
As cabin fever or virus fatigue continues to grow, people will want to worship in the temples of their favourite sports and clubs. Until a vaccine is found, innovation will be the solution - this could take the form of apps detailing testing, temperature gauges at entrances, reduced capacities, no F&B etc. Fans will be more discerning about where they go and what events they spend their money on. They will also be slow to come back, but will come back to those events offering a high quality (and health-conscious) experience, as well as value for money. Much has been written about "Big Eventers". They will be the most difficult sector to attract back as their interest in the sport is generally the weakest. May be this will improve the atmosphere in some stadia?