How the pandemic is changing the future of sports
Part 1 of One’s ‘Together Apart’ series
The pandemic is accelerating many of the underlying advertising, media, and commerce trends that were slowly bubbling to the surface. We’re experiencing rapid shifts in global consumer behavior - an experience we’re sharing collectively, yet alone - away from our regular pre-pandemic social lives. Some of these shifts may be temporary, but many will stick around. We will digest which ones are most relevant for brands, media owners, consumers, and other relevant constituents, all through the lens of content and experiences we like to consume the most. Today’s first installment will focus on sports.
Just before the end-of-year holidays NBCUniversal execs were in good spirits. The network holds TV rights for US broadcasts of the Olympics. The time-zone difference with Tokyo didn’t seem to be much of a concern for advertisers who, by December, had bought up 90% of all available Olympics commercial inventory totaling to an estimated $1.25 billion haul (and a healthy double-digit increase on the previous Olympics held in Rio de Janeiro in 2016). It was estimated that the games would bring roughly $1BB to Tokyo and vicinity and the total global commercial tally includes carriage rights and local sponsorship deals in each country. It’s not just the Olympics: WarnerMedia posted revenue declining 23% YoY in Q2, with Turner’s revenue declining 12% YoY due to the postponement of the NBA season. Per Nielsen Sports, brands spent $20 billion to advertise on various sports-related TV programming in 2019 (and close to $17 billion of that was tied to sporting events). Ouch.
Instead of a marquee year for sports the first half of 2020 brought us a fan experience more akin to ESPN The Ocho: the channel we were introduced to in the 2004 comedy “Dodgeball” and that ESPN, to their credit, turned into a real ‘channel’/event in 2017 (and every year since).
If it’s almost a sport, we’ve got it here
- Gary Cole as sports announcer Cotton McKnight in Dodgeball
Even the biggest pessimists among us were hard pressed to imagine a world in which all sporting competition ground to a halt worldwide within a matter of weeks. Some events got lucky and were hailed for their foresight: Wimbledon, one of tennis’ most venerable tournaments, had presciently invested in global pandemic insurance for the past 17 years and is expected to recoup around $141 million (or roughly half of what this year’s cancelation will end up costing). Others were faced with impossible choices. Contracts specialists got really good at understanding the definition of force majeure and if it applies to pandemics. Advertisers initially put up a brave face but started talking clawbacks and spend alternatives in the background. Athletes had to rethink their training regimes and face the possibility of an extremely lean year.
If we leave commercial carnage aside for a second, a major current became apparent on the consumer side:
Live events and live sporting events in particular have always been at the cornerstone of our relationship with sports media. Heavy sports viewers remain a resilient demographic for cable companies and are in many ways the anti-cord cutters. A recent Nielsen study compared the behaviors of overall TV audiences with those of heavy sports viewers and found that sports viewers continued to watch television and increased their overall consumption even though there was significantly less sports content available.
In a normal non-pandemic world/year we wouldn’t be able to observe this experiment that challenges the fundamental assumption of what really brings value to fans in the sports media ecosystem. Live sports have always been there.
But what if the live sporting event is no longer the core main draw? What if in addition to the synchronous experiences (like watching the finals of a Grand Slam) the ancillary content around it that doesn’t have to be consumed in real-time is equally if not more valuable?
The ancillary content isn’t in short supply and can range from athletes themselves carefully cultivating their Instagram followings (LeBron James has 68.7 million followers and soccer superstar Cristiano Ronaldo a whopping 231.9 million at the time of publication) to behind-the-scenes productions like ESPN’s fantastic 30 for 30 series or The Last Dance, a documentary about Michael Jordan’s last season with the Bulls that’s now on Netflix following an initial run on ESPN. The possibilities in between these two are endless and more and more athletes, agents, clubs, sponsors, and savvy media owners are jumping in.
Why should you care:
It’s natural that our first reaction is to tally what we’ve lost with the worldwide sports freeze and subsequent somewhat comical attempts at regaining normalcy. The good news is that in the background of mainstream sports many other alternatives were quietly developing, building audiences and distribution channels outside of the main spotlight. These are now nicely poised to help us fill in the traditional live sports withdrawal.
On the one end of the spectrum are ‘traditional’ sports with well-established traditional distribution and monetization methods. On the other are e-sports who’ve largely built an alternative parallel delivery stack and relied on new distribution platform entrants (like Twitch) to rapidly gain scale. That leaves a lot of opportunity in the middle for sports who can develop (or already have) a virtual offering and can benefit from both traditional and new/direct distribution and monetization.
Let’s look at what we’re gaining instead through some examples:
As some countries recovered faster, modified live sports were able to return. Some of the modifications are downright amazing. An early (adorable) example comes from Korean baseball - it’s really no fun to play in front of an empty stadium but if people can’t come to games, who can fill the stands? A variety of cute fluffy stuffed creatures, of course! You have to admire these athletes’ ability to keep a straight face and focus on the balls and bases with SpongeBob, Pokemon, and Giant Bear (?) over there lurking in the background.
(Screenshot courtesy of YTN News via Kotaku)
Another more commercially savvy twist on the same idea comes from Germany - supporters of Borussia Mönchengladbach (currently ranked 4th in the Bundesliga) could snap a selfie, have it printed out on cardboard, and placed in the stands so players can ‘see’ their fans when they walk out the tunnel. Ordering a cardboard cutout runs ~$20 (or 19 Euro) - slightly more expensive than the cheapest nosebleeds. What an ingenious way to be somewhere you’re not and to combine digital and physical experiences.
It’s a popular idea. Today, at the opening day at Fenway Park, The Red Sox will face Orioles in a baseball stadium full off cardboard cutouts as well.
Peloton and ESPN partnered to organize and broadcast a charity ride with 16 current and former professional athletes across a variety of different sports (from swimming, through tennis, football, all the way to golf). We rarely get the opportunity to see athletes at the pro level compete with each other across sports - but Peloton introduces a new, neutral medium that makes this possible. The opportunities are interesting here: if you’re a media outlet who can’t spend billions of dollars for carriage rights to a Tier 1 league can you make this type of content attractive to sponsors and viewers instead?
This year’s Tour de France, the cycling world’s premier race, is running virtually on Zwift: a virtual world for cycling and running training and competition. 23 men’s teams and 17 women’s are competing with top riders like Marianne Vos, Chloe Dygert, and Chris Froome (who has won the IRL Tour 4 times). A slew of modifications have been made to accommodate a realistic competition. Arguably the biggest advancement is that in this current scenario men and women can compete on the same course against each other (in real life ladies get a one-day race instead of the multi-stage affair the men ride, and to say that elite competitors are absolutely stoked about this would be an understatement).
Squint and it almost looks like a regular broadcast. The possibilities here are delicious. Elite events like Tour, marquee marathons, etc are limited by the size of the field, geography and similar real-life constraints. Virtual worlds like these can create entirely new competitions and entirely new ways of monetization: what if everyone with a connected roadbike and a stable internet connection could pay an entry fee and compete in the Tour? What would that do to the economics of the underlying event? What exposure could an advertiser get for sponsoring virtual jerseys or buying a (virtual) roadside banner?
It’s easy to fall into a rabbit hole of other cool examples (Formula 1, MotoGP, even Nascar!) while recognizing that many sports don’t and won’t readily translate well to a mixed/virtual mode. The more interesting challenge is what does this all mean to two important commercial cohorts: brands and advertisers, whose investments make a lot of the sports world possible, and media owners who package and productize the sports content we love.
Brands and advertisers
While traditional marquee sports are on a pandemic-induced hiatus or embarking on a slow recovery (like baseball with empty stadiums and the NBA with their Florida bubble), savvy advertisers can be on the lookout for new opportunities, like in our virtual Tour de France example above. It’s not a matter of interest as much as it’s operationally difficult to execute: sports sponsorships are negotiated well in advance and this year’s marketing budgets may not have any more room in them for experimentation. But that’s exactly the strategy brands should be embracing: the pandemic can be a universal excuse for trying something new. Your key demographic might not be paying attention to baseball or basketball but instead watching replays in the WSL app or competing along their favorite instructor’s team on Peloton’s PeloThon Challenge. As those who’ve had exposure to e-sports can attest, eyeballs are shifting to new forms of competition - how permanently remains to be seen, but now is the time to be nimble and experiment.
What new sports and fandoms will we see emerging out of this? The synchronous disappearance of major mainstream sports creates an interesting opportunity for media owners to flex their distribution, and venture arms. Many challenger and niche sports (lumping in e-sports here) have a direct-to-consumer approach to distribution; a traditional media owner can help expose them to a more mainstream audience and then hone in on the ones that are resonating the most (which is usually a good segue to a venture discussion). Differentiating the strategy from a single marquee draw to a portfolio of different well-packaged events can put sports rights negotiations (NFL Sunday Ticket or the Amazon Premiere League deal) in a new light.
It may have started as a joke but The Ocho may very well be a viable channel to explore (perhaps not for a cable company but for a scrappy AVOD outfit good at banter and internet silliness).
Like in retail, direct-to-consumer offerings present an advantage from a fan experience perspective: if your app is already on someone’s phone, using it to enhance a live VOD viewing or in-person experience is a natural extension. Who ultimately owns fan experience? Is it the league, the local club, individual athletes with big followings? The companion digital experience is an area where traditional sports and leagues haven’t put a lot of effort behind mostly because they didn’t really need to; will this be the first change we see as major sports slowly begin to rebound?
A ‘plush’ audience for Korean baseball
Peloton: All-Star Ride
Virtual Tour de France
The weirdness of live sports without fans
Platforms competing for sports rights
Continued cord-cutting makes big content licensing deals less appealing
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