Sports have long been an integral part of our culture, from the earliest form of football in ancient China, Cùjū, to the spectacle of the Colosseum in ancient Rome. Sports and entertainment leaders around the globe have long understood the importance of atmosphere and excitement in keeping fans happy and engaged.
Infectious diseases present an omnipresent threat to the health and safety of the global community. In 2020, the COVID-19 pandemic that began in China in 2019 swept around the world imposing unprecedented impacts on all the sectors of the world economy while the multibillion-dollar sports tourism industry was hit hard.
Many sports governing bodies were also bankrupted and left in financial distress. Individual athletes lost income as their salaries were reduced or completely cut. Sponsors, betting firms, broadcasters and others in the sports value chain also incurred huge losses during this period. Among the key events affected were the 2020 Olympics, football leagues, golf, cricket, marathons, rugby and tennis. As such, there was a need for bailout packages and seeking alternatives for the sports industry to recover from the shock.
Though the current Covid-19 pandemic has affected every aspect of the sport industry, however, sports organizations can position themselves to prosper in 2021 by addressing key opportunities, from fan engagement to advanced technology to the role of sports in society.
Pre-Covid-19, projections were that the global sports industry would grow by 4.9% year-on-year to reach $135.3 billion in 2020. But as of 20th April it is projected that it will generate just $73.7 billion in revenue in 2020, $61.6 billion less than pre Covid-19 predictions. The loss is created by the complete shutdown of live event day revenue and payments from broadcasters either delayed or rebated due to no live content. Projections have also indicated that just 26,424 of the 48,800 sporting events scheduled prior to Covid-19 will likely go ahead.
Sport industry ecosystem
Every part of the sporting value chain has been affected, from athletes, teams and leagues, to the media that broadcast and cover games and brands and sponsors that advertise around them. Global sports sponsorship deals alone represented almost a $46 billion industry last year. Then there’s sports-related advertising. In TV, brands put almost $20 billion toward sports-related programming last year, with about $17 billion (85%) spent around live sporting events. Brands also put close to $1.2 billion toward digital advertising. We expect unprecedented disruption to the ecosystem over the coming months and perhaps permanent change longer term, with a break in traditional sponsorship deal-making until the true impact on the landscape is known. No live sport means no live coverage and therefore sponsors do not have the foundations from which to launch their marketing, fan engagement, and all other activities associated with the rights and assets they’ve acquired.
Existing agreements will exist but cannot be delivered. Sponsors and events or rights holders who have been in partnership for many years will not want to move too quickly.
New sponsorships deals
The Covid-19 outbreak has seen the number of new sponsorship deals fall by 40% in just three months. With a lot more time on their hands and no live sport to watch on linear channels, fans are still as passionate and hungry as ever for sport and are turning to video content to get their fix. This increase in demand has led to leagues opening up their archives across owned and social media channels, launching virtual competitions and events, and athletes providing challenge and workout content. In-house media teams at leagues and clubs across all sports have been quick to pivot and harness the immediacy, flexibility and interactive nature of social and video streaming platforms to experiment and drive engagement with fans while the interruption to the calendar goes on. Athletes are creating workout videos, tutorials and other lifestyle focused content for distribution across their own, their teams’ and their sponsors’ social accounts.
There has been a 27% increase in video streaming worldwide. However, it’s not just TV & movies people are streaming. Gaming viewership is up 75% during peak hours in North America. This is up way ahead of standard web traffic (+20%) and video traffic (+27%).
Even before the crisis, gaming was already a bigger industry than music and film combined. Covid-19 has only accelerated this trend with people finding themselves quarantined at home. As well as gaming, professional eSports around the world are seeing a huge spike in viewership over the past few weeks as they fill the void left by cancelled live sport competitions for some viewers. While properties across sports have lost out on sponsorship revenues as a result of the Covid-19 outbreak, those within eSports have bucked the trend with an overall 53% increase compared to this time last year. eSports was seeing rising popularity anyway, enticed by high viewership figures and the opportunity to reach a millennial demographic, but it has also been better able to cope with the impact of the virus, and has had the opportunity to capitalize on gaps in the sporting calendar. The lack of sport has allowed developers to build their presence among sports fans who ordinarily would be consuming traditional sport content. As such, brands are still receptive to signing deals in the space, even at a time of extreme short and long-term economic uncertainty. There will be losers in the scheduling battle and global recession over the next 12-24 months as sport events compete for audience and sponsorship. Ultimately, this could see the sports landscape change more in the next decade than in several decades preceding it.
Three critical issues for the sports industry to consider in 2021
- Reshaping Revenue Generation Models
With many traditional revenue streams disappearing virtually overnight due to the pandemic, sports organizations are grappling with how to fill the void. Forward-looking organizations should consider a broad range of potential solutions, including monetization of data pertaining to fans, player and team performance, and sports betting; novel real estate plays; and unique partnerships with technology companies to help elevate the fan experience.
- Reconsidering the role of sports in society
Although the struggle for social justice transcends sports, leagues and athletes possess powerful platforms that can fuel significant change for society as a whole. US sports organizations should consider making social justice a core component of their mission, culture, and brand.
- Redefining interactions with fans
The hollow echo of empty or partially filled stadiums highlights the critical need to establish year-round, two-way relationships with fans. With the pandemic likely to remain a major challenge throughout 2021, it is important for sports organizations to invest in multichannel digital solutions (everything from streaming platforms and augmented or virtual reality to artificial intelligence and virtual fans) that can influence fan behavior and boost their level of year-round engagement. It’s likely no longer sufficient simply to host a stand-alone app, website, or social media account; they’re all important, and they should be tightly integrated across channels. Even with the challenges posed by Covid-19, in-person fan attendance will undoubtedly remain a critical component of any team’s business model.
One of the biggest sources of alternative revenue for US sports organizations in 2021 could be data monetization, particularly in the areas of fan engagement, player and team performance, and sports betting. The market for data-wranglers and aggregators is heating up as organizations increasingly employ data analytics to guide decision-making and support their marketing efforts. In terms of fan engagement, data-driven platforms and artificial intelligence can help organizations sense the sentiment of fans, analyze the data to better understand fan behavior, and then connect with fans in ways that generate a better fan experience and new sources of revenue. This combination of sensing, analysis, and engagement can fuel monetization on an integrated e-commerce and socially active platform. Within the overall fan ecosystem, data can help organizations monetize different fan-engagement ‘zones’ through specific value-added incentives. This can include engaging fans on social media, through the team’s marketplace (website, store), via in-game offers (merchandise, refreshments), and by using hyper-personalized mobile advertising and gamification (real-time games and scoreboards with prizes).
More than ever before, big data is also being used in sports to glean insights pertaining to player metrics and team performance. These data-driven insights are changing how games are played, managed, and monetized. As a result, sports data has become big business.
According to Research and Markets analysts, the sports analytics industry is expected to reach nearly $4 billion by 2023 as teams, coaches, broadcasters, and rights holders harness data to improve performance and connect with fans. In one recent data monetization deal, the NCAA signed a 10-year contract with a UK- based technology company to collect and distribute intercollegiate sports data, which is being packaged, licensed, and sold to media companies and other interested parties. Of course, it’s important that data monetization initiatives be conducted in partnership with players’ associations to help minimize the potential for foul play, such as competitors and hackers trying to use individual or league data to their advantage. Data is likely destined to become an even hotter commodity as avenues for sports betting continue to expand across the United States.
Enhancing digital fan engagement
In a world where consumers are no longer tied to broadcast and cable schedules to catch their favorite shows, live sports are the exception. Sports is one of the few remaining content types/genres that fans will go out of their way to watch live. This passion equates to a big opportunity for sports teams, advertisers, and over-the-top (OTT) streaming and broadcast media companies. The future of sports broadcasting includes new ways to keep fans engaged and capture their attention with compelling, authentic experiences. Overall satisfaction was only 39 percent for the broadcast and OTT experience, leaving significant opportunity for continued technological advancement for fans looking to consume sports across devices and integrate augmented reality (AR), virtual reality (VR), social media, and gambling into their viewing experience.
Sporting goods industry
Supply chains seem to be mostly affected in Far East (68%), followed by Europe (64%), South Asia (54%). Supply chains in Northern America are only affected for 22% of respondents and in Latin America less than 10% see an impact on their supply. Around 90% of respondents see decreasing orders from customers in Europe and the Northern America. This number is significantly lower and around 30% for Latin America, Far East and South Asia. Over 70% of respondents face material shortage due to the closure of suppliers’ companies. Around 40% face issues due to shipments being withhold, due to specific trade restrictions or delayed finish goods transportation. A little over 30% have to cope with a lack of capacities of shipping companies. Close to 60% of respondents see a labor shortage due to forced company closure, however, none have infected staff members not showing up to work. A little less than 30% face labor shortage due to travel restrictions for workers and shut down of public transportation for workers. Around 20% have seen staff not coming to work since they have to take care of family members or are reluctant to return to work due to fear to be infected.