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COVID19 — BOTH A THREAT & AN OPPORTUNITY FOR THE SPORTS INDUSTRY

Chiliz | 03.26| 88

COVID19 — BOTH A THREAT & AN OPPORTUNITY FOR THE SPORTS INDUSTRY

As the world grapples with COVID-19, the sports world is facing an unprecedented economic crisis. With tournaments cancelled, matches postponed and athletes and players quarantined, what will be the impact of COVID-19 on the sports industry, and what can be done to soften the blow?

In the past, when economies have experienced a downward trend, there have always been strong arguments that sport is largely recession-proof — the argument being that through good times and bad, fans will still attend matches, buy food and drink, and purchase merchandise. Broadcast rights and sponsorship also continue to provide an ongoing revenue stream.

But what happens when those revenue streams that rely on in-stadium and physical matches cease to exist? How will sports entities replace this lost revenue? How will it affect not just teams, leagues and athletes, but the numerous companies and brands that align themselves with sport to promote their products to sports fans?

There are two ways that the sports industry can tackle the impending disaster. The first is by learning to adapt to the changing sports sponsorship landscape and exploring new revenue opportunities, and the second is through diversified fan engagement.

Learning to adapt

We are all hopeful that this crisis is short-lived, but looking at the football industry in particular, we know that difficult decisions are pending. It’s not just a case of whether or not Liverpool will win the Premier League or whether the Transfer Window will be postponed, but what happens should the football season not restart before the summer; what happens if the season resumes but fans are not allowed back in the stadium? The truth is, nobody knows, because nobody knows how long this pandemic will last, or indeed, whether it will return at some stage in the future.

What we do know, regardless of when life returns to normal, is that the lingering social & economic effects of this global pandemic will be felt for a long time to come. Since the spread of COVID-19 into Europe, it’s been reported that the five major leagues have already lost €4 billion, while ESPN states that many of France’s professional clubs in Ligue 1 and Ligue 2 will declare bankruptcy within six months if the pandemic continues to freeze football. If the seasons are not completed, the loss of broadcasting revenue will have a devastating impact on bottom lines, and because marketing, including sponsorship, is always the first to be curtailed in an economic downturn, there’s no doubt that we’ll see a large number of sports sponsors — in particular airlines, travel companies, sports betting etc — exit the sports industry in 2020, leveraging the ‘force majeure’ clause in their contracts because their own business was destroyed.

Through no fault of their own, the sports industry cannot deliver value to sponsors. To prove ROI and minimise the cuts, sponsors need more than just branding or the kudos of being associated with a big name sports property. Without their brand name on LEDs or their logo emblazoned on a jersey, how can these sponsors connect with the fans? The rights holders need to demonstrate how sports sponsorship can help customer acquisition and/or can generate revenue. While it is something that most rights holders resist, now is the time to start connecting their partners and sponsors, incentivizing them to work together to grow exposure and increase ROI, which might, just might, go some way to prevent the mass abandonment of sports sponsorship.

Diversified fan engagement

By and large, sport is an entertainment vertical. At elite levels, 99.9% of a team’s fanbase exists outside of the stadium — whether it’s through TV, social media, or OTT content, fans get their sports fix through other means. This was the founding principle of our fan voting & rewards app for the sports & entertainment industry, Socios.com. But, with the sporting world temporarily on hold, 100% of fans are outside the stadium all the time; matches can’t be broadcast on TV, highlight reels can’t be viewed online and opportunities to generate OTT content are all but non-existent. So, how do sports fans get their fix? And, how do the clubs and teams keep the fans engaged?

Whilst every single sports entity is currently focused on surviving this crisis, they must also prioritise their fan engagement plans in order to sustain their business for the future. And that means thinking outside of the box, making decisions outside of their comfort zone and moving away from ticking the boxes of traditional sports marketing activation.

Football clubs in particular are having to rapidly adjust to a silent news cycle. There is a huge reliance on archival or nostalgic content, but that is not sustainable while every sports channel is running the same content, and sport is competing with Netflix and online gaming. Sadly, no amount of ‘greatest goals’ footage from Dugout is going to replace the euphoria of seeing Ronaldo, in real life, defy gravity to score with a vital header.

From a content perspective, the winners during this period will be the ones that can think creatively around the assets to which they still have access. And yes, that means the players themselves. We’ve seen a few attempts over the last week to move further into the digital space, even moving into esports temporarily to maintain social distancing. While this may give a temporary boost to sports-based esports like FIFA 20 or real esports like CS:GO, asking real-world athletes to compete in esports is like deciding the outcome of the Champions League Final via Rock, Paper, Scissors. Just because someone is good at scoring goals with their feet, doesn’t mean they can score with the same accuracy using their fingers.

The appeal for this type of novelty content will eventually wane, especially when all brands are trying to execute on the same idea — this is not real innovation, it’s just following the easiest and most obvious solution.

So what’s the answer? There is no doubt that our experience of social distancing is going to re-engineer how fans interact with their teams and heroes, even once the virus has disappeared. In just a matter of weeks, we can already see how people are discovering new ways in which to socialise in a much more digital way. Rights holders need to learn from these experiences, re-think how they can connect with their audiences for the benefit of both the fans and the sponsors, start interacting and delivering digital experiences for fans that can, in part, replace the physical experience.

As a platform, Socios.com cannot deliver OTT content; for the moment, we can’t sell jerseys or tickets, although this is something our business model can deliver. But we do provide a solution, now more than ever, for clubs to find a path through the crisis. Our vision has, and always will be, to connect fans from all over the world to their team, and to not only give them a voice, but to reward their loyalty. We are aware that in the future, due to tech advancements and global distribution, sports and entertainment brands will have more and more global fans, and will compete to offer the very best fan experience — fan engagement will be critical.

We have a long term vision on how sports teams should engage, reward, and monetize their fan bases. Our fan-transactional platform allows fans to vote in club-designated polls, thereby offering a new way for teams to interact with their fans; our upcoming Chat feature offers a connection to a global community of like-minded fans; we provide digital experiences that reward loyalty (as well as real-world experiences when the time returns); and we provide fan-centric alternative to sports betting through the trading of Fan Tokens. But more than that, we want to become the infrastructure upon which the sports industry can build fan rewards, fan transactions, and fan data, either directly through our app, and/or technology embedded into a team or club’s own platform.

If we can work together with other sponsors, and allow those brands to use our technology to reach those fans outside of the stadium, whether through in-app polls & surveys, branded augmented-reality Token Hunts, or simple customer acquisition campaigns, we can go some way to grow the ROI of those sponsorships.

With our platform barely off the starting blocks, we can’t yet offer a solution to solve all problems, but we are very clear in our vision that this global crisis will force the sports industry to be even more fan-centric, to embrace digital solutions in order to build more momentum in the future. And we want to be here to help every club in support of these initiatives.

We often talk about how technology is disrupting the sports industry, and yet, it is a human virus that has brought the industry — if not the world — to its knees. As the sports industry is forced to reinvent itself as a result, innovative technology may just stand out as its saviour, and the real winners, will be the teams and rights-holders that are prepared to act differently.


COVID19 — BOTH A THREAT & AN OPPORTUNITY FOR THE SPORTS INDUSTRY was originally published in Chiliz on Medium, where people are continuing the conversation by highlighting and responding to this story.

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