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BLOG: How can sports clubs benefit from the burgeoning relationship between their stars and their fans?

You always felt that Alex Ferguson’s oft used adage that “no one player is bigger than the club” was a wrestling attempt to subvert the rising power of his stars beneath the machinery of his powerhouse team. Seven years after his retirement at Manchester United, it is difficult to imagine a manager feeling they have the leverage to say the same thing with such confidence in front of the television cameras.

The world has changed. This is the age of star power in all walks of life including sport. Celebrity influence conquers all and if sports stars are able to harness their image rights and their brand adequately, their employers are required to pay homage to the new religion. Marcus Rashford’s recent achievement in almost single-handedly forcing the UK ministers to change its policy regarding the extension of free school meals for children during the summer holidays shows that even governments have to follow.

Player Value

Is there a way that this changing landscape of power could benefit the clubs? Until the Bosman ruling in 1990, even if a European football player was out of contract with a club, the club could have prevented the player from moving on to another for as long as they felt like it. That ruling started the shift towards player power which was accelerated by the money flooding into football, funded by the PayTV revolution.

In 1990, Italy’s Roberto Baggio was the world’s most expensive soccer player having been bought for the equivalent of €11.6 million by Juventus; compare this to the €222 million paid by PSG for Neymar 27 years later. That neatly gives us a twenty-fold increase and the CIES Observatory tells us you would need to pay well over €250m for Mbappe in 2020. The graph below shows UK-only median figures over a 20 year period, showing a nine-fold increase for Pl transfer free (adjusted for inflation), set against UK house prices’ stellar growth for comparison:

On a side note it is interesting, and rather extraordinary, to note that this stellar growth would actually be dwarfed by the growth in salaries in the same time period.

In European sports it is not just the influx of revenues that have driven player prices up. The competition for talent between clubs and leagues means that it is very difficult to get a grip on escalating transfer fees and transfer prices.

Unlike in US sports where governance is centralised and there is relatively little or no international competition for talent, European sports have no governance framework at an international level to enable an effective salary capping system or collective agreement with players. This also extends to the murky world of player agents and transfer fees which further tips the balance away from the clubs.

The age of social media

This escalating financial muscle started the shift in balance between players and clubs that Ferguson was trying to contain. However, what really cemented this shift beyond a doubt was the arrival of social media platforms in the late 00’s and the subsequent effect it had on increasing celebrity and star power. This dwarfs any other factor at the elite level. Sports stars have long been considered as icons and pin-ups (let’s not forget David Beckham pre-dated the social storm) but social media has provided them with a platform to showcase themselves directly to their fans.

Players have become skilled content creators and have amassed huge followings, which in turn drives their personal brand.

This table shows a sample of the social media following of the top teams and athletes alongside stars of entertainment and social media influencers. Of the top ten, six are from sports including Ronaldo, Neymar, Messi, FC Barcelona and Lebron James:

What impact does this have on the clubs?

Plenty. First of all, managerial tenures are getting shorter as the likelihood increases of losing the players’ confidence, and just to complete the volte-face, players can now hold the club to ransom if they feel like it, as Griezmann and Neymar did last Summer. Although Paul Pogba would probably dispute this, clubs have to do as they are told by their stars.

Secondly, as the Deloitte Football Money League 2020 report shows, ‘Generation Z’ fans (aged 16-24) have more of an allegiance to individual players than a club, and their club support is transient.

Finally, it shows in the finances. Another Deloitte report, the Annual Review of Football Finance 2020 highlights that Premier League clubs’ spending on playing talent created a negative swing of almost £600m in 2018/19 compared to 2017/18, with clubs recording an aggregate loss of £165m.

Almost half of the Premier League’s clubs recorded losses for the first time since 2015/16 when the clubs knew they were in for a bumper rise in broadcast values the following season. That will not be so on this occasion. These losses are despite each club receiving a minimum of £100m in distributions each year.

According to an Esportif report, the story in rugby is not too dissimilar with combined Premiership Rugby club revenues of £208m in 2018/19 and a combined operating loss of £36m, despite a salary cap supposedly having been in place. The league has recently announced a reduction in the cap to help the clubs combat the pandemic’s impact on matchday revenues, which represent 24% of the average club’s total income vs 19% in Premier League football.

As a postscript, whilst star power has not been great for the club profits to date, sometimes celebrity transcends normal metrics. The CR7 brand had a quite extraordinary impact on the Juventus share price when Ronaldo signed for the club in July 2018:

Benefitting from Star Power

So how can clubs harness star power into an asset that benefits their businesses and brands as well as the brands of the individual players? By demonstrating that the whole can be greater than the sum of its parts. As described above, clubs have lost their contractual leverage with players post-Bosman and their financial leverage through competition between leagues and a lack of international governance structures. They need to find an alternative way of re-balancing.

I offer two suggestions for collaborating to grow the value of intellectual property rights for the benefit of all.

Commercialise

Firstly, star power represents an enormous commercial opportunity for clubs if used correctly. The social reach offers clubs a chance to broaden their fanbase and attract new types of supporters that might be more interested in a particular player.

This is both passive and active. The CR7 example above resulted in a fourfold increase in the club’s Instagram followings for the club (passive) but it’s also a question of contractually agreeing the right commercial controls for image rights and commercial obligations to benefit your commercial partners (active). Technology is available to help clubs deliver content to players and improve the content on their channels which is of mutual benefit.

Build Value

Secondly, clubs should be building the value of their own digital assets by leveraging their own unique IP in the way that the players have done so successfully via social media, and create brands and platforms that prove worthy of the players’ involvement beyond the pitch. At the moment this is a dream rather than a reality for most clubs, but a goal that can be achieved with the right investment. Technology is available to help clubs get to know their existing audiences and grow them by creating content and products that appeal to typically social media savvy generations as well as all those that were born before them.

The venue or stadium is a unique opportunity to deliver great experiences to fans and this is ultimately where players need to perform in order to drive their brands. This is the home of the club as well as the player and that is something to leverage with fans, who will be disenfranchised if you don’t make their experiences memorable and worth sharing with their friends and networks.

Collaborating with players to collectively grow brands is a no-brainer. If Harvard University can develop a lifestyle brand then so can a sports league or team.

Anyone that has spent lockdown relishing Netflix’s “Last Dance” will have seen first hand the power that the stars of the 80’s and 90’s had in propelling the NBA and its clubs beyond the sport itself and into an urban culture phenomenon. Clearly the rise of Michael Jordan from a player to a worldwide icon was made possible via mass media, but the learnings from this period has made the NBA acutely aware of how the personalities within its league can be leveraged via new digital media channels.

Compared to the NFL for example, the NBA benefits from small team sizes that allows for greater player fan interaction, but this is further enhanced by the fact that the NBA does its part to ensure that individual player personalities are never hidden from fans. A report by MVPindex showed the impact of this approach commercially. The NBA and team accounts collectively generated more than $1.1B of value for brand partners in 2019, compared to $343M in brand value attributed to the NFL social ecosystem.

Conclusion

This is not a case of deciding to adopt a new approach or sticking to previous methods. This is an essential development that teams and leagues need to embrace to move forward. There is no reversing star power and its impact on clubs but there is an opportunity to re-balance by harnessing it for the greater good. This requires a change in thinking from clubs alongside investment in technology and content creation that delivers a platform that is deserving of players lending their own brands for the collective benefit of all parties.

BLOG: New technologies have not been applied to tackle the racism epidemic in sport, but have the potential to make big impact

As we all come to terms with the global impact of the Covid Pandemic, we continue to face a much longer-term and deeper ingrained malaise; racism.

Racism is a centuries-old epidemic, which has manifested itself in sport. Immediate thoughts may turn to the historic symbolism from the United States, created by the actions of athletes that have made a stand. From the black glove gesture used by athletes at the 1968 Mexico City Olympics to Colin Kaepernick leading NFL players to take a knee during the National Anthem in opposition to the RealDonaldTrump. These gestures of protest against systemic problems created noise; pushing an important conversation forward.

However, when we think of racism in the bigger football markets in Europe, rather than gestures by athletes, we are drawn to the historic problem of active racism within the arenas themselves. In 2005, Marco Zoro attempted to stop the Messina–Inter match by leaving the field with the ball after being tormented by taunts from some Inter supporters. This is just one example of a litany of racist abuse, monkey chants and banana projectiles directed at black players that have left an ugly stain on the game since the 1970s.

Are we seeing enough change?

At InCrowd, we often talk about the changing consumer in a positive light and the impact the change is having on how sports are followed, watched and attended. But is there evidence to suggest that this change is having a positive impact on our attitudes to race and other forms of discrimination?

Unfortunately not it seems. Earlier this year Chelsea defender Antonio Rudiger was seen complaining to the referee, with a gesture of putting his hands under his armpits, to indicate that he believed he had been subjected to racist monkey chants from rival Tottenham supporters. Last year Romelu Lukaku said that the sport was “going backwards” on racism after he was on the receiving end of similar abuse from Cagliari fans.

Kick It Out, a charity established in what was meant to be the back end of the bad old days of racism in 1993, aim to fight against discrimination in football but their most recent statistics show that the problem is escalating again. Reported incidents rose to 422 in 2018/19, up from 319 in the previous year.

The numbers could actually be a lot higher than reported. These statistics rarely tell the whole story; there are many barriers for people in regards to reporting these incidents both culturally and logistically (although you can now report via social media). 

Are we taking action?

A more pressing concern is that these are just statistics and don’t seem to lead towards enough positive, affirmative action. According to the report, the FA have not informed Kick It Out of the outcome in seventy-nine per cent of the 109 cases reported in grassroots football and 80% of the County FA verdicts. So whilst plenty of energy is going into trying to solve the problems at the grassroots level through education and reporting, there does not appear to be a strong system of governance in place to effectively deal with these issues when they are surfaced.

The rise of technology

Changes in consumer behaviour have been seismic, driven by technology and the rise of the smartphone and social media. And yet despite the ability of these platforms to offer real-time conversation and direct interaction, there has been minimal positive impact on attitudes to race and discrimination. Furthermore, not enough is being done to tackle the problem, especially considering we are now in a time when technology makes it far easier to hold people accountable.

This does all seem counterintuitive. When we talk about the changing consumer we are normally talking about the rise of the “woke” generation. However, such technology and social media are used by everyone else too and there is plenty of strong evidence to suggest that placed in the wrong hands, these platforms can be abused to deepen the problem rather than open up a conversation and reach resolutions. We are not just talking about Putin’s election rigging bot farms and Cambridge Analytica here but more nuanced systematic issues.  

A report earlier this year described a “data racism” emerging. It argues that as automated or data-driven decision-making tools are increasingly deployed in numerous areas of public life, these data technologies are actually reinforcing or codifying the systemic race bias and increasing the sense of neutrality afforded to discrimination. If the computer says no, what can I do…? An example of this bias would be using facial recognition tools in crime investigation, despite evidence that they misidentify people of colour, and in particular women.

The potential positive role of technology

So how can technology be used to drive positive change? By using technology to develop relationships with fanbases, sports organisations can hold themselves to higher standards of inclusivity and try to effect positive behavioural change amongst their devoted supporters. Technology could also help surface and deter the problems by making the process of reporting incidents far easier and perhaps more significantly, enable the ability to pinpoint and deal with the problem more efficiently and effectively. 

Imagine if you could report a problem by pressing a button on the official app and highlighting the seat number of the offender. Imagine if all tickets were digital and tied to a device so you also knew immediately who was sitting in the offending seat. If this wasn’t enough to deter a problem fan, it would certainly be enough to take appropriate action. You don’t have to imagine. This technology exists, it just isn’t widely enough implemented.

Hopefully, we all agree that it is no longer acceptable to just sit on the sidelines being passive; we must all be actively anti-racist. And in sport, let’s consider every tool that is available to us, and utilise what we have to make sure that we can deliver the same great experience for spectators, players, officials, staff – #ForEveryFan.

BLOG: Will the Pandemic accelerate the growth in larger sports clubs and leagues at the expense of the smaller ones?

I have read with interest various interpretations of how the Covid Pandemic will impact the sports industry. The general consensus is that it will accelerate the already rapid changes taking place as a result of consumption (how we follow, watch and attend sports events) driven by the smartphone and the rise of web 2.0 which will, in turn, accelerate the gaps between the richest and poorest sports federations, leagues and clubs, affirming a new world order. 

There is no question that changes in consumption have been driving a greater gap between rich and poor in the last few years and this has shown in the numbers. 

The biggest events increasingly command a greater share of fan attention, resulting in the bigger sports growing at the expense of smaller sports where audiences are falling.

There are lots of reasons for this including social followings increasing the importance of celebrity, meaning the biggest stars with the biggest followings drive interest in the team they play for and this drives the overall following and viewing of the league and sport overall. Witness the impact of Cristiano Ronaldo’s signing on the Juventus share price. However, whilst the Pandemic has certainly accelerated some consumer trends, I actually think that it will shake things up rather than simply follow the same path.

First of all bigger doesn’t necessarily mean less vulnerable. Larger event organisers, venues and clubs have larger balance sheets, but also far greater operational expenses which leave them exposed when there is no income coming in from live matches. It is well documented that Premier League clubs lose money when times are good. As a result of the Pandemic, the Premier League is having to offer rebates to its broadcast partners and 20% of the average club income is from matchday, which may not return for several months. 

Secondly, bigger businesses are often less nimble or adaptable to change and this could be a problem. As McKinsey research shows, organisations with an agile operating model are far more likely to show improvements in both execution pace and productivity. The break in the sports calendar has offered them a chance to focus on adapting products and business models to the new norm and the price for not doing so may be very high. 

Many sports in Europe are not centrally organised, which creates a fractured decision-making structure that can be an additional barrier to adapting to the current situation.

By contrast, smaller leagues and federations may be forced to work together to invest and adapt and this could be a big factor in growth, particularly in digital audiences and resulting revenue mixes. More McKinsey research shows that as much as five years of consumer and business digital adoption has happened in the last eight weeks. 

However, this accelerated change does not necessarily mean that change has followed the same path that it would have without the Pandemic. Covid has changed the way we think about hygiene, the way we interact and the way we work and this will have a lasting impact. 

The accepted norm in sport that the big will get bigger and the smaller will struggle to survive is hugely over-simplifying matters.

Many smaller sports have been dealing with the reality of not being one of the chosen ones scheduled on linear broadcasters for some time and have adapted their business models accordingly.  The Americas Cup and the World Surf League have pioneered this approach over a number of years and it has actually led to more broadcast deals as a result of the success of its digital-first strategies, exponentially growing global audiences in the process. 

We may well see a change in the world order as a result of the Pandemic but not necessarily as we might have expected. Strong leadership that is prepared to adopt change thinking combined with investment in the right areas will be the key differentiator, regardless of whether your organisation is large or small. 

 

Facebook Venue

BLOG: Is Facebook Venue an opportunity or a threat for sports Rights Holders?

Over the weekend, Facebook announced that its new product experimental team is launching Venue, an app for engaging fans around live events. With Venue, the company aims to offer a digital companion for live events, starting with this Sunday’s NASCAR race.

This is not the first time that Facebook has launched a broadside at its rival Twitter, which is still the primary platform for second-screen social commentary. However, this new product has some key differences. Whereas Twitter gives all commentators or fans an equal share of voice (although curated), Venue will only include well-known personalities or influencers whose opinions are deemed to carry more weight. These commentators will provide their own takes on the event and pose interactive questions and polls for those watching. Therefore on the face of it, this is more of a linear proposition where experts tell the story and the fans participate by offering their views rather than setting the agenda themselves.

This is surely a great opportunity for sports. With over 2.6 billion monthly active users in Q1 of 2020, Facebook is the biggest social network worldwide. Of these, 1.73 billion people on average logged in daily in March 2020 compared to 1.66 billion in December 2019 demonstrating both scale and growth. The Facebook network is where a massive amount of the social universe resides, let alone the sports fan subset of that universe, so this is where sports event and venue owners, as well as players and teams, should be focusing their efforts on reaching their potential global following. Right? Yes and no.

The issue with Facebook extending its social reach into our sports fandoms like this is that it further extends the existential crisis for the organisations that create, own and control the content.

First of all, unlike Twitter, this product is a direct challenge to the linear broadcast propositions that pay sports organisations huge amounts of money for the privilege and provide between 30% and 50% of the total funding. They are therefore very, very important. Facebook’s advantage is that, instead of using content they have acquired to reach ageing audiences via traditional platforms, they already have the audience that everybody is trying to reach without needing to make the investment, which potentially undermines the very existence of the sports in their current form.

Secondly, if you think about it, being a fan is about being passionate and sharing collectivised feelings and memories amongst your friends, groups of fans and communities. When you like, share or comment on a social network, that network is actually capturing your essence as a fan and that is far more valuable to a brand in terms of engagement than linear content channels.

Therefore, Facebook has the best of both worlds; a proposition to challenge linear broadcasters and the captured digital emotion of the fanbase that is so valuable to brands. Ouch. 

We talk about sports rights holders needing to win their fair share of their fanbases attention, given it is their investment that is generating the content that underpins the second screen proposition as a whole. If rights holders like Nascar use Facebook as a platform to reach its valuable audience then they have to be careful not to undermine their core. Facebook doesn’t share its data, even on your own channels, meaning you still have to buy the audience you have co-invested in creating. Here’s an example of an excellent compromise in this siutation. The content team at UEFA, working with TEAM Marketing, have evolved their approach to use social platforms as marketing channels with a priority on engagement. This drives value for its owned and operated channels and its sponsors. 

So what single piece of advice do I offer here? Of course, you need to do everything you can to stay relevant on social media, but you must ensure that this effort pays dividends to you and does not undermine your core business.