Stephen Bourke, a thought leader in the world of sports, serves on the board of SEAT (Sports Entertainment Alliance in Technology) and runs an online educational program with the Sports Business Institute in Barcelona called "Managing Digital Transformation in Sport". He' has already written twice on this blog on matters of sports and the world that we all are so desperately trying to enjoy our lives in. His posts are here and here.
Now, for the first time I've seen it anywhere, Stephen discusses sport as a platform. The business benefit of thinking of sport as a platform is rather massive, so read on. If you want talk to Stephen after you've read this -- and you will -- you can reach him here at LinkedIn or at @sb1sport on both Twitter and Instagram.
Stephen, the ball is in your court...
As a university student I had the good fortune to study sports history from a prominent professor who taught me that "'sport is a microcosm of society." This article explores that concept in our digital times.
If, like me, you would need to look up "microcosm" you could come across its Oxford Dictionary definition as "a community, place, or situation regarded as encapsulating in miniature the characteristics of something much larger". Sport as a microcosm then reflects the people, culture and history of its community. This is why sports participation and fan behaviours vary so much from country to country and even across a regions.
Since sport is a microcosm of society, it follows that the sports business is a microcosm of digital society. Here are some of these ways.
Social media is part of the sports product
The world has gone social thanks to networking platforms like Facebook, Twitter and Instagram. Their emergence uncovered the latent desire that people have to connect with others and share their thoughts and experiences online.
In society, some of the largest and most dynamic online conversations are those that form around sports teams, leagues and events.
Social media metrics show a surge in activity during live sporting events. Due to its in-the-moment relevance, Twitter has become the online sports bar for the connected world with over half of all posts being sports-related (at least they were in less complex political times). In addition, live sports are often the only time that many people post to their social accounts.
Social sharing has become such a common part of the sports experience that teams, leagues and events have updated their business models to make social media part of their events and build team loyalty out to a year-round program.
Social media activation in sports has created a consumer (fan) engagement behaviour unique to sports called second-, and even, third-screen consumption of the event.
Data as sports entertainment
As society has become increasingly quantified through digital data, organizations have taken steps to make analytics a part of their business by figuring out which data is most beneficial for them to capture and analyze for decision-making, real-time marketing and overall business growth.
Beyond corporate and consumer use, data in sports has evolved to the point that -- like social media -- it too has become part of the sports product. Data in sport offers entertainment value for fans that rely on team and player stats for greater immersion and investment into the match or event.
No other industry has to bring as much of its product data into the public realm as sports to satisfy its market demands. As consumers, we don't seek out our favourite hotel's occupancy rate or the latte to macchiato ratio of our go-to barista. At game time though, every possible current and historical statistic had better be at our fingertips and on our preferred device.
Sport has a digital twin
The 2017 Internet Report by Kleiner Perkins observed that society is moving towards valuing human-to-computer interactions more than direct personal contact. If sport is a microcosm of society, how does valuing computer interactions play out in the industry? The answer is in the evolution of competitive gaming into the powerhouse esports industry that it is becoming.
Esports have become too popular and too commercially relevant to be ignored by traditional sports with many leagues now setting up their own e-leagues. Esports are creating another entry point into fandom since it is possible that the first experience youngsters have with a sport is through its electronic counterpart such as FIFA, NBA 2K or Madden NFL.
The 2017 Internet Report revealed that the same number of Millennials (27 percent) felt a strong affinity for their favorite esports team as those with the same attachment for traditional sports.
In the future it is likely that studies will define the impact that the popularity of esports is having on younger generations of potential sports fans. Knowledgeable folks in sports and esports already know this to be true from their own observations about new fan behaviours.
Sport is no longer in competition with other sporting codes or leagues for fans; it competes with digital attention hogs that, as well as esports, include social media and video streaming.
The concept that platform-based business is the way to stimulate growth in the digital economy is now well documented and it is the inevitability of any digital transformation.
At its simplest level, digital platforms allow organizations to exchange data and interact with their consumers. Because they are online, they offer scalability and global access. Ray Wang, Founder and Principal Analyst at Constellation Research has prophetically observed that "if a business doesn't have at least 20 percent of its business model based around data it won't have a business for the digital era".
Sure, there are game changers who have revolutionized markets, and even re-defined consumer behaviours, such as Amazon, Netflix and Uber. Whilst their achievements are celebrated, legacy organizations have been quietly going about their own revolutions so that platform capabilities will improve their connection with markets and improve operations.
Sports is no exception and even technology leaders have remarked on the industry's level of transformation, including Microsoft CEO Satya Nadella who has observed that "there isn't another industry that is being so fundamentally transformed with data and digital technology like sport".
- Why sport is one of the most disrupted industries
- How sports teams are scrambling to keep Millennials coming to games TechRepublic
- Dota 2 tournament showed me the future of esports CNET
Our earlier observations about social media, data and esports influence on the sports product all contribute to the industry's unprecedented level of disruption.
In sports, fan data can come from a range of sources including ticketing, merchandise, web, social media, mobile, the event app and other digital touch points. As a result, sports properties are able to integrate data of individuals and fan segments that go well beyond traditional demographics to feature lifestyle characteristics such as attitudes and preferences. In fact, teams need to build personal relationships with fans as the price of admission that they pay for a lifetime of loyalty.
An output of disruptive forces and increasing fan demands is that sporting properties are developing powerful and insightful fan-data platforms. They are able to utilize their fan platforms for a range of purposes including customized experiences, personalized marketing and pricing decisions.
These fan data platforms are also becoming an increasingly strategic asset for the corporate partners of teams and this is where the concept of "sport-as-a-platform" for economic partners has evolving from.
Modern sport organizations can now offer brands the lure of access to their fan data through a mutual alliance that allows the partner brand to create activations that entice fans, and their data, into the brand's own platform.
Sport organizations that have pioneered the industry's platform model to engage fans include La Liga team Real Madrid whose platform efforts have focused on bringing their 450 million online followers into the fold. Long-term sponsorship arrangements such as Real's lucrative 10-year deal with Adidas show the possibility for platform alliances in the digital era.
Other notable platform pioneers include German club FC Bayern Munich, the most valuable team in the largest European economy, and Orlando Magic, a mid-market team in the NBA, whose platform-inspired innovation creates magical moments for their fans.
Sponsors are moving away from "analogue awareness" -- the hope that their brand involvement would passively move fans towards loyalty-by-association. They now pursue a "digital relationship" where the brand engages with fans-cum-customers from within their own platform ecosystem. Unique offers, fantasy games and competitions are some ways that sponsors generate fan data into their platform.
The ROI on sponsorship investment shifts to the subset of a team's fan platform that the brand is able to convert into their own customer data platform. This is not big brother at work; this is the outcome of a genuine value exchange offered from brand to fan – and how sports business is a microcosm of the broader economy!
Shifting from an analogue to digital sponsorship model modernizes the following set of circumstances.
Now that the world of sports is competing with forces external to the industry, the previously unthinkable is happening – the decline in sports viewership on traditional TV.
For example, despite more than 100 million US viewers of Super Bowl 2018 on NBC, it was down by seven percent from the previous year. Numbers watching the 2016 Rio Olympics declined by 25 percent or more in some markets compared to London 2012 and it was a similar story with the Winter Olympics.
Several of the world's other biggest sporting events including the NBA, English Premier League and international tennis have also reporting declining numbers of traditional TV viewers. The end of this downturn doesn't seem in sight as fewer Millennials follow sports -- 38 percent compared to 45 percent of Generation X according to McKinsey research -- and the rate of sports participation is also dropping off around the globe.
Against this backdrop, we could expect that corporate investment, or sponsorship, of sports properties would reflect this same trend. However, the opposite is true.
According to the World Advertising Research Center (WARC), sports sponsorship revenues were predicted to grow by nearly 5 percent in 2018 and PWC's "2018 At the Gate and Beyond" found that sponsorship and advertising is predicted to grow at a rate of 5.5 percent. This is second only to growth of digital media rights (11 percent) and ahead of the other main revenue streams of licensing and merchandising, participation fees, ticketing and hospitality, and traditional TV rights.
Now that platform models offer greater economic value than traditional modes, and since sport is a microcosm of society, the sports industry has become a virtual platform for economic businesses.
To maximize this new commercial advantage of sport-as-a-platform there is a lot of new digital ground to cover. Sponsorship still seems to fit into the famous John Wanamaker marketing philosophy of "half the money I spend is wasted; the trouble is I don't know which half".
WARC has reported that only 19 percent of sponsorship professionals say they can measure return on investment. They also quote research agency MKTG findings that 37 percent of surveyed executives have a standard way to measure the impact of sponsorship, with digital and social media analysis popular methods. (OK, not quite Wanamaker's 50 percent, but you get the idea.)
According to PWC's Sport Survey 2018, "56 percent of industry leaders believe that senior management at global sponsors are behind the curve in understanding how to engage with the millennial consumer based on the shift in consumer behaviour with regards to sports media."
PWC respondents believe that sponsors should focus on driving ROI through personalized fan targeting through better CRM data (73 percent) as well as branded content for own digital channels and branded content for rights holders digital channels (at 47 percent each).
In other words, sport leaders recommend that sponsors should pursue a platform-based approach to fan engagement similar to their own. Brands need to consider their sponsorship of sporting properties as sponsorship of fans. This does require a rethink on sponsorship capabilities, investments and processes to get on the right side of Wanamaker's ledger.
Maximizing sponsorship ROI is not all on the shoulders of sponsors. A genuine partnership between rights holder and brand should be established around their respective platform value of fan-to-consumer data. From their granular understanding of fans, rights holders can target brands that match to their fan profiles in a partnership of journey and discovery rather than traditional transactions (like Real Madrid and their 10-year arrangement with Adidas).
Don't forget the creative
For all this talk of the science around activation and commercial returns, the art of engagement shouldn't be forgotten and nor should the reasons why fans are part of sports -- for fun, enrichment and celebration.
WARC found that for 73 percent of respondents, brand awareness was the primary reason for sponsorship investment. However, the path to awareness can be a fickle one with the connected generation, i.e., all fans are no longer tolerant of passive logos and obvious interruptions.
Positive sentiment should be creatively nurtured by thinking like a fan with the sweet spot being activations that add value via the brands online and offline event presence. Sponsorship role models like Budweiser's FIFA World Cup deal and Emirates Airlines deal with the Los Angeles Dodgers have become expert in this field.
It is more than a happy coincidence that social media has become a part of the sports product which has extended the event from a weekend time slot to year-round entertainment. In doing so, sports properties have found ways to monetise the online reach that they have established.
Metrics are moving to engagement, interaction and financial return on investment (as are those of brand partners). Rights holders are becoming increasingly social businesses inspiring industry leaders to conclude that teams themselves are becoming like media companies.
As media companies, via content distributed over digital and social channels, sport organizations are evolving the value of their digital properties in ways that appeal to brands – hence the global growth of brand investment in sponsoring sports.
Media-like business models are emerging in sports with examples including:
- Rights holders defining digital content categories and assigning sponsorship valuations to these assets such as team announcements, injury reports, game highlights, MVP and so on.
- Rights holders introducing variable pricing structures for branded digital content with more value attached to prime-time posts, such as game day or post-victory slots. Progressive teams are also offering brand partners campaigns that are metric driven such as number of social media views or impressions.
- Rights holders are evolving internal structures to reflect their commitment to high-quality content, fan analytics and platform infrastructure by merging formerly separate departments like digital media, analytics and technology into an internal media house.
Sport, like society, continues to evolve and that is good news for sport organizations and brands alike who adapt to this new playing field of algorithms, analytics and fun.
Thank you Stephen. You'll be seeing more of him here as 2019 rolls on.
Next up, next week....The CRM Watchlist 2019 and the Emergence Maturity Index (EMI) Award Winner 2019. I know you are breathlessly awaiting it. See ya then. -- Paul Greenberg