- Private Equity firms can partner rather than exclude established agencies
- Co-operation not confrontation needed to address liquidity crisis
- Swift return of live sport will limit financial impact on broadcasters
The notion that what doesn’t kill you makes you stronger appears to be gaining traction across the sports sector.
The Covid-19-induced shock to sport’s commercial ecosystem hit at a time when the industry was already being forced to consider how it must evolve to flourish in a world changed by technology, and many senior figures believe that the ensuing hiatus has accelerated that process.
Among them is Bruno Marty, who leads the ProSports division at the Infront company where his role as senior vice-president encompasses overseeing the football, winter and summer sports operations, as well as media and marketing sales.
It is a position which puts him at the heart of deal-making and gives him a unique insider’s perspective on the way the sector is shaping up to the challenges and attendant opportunities it faces.
He remains unruffled in his approach to the crisis, firm in his belief that sport will return strong, that enduring, long-term relationships between rights owners and their partners will remain the bedrock of success and that winners and losers will be determined by the ability to adapt to changing market conditions and employ technology to engage with fans.
“Sport is an incredibly important part of the economies of developed countries and I think it will be back very soon. We have seen huge growth over the last 20 years in many major sports and I expect some of this growth will come back but at a more balanced level,” he said.
“In the short-term some of the sports will suffer and, depending on their ability to adjust and be innovative, some will survive better than others.”
With cash flows drying up, liquidity has become an even more important issue for organisations from top to bottom of the sports food chain. It is, Marty says, more than ever a time for co-operation rather than confrontation.
“Every company and federation is carefully looking at its cash positions. At the same time people talk about partnerships and long-term cooperation and in many cases this is now becoming a reality. You talk with your rights-holders and your key partners and find individual solutions. Every sport and event has to be looked at separately as there are no one-size-fits-all solutions. I understand there are lots of interesting talks (going on) focussing on the long-term and helping each other in the short-term.
“In general, federations are quite careful about their liquidity and try not to spend more than they have. A large amount of their spending is related to events, so if there are no events there are no event-related costs. With our clients, such as the International Ice Hockey Federation, good discussions have taken place because the intention is to work together for the next 10-20 years. You help each other now to (combat) any liquidity shortages.”
That said, the realities of any business sector are that a shortage of cash creates a buyer’s market and an upturn in interest in sport from private equity firms – which was evident event before Covid-19 – is unlikely to fade away if there are good deals to be done.
With organisations such as CVC already invested in prime rugby properties and now circling Italy’s Serie A it might appear that the new forms of ownership of sport could put the established agency model under pressure. But Marty feels that the model has evolved sufficiently to ensure that agencies have an enduring role.
“Maybe 10 years ago rights owners saw agencies purely as a bank for refinancing their events, but this has already changed. In many aspects we are now a service provider, still paying significant amounts to them but doing much more than sending a paycheck once a month.
“Private equity firms do things for the sake of profit which has to arrive within a limited amount of time. We also want to be profitable, but we are taking into account a longer period of say 10 years or more, because we work in partnership to help sports grow.
“It’s difficult for me to know exactly what it means when PE enters relationships in sports directly, but I hope the sports entities don’t only look for short-term liquidity and forget about the long-term commitments.”
The sentiment is based not just on philosophy but the realities of the current situation around Italian football. While CVC’s proposal – believed to involve a €2.2bn ($2.5bn) stake in a new company to market Serie A rights – is under consideration, Infront is working on a proposal to extend its own advisory role with the league.
“While I don’t know what CVC is discussing with the league I have the feeling (the two proposals) are not necessarily in conflict with each other. One is about financing and getting something in return, while we are talking about how to commercialise for the next three-to-six years.
“My feeling is that, with our specific expertise, we can cooperate with the CVCs of the world which have the capability to finance such activities.”
Media companies have also been hard hit by the lack of live sport, raising concerns over the prospects for highly leveraged OTT operations whose complete reliance on sports revenues appears to make them more vulnerable than more diverse operators. The hit taken by established sports broadcasters and a potential damping down of the sports rights market has also led to renewed speculation that this could be the moment for some of the cash-rich tech giants, which have so far chosen to remain bit-part players in sport, to make a more determined move into the space.
“The reality is that the door is already open to them. It is clear that the younger generation is expecting to consume sport on different channels and whenever they want, taking all the social media platforms into account and I think those players are already looking at sports,” Marty said.
“Will it happen faster now? Well that depends on how long the impact of the crisis lasts. If all the sports are fully back in, say, the last quarter of this year and 2021, I think the impact on traditional broadcasters of being in financial constraint will be rather small.
“But this is happening anyway. Today you talk to additional parties to those you talked to five years ago.”
So, could any damping down of the rights market lead more rights-holders to launch their own OTT platforms and go direct-to-consumer?
“My clear belief is that in the long term it might be an option for the top rights-holders to go for an own OTT solution but in the short-term a hybrid model is more likely to be used. That is where a federation takes over the programming of its content but still distributes it to the traditional broadcasters and channels before really focussing on the OTT-only option. That will probably only be feasible for those who manage leagues, not one-off events. At the moment OTT is supplemental for markets where you might not find a broadcaster.
“I am convinced that OTT will remain in place, either as an independent or partial solution. At the current time those companies which are highly leveraged have to look very carefully at their finances and it is about individual talks to find solutions. Those discussions may be quite challenging but both sides want them to be there in the long-term.”
Marty believes that one key impact of the crisis will be the acceleration of a polarization between sports properties. But this, he says, will be based not only on a distinction between big and small sports but on their ability to attract eyeballs and engage more deeply with audiences.
“Those who succeed will be the ones who are willing and able to adjust, to rethink their formats and come up with new and exciting ways to play the sport, adapt to new technologies , integrate digital technologies into their production and involve fans. That will separate those who succeed from those who don’t.
“Generally speaking, the way that we adapt to technology is the biggest difference in the last five years here at Infront. In that time we have acquired Omnigon, which develops digital platforms and technologies and fan activation and monetisation concepts for big properties, and we created the Infront Innovation Lab where we find innovative companies and try to partner with them to develop products as they often have the technology but not the product.
“We all have to adapt to new technologies and be innovative. That means making the right choices from all the new developments and all the start-ups out there.
But while technology may be driving the future of sport, Marty believes it remains a business based on the human factor.
“At the core of our business is the strong relationship we have with our rights-holders and we never forget we have to attract the right people in our company…it’s a people business.”