The Covid-19 pandemic has altered the sports rights model landscape forever. The new contours will probably only be fully revealed in the next series of rights renewals.
The good news is that the planet loves live sport and some major entertainment OTT players such as Amazon are now in the sports market. The bad news is that changing habits and technology means that the value of sports rights – and the ROI analysis for rights-holders and business partners – has never been more complicated.
Unfortunately for rights-holders, many broadcasters are feeling the pain in sport globally. In short, there is a trend of declines in total viewers and fewer quality eyeball minutes on the main screen during live matches. This has an obvious knock-on effect with the ROI.
Consider both the Super Bowl and the Australian Open tennis in 2021. Both elite sporting events with incredible narratives and strong global audience figures – but both with decreases in total global viewers in their most recent editions. A Covid anomaly or a new reality now facing sport? Hopefully the former for the next batch of rights renewals.
Following a brutal 12 months without hospitality, ticketing and merchandise revenue, there are few obvious wins for rights-holders’ balance sheets. In sponsorship, there has been significant damage to several valuable sponsorship sectors, such as airlines, tourism and automotive. To generate new revenue, commercial teams have mainly focused on additional inventory for existing sponsors, betting (particularly in the US), data, social media and some short-term partnerships. In the latter, there is more virtual advertising coming into play than ever before.
Virtual advertising (VA) finally has the chance to come of age. The original mechanics of VA in the last 30 years have been based around a variety of hardware solutions, many of which were too expensive given the ROI. Most broadcasters also viewed them as too intrusive on their operations. It did not help that the broadcasters were rarely a revenue beneficiary. As a result, in terms of commercial assets, the sector has been viewed as an occasionally useful, distant cousin – rather than core family by most sports.
Part of VA’s problem to date has been the influence of the advertising signage companies in the sector. These companies are selling the LED and branding hardware solutions – and now position themselves as experiential marketers, convincing rights-holders to adopt VA in addition to their existing services. However, they are not experts in sponsorship or rights sales – or in rights-holders’ business models. They are usually selling excess inventory in addition to being a branding supplier. As a result, their sales focus has predominantly been on finding betting partners. The opportunity for VA to become a core part of the media or sponsorship rights DNA has not been in play.
Perhaps the biggest winners in the sector have been ISG. Their “virtual media” business focuses on controlling both production and commerce for clients, including Serie A and F1, using a variety of VA solutions. The key to the firm’s success has been the combination of their sales network and the control of the international feeds. VA without a buy-in or mandate is not the way forward.
The VA sector is now entering a software-inspired era. This changes everything, particularly for remote production, which has also benefitted from Covid. Ultimately, VA software can become part of the core rights and broadcast design for rights-holders. If the commercial ecosystem is structured properly, this can lead to new rights models with global, regional and local partners or revenue streams.
Usually, the key question for rights-holders with VA is: “How can we source the local or regional partner revenue?”
In actual fact, the easiest solution may benefit the next rights renegotiations. Imagine a structure whereby a licensed broadcaster can agree a revenue share with the rights-holder in agreed sponsorship categories for their territory. This can help rights-holders to maintain the current level of broadcast rights fees, whilst also creating a win-win for both rights-holder and licensee in terms of new revenue.
VA, though, is not just about new commercial opportunities. It can add value for global sponsors with local campaigns in local languages. No longer does a Shanghai resident need to see an English campaign on the LED boards – or vice-versa. VA software can also help rights-holders combat local gambling or alcohol legislation. Off-shore, remote production combined with VA may become increasingly important for both categories.
In the coming years as OTT dominates broadcast rights, the VA golden ticket is personalised programmatic ads on the LED boards or even the pitch. The main VA software providers all have this on their to-do list. No-one in the sector has the winning algorithm yet. There are also obvious rights model questions to be addressed – but the key will be shaping the business model around the software.
Following a strategic review of the virtual advertising sector and the Zurich-based sports tech start-up UniqFEED for its board in the summer of 2020, Jamie Cunningham was seconded from his agency Professional Sports Capital to UniqFEED to oversee a project management office as the interim chief executive in September 2020.