How Sports Teams Can Embrace Digital Transformation to Strengthen Fan Engagement and Revenue | Hacker Noon

@aveslairAves Lair

An NYC-based accelerator that supports startups in the verticals of AI, blockchain, cloud, and data

Aves Lair is closely observing the trend of digital transformation in sports teams around the world. We believe that digital transformation will be key to engaging sports fans during the pandemic and beyond, and will improve sports organizations’ financial standing in the long run. 

The problem: The COVID-19 crisis has upended the way sports teams connect with their fans, engendering financial losses across the industry. 

The outcome and the solution: The pandemic’s disruption to the fan experience and sports organizations’ traditional revenue sources has accelerated the pace of digital transformation in sports teams, both as a means to boost revenue and connect with fans amid a period of profound uncertainty.

Outline

1. The pandemic has proved financially costly for global sports teams 

2. Fans are reluctant to return to stadiums and are unlikely to attend live games in pre-pandemic numbers even once it is safe to do so

3. Sports teams are badly in need of new, sustainable revenue sources to outlast the pandemic

4. Digital transformation: alternative and more sustainable revenue sources

  • Data monetization
  • Media rights utilization

5. New ways to keep fans engaged:

6. Sports teams can use digital technology, like streaming platforms and club apps, to connect with fans even while stadiums remain empty

7. Some clubs are embracing their role as both content creators and distributors

8. Virtual sports are emerging as a viable way to connect with fans during the crisis

9. Great digital experiences are linked with higher fan satisfaction and spending, as well as deepened loyalty

The COVID-19 pandemic has forced sports teams to find new ways of connecting with fans and more durable revenue sources. Photo: Photosport

The pandemic has thrown a spanner in the sports economy.

The pandemic has proved financially costly for sports teams across the globe. For National Football League (NFL) teams, empty stadiums resulted in approximately $5.5 billion in lost income tied to fan attendance – including concessions, tickets merchandise sales, as well as sponsorships. Indeed, multiple sources of income relied on by traditional sports teams are tied to fans at live games, and cannot be easily “decoupled” from supporter-filled stadiums. 

The phenomenon is not unique to American sports leagues. Eleven professional sports in England – ranging from rugby to horse racing, but not including the upper echelons of men’s football and cricket – are set to receive 300 million pounds in an emergency government bailout aimed at staunching revenue losses across professional sports triggered by nationwide lockdowns to reduce the spread of COVID-19.

Rugby Football Union, representing one of the sports to receive a portion of the government funding, recently publicized revenue losses of 145 million pounds resulting from restrictions on spectators and cancelled international matches. 

The pandemic has put sports around the world under considerable strain – even at the highest professional levels. Photo: Andy Rain/EPA via The Guardian

The British government, meanwhile, has ordered that the English Premier League, representing the highest level of professional men’s football in the country, share some of its money from television contracts – which amount to 9.2 billion pounds in total – to buoy the professional men’s game below the first-division level. The League has agreed to send 50 million pounds to teams in League One and League Two (England’s third and fourth tiers of men’s pro football) to help make up for their lost match day revenue.

Though losses for League One and League Two sides have been great – clubs in those two divisions have lost on average $38,000 to $130,000 per game during the pandemic – even Premier League stalwarts have been touched by the downturn in match day revenue.

Manchester United, perhaps the world’s most famous football club, have said they lose four to five million pounds every time a game is played in front of empty terraces. 

Financial shortfalls have also affected continental sports teams. A KPMG study produced by the Football Benchmark Team found that the economic effects of the pandemic have resulted in revenue losses in excess of 1 billion euros among some of Europe’s biggest football clubs. 

Fans aren’t coming back anytime soon.

Fans’ reluctance to return to stadiums even when conditions are safer suggests that sports teams’ game day revenue losses are not likely to disappear the moment the pandemic finally lifts. One in three consumers polled by Deloitte in May 2020 expressed wariness about going to live events for six months (one might reasonably assume that with the worsening pandemic in the United States, those consumers might reiterate their answer if they were surveyed again today).

Secondly, of the people surveyed in a study conducted by Seton Hall University’s Stillman School of Business, nearly two-thirds of those who identified as “sports fans” “said they would not attend another live sports event until a COVID-19 vaccine has been developed and distributed.”

Crucially, even if enough sports fans were to eventually feel comfortable enough to attend live games as to positively affect sports teams’ game day revenue, exactly when it will be safe to join thousands or tens of thousands of fans in a stadium remains unclear, and potentially far off.

The 2020 NBA Finals, which saw the Los Angeles Lakers defeat the Denver Nuggets, was attended virtually by an audience that included some well-known basketball fans. Photo: USATSI

Clearly, it is vital that sports clubs, whether in the NFL or EFL League Two, look to alternative sources of revenue as the pandemic enters its second year and games continue to play out in front of empty stadiums. In fact, a report by Deloitte emphasizes the importance of “reshaping and expanding revenue generation models” for professional sports in the new year.

Digital transformation could hold the ticket to sustainable income generation and fan engagement for sports teams willing to embrace change. 

Teams can put their media rights and data to work to generate revenue.

Sports teams’ adoption of new digital modes to connect with fans predates the pandemic; however, the crisis caused the trend to accelerate in more visible and dramatic ways than ever before. Clubs can use digital transformation as a means to utilize their brand and media rights, and monetize their data – two potential revenue streams MediaKind described as “under-utilized.” Sports’ digital shift also aligns with fans’ growing preference for more digitally integrated experiences and demand for more ways to engage with their favorite sports team or club.

The industry, teams and fans each stand to gain from digital transformation; consequently, sports is about to change in a big way.

Sports teams had already been steadily accumulating vast troves of player and fan data before the pandemic set in, collecting information that happens to be extremely valuable to “teams, coaches, broadcasters, and rights holders,” whose interest in connecting teams with their fans has built a sports-specific analytics industry Deloitte expects to approach $4 billion in the next two years. To optimize the way that data is used to empower better team results, better player performance, and more personal relationships with fans will prove indispensable to the building of a future-proof sports team

Sports media rights, on the other hand, offer another opportunity for teams to build sustainable revenue streams. In this context, sports media rights refers to the ways in which a sports brand or rights-holder chooses to sell a copyrighted product – such as a recorded game played by that sports team – to a media distributor.

While broadcasting still comprises the bulk of sports media rights use in today’s sports industry, other possibilities have emerged, identified by SportsPro as “ecommerce, streaming, ticketing, sponsorship, membership, loyalty and wagering.”

And sports media rights are increasingly valuable from the rights-holder’s point of view. From 2006 to 2018, sports media rights in the United States grew nearly 150%, and are predicted to “triple by 2023,” according to the World Economic Foundation.

Gaps remain in the market, though. Sports media rights-holders, such as teams and clubs, rarely offer a team-specific app to connect with fans, and those mobile apps that are offered by rights-holders do not take full advantage of “secondary” monetization sources, like “ticketing, merchandising and advertising,” which are often absent from app interfaces, according to MediaKind

New tech allows teams to connect with fans during the pandemic and in the digitally integrated future.

The sports industry is also attempting to use digital technology to connect with fans in-person despite the pandemic, effectively bringing them “inside” empty stadiums. Fox Sports rolled out “virtual fans,” who filled vacant stadiums in the network’s coverage of Major League Baseball games. The atmosphere at one empty, 50,000-seat stadium in Japan, the Shizuoka Stadium Ecopa, was recently enlivened by an app produced by Yamaha, the “Remote Cheerer powered by SoundUD,” which allowed fans to broadcast their cheers from their homes into the ground of their favorite team.

Top-tier Danish football club Aarhus Gymnastikforening (AGF) set up an array of massive screens pitch-side to virtually bring 10,000 AGF fans into the stadium for a match against Randers. The club used Zoom to host fans virtually, in what became a case study in digital agility as the key to seeing out the pandemic and keeping fans engaged in the long run.

Shortly after the experiment, bigwigs at Norwegian, Dutch and English teams reached out to AGF to discuss how the digital fan experience was accomplished, and a Zoom spokesperson said London-based West Ham United were also interested in testing the video conferencing platform to once again fill London Stadium with fans – albeit virtually.

Aarhus Gymnastikforening supporters cheer their team on via Zoom during a game against Randers in the Danish Superliga. Photo: Henning Bagger/Ritzau Scanpix/AFP via Getty Images

Previously, forerunners in the industry had begun to explore new applications for technologies like artificial intelligence to create engaging game day experiences. Major League Soccer side Los Angeles FC became one of the first sports teams to deploy artificial intelligence to serve fans’ needs, including helping fans order concessions, when it unveiled its AI assistant, OLLY. 

Moreover, the sports venue of the future will likely reflect a technological approach to the changes sports fans have grown accustomed to during the crisis. Deloitte predicts that the experience of attending a sports game in the future will involve fans buying tickets from personalized ads on social media platforms, storing their ticket in a digital wallet and preloading the ticket with cash for merchandise and food at the venue, undergoing a symptom and temperature check at the gates of the stadium, picking up food orders from a contactless location, betting on game events with their mobile device, and experiencing contactless shopping in stores at the venue (that is, customers can simply walk out of the store with whatever merchandise they want, knowing that their account will automatically be charged for their purchases). 

Teams aim to build four-season connections with fans through official apps.

Some sports teams have opted to create an official team app to give fans fuller means of keeping up to date with the goings on at their favorite team while hooking the brand up with new revenue streams, like “paid advertising and sponsorship,” along with premium content and subscription plans for fans interested in accessing an even richer fan engagement experience. Indeed, a Deloitte report asserts that sports organizations need to “establish year-round, two-way relationships with fans,” converting supporters’ passion into four-seasons demand for team content, whether by using streaming platforms like Twitch or rolling out fan apps.

Consumers want more ways to interact with their favorite sports teams – and the industry is listening.

Pioneering sports teams are busy keeping up with fans’ growing appetite for digital sports consumption and digitally integrated ways of connecting with their team. For some clubs, this means leaning into the convergence of content and distribution – being both the creators of content fans love and the platform on which fans consume that content.

Last year, the NBA announced that it would partner with Microsoft to produce its own bundled, D2C game broadcasting and fan engagement platform. Indeed, sports teams and the players who comprise their rosters are “becoming platforms” in their own right. This process of “platform-ification” enables sports teams to get closer to fans in spite of the pandemic. Some fans tune into their favorite athletes’ video game streams on Twitch, for instance.

Teams are attuned to the potential to connect with fans this way; many, like the NHL’s Capitals, “showcase” the gaming talents of their players in Twitch channels. Meanwhile, esports is attracting traditional sports organizations, who see in the emerging world of competitive online gaming an opportunity to foster connections with younger, digitally native fans. Recent years have seen owners of teams from “every major sport” in the U.S. dabble in esports, “largely with franchised leagues owned by Activision Blizzard and Riot Games.”

The move is likely to pay off. Data show that more consumers are “watching video game content,” with approximately one-quarter of consumers and about one-half of Millennials and Gen Z consuming video game streams and recorded video every week. Esports’ popularity is staggering. Revenue across esports was predicted to exceed $1.1 billion last year. 

Some sports teams have turned to virtual sports and live-streaming to engage fans online. Image: Twitch

Virtual sports: The future, today.

Virtual sports, meanwhile, also makes it possible to sustain fan engagement in spectator sports like car racing and cycling during the pandemic. A virtual Tour de France held last year used the Zwift indoor cycling platform to tap into cycling fans’ love of technology and tracking vital statistics by showing viewers the competing athletes’ heart rates and power in real time. And the category is already gaining traction with consumers: almost one in five Millennials watches virtual sports. 

Cyclists competed in a virtual Tour de France last year using the Zwift virtual cycling platform. Image: The Connexion

Fans reward teams that offer great digital experiences.

Sports teams are likely to benefit from their efforts to go digital, because digital transformation is linked to higher fan satisfaction and engagement. Over 60 percent of fans polled in one survey “agreed that having a great ‘year-round experience’ would make them more likely to become more engaged with their team in the coming season,” and 55 percent of respondents attested that a fuller fan experience “would make them more likely to purchase a ticket in the future.”

Nearly three in four “avid fans” go to more games after a positive interaction with digital fan engagement. Digital transformation is also associated with increased spending on team merchandise – almost half of the fans polled in the survey “often increased their spending on team merchandise following a good tech-enabled experience.” 

Summary

The COVID-19 pandemic has upended the way sports organizations around the world connect with their fans, and dealt a serious financial blow to the sports industry. Moreover, fans are wary of returning to stadiums amid the crisis, and may not flock to sports games in pre-pandemic numbers even when it is safe to do so. Doubtless, the sports industry requires new ways to shore up its financial health during this period of uncertainty and beyond.

Aves Lair believes that digital transformation presents a viable path forward for the sports industry, both in terms of sustainable revenue generation and fan engagement. Sports teams can use digital transformation to utilize their brand rights and monetize their data, providing new revenue sources; while connecting with supporters year-round using digital technology, including streaming platforms and club apps.

Sports teams that have embraced their dual role as both content creators and distributors, or ventured into the world of esports and virtual sports stand to reap major dividends from their digital transformation. Positive digital experiences mean happier, more loyal fans who spend more on the club they are passionate about – which should motivate the sports industry in this time of profound changes and challenges.

By John Payne for Aves Lair

Blocksport is a fan engagement technology startup and member of Aves Lair’s 2020 winter accelerator cohort specializing in white-label platforms for the sports industry, unlocking new revenue sources and data for sports teams and bringing clubs and fans closer together. Contact [email protected] to learn more about Blocksport’s white-label solutions for the sports industry.

To learn more about Aves Lair and the Aves Lair accelerator program, visit aveslair.com, or follow us on LinkedIn and Twitter.

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