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The world in 2022 – part two: Why you need a newly fluid business model

In his latest four-part series written exclusively for SportsPro, senior contributor Matt Rogan gazes over the horizon to better understand the future into which leaders will be rebuilding their businesses. Here, he explains why the old ways of thinking - and traditional approaches to doing business - no longer apply.

19 October 2020 Matt Rogan

Where Amazon is a master of its trade is understanding how each part of its business model feeds the other. Its stores cross-sell other higher margin offers – for example, many of the new test formats are showrooms for its Echo products, which in turn require Amazon Prime membership to work to their full potential.

Amazon Prime itself – and the subscription video content it provides – is a fundamental part of the business model. Jeff Bezos described this succinctly when he said: ‘Every time we win a Golden Globe we sell more shoes.’

As SportsPro managing director Nick Meacham explained in a recent article predicting the rosy future of Amazon in sport, this model is perfectly replicable within the sports industry in theory. At the time of writing, Amazon’s All or Nothing series on Tottenham Hotspur, with a specific retail presence on the Amazon platform, looked like being an early test case. In Meacham’s words, this ‘capability has the potential to deliver an incredible surge in the monetisation of live sports, and could change the way rights are valued permanently.’ 

Making this theoretical virtuous circle work in practice is not straightforward, of course. One skill which Amazon has in spades – but which more traditional sports businesses still struggle with – is the desire and ability to consistently test and iterate its model, despite its current success.

Amazon has branched out into bricks-and-mortar retail with its fully automated, checkout-less Go convenience stores

While launching physical stores might, to an outsider, seem like a retrograde and unnecessary step backwards, Amazon knows exactly which pockets of its customer base this extension works for, and how it pays back. These customers become its focus to drive through low-profile stores that other customers might never even find out about. The fluidity in the company’s customer-led approach and the conscious trade-offs it makes between revenue lines and business models is where sport will head next.  

Easier said than done, of course. This kind of approach is particularly tough for sports businesses which do not always ‘own’ the direct customer relationship in the same way that Amazon does. For example, the Premier League supplies its British highlights package to domestic free-to-air broadcaster the BBC. The logical principle would be that this keeps the sport in the public eye in its home market, generating a host of eyeballs to monetise through pay-TV broadcast partners, and then through the clubs. Intuitively, it is the key entry point for fans into the sport and should also play a key role in retaining casual fans less prepared to pay specifically to watch live games or attend a match. However, in 2022, ‘intuitively’ will no longer be good enough. 

By 2022, being able to understand and measure the to-date unquantifiable within a supply chain will be critical. Some of sport’s gut instinct decisions will be vindicated, and others called into question.

At times, we will be shown quite how far off the mark we have been. Reach plc is the largest commercial national and regional news publisher in the UK, with a total monthly reach of 46.7 million Britons (or nearly seven times the weekend reach of Match of the Day). It distributes content through newspapers, magazines and digital platforms, including the likes of the Daily Mirror and Daily Express, regionals such as Birmingham Evening News and the Liverpool Echo, and digital platforms including football.london.

Ceri Gould is editorial revenue director for the Reach plc Group, shaping new business models for a changing British media landscape. As part of that responsibility she heads up the Reach Sport operation, which has been successfully grown by managing director Steve Hanrahan and his team. The richness of intelligence she is able to access through the sheer breadth of Reach’s platforms drives her conviction that “readers are ahead of the sports they support in many ways, embracing podcasts and live blogs and interactive formats far quicker than the sports themselves supply them”.

Jonathan Birchall, Reach’s head of sport, regionals, expands on the implications of this division for the longevity of the BBC’s show. “Match of the Day caters to the football fan but how many people define themselves as such any longer?” he says. “Younger generations are looking for the niche within the niche. Specific club coverage, tactics, analytics, gaming – the entry points for football fandom are so much more diverse than even ten years ago. It’s why we hired our specialist writers last year, for example, one in gaming.”

In order to service the ‘niche within the niche’, just as Amazon manages its ‘long tail’ so successfully, rights holders will need to become far more sophisticated in the way in which they use and measure earned and bought – as well as owned – media channels to drive their business model. Smarter management of first- and third-party data sets, and critically the links between these, will become a core capability.  

Younger generations are looking for the niche within the niche.

Jonathan Birchall, Reach’s head of sport

This is not to say that free-to-air is dead. The more we understand about where value is generated, the more we may well find ourselves going back to the future. 

From a broadcast perspective, we may well see a resurgence in understanding the value of free to air in the mix. This will not only impact traditional broadcast as we know it, but also increase the usage of free tiers of an over-the-top (OTT) product or the use of YouTube – as BT Sport has done very successfully for its business model, streaming the Champions League final in recent years as a means of driving annual subscriptions. This isn’t guesswork: the company knows, and can prove, that it works. 

While the plethora of free, digitised content is clearly hugely valuable for fans, the entire sports industry is still recalibrating its model to adjust to that and starting to understand where the value truly resides for business and fans alike. “The model needs constant tinkering,” says Gould. “The BBC has a strong sports digital offering and that is ‘free’. It is difficult to create the appetite for paid-for content when there is so much that is already available. However, that is our journalistic challenge.”

Of course, ‘niche within the niche’ is where the use of direct-to-consumer media platforms should really excel. However, as Birchall explains, this is not straightforward.

“Beyond live rights, there are very few successful, broad scale D2C paid-for media businesses around sport,” he says. “The Athletic are raising significant capital through third-party investors to fund what they do and there are also small, hyper-loyal podcast fanbases which are working well but difficult to scale. Driving subscription and loyalty can only be a part of the mix. It’s also about saturating the markets we’re playing in with every available content type and platform, underpinned by being more comprehensive and specialist in the niches.”

The absolute priority from a commercial perspective is determining which industries are likely to thrive in the bounce out of Covid and aggressively getting sport front and centre of their commercial thinking. 

Ceri Gould, Reach editorial revenue director

For Reach, this is a future where, just like Amazon, several business models will co-exist and feed off each other. The crux of succeeding in this environment is to understand the interplay between the different revenue streams.

“There will absolutely be elements of paid-for content in our future, I’m sure of that, but I think it would be foolish to treat it as an either/or – the walled garden which completely reduces the potential for scale,” explains Birchall. “Through smart content marketing, sponsorship and other free to access ad-models, I think we can still drive significant revenue from our scale while still looking at opportunities for OTT revenue. Our Blood Red multimedia offering around Liverpool Football Club has been a good example of this – YouTube, Twitter Amplify and podcast revenue have all gone into the mix. It’s a tight but profitable venture for us.”

Gould agrees. “It’s difficult to imagine a world where readers are paying for all of their sports content online,” she says. “The absolute priority from a commercial perspective is determining which industries are likely to thrive in the bounce out of Covid and aggressively getting sport front and centre of their commercial thinking.

“We have a huge, strong demographic who are extremely loyal to our content and brands – we need to be smart in aligning that audience with potential commercial opportunities. While Covid has sped up some much-needed innovative thinking, there is much to do. The difficulty is how to add ‘cherishing’ to digital products. For example, a box of match programmes, yellowing in the attic, may be cherished as a collection – digital programmes on your hard drive, less so.”

We can see in Reach’s journey that content, sponsorship, advertising and subscription revenues are traded off at pace, with the right intelligence at its core. Similarly for sports clubs and teams, those who can proactively manage the interplay between broadcast media, subscriptions, sponsorship, advertising, membership and retail revenues will be best set up for success. Sport has done a terrific job latterly of playing catch up in areas like this, and in preparing for 2022 there will be no room for sacred cows – not even an British institution like Match of the Day.  

Of course, no sporting organisation can make smart judgement calls between different monetisation routes without having a direct understanding of, and impact on, its audience. Over the last ten years it has become a hygiene factor for commercial sports businesses to manage their fanbases at a single customer, first-party data level to enable that quality of thinking, with businesses like Two Circles supporting them in the management and monetisation of those approaches. 

One such organisation is Learfield IMG College, which drives commercial growth through media and technology services for hundreds of North America’s top collegiate properties including the NCAA and its 89 championships, leading conferences, and many of the most prestigious universities in the country.

Like Reach in the UK, the organisation relies upon an in-depth understanding of its audience to understand the opportunities and trade-offs in its commercial decision-making. One significant initiative in enabling sharper, cross-organisational thinking is the development of its Fanbase product which, with the support of Two Circles, combines behavioural data sets from official athletics sites with other sources of fan data, including primary and secondary ticketing, sponsorship campaigns, donation information, and more.

As managing director of Fanbase and senior vice president of strategy and corporate development at Learfield IMG College, Matt Deimund has led the creation of this platform. While this might sound a logical step, even perhaps a slightly tardy one, pulling this off in a very different environment to the more traditional professional sports space is a significant achievement.

Learfield IMG College’s data-led approach is enabling US universities to better engage their fanbases and reshape their strategy for growth

“When you have a connection with a university, it stays for life,” says Deimund. “However, the nature of that personal connection has traditionally been difficult to qualify and nurture as universities can at times be siloed in the way they operate and the data they hold. Many universities have complex objectives – which are far much more subtle than merely being focused on revenue, let alone purely sports fan revenue – and can at times face challenges securing the resources needed to draw insights from connected data sets.”

The most progressive component of Learfield IMG College’s approach, one which is fundamental to the way in which every organisation with Reach-level complexity in its model is evolving its approach, is the work the company has done enriching and integrating its audience understanding across first and third-party, known and unknown, data sources.

“In building Fanbase, we’ve worked in partnership with universities to really understand their drivers,” Deimund expands. “We’ve overlaid first and third-party data to help them consolidate their understanding of their audience. However, this isn’t about the APIs, data warehouses and dashboards – this is about the actionable change that we have managed to drive together as a result.

“For example, one of our first Fanbase partners, a large research institution with a perennial top ten football programme, leveraged Fanbase to help support primary ticketing. Using Fanbase-enriched data sets, our partner was able to more effectively segment existing fans to drive upsell offers, while also working with us to create lookalike audiences for new fans.

“In a short pilot, during the midst of a pandemic, we saw return-on-ad-spend of 9:1. That same institution has used that data to inform their mobile ordering strategy and help the sponsorship sales team re-engage with several brands that had lain dormant, all based on a deeper knowledge of fan preferences and behaviours.”

This isn’t about the APIs, data warehouses and dashboards – this is about the actionable change that we have managed to drive together as a result.

Matt Deimund, managing director of Learfield IMG College's Fanbase platform

The opportunity Learfield IMG College offers its partners is to be able to digitally engage with specific audiences highly attuned to their brand messaging, but also knowing that they are fans of the college.

“Brands are valuing this premium inventory, which has far more richness to it than being extrapolations driven out of Scarborough or YouGov data sets,” says Deimund. “The results have been stunning. Our click-through rates are multiple times higher than regular campaigns because we know that we are serving up integrated messaging to loyal audiences. They’re not just warm to the message, they’re heavily engaged customers – and that’s a hugely powerful difference.

“We’ve only just begun here. Ultimately, we are continuing a culture change which focuses on knowing the fan deeply and understanding how best to serve their needs. We hope to be able to drive far richer intelligence for the college community; one opportunity, for example, is the ability to provide far deeper insights in terms of benchmarks versus peer institutions.

“As Fanbase grows, we plan to leverage additional resources to establish a sort of ‘think tank’ model that can continue to provide insights on the college sports fan. If we can drive the right relationship with each fan at an individual level, then we know we will ultimately drive revenue growth, which in turn feeds back into providing the ultimate experience for student- athletes.” 

The DRL's Academy teaches children how to build drones and supports a STEM learning curriculum in schools

Data-led decision making is not new. Audience-led, data-driven thinking has played a significant role in driving revenue lines across the industry in the last five years. However, it has largely been done by looking at those revenue lines in isolation. The next phase of growth – as at both Reach and Learfield IMG College – is to see traditional revenue lines blur. This will have two main implications for leaders to think through. 

Firstly, sports will be increasingly focused on owning their entire supply chain, even if they sell the rights to the content, and ideally owning the customer journey throughout. The Drone Racing League, for example, has built an end-to-end pathway for the new sport. Its academy teaches schoolchildren how to build drones and supports a STEM learning curriculum in schools, while its simulator enables fans to experience what it’s like to engage with the sport, acts as a source of talent ID, and cost-effective additional content creation. The live event portfolio takes racing to new locations with a physical high-octane experience, in which the pilots themselves are very actively engaged with fans.

The whole of this can be measured, packaged and monetised for broadcasters and brand partners alike. The DRL can be every bit as agile as Amazon managing the interplay between its distinct but unified businesses. As league president Rachel Jacobson says, “at our heart we are a technology company.”

Secondly, the organisational structures and decision-making methods of commercial sports teams will look very different. A Premier League club considering how best to distribute content in Asia, for example, will be weighing up the revenue opportunity across membership, media, sponsorship, and likely also merchandising, balancing up the opportunity against the delivery costs and long-term audience growth opportunity. There’s no place for sponsorship, media and merchandising directors fighting their own corners and looking after their own targets in that discussion. Structurally speaking, sports businesses will be focused – just as Learfield IMG College is – on delivering the right experience at an individual fan level. As Deimund says: “If we get the audience part right, the rest of the value chain will follow.”

The new fluidity in the business model for sport is a complex subject but sourcing the skills to navigate it – whether in-house or out – will be a hygiene factor in every sporting kit bag by 2022. Opportunities for audience, revenue and margin growth will be traded off daily in a confluence of business models. Responsibility for distinct revenue lines will need to be left at the door, with the only useful metric being the value generated from each audience member.

It’s not necessary to be a technology company, but you do need to be one filled with both right and left brain thinking. 

About the author: Matt Rogan has spent his career creating and scaling businesses in the sports and entertainment arena. Having co-founded Two Circles and led the business as chief executive and executive chairman for eight years, he now advises a number of businesses inside and outside sport as a non-executive director. He also supports a small number of chief executives in a mentoring capacity. Matt joined the SportsPro team as a senior contributor in 2020 and will be publishing his second book in during 2021. Find out more at www.mattrogansport.com.

Read part one of this four-part chapter – on how sport’s leaders can future-proof their businesses for 2022 and beyond – here. You can also read the chapter in its entirety in the forthcoming Issue 111 of SportsPro magazine. Subscribe today here.

Matt Rogan's CEO Playbook, an in-depth practical guide for running a sports business in the wake of Covid-19 – is due to be released in early 2021. Here's the story so far:

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