PwC’s Sports Survey 2020

Sports industry: system rebooting

www.pwc.ch/sports View from The state of the Impact of Sports media: Esports: the great References and the top sports industry COVID-19: navigating the age of emancipation contacts winds of change complexity How to get back COVID-19 severely Surge of esports Navigation menu impacting growth on track? Sports hiatus has Content ecosystem reshaped viewership during exposed systemic by new formats and channels lockdown: sustainable? Notes and sources Fantasy and betting weaknesses hold promise From event to IP-driven Those who persevere will Contacts Blurring boundaries: the storytelling reap benefits from esports The untapped opportunity rise of hybrid sports of digital assets How D2C is morphing Esports to establish new, Greater risks require into B2B2C standalone disciplines Health restrictions 06 revenue diversification threatening long-term Media rights to deliver value Creating a world where prospects Appeal and caveats of beyond exclusivity everybody can be somebody 60 private investors OTT rising to meet fan Strategic collaborations expectations to transform sports’ 08 operating models 46 20 32

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This survey was conducted by our Sports Business At the time of their response, each of the Respondent profile by organisation Respondent profile by geographical sports market they know best Advisory team between June and August 2020 respondents occupied a senior/C-level position 3.4% South America through an online questionnaire distributed to within their respective organisations. The analysis Other/consultancy 1.6% Africa 12.8% Australasia sports industry leaders around the world. Because in this report is primarily based on the collective Academia/public sector 21.6% 8.8% Sports federation 19.1% they share our vision of establishing an independent opinion of the respondents. It is complemented by 6.1% Asia perspective on the state of the industry, a number data provided to us by IRIS Intelligent Research in Investment company 2.7% 17.7% North America of high-profile sports executives supported us by Sponsorship and HORIZM, as well as the team’s 10.0% sharing the questionnaire with their peers. This knowledge, research and views about the industry. Sports 6.9% technology Broadcaster/ media company helped us ensure broader representation across company 4.5% regions and industry segments. The effort was also 17.3% 9.9% Middle East driven by PwC Australia, China, France, Germany, Team/club Sports marketing agency 45.0% Hungary, India, Japan, the Middle East and 6.5% 6.2% Europe Brand/sponsor Russia. In total we received 780 responses to our League/event organiser questionnaire across more than 50 countries. Source: PwC Analysis, N=780

PwC’s Sports Survey 2020 | 3 | Dear friend of the sports industry,

In this particularly turbulent time for our sector marked by COVID-19, we’re pleased to have gathered the views of 780 industry leaders – a record number of respondents for the second year in a row. The continually increasing size and quality of our sample has enabled us to reinforce both the depth and validity of our analyses. To this end, I’d like to express my most sincere thanks to each and every one of you for your valuable contribution.

As expected, the 2020 edition closely reviews the short- and long-term consequences of a crisis unprecedented in the history of modern sport. Against this backdrop, we’ve delved into the rapidly evolving sports media ecosystem, as well as the opportunities and challenges of emancipating esports as a new discipline alongside its physical equivalent.

In general, our results show that the prevailing pessimism is cut by the many opportunities brought about by the crisis. This situation may favour the emergence of changes that have long been considered but never achieved to their full extent, whether it be hybrid sports, new revenue streams, drastic governance reforms or enhanced collaborative models.

Ultimately, as demonstrated by spectators’ unwavering interest amid and after the hiatus, nothing seems to be able to undermine the inspirational capital of the sports product. This means that all the ingredients are in place for industry leaders to fully engage in the building of an equally prosperous but more robust new dawn for sports.

Yours sincerely,

David Dellea

Head of Sports Business Advisory

| 4 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 5 | Top three View from the top benefits and challenges for rights owners setting up an esports strategy Most growing sports How to get back 1 Engaging a new fan base 2 Attracting new commercial partners media content types

3 Generating new revenue streams Highlights/short-form 90.5% on track? content Team/athlete-generated Creating engaging content and narrative 81.6% 1 content 2 Developing an effective monetisation strategy 3 Selecting the most relevant games and competition formats Original content/ 75.7% Future vs. past documentaries Top 10 sports by potential to growth grow revenues

8.0% 1 Esports 6 Golf Top three industry-wide average Football/ opportunities and threats Cycling growth 2 soccer 7 Past 3–5 years 1 Enhanced digital media fan experience 3 Basketball 8 Motorsport 2 Creation and monetisation of digital assets 3.3% Most expected 3 Innovation in media rights packaging and distribution collaboration models 4 Urban sports 9 Rugby with the sports industry average 1 Impact of health and safety crises growth 2 Reduced financial resources to invest/innovate American 5 Tennis 10 75.0% 3 Dominance of major tech firms as gateway to content Next 3–5 years football 70.2% Funding by Joint projects financial investors/ Relative to other industries, how well was the sports industry and co-creation private equity prepared to face the with sponsors COVID-19 crisis? 1.0% 1.2% Don’t know/abstain Excellent 13.0% 25.5% Above average Very poor 86% of industry leaders believe that live sports viewing will become significantly richer, immersive 28.4% and interactive Average

31.0% Below average | 6 | PwC’s Sports Survey 2020 The state of the sports industry

Each year, we survey a select group of industry leaders on their perceptions of the growth, key opportunities and threats faced by the sports market. Through this exercise, we aim to provide you with macro insights on how our industry is likely to develop in the coming three to five years. This section outlines high level takeaways, setting the stage for the following chapters which address in greater detail the impact of COVID-19, the market dynamics reshaping sports media as well as the growing opportunities in esports.

| 8 | PwC’s Sports Survey 2020 The state of the sports industry

Figure 1: Market growth outlook by respondents’ best known market Percentage annual growth estimates over a 3-5 year period Insight 1: COVID-19 undermining

Past 3–5 years growth expectations Headlines Next 3–5 years 8.0 • Fully impacted by the COVID-19 outbreak, the sports market is predicted to slow to an annual growth rate of 3.3% in the next 3-5 years (down from 8% compared to the European Club Association past 3-5 years). 30% of respondents expect growth rate to be zero or below. predicts a EUR 3.6bn revenue shortfall for • The Middle East and Asia – fuelled by robust governmental support, upcoming mega elite football 3.3 events and overall growing commercial maturity – report the most optimistic forecasts. Africa also anticipates steady growth thanks to an increasing influx of investments and partnerships. NFL’s revenue could fall Overall by USD 4bn over the • In Europe, the Americas and Australasia, the crisis has significantly lowered confi- coming season dence. We nevertheless dare to see the cup half full: long-term growth prospects of above 3% per annum suggest that the industry holds robust fundamentals. 8.8 8.6 8.7 8.5 8.0 7.3 7.7 6.6 6.6 5.3

3.6

2.0 1.5

-1.3 Europe Asia North America Australasia Middle East Africa South America

Figure 2: Market growth outlook by stakeholder Percentage annual growth estimates over a 3-5 year period

Past 3–5 years Next 3–5 years

8.1 7.4 7.2 7.5 7.3 Never waste 3.8 3.1 2.8 3.1 a good crisis. 1.7

Sports Broadcaster/ Sports marketing Brand/ League/event Winston Churchill federation media company agency sponsor organiser

9.4 8.2 8.1 8.0 6.6

4.5 3.9 4.0 3.5 3.3

Sports Sports technology Academia/ Investment Other/ team/club company public sector company consultancy Source: PwC Analysis, N=771

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Figure 3: Expected annual growth rate by revenue stream Figure 4: Ranking of top 10 sports by potential to grow revenues Percentage annual growth estimates over a 3-5 year period Percentage of respondents, Top 2 box (“above average” and “very high”)

new new Flat-out sprinting Perennial powerhouses Breakaway group Front of the peloton +1 –1

Sponsorship and Media rights Betting and Ticketing and Licensing and advertising fantasy hospitality merchandising 86.3% 85.8%

13.7%

73.6%

10.1% 66.4%

8.4% 8.6%

7.2% 7.0% 50.6% 4.5% 4.1% +1

3.2% +1 new –3 3.2% 3.4% 40.7% 38.2% –1 2.2% 33.3% 32.0% 31.3% 27.7% 0.8% 0% 0.0%

-1.8%

-3.6% -3.9%

Expected annual growth rate by revenue stream Percentage annual growth estimates over Esports Esports Football/ Urban American a 3-5 year period simulated action/fanta- Basketball Tennis Golf Cycling Motorsport Rugby soccer sports football 2019 2020 -6.9% Source: PwC Analysis, N=771 sports sy/shooter

Source: PwC Analysis, N = 702

Insight 2: Betting and fantasy presenting Insight 3: Esports accelerating its rise as greatest growth prospects fastest-growing category

• Betting and fantasy are predicted to become key industry drivers in the next • Benefiting from unprecedented exposure in the mainstream media, esports unsurpris- 3-5 years, with an anticipated yearly growth of 7.2%. These favourable forecasts ingly emerged as the big winner of this lockdown period. The simulated sports genre, are mainly due to the rapid acceleration of the betting market in the United States Headlines which temporarily turned into a substitute for real, physical sports, is even ranked first Headlines since the lifting of the federal ban in 2018. by respondents. Sports betting legalisation FIBA announces its first • For rights holders, these prospects imply the growing potential of both core fosters value of • The growth potential of the ultimate global games – football and basketball – remains esports competition for (e.g. betting partnerships, licensing of game data rights) and adjacent (e.g. performance data robust, as confirmed by the large broadcast audiences recorded by the major national teams integration of betting and fantasy into live broadcast) betting-related revenues. competitions at the time of their respective restarts. • Concerning sports’ historical revenue streams, licensing, merchandising, media • Interestingly, motorsport moved up to 9th place – up 5 ranks from the last edition. Betting-related companies LaLiga’s global viewership rights and sponsorship are still expected to grow slightly over the next few years This may be tied to the recent experiments by flagship properties such as Formula 1 outperform overall market grows by 48% at restart (3% on average), while ticketing and hospitality are projected to remain flat. at Wall Street and NASCAR during the hiatus, reaping great success with innovative fan engagement campaigns.

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Insight 5: Rights market pointing out It’s time to opportunities through diversification Headlines accelerate direct • In contrast to the historical model, the sports hiatus has put negotiation power in the J. League and DAZN agree relationships hands of content buyers over rights owners; a symbolic paradigm shift that is likely on a collaborative, profit- share rights deal with fans. to impact the dynamics of rights tendering. • Given that media companies are also being severely hit by the crisis, the future suggests a more diversified, risk-sharing revenue pattern, which might imply more Chelsea signs its first Timo Lumme, CEO/Managing transactions of lower values on average. non-exclusive, short-term Director at IOC Television & • We believe that the greatest potential for positive disruption lays in media rights, partnership with Duracell Marketing Services where we expect a softening of current exclusivity terms and growth of collaborative distribution models.

Opportunities 71.7% 47.1% Threats Figure 5: Top opportunities to increase revenues in the sports industry Figure 6: Top threats to revenues in the sports industry Percentage of respondents, Top 2 box Percentage of respondents, Top 2 box (“above average” and “very high”) (“above average” and “very high”) Insight 6: Health crisis squeezing Enhanced digital media fan Impact of health and 89.3% 69.3% experience (e.g. UX, interactivity) safety crises resources and investments Headlines Creation and monetisation of 82.9% Reduced financial resources 58.1% digital assets to invest/innovate • Looking at threats, the COVID-19 crisis is unsurprisingly top of the agenda for sports European football prepares Innovation in media rights 72.2% Dominance of major tech firms 45.8% for the age of austerity packaging and distribution as gateway to content leaders, with primary concerns around reduced financial resources to invest and innovate. Innovation in sponsorship rights Growing complexity to 70.4% 44.4% packaging (e.g. flexibility, targeting) reach/service fans • On the bright side, most sports leaders agree that sports’ capacity to engage COVID-19 pushes rights Monetisation of gaming and Sports content saturation/ audiences remains intact, as interest in live sports content is not expected to drop. 69.9% 41.0% owners to revise their esports scheduling conflict • Facing today’s dramatic challenges and tomorrow’s uncertainties, the sports industry approach Improved on-site fan experience 62.6% Piracy/illegal streaming 40.8% urgently needs to ask itself what concrete initiatives should be prioritised to accelerate change despite significantly reduced resources. Monetisation of betting and 54.5% Declining interest in live 30.5% fantasy sports content

Source: PwC Analysis, N=780

“COVID-19 has been a digital Insight 4: Digital strengthening its position accelerator and an enabler for as major opportunity driver change. Vision and strategy Headlines suddenly became must-haves • Survey results show that sports leaders fully recognise the digital fan experience as NBA brings in innovative a top priority, although few organisations have yet managed to deliver it in a way that digital enhancements for the to secure sports’ future legacy. allows it to acquire and retain fans sustainably. season restart At FIVB, the threat has been • The COVID-19 pandemic has significantly weakened physical entertainment, reinforcing turned into an indisputable the value of both immersive and interactive technologies to compensate for sports’ Formula 1 plans to make diminished visual and social experiences. use of its digital sponsorship opportunity.” • Highly rated by survey respondents, sports properties’ digital assets can unlock a broad set-up to partner with seven regional betting partners space for growth (Deep Dive I), in particular by making use of the rising interest in Guido Betti, TV & Marketing short-form and on-demand content. Director at FIVB

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Deep Dive I The growing opportunity of monetising digital assets

Digital assets are touted as a significant To illustrate the impact, we’ve singled opportunity by sports leaders, ranked out three main key performance indica- second as a top prospect to increase tors (reach, engage, monetise) to track revenues. In the context of transition from progress towards greater maturity in linear to digital consumption and growing commercialising digital inventory (figure interest in non-live content, digital assets 8). Each element works incrementally and can indeed provide an opportunity to ensures a compounding effect to uplift de-risk dependency on live events and revenues. Figure 7: Maturity framework for commercialisation of digital assets diversify revenue streams. Demonstrating the potential of digital To harness this potential, it’s essential assets in the context of social media, that rights owners advance their ability to HORIZM provided us with anonymised clearly package, value and commercialise data collected from a sample of clients Stage 1 Stage 2 Stage 3 Stage 4 digital assets, moving away from merely (figure 9). Any sports organisation (irre- considering them as a tool for indirect spective of size) has the potential to gain Indirect Individual assets are Packages of digital Digital assets are Commercialisation sponsorship monetisation. a significant uplift in revenues by going commercialisation commercialised assets are integral part of overall of digital assets from stage 1/2 to stage 3/4. Interestingly, through activation opportunistically commercialised commercial strategy Alongside Spanish start-up HORIZM, only increasing the number of fans (or Plan with outlined digital Clear vision and strategy Business-aligned we’ve developed a simple maturity frame- followers) has alone the smallest impact, Strategy No strategy work to help rights owners navigate their whereas boosting engagement and activities for digital transformation strategy and roadmap development agenda. As highlighted in extending the commercial inventory truly Centralised hub and figure 7, making digital assets an integral drive up the commercial value. The size of No specific digital Selected core-skills Decentralised and Structure dedicated resources part of the commercial strategy requires the prize may be an uplift in revenues up skills in-house centralised and agency re-skilling (more insourcing) alignment and concerted progress across to 12 times. multiple dimensions within the organisa- Sponsorship and Verbal support but Appropriate investment tion, including strategy, structure, leader- Leadership Limited buy-in increased investment inadequate resourcing and resource allocation ship, performance and technology. in digital assets

Performance Volume-based KPIs Quality-based KPIs Value-based-KPIs Lifetime value KPIs

Data provided Make use of market Tailor-made dashboard Default channel- Customised channel- by Horizm Technology analytics platforms based on own based analytics based analytics and reports data warehouse

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Figure 8: KPIs to track progress of commercialisation of digital assets Figure 9: Case study A/B: commercial potential of digital assets

1. Fan reach Case study A As you perfect your ability to generate Mid-tier football club (Big 5 league), primarily local audience Potential to increase attractive content – tailored to the specificities digital assets revenues by 3. Percent of inventory of the digital platforms and their audiences – Stage 1-2 Stage 3-4 x12 commercialisation you’ll grow the number of fans. 3.5 % of inventory Last but not least, you’ll get better at commercialisation 10% commercialised 60% commercialised using technology to integrate relevant 1.7 brands into digital content, increasing the commercial impact of digital assets. % of meaningful 1.0% of total 2.5% of total engagement engagement engagement 1.2 2 million fans, of which 5 million fans, of which Fan reach 0.3 0.3 Digital Assets 5% international 30% international KPIs Stage 1/2 Stage 3/4

Case study B Potential to increase Top-tier football club (Big 5 league), primarily global audience digital assets revenues by x6 28.2

Stage 1-2 Stage 3-4 14.2 2. Percent of meaningful % of inventory 10% commercialised 60% commercialised engagement commercialisation

Driven by an efficient content strategy, you’ll % of meaningful 2.5% of total 4.5% of total be able to boost the portion of meaningful engagement engagement engagement 9.0 engagement (comments and shares) on social channels, as well as optimise usage 32 million fans, of which 48 million fans, of which 3.7 1.2 Fan reach on first-party, owned platforms. 60% international 65% international Stage 1/2 Stage 3/4

Source: PwC Strategy&, Capabilities-Driven Strategy + Growth Source: HORIZM Data, PwC Analysis, Figures in USD millions

| 18 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 19 | Insight 7: COVID-19 catching sports off guard Headlines

• Like all industries predicated on events and mass gatherings, the unprecedented health XFL files for bankruptcy crisis brought about by COVID-19 has impacted the sports market at its very core. caused by COVID-19 crisis • The sports sector is just not used to external crises, as its major blowbacks often come from within the industry itself (e.g. corruption and doping). This has shaken the sense of British sport fears GBP security and untouchability in which the sector has wrapped itself in recent years. 700m loss due to the • In many instances, risk management and contingency plans were not in place. Short- pandemic sighted funding, cash flow and cost management practices were drastically exposed.

Figure 10: Relative to other industries, how well was the sports industry prepared to face the COVID-19 crisis? Impact of Percentage of respondents 1.0% 1.2% Don’t know/abstain Excellent 13.0% Above average 25.5% COVID-19 Very poor

Winds of change 28.4% Average Only when the tide goes out do you We surveyed sports industry leaders on both the short- discover who has term impact and long-term implications of the COVID-19 crisis. Results indicate that the sports sector was less been swimming 31.0% prepared relative to other industries, with a full recovery Below average Source: PwC Analysis, N = 698 naked. expected no sooner than 2022-2023. Investigating the potential changes arising from the crisis, digital Warren Buffett transformation, revenue diversification and investments from external stakeholders are the market prospects most likely to be accelerated. We also looked at how strategic collaborations are expected to impact the sports landscape going forward.

| 20 | PwC’s Sports Survey 2020 Impact of COVID-19

Figure 11: By when do you think the sports industry will have fully recovered to pre-COVID-19 levels? Percentage of respondents Deep Dive II

0.1% 8.7% 43.4% 27.1% 10.9% 5.7% 4.0% Combining physical efforts with virtual overlay, will hybrid sports 2020 2021 2022 2023 2024 2025 Don’t know/ abstain Source: PwC Analysis, N = 698 keep endurance events going?

Insight 8: A crisis shaking the

industry’s foundations Amateur participation sports such as run- Acting as pioneers, UCI has just launched ning, triathlons and cycling are suffering its first Esports World Championships heavily from the crisis. These disciplines alongside technological provider Zwift, • COVID-19 has revealed systemic weaknesses within the sports sector, which makes are highly dependent on mass, physical whereas Super League Triathlon is using a scenario of imminent recovery highly unlikely. The industry is in for a longer period of participation. Their format (rather long and the same supplier to power a new com- recovery and reorientation. Headlines slow) does not allow the shortfall to be petition called SLT Arena Games. Both • Beyond the outright cancellation or postponement of major events, competitions that International Ice Hockey recouped through significant media-relat- formats channel real-life performance did restart are suffering from severe event-day revenue shortfalls, which is frontally Federation cancels 2020 ed revenues. into virtual racing. impacting sports organisations (starting with the smallest). For their part, participation World Championship sports have entered a long, challenging period as people shy away from mass gather- Amid this uncertainty, the overlap be- Hybrid already offers innovative use ings (Deep Dive II). tween real and virtual sports is increas- cases within professional sports (e.g. IOC President and Prime • The crisis has also contributed to redesigning the sports calendar, with the benefit ingly converging. This blurring of bound- Digital Swiss 5, Virtual Tour de France). Minister of Japan postpone of experimenting with new formats but, on the other hand, the risk of unbalancing aries takes on a new dimension with the Circumventing most health restrictions, Tokyo Olympics to 2021 schedules that were already on the edge. emergence of the hybrid sports model, the model can also be conveniently which merges sports-like physical efforts applied to mass endurance events, as with esports’ virtual rendering. already experimented with by Asics and runDisney. All things considered, we be- We believe that hybrid has the potential to lieve that participation sports will have to carve out a promising value proposition go hybrid to overcome the downturn. for participation sports by attracting a bal- anced mix of both (virtual) spectators and (connected) participants. Relying on the same training and performance model, tri- athletes, runners and bikers can smoothly try their hand at this new category; the investment in equipment more or less compensates for the logistical costs of getting to event sites.

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Figure 12: Most likely outcome of the COVID-19 crisis Percentage of respondents, forced trade-off among two options Insight 10: Greater risks pushing a new, diversified revenue model Sports organisations will increase funding and To save costs, sports organisations will decrease We are re-examining efforts to accelerate digital transformation funding of digital transformation initiatives • Sports organisations are highly dependent on a few, high-value revenue drivers. our business model. 78.4% 21.6% The crisis has redefined the relationship between rights sellers and buyers, Traditional events have empowering the latter and thus putting tangible pressure on the traditional model. been and will be affected Albeit suffering, the pyramidal system of sports The pyramidal system of sports is under existential • Rights owners facing particular danger are those with less diversified revenue for an indefinite time: we is robust and will adjust to the new reality threat, requiring concerted action at all levels streams, a narrower portfolio of commercial partners, and not benefiting from thus need to explore other 48.9% 51.2 % financial contributions from wealthy stakeholders. revenue streams. • We share the view that sports will be forced to diversify and open up to new revenue streams, which will shape a more liquid, transactional market based on a Robert Fasulo, Executive Director, Sports organisations will increasingly focus on Sports organisations will prioritise rebuilding broader portfolio of partnerships. International Surfing Association diversifying revenues streams and growing core revenues streams

70.6% 29.4%

Collaboration between stakeholders in sports will Stakeholders in sports are less likely to collaborate intensify, driving synergies and shared benefits and will focus on maximising own benefits

69.2% 30.9% Insight 11: Has the era of game-changing reforms arrived? World Rugby is looking at Governing bodies will implement significant governance Governing bodies will focus on short-term financial and regulatory changes to improve sustainability relief, without implementing any structural changes • Overall, the COVID-19 crisis is widening the gap between bigger and smaller sports governance and decision- properties. As the attractiveness of their product is fundamentally driven by maintain- making for a post-COVID 50.9% 49.1% ing a competitive balance, leagues and federations are facing a “moment of truth” world, recognising testing solidarity mechanisms. that new and younger Once restrictions are lifted, attendance of live Once restrictions are lifted, fans will not be • The jury is out on whether governing bodies will take advantage of the crisis to audiences want to see sports events will normalise quickly motivated to attend mass events for a longer period address systemic issues, notably by establishing new, more drastic regulations and an inclusive, diverse, and financial management standards. 52.0% 48.0% socially-responsible sport. • Doubling up pressure for reforms, sports has been coming out of its microcosm by emancipating itself towards a more assertive societal role, with leagues and athletes Alan Gilpin, COO, World Rugby Sports organisations will overcome their Sports organisations will increasingly look for becoming leading figures combating racism and inequality. financial challenges independently external investment

11.1% 88.9%

Source: PwC Analysis, N = 698

Insight 9: Health challenges accelerating Insight 12: Sports on the back-foot, transformation calling upon investors

• The crisis essentially accelerated all underlying trends shaping the industry, bringing a • The sports financial model, characterised by short-termism and fragile cash wide range of emerging products and solutions to life. flows, has been severely tested by the health crisis by forcing it to draw on its (often meagre) reserves. • Sports organisations have multiplied experiments, giving rise to the first virtual stands, Headlines Headlines hybrid competitions, virtual player drafting, digital press conferences and summer tours. • This underlying vulnerability, combined with a decline in financial valuations, has Borussia Dortmund Beyond media, the next laboratory phase is already focusing on stadium and venues, further boosted the existing interest of private equity funds, which have become Private equity funds aim to organises “Virtual BVB Tour where health and safety technology is poised to profoundly redefine the spectator increasingly active and seeking opportunities for investment (Deep Dive IV). relaunch Serie A of Asia” experience. • If transactions were to materialise, we would then witness a form of convergence • We believe that sports organisations should take an integrated approach towards towards the top-down, North American model, where sports would increasingly CVC acquires 28% share of transformation (Deep Dive III), balancing visible, fan-facing innovation (e.g. immersive Realife Tech raises USD develop under the wing of private companies driven by return on investment. PRO14 Rugby features) with deeper, structural changes around the way of working or back-end 7.2m for event safety infrastructure (e.g. data and cloud capabilities). product

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Figure 13: Most prevalent collaboration models expected within the sports industry Percentage of respondents, Top 2 Box (“likely” and “very likely”) Deep Dive III

Funding by financial investors/ private equity 75.0% Joint projects and co-creation 70.2% with sponsors How to get fit Joint ventures with sports 57.8% marketing agencies Teams/federations sharing for recovery? 51.8% resources and assets

Corporate ownership of teams 44.5%

Creation of cross-sport event formats 44.5% Sports leaders are clear that the COVID-19 crisis is not a short-term affair: Public sector and corporates creating new events 33.5% nearly 44% of respondents expect the re- covery to be by 2023 or later. Under such Source: PwC Analysis, N = 436 a premise, it’s of paramount importance to make sure that organisations develop a clear roadmap towards recovery, using Insight 13: Increasing complexity short-term funding and governmental fostering collaboration schemes to set the foundation for a more Headlines sustainable future.

• Respondents widely assume that the downturn will lead to an increase in collaboration NBA utilises Microsoft Concretely, the methodology below between stakeholders in the sports ecosystem. Collaborations have the potential to partnership to bring in (figure 14) from PwC’s Strategy& uses a trigger higher revenues, greater funding for strategic initiatives, as well as synergies that virtual fans six-step approach to help sports organi- allow cost reductions (Deep Dive V). sations reach long-term prosperity: • Exponential growth of complexity within the business sphere in general is also reaching Formula 1 collaborates with the sport industry. This reinforces the relevance of expertise pooling and collaborative sponsors AWS and DHL models, implying the sharing of both risks and assets. around driver performance • While cooperative models are already deeply integrated in the sports ecosystem and esport (especially through the syndication of rights), we share the view that current challenges will drastically accelerate collaboration and value co-creation, both to increase revenues and reduce costs. Figure 14: Transformation roadmap for sports organisations

1) Rapidly 2) Radically 3) Reimagine 4) Build 5) Activate 6) Build iterate and transform cost the operating differentiating culture-led trusted value define strategy structure model capabilities behaviour change

Understand fans, Identify, classify and Identify core capabili- Increase investment Make the most of Seize the moment to identify most viable prioritise cost areas, ties and assets, in impactful areas, heightened openness build trusted value with opportunities, boost shared services consider benefits of strengthen attractive- for change, engage teams, fans, customers accelerate digital (revenue and cost-side), partnership and ness of core products leaders to identify new and broader stake- programmes, target optimise cash flow outsourcing, adjust and ability to grow ways of working, avoid holders to ensure the growth areas. management. governance model to current and new cutting corners, put in ecosystem as a whole boost performance revenue streams. place practice to emerges stronger. and scale. reinforce change.

Source: PwC and Strategy& Analysis

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An executive from point of view Christian Müller Senior Vice President, Infront Sports & Media Deep Dive IV Football’s breeding Appeal and caveats of private investments ground for private equity for rights owners The past few years have seen an unprece- “ dented rise of private investments in sports. While this has been common in North Amer- In recent years, institutional investors in- Undoubtedly, football offers an attractive ica, the COVID-19 crisis has accelerated the cluding sovereign wealth funds, traditional investment case due to its huge global trend in Europe as well. According to Pitch- private equity firms, venture capitalists audience, strong revenue growth over the book, 10 deals amounting to almost one bil- and boutique sports funds have shown last decade, growing franchise valuations, lion dollars were concluded in 2019 in Europe increasing levels of interest in the sports and further potential to create value. alone. One of the few most recent examples industry. As mentioned above, there’s no This is best illustrated by Manchester is the broad line-up of private equity firms and sign of this process slowing down. City, which was acquired for GBP 210m agencies (including Infront) competing for the in 20o8. In 2019, Silver Lake acquired chance to invest in the Italian Serie A. More than others, the football world has a minority stake in City Football Group seen an influx of private equity investors – Manchester City’s holding company – What should rights owners watch out for in buying clubs across major international which valued the group at USD 4.8bn. such a context? Based on our experience, leagues (e.g. Redbird Capital with the single most important aspect is making Toulouse FC, Elliott Management with But more concretely, what are the ave- sure interests are aligned towards a shared AC Milan). nues for private equity funds to generate long-term vision for the sport. This is ever value when investing in football? As illus- more important, especially considering that Severely impacted by COVID-19, many trated in figure 15, we describe the overall investors may have a shorter window to clubs are currently facing deep economic investment rationale through four main valorise (and exit) their investment compared challenges. This has created more oppor- levers: strategic repositioning, business to traditional rights owners. Funding should tunities for private equity, as teams are performance improvement, financial opti- enable long-lasting advantages, like launch- increasingly looking for external support misation and, ultimately, multiple uplift. ing new sports formats, D2C channels, or to ensure their viability. technological advancements that collectively and sustainably increase fan reach and engagement. Figure 15: Main value levers for football-related investments

To that end, an essential aspect is establish- Multiple uplift ing a clear governance structure that will keep Financial levers Position business in an interest aligned while ensuring a new level of Operational levers Simplify legal entities, industry segment with entrepreneurial agility and professionalisation higher market multiple Optimise core football create working capital Strategic levers than football clubs to boost commercial activities. Indeed, the and business processes efficiencies and entry of a private investor will make a true Improve fan and create synergies implement tax effective difference only if it enables a “new way of experience, enhance where possible operating model working”, access to fresh talent and strategic international footprint, drive synergies thinking that would have been impossible to through multi-club incubate in the context of a traditional rights approach and diversify owner and its structures. into entertainment, ” lifestyle and media As head of business development at Infront, Christian has been working with leading rights owners for over 20 years, implementing innovation and growth strategies to commercialise their IP. Source: PwC Analysis

| 28 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 29 | Impact of COVID-19

Deep Dive V From saving costs to making use of strategic collaborations

COVID-19 has had a ravaging impact on use of “Zero-based activity assessment” leagues. Areas of focus are likely to be sports organisations, with revenue short- methodology by PwC’s Strategy& (figure around further syndication of rights for falls estimated between 30 to 40%. 16) offers an indicative framework address- revenue generation, procurement of ing cost savings in a strategic manner. centralised technology platforms and The effect of such huge financial pressure, centralisation of (non-strategic, non- which may persist for a while, has cata- The second impact relates to understand- differentiating) back-office functions. In a nutshell ing who is best suited to do which activity pulted questions around how to reform • Secondly, we predict that many within the organisation. This is where col- sports organisations’ operating model to governing bodies will be increasingly laborations take on a central role, making the top of the agenda. willing to separate sports governance sure that each activity is delivered by the The sports industry was far from being prepared to and development (inherently political) organisation (or partner) that is judged to absorb a shock of this magnitude, shattering the The first impact has been shaping a sen- from commercial exploitation. Strate- be the most impactful and cost effective. false sense of security on which it had been relying sible approach towards cost reductions. gic investors, either contractually or for years. The entire sector has been affected, from While some organisations may have opt- through equity investment, will concre- How do we expect this to materialise in ed for a solidarity-based method (“every tise this approach by bringing in critical grassroots to elite, with fundamentally harmful effects the sports industry? department contributes…”), we are of the capabilities and assets, starting with on properties that are highly dependent on physical view that sports organisations should be • Firstly, we assume a greater push for entrepreneurial agility. manifestations. strategic about reducing costs. Making shared services, particularly for sports Beyond the structural risks inherent in the industry’s natural ties with crowds and events, the crisis also brought systemic weaknesses to the surface, Figure 16: Zero-based activity assessment model by PwC Strategy& suggesting prospects for profound change. Indeed, the then-weak signals related to shifting consumption Cost type Description Action Ilustrative behaviours, mutation of revenue models, as well as the arrival of external investors have now become Legacy investments and activities ~10% Not required that no longer support the post Eliminate tangible trends. It’s vital that sports organisations COVID-19 strategy –30% fully address these issues with the perspective of turning them into opportunities. ~40% Bare minimum activities that “keep the Be ruthless – aim for cost Lights on lights on” in the business levels below competition ~20% All in all, the underlying challenges only shed light on the importance of innovation, proactivism and Basic competencies/activities required Cut costs but keep the cooperation to protect and support the growth of the Table stakes by everyone to participate in the sports balance to maintain “good industry over the medium- and long-term. With regard industry enough” quality ~30% ~40% to collaboration, we foresee the end of the historical, in-house vs. outsourcing binary model in favour of Activities that provide a competitive Invest at levels above peers more symmetrical schemes, driven by value co- Differentiating advantage needed for future to gain a competitive activities ~20% creation and shared accountability of results. differentiation advantage ~10% Current state Possible cost cost structure structure

| 30 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 31 | Figure 17: Expected growth of sports media consumption by content types Percentage of respondents, Top 2 Box (“grow” and “grow significantly”)

Highlights/short-form content 90.5%

Team/athlete-generated content 81.6%

Original content/documentaries 75.7%

Fan-generated content 69.9%

Live video content 68.3%

Results/news/data/statistics 59.9%

Digital audio/voice-activated content 58.0%

Sponsor-generated/branded content 57.4%

Source: PwC Analysis, N = 665 Sports media Insight 14: Highlights arising as the “new free-to-air”? Navigating the age of complexity Headlines

• As a proven engine to drive audiences, a broad range of media companies wish to UEFA partners with WSC acquire premium sports content, although only a few are actually able to afford live rights. Sports to create and distribute • Building on its affordability, on-demand nature and increasing popularity among millen- automated highlights packages nials (Deep Dive VI), we see the highlights format gaining tangible attractiveness for media companies, affirming its commercial value. We surveyed sports industry leaders about the market Alex Springer acquires forces that are incessantly reshaping how sports • For rights owners, the pressure for brand and partner exposure (as most live content Bundesliga highlight videos’ rights content is consumed. As the landscape is shaking up, is locked behind paywalls) is becoming untenable. In this context, we expect further acceleration for highlights, which may become established as the “new free-to-air”. we also asked trade-off questions to test diametrically- opposed scenarios. The findings demonstrate that sports media distribution is predicted to continue fragmenting drastically, driven by a wider variety of content formats, media players, enabling technologies and consumption behaviours. In this increasingly Insight 15: Original content shaping complex market, our analysis also shows that the a flourishing market growing relevance of platform integration may herald Headlines a push for reconsolidation and broader content • Streaming giants’ deep market penetration is reshaping watching habits among media accessibility in the ecosystem. Michael Jordan’s docuseries consumers, fostering on-demand as the dominant format. “The Last Dance” breaks • While live content has been severely weakened by the COVID-19 crisis, sports has an audience records inexhaustible narrative potential to convey inspirational, scripted stories (whether short- or long-form). On-demand also gives an ongoing relevance to content libraries, allowing DAZN bets on non-live media partners to enhance usage and combat churn while maximising rights owners’ content to retain IP exposure (Deep Dive VII). subscriber base • Driven by a clear convergence between supply (sports’ deep storytelling potential) and demand (rise in OTT offerings), we expect growth of the on-demand sports content market to accelerate, particularly benefiting rights owners with premium IP.

| 32 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 33 | Sports media

Deep Dive VII From event to IP to flatten the attention curve

Sports organisations have long relied on The future pattern aims to show a more Deep Dive VI event-related emotions to engage fans. flattened curve with a reduced de- This strong dependency can be reflected pendence on live events, which will be FC Barcelona’s firm move by peaks and valleys when illustrating the nothing more than vital links across an towards entertainment volume of sports-related conversation. “always-on” and omnichannel, IP-driven When the COVID-19 pandemic hit hard, it narrative. With the launch of its members- Highlight consumption grows revealed the undeniable value of cri- only OTT platform (Barça TV+) To successfully pivot from an event focus sis-proof, on-demand, non-event-related covered by a new content to an IP focus, sports properties need to content verticals. production unit (Barça Studios), learn how to master both omnichannel FC Barcelona gives itself the means among all age groups We believe that the industry urgently needs publishing and multiplatform story- to perform way beyond its sports to achieve greater independence from telling, bridging the gap between enabling activities. undermined live games and events by technologies and content creation To support our analyses on sports-related more effective at engaging younger fans’ is all the more striking within OTT (205% becoming an integrated, fully-digitalised (see figure 19). Making use of a globally- content types, we asked IRIS (Intelligent shorter attention span. growth from 2015 to 2020), which only re- media and entertainment platform, shaping renowned IP, Barça Studios has Research in Sponsorship) to share some of inforces highlights’ strategic significance. its brand narrative around its IP rather than already produced several original their consumer research on sports media. Even more enlightening: highlights are just around physical manifestations. documentaries for both its own and gaining popularity among non-millennials While gaining wide adoption, the remain- third-party channels (e.g. Netflix As detailed in figure 18, millennials’ as well. This age group now consumes an ing question is around highlights’ com- Figure 19: Enablers of sports media’ IP-driven pattern and the docuseries Matchday). consumption of highlights experienced a average of two hours more highlights per mercial potential. What is a fair value for IP-driven pattern Event-driven pattern growth of 103% over the last five years week compared to 2015, which represents a format that is consumed at par with live Recently, the Spanish club teamed to reach an average of 05:43 hours per a tremendous growth of 138%. content and, on top of that, with a greater up with Sony Music to co-create week, which is getting close to live sports. level of attention? a fictional animated docuseries The underlying pattern clearly under- As sports media consumption is firmly Event Event Event Event aimed at younger audiences (Talent Explorers). This innovative scores the growing relevance of short- migrating towards streaming, IRIS data Data provided by Iris form content, which is assumed to be demonstrates that the underlying trend Omnichannel publishing Multiplatform storytelling format further dissociates the Shape the ecosystem Tell the story Catalan brand from the pitch, which is diversifying into an Cover all touchpoints. Relentlessly Experiment. Besides live, dig deeper into the inspirational force for the creation Figure 18: Average time spent per week consuming sports content, live vs highlights analyse your fans’ journey to identify all emotional capital of your sport to create inspiring relevant behaviours and channels. Use an stories. Try out formats; foster cross-over to of entertainment content. By profile By channel agile, cross-platform content gaming and esports; balance live, short-form and management system to efficiently cover, long-form to feed your fan base’s appetite for Whereas most premium live content extend or adjust your publishing scope. content, which is truly growing in variety. is still locked in B2B media rights deals, FC Barcelona’s resolute Think ecosystem, act channel. Think like a production studio. Harness your 7:19 7:44 approach towards multiplatform Develop tailored content formats for storytelling potential with the vision of a leading 6:05 6:22 5:49 each media platform. Research shows content producing studio, even if it means tapping storytelling aims to generate 4:54 that content performance is significantly into fiction or creating standalone esports stories additional content and commercial Live 4:05 driven by the fit between format and to break boundaries. Ultimately, a strong IP can engagements; a necessity to 2:56 channel. power any format. effectively compete against non- 2:06 0:52 sports entertainment giants Millennials Non-millennials TV OTT Social media Automate content production. Greater Make fans part of the story. Fans are not passive (e.g. Fortnite). variety means lower scale; this was the consumers; they are the sounding board echoing case before artificial intelligence. Invest in your story. To extend your reach, co-create with AI-powered technology to smoothen your fans by building interactive tools and formats turning publishing operations with content them into content creators, competitors (e.g. 5:43 automation tools. gaming), or brand ambassadors. 4:26 3:23 2:49 3:34 Mix own and third-party channels. Spread your values. As your content ecosystem

Highlights While architecting your ecosystem, go grows exponentially, build a robust editorial tone to 1:25 1:30 1:27 1:17 1:06 beyond your own channels and consider maintain harmony. Like Disney movies (which carry Millennials Non-millennials TV OTT Social media syndicating your content to third-party a wide variety of themes but a common identity), publishers to give it a greater resonance. align your IP values and make them consistent.

Source: PwC Analysis, IRIS Intelligence | Market Research – 02/2015 02/2020 – CAWI – Source: PwC Analysis 2015 2020 Base: Top-2 Interested people – Millennials 18-34 years of age (n = 4612), Non Millennials 35-65 years of age (n = 16’655)

| 34 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 35 | Sports media

Figure 20: Expected growth of sports media consumption by channel types Percentage of respondents, Top 2 Box (“grow” and “grow significantly”) The collapse of the pay- Social media platforms 86.1% TV model is the biggest Super-aggregators (e.g. Apple 85.0% TV+, YouTube TV) threat, whereas D2C

Pure streaming and OTT offerings 84.9% represents a unique opportunity for sports Rights owners’ OTT offerings 77.9% to regain the lion’s share Unofficial streams/piracy 47.6% of the value chain. Pay-TV broadcasters (cable and online) 32.0% Geoffroy Bourbon, Vice President, Free-to-air broadcasters (cable and online) 22.6% Sales & Sponsorships at ATP Tour

Source: PwC Analysis, N = 647

Figure 21: Expected growth of sports media business models Percentage of respondents, Top 2 Box (“grow” and “grow significantly”)

Freemium (paid access to certain content or features) 69.1% Pay-per-view and 66.6% microtransactions

Integrated in-play/live betting 65.7%

Native advertising (e.g. branded 64.9% content, virtual advertising) Unbundled subscriptions (sports content only) 58.1% Bundled subscriptions (sports, entertainment, telecom) 56.1%

Classic advertising (e.g. pre-roll/mid-roll) 14.7%

Public service broadcasting 13.1%

Source: PwC Analysis, N = 647

Insight 16: Traditional broadcasters aren’t dead, yet they urgently need to pivot their business Headlines

• Traditional broadcasters are struggling to escape the stigma of diminishing relevance. NBS Sports migrates premium However, we’re convinced that they remain well-positioned to best serve sports consumers. sports content to OTT • Their long-term expertise in storytelling and audience management, their potential to platform Peacock aggregate content, as well as their ability to roll out an omnichannel value proposition (cable, digital, OTT) represent robust competitive advantages. Disney offers Hulu, Disney+ • While the perceived association between traditional broadcasters and historical TV and sports-related ESPN+ for models remains strong, media companies which are bold enough to pivot away from free to Verizon clients paywalled bundles with flexible offerings, all while managing their base of fixed costs, are definitely here to stay.

| 36 | PwC’s Sports Survey 2020 Sports media

Figure 22: How will the sports media landscape evolve in the next 3-5 years? Percentage of respondents, forced trade-off among two options

Sports content consumption will be a fragmented A few super-aggregators will dominate the market, experience, involving numerous content distributors with highly-consolidated content libraries

53.0% 47.0 %

Rights owners’ OTT offering will establish and thrive as Rights owners’ OTT offerings will serve secondary content/ standalone revenue source, bypassing media companies markets and grow licensing to media companies (B2B2C)

30.0% 70.0%

Premium live sports content will continue to generate Rights owners will transition to non-exclusive, risk- value as a highly preserved and exclusive asset sharing business models and away from paywalls 73.1% 26.9%

The live sports media viewing experience will The live sports media viewing experience will become remain similar to traditional broadcasting significantly richer, immersive and interactive 13.5% 86.5% Insight 18: Media market moving from illiquid and exclusivity-based to liquid and collaboration-based Headlines Tech giants will acquire premium live sports Tech giants will utilise sports as a bait for brands and audiences, media rights, competing with broadcasters seeking content partnerships with broadcasters and rights owners • Rights owners have mainly generated revenues from a few large-scale, exclusive rights Swiss competitors Swisscom 42.0% 58.0% deals in a cyclical pattern; this model has created a robust yet illiquid market, exposing and UPC agree on sharing the industry to significant risks. their respective sports assets

Source: PwC Analysis, N=660 • Even though the survey results speak for the resilience of the historical model, we dare to claim that both rights owners and broadcasters need to learn how to rely less on Content Area’s sports rights exclusivity going forward. trading platform fluidifies • We expect tendering processes to open up to a broader range of potential buyers, the market including smaller media companies, evolving the content distribution model towards collaboration and greater accessibility. Insight 17: D2C morphing into B2B2C

• After a period of euphoria, survey results show that enthusiasm for pure rights owners’ OTT offerings as substitutes to media partners is waning. Insight 19: Cutting through the noise with a • Nevertheless, well-operated D2C strategies bring tangible benefits to rights owners: Headlines richer, data-driven fan experience a better understanding of their fan base through data, additional revenues, a supple- Headlines mentary touchpoint to either recycle or experiment new content formats, as well as European Professional Club • Deprived of on-site audiences and flagship content, the COVID-19 pandemic has pushed robust leverage within rights-selling negotiations. Rugby launches OTT platform Fox Sports’ new app offers set to cover markets without rights owners to new heights of creativity in order to reshape and augment the digital fan of augmented features to be • Also, we expect OTT solutions to act as a trojan horse for the emergence of hybrid, TV deals experience. refined based on usage B2B2C models, where rights owners service media partners with turnkey solutions. • Content holders have drastically accelerated their digital plans, giving birth to numerous Everyone will focus on what they do best: rights owners delivering experience and and fundamentally variable – in terms of both quality and utility – augmented features storytelling, with media partners managing viewers and churn. Bundesliga partners with Bundesliga’s OTT offerings (Deep Dive VIII). complement B2B deals with Amazon Web Services to broadcast partners • Within an uncertain and austere environment, it’s all the more critical for rights owners to deliver a personalised fan control their technological investments, going beyond buzz words and peer pressure to experience precisely aligning with fan expectations.

| 38 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 39 | Sports media

Figure 23: User preferences for optimal sports media experience on OTT, top-2 box

Important for millennials Important for non-millennials

Integration of VR 84.7% 62.6%

Social media live feeds 83.8% 70.3%

Multiple audio options 83.1% 74.9% Deep Dive VIII Multiple camera options 80.8% 73.5%

Interactive communication features 79.5% 76.7% Amplifying OTT broadcast Fan forum 75.4% 73.2% Integration of betting 72.5% 75.6%

Customised advertising 72.0% 53.8%

OTT providers were widely celebrated as acceleration of digital trends has given rise Personalised selection of content 71.5% 64.2% the saviours of sports broadcasting. Purely to promising use cases within the sports Internet-based players, combined with industry, like the NBA League Pass offer- Integration of fantasy games 61.8% 68.0% younger brands, were the hope of many ing games in VR and integrating betting Source: PwC Analysis, IRIS Intelligence | Market Research – 02/2020 – CAWI – Base: Top-2 Interested people rights holders to effectively reach and through digital overlays. in sports –millennials 18-34 years of age (n = 4.612), Non millennials 35-65 years of age (n = 16.655) engage younger audiences. Besides best practices, it should be While digital platforms are enabled to recalled that fan experience is a multi-fac- enhance user experiences, OTT has not eted and fast-evolving field, closely related Figure 24: OTT user experience layers yet delivered in that regard. However, our to fluctuating fan behaviours. The frame- respondents agree that enhanced user work in figure 24 helps manage complexity experience is the future of sports con- by identifying five main experience layers, Layer Usage Key features Monetisation sumption, as confirmed by market studies each of which addresses different needs • OTT players are empowered to identify users with high granularity: the Use first-party data to nurture a around the preferences of OTT viewers (e.g. consuming, playing and interacting). ultimate foundation supplying fan experience powerful advertising ecosys- (figure 23). Data Identify • A well-operated, data-driven strategy not only enables platforms to pri- tem, which can be operated at While experience augmentation requires a oritise content and deliver personalised experience, but also monitor the high scale with programmatic While Twitch is firmly democratising clear roadmap and, above all, partnering relevance of the feature roadmap interactive, social broadcasting, leading to with technology providers, directly ad- the market entry of bespoke solutions like dressing fan behaviours also brings as-yet- • COVID-19’s empty stadiums have fostered the need for immersive media Offer premium pay-per-view experiences, whether multi-screen or augmented reality LiveLike and Maestro, the COVID-19 crisis’ untapped monetisation opportunities. fees for VR games, or integrate Immersion Consume • Boosted by 5G, AR and VR-based solutions are rolling out multiple use automated, virtual product cases. This is high time for OTT to go beyond experiencing, and start placement adopting

• OTT has a recognised potential to stand out from classical, linear broad- Publish branded content within casting, utilising video streams as a gateway to social or open content in-play chat, offer paid “watch Interactivity Engage co-creation together” opportunities hosted Sports is the last genre to • Sports participatory culture can be channelled into a wide range of by celebrity reinvent content around modern features, virtually bringing fans closer to their peers (or idols) • Enabled by advanced data infrastructure, personalisation grows in rele- Operate virtual advertising fans’ lifestyles. COVID-19 is vance exponentially (just as variety of preferences expands) within live streams, displaying Personalisation Browse accelerating this process, though • Personalisation precisely acts as the catalyst showing what users want, tailored advertising messages the structure of the media rights and hiding what they don’t, while leaving enough room to explore for each user • Building on the growing popularity of fantasy leagues and their ties with Enable users to turn in-game market remains a barrier. betting, gamification stands as the most promising fan experience layer predictions into bets with Gamification Play monetisation-wise betting partner, propose open Paul Kandel, Head of Strategy, Intel Sports • While OTT struggles to handle churn, gamification’s ability to embed and closed fantasy challenges reward programmes acts as a valuable asset for retention with entry fees

Source: PwC Analysis

| 40 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 41 | The biggest challenges Deep Dive IX remain fragmentation, the collapse of the bundle and what will The sports media landscape re-emerge in its place. The current levels of over time fragmentation across all genres are unlikely Formerly dominated by TV giants impos- Indeed, platform integrators will be ing rigid bundles but offering wide-rang- both commercially and technologically to be sustainable. ing content libraries, sports media has equipped to offer fluid, consumption- evolved towards a highly fragmented efficient offerings, creating revenue models market. Directly impacted by this channel that acknowledge and absorb churn, rath- Tom Broom, Senior Vice President, chaos, dissatisfied fans are now forced to er than desperately struggling against it. Business Development Entertainment and Digital at IMG overspend, renounce or stream illegally. Conversely, it can be expected that Even if the sports rights ownership model rights owners will achieve growth by is far too structured to enable the immi- further fragmenting their rights packages, nent rise of a Spotify-type value propo- fundamentally dissociating the distribu- sition, we still interpret market dynamics tion (fragmented) from the consumption as moving towards consolidation, notably (consolidated) market. through carriage deals, platform integra- How will the sports media landscape evolve in the next 3-5 years? tion and super-aggregators. Percentage of respondents, forced trade-off among two options Figure 25: Sports media landscape over time

Sports content consumption will be a fragmented A few super-aggregators will dominate the market, experience, involving numerous content distributors with highly-consolidated content libraries Yesterday Today Starting tomorrow 53.0 % 47.0 % Consolidated media landscape Fragmented media landscape Reconsolidated media landscape

The age of disruptors, broadcasters The age of editors, broadcasters The age of aggregators, media market is compete against tech and digital players, struggle for leadership, a handful of split across a wide variety of content types shifting consumption habits driving dominant TV bundles strive to acquire a and channels, media consumers rely on cord-cutting, new forms of entertainment compelling range of exclusive rights to platform integration and super-aggregators fragment both rights market and content lock in subscribers to finally reach consumption efficiency experience, rise of piracy

Insight 20: Super-aggregators heralding Platform-neutral packages maintaining Fragmented packages offering Exclusive packages for live content only the “Great Reconsolidation” exclusivity despite fragmentation various content formats Headlines Dominant TV network as the one Streaming and tech players disrupting Wide variety of partners shaping a and only buyer profile bidding processes transactional and fluid market • Across the sports and entertainment industries, the so-called “streaming war” is prov- Apple TV+ adds showtime and

ing to be a scourge for both platforms and users, incurring significant marketing costs ad-free CBS All Access as part of Distribution TV giants’ loss of dominance Increasing number of packages Rights war driving up price for distributors and high subscription fees for consumers. its offering correcting media rights value and buyers boosting rights value • While content holders are increasingly recognising the value of aggregation over exclusivity by multiplying carriage deals, enhanced connectedness in the digital space Reelgood streaming aggregation Comprehensive library through pay-TV Limited access to content due to channel Comprehensive and personalised is, for its part, driving ecosystem integration. app launches integration with and free-to-air mix and platform fragmentation library through platform integration • Despite a fragmented rights market, we foresee the “Great Reconsolidation” of media Android TV, Amazon Fire TV and Willingness to pay tied up to pricing Decreasing willingness to pay fostered Increasing willingness to pay consumption, notably fostered by a handful of dominant content and tech players LG smart TVs practices of TV giants by the rise of disruptive offerings driven by enhanced access acting as super-aggregators (Deep Dive IX). Consumption Moderately satisfied viewers dependent Dissatisfied viewers forced to Satisfied viewers empowered to on rigid bundles overspend, renounce or defraud compose their own bundle

Source: PwC Analysis | 42 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 43 | Sports media

In a nutshell

Historically, the industry has drawn its commercial value from live sports. The COVID-19 shock has weakened this, fostering the adoption of alternative content formats. This new pattern pushes sports properties towards shaping their content strategies beyond events, paving the way for omnichannel and multiplatform storytelling.

The acceleration in cord-cutting, piracy and audience fragmentation are putting tangible pressure on the value of sizable, exclusive media rights deals. This underlying threat raises important questions on how rights owners should approach exclusivity. We predict the near-term adoption of more diversified content distribution models, shaping a liquid market.

Augmenting the fan experience might be on everyone’s lips, but sports-related digital platforms haven’t cracked it yet. As immersive solutions go mainstream in line with technological progress, consumption preferences need to be understood with higher granularity to enable the enable the design and implementation of features that meet their needs.

In the broad scheme of things, the dynamics of the sports media market are becoming more complex. As sports are being consumed in a pluralistic way, marking the end of the historical monopoly of the live format, the proliferation of content buyers is contributing towards forming an ecosystem that is increasingly difficult for content distributors to control. This is the dawn of a new, convoluted reality in a market once simplified by the dominance of TV giants.

| 44 | PwC’s Sports Survey 2020 Figure 26: Has your organisation engaged with esports yet? Percentage of respondents

5.8% Don’t know/abstain

33.2% No 61.0% Yes

Source: PwC Analysis, N = 636 Esports

Insight 21: Sports organisations widely The great emancipation engaging with esports Headlines

• Over the last 2-3 years, sports organisations’ level of engagement with esports has F1’s Virtual Grand Prix accelerated significantly. The discourse around it has evolved from scepticism to series achieves record- embracing and learning. breaking viewership • While many sports properties utilised virtual competitions to entertain their audienc- We asked sports leaders whether esports was delivering es, COVID-19 has amplified the underlying trend (Deep Dive X). This unprecedent- commercial success and if simulated sports esports Video game giants thrive in ed period has given rise to promising use cases at the crossroads between sports the pandemic will be a mainstream viewership product. We also and video games. surveyed the potential of esports to create value for • The hiatus is over: sports organisations should now develop a long-term plan to rights owners and the important challenges in entering capitalise on the esports opportunity, with the vision of achieving sustainable growth. this industry. Our analysis indicates that the commercial success to date has been mixed, but that esports is clearly worth persevering with. Esports can create value through engaging new fans, attracting new Engage with it! Learn, study partners and generating new revenue streams, whereas and understand why a whole the challenges are creating engaging narrative and developing an effective (monetisation) strategy. We also generation loves gaming and reflected on the emerging opportunities that mobile why games are now bigger gaming might provide for sports organisations. than movies. Only when understanding the size of gaming will they understand the opportunity in esports.

Michael Broughton, Advisor, Acceleration Equity

| 46 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 47 | Esports

Deep Dive X COVID-19’s impact on esports growth

To fill in the gaping holes left by physical impact on the popularity of gaming as a watched for every hour streamed, sports during the COVID-19 lockdown, media product. Indeed, when comparing compared to 23 for simulated sports many turned to gaming, including sports pre- and post-crisis data, the chart hints (nearly 8 times fewer hours). This shows properties investing in esports activities to at a generalised uplift in consumption that simulated sports esports is not a keep audiences engaged. compared to the pre-crisis period. Of mature media product yet. course, only time will tell if the trend will be • Thirdly, while the number of hours We have investigated this unprecedented sustained in the long run. streamed for simulated sports remained situation with the help of market analysis high, the number of hours watched carried out by IRIS (Intelligent Research in Interestingly, three aspects stand out when dropped significantly once real, live Sponsoring). Unsurprisingly, the consump- comparing action, fantasy and shooter sports returned. Despite the advantage tion of simulated sports esports literally with simulated sports genres: of being recognised and understood exploded at the heart of the crisis, tripling • Firstly, the top-100 accounts for action, by a wider audience, there’s still a the number of hours watched (figure 27). fantasy and shooter generated 500m long way to go for simulated sports to Action, fantasy and shooter genres also hours watched in week 1 of 2020, sustain high viewership in parallel to experienced significant growth, with an dwarfing the 5m generated by simulat- physical competitions. increase of about 50%. ed sports.

It is worth mentioning that the COVID-19 • Secondly, action, fantasy and shooter Data provided by Iris effect seems to have had a lasting positive titles generated on average >180 hours

Figure 27: Streaming and media consumption of gaming during COVID-19 crisis

Action, fantasy and shooter genres Simulated sports genre

Hours streamed Hours streamed Week of 30.12.2019 Week of 30.12.2019 400 Hours watched 400 Hours watched Hours watched: ~500m Hours watched: 5.2m 350 Hours streamed: ~2.3m 350 Hours streamed: 186k (indexed to 100) (indexed to 100) 300 300

250 250

200 200

150 150 Progressive return 100 100 of live sports Potential COVID-19 Potential COVID-19 50 consumption uplift 50 consumption uplift Start of generalised lockdown Start of generalised lockdown 0 0 27.01 27.01 27.07 27.07 30.12 30.12 07.09 07.09 13.01 13.01 13.07 13.07 01.06 01.06 10.02 10.02 24.02 24.02 18.05 18.05 10.08 10.08 15.06 15.06 24.08 24.08 20.04 20.04 23.03 23.03 29.06 29.06 04.05 04.05 09.03 09.03 06.04 06.04 Weeks of 2020 Weeks of 2020

Source: PwC Analysis, IRIS Market Intelligence 08/2020 | Number of hours watched and Source: PwC Analysis, IRIS Market Intelligence 08/2020 | Number of hours watched and number of hours streamed on YouTube and Twitch, for top-100 accounts of each title per number of hours streamed on YouTube and Twitch, for top-100 accounts of each title per platform; tittles included: LoL, Dota 2, CS:GO, Fortnite, Battlegrounds platform; tittles included: FIFA, NBA2K, Madden NFL, F1, PES

| 48 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 49 | Esports

Deep Dive XI

Figure 28: Perception of commercial success of rights owners’ esports initiatives Percentage of respondents Esports driving the advent of multi- 9.9% Clarity on an Don’t know/abstain 18.5% 7.2% Have exceeded organisation’s layered competition ecosystem Disappointing, should expectations gaming strategy is be reconsidered a pre-requisite for We expect governing bodies to increas- & Entertainment and Harris Blitzer Sports the creation of a multi-layered ecosystem, sustainable, long- ingly recognise virtual variations of their & Entertainment have also added esports where each physical sport will have its sport as new disciplines. So, it’s crucial to as a vertical alongside traditional sports simulated and hybrid equivalents. Ulti- term success in the accurately classify and define these, es- and entertainment venues. mately, each subdiscipline will carry out world of esports. tablishing appropriate regulations, involv- different functions and bring specific ben- 33.1% 31.3% ing relevant stakeholders and developing To cut through the landscape complex- efits to the overarching body (figure 29). Below expectations In line with standalone go-to-market strategies. ity and develop tailored development so far, but still promising expectations Christian Volk, Director of eFootball programmes, rights owners should Clearly, the shaping of such an ecosystem and Gaming, FIFA We believe that considering esports as distinguish between simulated esports will take significant time to mature. As Source: PwC Analysis, N = 655 a new discipline will enable it to develop (e.g. FIFA eWorld Cup) and hybrid esports, opposed to those who seek immediate with a clear position within its respective which refers to physical efforts with digital returns, we expect rights owners that ecosystem. This approach should mirror rendering (e.g. Digital Swiss 5). have long-term perspective for building the development of new game formats standalone products and verticals to Insight 22: Esports’ mixed results like T20 cricket, FIBA 3x3 and Hockey 5s. Going forward, we predict that the addi- benefit the most from sports’ growing to improve over time Sports investors like Monumental Sports tion of virtual disciplines will contribute to virtualisation.

• It’s unrealistic to expect esports to deliver quick wins given its early development stage, Figure 29: Sports multi-layered competition ecosystem requiring both patience and resilience from sports organisations. Headlines • We believe that a gaming-first approach provides the most robust foundation to build Sports multi-layered competition ecosystem upon, as games pave the way for both casual and competitive gaming to develop. UCI and Zwift launch cycling esports as a new discipline • To achieve consistent results over time, esports (intended as the virtual variation of Esports the real sport) should be considered as a genuine new discipline within each sports ecosystem (Deep Dive XI). World Sailing creates eSailing Growing World Championships in partnership with Virtual Regatta Simulated sports Emerging • Appeal to wider audiences through gamers Hybrid sports • Broaden participation with lower entry requirements Established • Bridge gap between physical and virtual • Make the most of ties with gaming • Increase participation with enhanced to offer a new, innovative discipline Physical sports accessibility requiring different abilities • Rise as an innovative, closely-related • Promote and complement real • Build on existing structure to rule and discipline with transferrable abilities sports format govern the overarching ecosystem • Substitute, complement or promote real • Drive participation with traditional model sports format • Source sport’s IP, flagship event and core discipline • Promote and inspire esports formats

Source: PwC Analysis

| 50 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 51 | Esports

Figure 30: Will esports become a mainstream viewership product for non-gamers? Percentage of respondents

9.2% 6.9% Deep Dive XII Don’t know/abstain It already is 15.1% Action, fantasy and shooter genres Yes, in the short term (1-3 years)

36.0% largely drive esports viewership No, esports will never become a viewership product for non-gamers 16.6% To better understand the viewership tive ecosystem, which today features As mentioned earlier, the cup may be Yes, in the medium term differences between simulated sports 12 professional leagues qualifying for half empty or half full. Either this is (3-5 years) versus action, fantasy and shooter genres, the world championship. proof of a structural disadvantage as a we’ve analysed IRIS data on the weekly media product (which is cannibalised • Secondly, there’s a significant gap ratio between hours streamed and hours by real sports media), or merely an between titles in regard to the volatility watched since January 2020. From this indication of a potential that, once the of their return on streaming. Indeed, 16.2% so-called return on streaming (figure 31), adoption curve rises, will be exploited Yes, in the long term (5-10 years) some titles have clearly managed to Source: PwC Analysis, N = 655 some interesting insights emerge: to its full extent. break free from flagship one-off events, using their IP for week-in week-out • Firstly, League of Legends (‘LoL’) is media consumption. Insight 23: Simulated sports esports starting clearly setting the standard, with an av- on the path of mainstream viewership erage of 420 hours watched for every • Thirdly, action, fantasy and shooter es- Headlines hour streamed. Riot Games is reaping ports genres are still firmly ahead of the the benefits from its massive invest- curve compared to simulated sports, • While divided on the question, most survey respondents believe that, in the medium- eNASCAR drives TV audience with ment in developing a strong competi- which are led by FIFA. to long-term, simulated sports esports will manage to turn into a mainstream viewer- esports product ship product (Deep Dive XII). Figure 31: “Return on streaming”, by genre and title Volatility + – • Indeed, we think that this will happen as gaming grows, products improve, media / Media companies’ Eleven Sports coverage increases and technology advances. We expect that game modes will and ESPN invest in esports as a increasingly be developed with esports in mind, offering an improved visual experi- new content vertical League of Legends 420 12% Low ence for non-players.

• Most notably, younger athletes who’ve grown up with gaming as a cultural norm Fortnite 131 12% Low provide a natural bridge between virtual and traditional sports. As a result, we Growth of esports gambling perceive simulated sports esports as a great opportunity to attract both gamers and confirms viewers’ interest Dota 2 75 17% Low non-gamers, and thus democratise the viewership.

CS:GO 65 137% High

Battlegrounds 44 212% High

FIFA 40 29% Low

F1 26 116% High

NBA2K 12 15% Low

Madden 10 32% Low

PES 3 115% High

Source: PwC Analysis, IRIS Market Intelligence 08/2020 | Number of hours watched divided by number of hours streamed on YouTube and Twitch, for top-100 accounts of each title per platform. +/- Percentages represents 1 standard deviation divided by the average value.

| 52 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 53 | Esports

Figure 32: Top esports benefits for rights owners Percentage of respondents, Top 2 Box (“above average” and “very high”) An executive

Engaging a new fan base point of view with your sport 74.3% Attracting new commercial 71.9% from partners Ralf Reichert Generating new revenue streams 65.7% Founder and co-CEO, ESL Gaming By now it should be clear:

Increasing sponsorship revenues 61.6% esports is not a hype but a phenomenon Attracting new participants to your sport 50.4% Engaging/retaining existing As simple as it can get, core to esports – 49.1% fan base “ and all other sports – has always been the joy of playing. That is where it all started. By Increasing media revenues 40.8% introducing rules, gaming has culturalised playing and added a competitive edge to this Source: PwC Analysis, N = 385 form of enjoyment. Sport as we know it today is about more than playing games and com- peting: we’ve built an infrastructure around it consisting of leagues and tournaments, en- Insight 24: Esports driving both abling a great experience for fans across the fan acquisition and retention globe. Esports has all of this, too. There’s no Headlines difference. It’s about helping people unleash their maximum potential. As a pioneer in this F1 perceives esports as a • As recognised by respondents, building esports into a new vertical can certainly industry, ESL has been at the centre of the platform to reach younger fans open up opportunities to attract new audiences, commercial partners and, ultimately, esports movement for almost 20 years. While revenue streams. the scene has become more professional, the “why” never changed: to create a world • We believe that the underlying opportunities will still require significant time and efforts to NHL uses esports to keep where everybody can be somebody. materialise, especially given the challenges of building an effective monetisation strategy. fans engaged

• On top of that, esports has demonstrated value to retain and engage existing audiences. While there are already many good examples While physical events are still undermined due to the COVID-19 crisis, esports represents of (traditional) sports organisations embrac- a valuable asset for feeding content-hungry fans, building on the multi-platform ing esports and its community, we’re not storytelling pattern. even close to reaching the end of this path. Gaming and esports are here to stay, and many organisations will find themselves at a disadvantage if they don’t start to appreciate and ultimately engage in this sector. Connect- ing to today’s young and digital audience has never been more challenging and an involve- ment in esports can serve as a remedy for those firms trying to reach the unreachables.

Let’s stop simply leaning back and start to lean in together. There’s significant value we can add together for athletes, teams, fans, game developers, brands and media partners. ” Ralf is a serial entrepreneur, avid gamer and esports evangelist. Ahead of its time, in 2000, he founded ESL, today the world’s largest independent esports event organiser.

| 54 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 55 | Deep Dive XIII

Figure 33: Challenges for rights owners to set up an esports strategy Percentage of respondents, Top 2 Box (“important” and “”very important”) Beyond esports, mobile Creating engaging content/ narrative 84.7% Developing an effective 81.3% gaming will form a critical (monetisation) strategy Selecting the most relevant 76.1% games/competition formats part of future gaming and Identifying suitable partner(s) 73.8%

Getting senior management buy-in 73.2% esports strategies Key mobile Cost of technology and gaming questions: implementation 58.7%

Managing entrepreneurial risk 44.4% Although controlling a game’s IP can Concretely, micro-games can offer a Source: PwC Analysis, N = 385 drive significant value from the gaming broad range of benefits for the IP owner, and esports ecosystem, it’s extremely notably around fan engagement, data hard for sports organisations to bypass capture, in-game advertising and micro- How will the mobile gaming Insight 25: Rights owners’ main esports publishers ownership-wise, especially transaction payments. strategy complement digital and considering the large financial and tech- gaming strategies? challenges lie in storytelling, format and nical resources required for developing The market for mobile gaming is rather monetisation Headlines blockbuster games. saturated, and the chances of creating a single hit game are low. Taking a portfolio • Creating a competition doesn’t equal creating relevance. Building a strong Real Madrid partners with EA to For its part, mobile gaming has lower approach by trying out several formats entry barriers as it costs considerably and concepts could be an effective way narrative to contextualise athletes, teams and events is fundamental to the success integrate Volta mode’s storyline What types of game(s) do you of esports. less to develop and publish mobile to manage risk. games. Mobile gaming can indeed want to create? • To choose the right competition formats and build a strong esports platform (ranked NBA and Bundesliga operate provide sports organisations with a great In the medium-term, we expect new as the third biggest challenge), we believe that rights owners must intensively esports vertical by making the opportunity to use existing IP, create business models to emerge through collaborate and co-create with existing stakeholders, including the game partner. most of existing stakeholders and new digital assets and grow their digital greater collaborations between mobile • The above model obviously needs to achieve financial sustainability. As it’s still competition structure audience. To date, sports has been slow gaming developers and sports organi- unclear whether the sports industry’s traditional revenue streams can bear fruit in to enter the mobile gaming sector but, sations. Which game developers will the esports context, sports organisations are exhorted to design tailored, esports- given its size and growth, it’s definitely make the best partner? specific monetisation models. an area worth exploring.

The continued penetration of smart- phones across the world, the major developments in 5G and the imminent Which markets are to be advent of cloud gaming platforms all targeted? speak in favour of mobile gaming.

Embrace, engage and embody esports What assets and capabilities into the core of the are required to monetise the game(s)? organisation. It is here to stay, so those who adopt and adapt will benefit the most. How will you use the data captured via the games?

Jason Lohe, President at Gameplan Impact

| 56 | PwC’s Sports Survey 2020 Esports

In a nutshell

Generally speaking, it is clear that the COVID-19 crisis has favoured the acceleration of virtual entertainment, improving the odds for simulated sports esports. While our analysis shows that the underlying trend is likely to continue over the long term, it should nevertheless not be taken for granted. Sports organisations need to carry full responsibility for their esports strategy and ride the wave before other games win and lock in consumers.

The central insight from our survey is the importance for rights owners to stop considering esports merely as a fan engagement tool but as a genuine discipline with its own rules, fans, heroes, and culture. Developing such a model is similar to developing a new product or a brand; it can only be part of a long-term process. The advent of hybrid sports – which puts an end to the perennial debate about the physical aspect of esports – has now reinforced both the legitimacy and potential of virtual sports within federations’ discipline portfolios.

Reflecting on the trends impacting the media market for traditional sports, rights owners must be inclined to experiment and diversify, with the vision of building their very own revenue ecosystem. If simulated sports esports does not yet have a dominant financing model, the wide variety and speed of the market imply that this may never be the case. For this very reason, the sports industry must be bold enough to break down boundaries and dogmas in order to truly emancipate itself both creatively and financially. This, to us, is the only path to esports success.

| 58 | PwC’s Sports Survey 2020 Deep Dives Insights PwC Sports Survey data COVID-19 undermininggrowth expectations Rights marketpointingoutopportunities Ranking oftop10sportsbypotential Expected growth byrevenue stream Digital strengthening itspositionas Health crisissqueezingresources Betting andfantasypresenting Esports acceleratingitsriseas Top opportunitiesandthreats State oftheindustry The growing opportunityof greatest growth prospects fastest-growing category monetising digitalassets major opportunitydriver Market growth outlook through diversification to grow revenues and investments Will hybridsportskeep enduranceeventsgoing? Will By whenthesportsindustrywillhaverecovered Has theeraofgame-changingreforms arrived? Sports ontheback-foot,callinguponinvestors Most prevalent collaborationmodelsexpected Health challengesacceleratingtransformation Increasing complexityfosteringcollaboration Football’s breeding ground forprivateequity How wellwasthesportsindustryprepared A crisisshakingtheindustry’s foundations COVID-19 catchingsportsoff guard From saving costs tomakinguseof Most likelyoutcomeofthecrisis Impact ofCOVID-19 to facetheCOVID-19crisis? Greater riskspushinganew, How togetfitfor recovery? diversified revenue model to pre-COVID-19 levels? strategic collaborations Traditional broadcasters aren’t dead,yettheyurgently Highlight consumptiongrows amongallagegroups Expected growth ofsportsmediaconsumption Expected growth ofsportsmediaconsumption Expected growth ofsportsmediaconsumption From eventtoIPflattentheattentioncurve Media marketmovingfrom exclusivity-based Original contentshapingaflourishingmarket How willthesportsmedialandscapeevolve Highlights arisingasthe“newfree-to-air”? Cutting through thenoisewitharicher, The sportsmedia landscapeovertime Super-aggregators heraldingthe need topivottheirbusiness D2C morphingintoB2B2C data-driven fanexperience Amplifying OTTbroadcast “Great Reconsolidation” to collaboration-based inthenext3-5years? Sports media by businessmodel by contenttypes by channel Sports organisationswidelyengagingwithesports Esports drivingbothfanacquisitionandretention Simulated sportsesportsstartingonthepath Rights owners’mainesportschallengesliein Esports’ mixedresults toimprove overtime Action, fantasy, andshootergenres largely Esports drivingtheadventof multi-layered Mobile gaming willformacriticalpartof COVID-19’s impactonesportsgrowth Perception ofcommercial successof future gaming andesportsstrategies viewership product fornon-gamers? storytelling, formatandmonetisation Top esportsbenefitsandchallenges Will esportsbecomeamainstream Will rights owners’esportsinitiatives Has yourorganisationengaged of mainstream viewership drive esportsviewership competition ecosystem with esportsyet? for rightsowners Esports

Navigation Notes and sources List of figures

Impact of COVID-19: winds of change 1. Market growth outlook by respondents’ best-known market Ahmed, M., Borrelli, S., Wiggins, K.; 23 July 2020; Private equity groups tackle challenge to relaunch Serie A; Financial Times (online) 2. Market growth outlook by stakeholder BBC; 7 August 2020; League One & Two clubs vote to introduce salary cap; BBC.com (online) 3. Expected annual growth rate by revenue stream Lepitak, S.; 21 May 2020; Formula 1’s sponsors are helping the sport get back into gear; The Drum (online) 4. Ranking of top 10 sports by potential to grow revenues Our service 5. Top opportunities to increase revenues in Nelson, A.; 12 May 2020; Success of Digital Swiss 5 points way toward cycling’s hybrid future; SportBusiness (online) the sports industry offerings Seifert, K.; 13 April 2020; XFL files for Chapter 11 bankruptcy after suspending operations; ESPN (online) 6. Top threats to revenues in the sports industry Spataro, J.; 24 July 2020; Reimagining how NBA fans and teams experience the game of basketball with Together mode in Microsoft Teams; 7. Maturity framework for commercialisation of digital assets • Corporate strategy Microsoft (online) 8. KPIs to track progress of commercialisation • Business planning of digital assets Super League Triathlon; 16 July 2020; Super League and Zwift to bring pro triathlon back with SLT Arena Games in Rotterdam; Superleaguetriathlon.com (online) 9. Case study A/B: commercial potential of digital assets • Organisational design 10. Relative to other industries, how well was the sports Wilson, M.; 29 June 2020; The Tour de France goes virtual, as e-cycling takes off during quarantine; Fast Company (online) • Governance and compliance industry prepared to face the COVID-19 crisis? • Independent business review 11. By when do you think the sports industry will have fully Sports media: navigating the age of complexity recovered to pre-COVID-19 levels? and due diligence Barnes, B.; 18 November 2019; The Streaming Era Has Finally Arrived. Everything Is About to Change.; The New York Times (online) 12. Most likely outcome of the COVID-19 crisis (trade-offs) • Market analysis and 13. Most prevalent collaboration models expected within the benchmarking Dixon, E.; 21 August 2020; ‘Video highlights will be more valuable than live rights,’ says WarnerMedia VP; SportsPro (online) sports industry • Mega-event feasibility and Holloway, D.; 1 July 2020; Why Sports Documentaries are Seeing a Boom Amid the Coronavirus Pandemic; Variety (online) 14. Transformation roadmap for sports organisations impact assessments Magnotta, K.; 30 July 2020; Yahoo Sports and NBA bring future of sports entertainment to life through VR, fantasy, betting; Verizon (online) 15. Main value levers for football-related investments McCaskill, S.; 26 May 2020; The Bundesliga Is Using Cloud And AI To Power New Stats For ‘Der Klassiker’; Forbes (online) 16. Zero-based activity assessment model by PwC Strategy& 17. Expected growth of sports media consumption Mullin, B.; 20 April 2020; Michael Jordan Documentary a Ratings Win for ESPN Amid Coronavirus Sports Shutdown; The Wall Street Journal (online) by content types Newman, J.; 14 July 2020; These two underdog apps have solved streaming TV’s biggest headache; Fast Company (online) 18. Average time spent per week consuming sports content, live vs highlights Our Ross, M.; 6 August 2020; DAZN reshuffles executive team, eyes non-live content to protect subscriber base; SportBusiness (online) 19. Enablers of sports media’ IP-driven pattern clients Svenson, D.; 24 July 2020; Rivals Swisscom and UPC agree landmark distribution deal; SportBusiness (online) 20. Expected growth of sports media consumption by channel 21. Expected growth of sports media consumption • Brands Esports: the great emancipation by business model • Event organisers Alexander, J.; 3 April 2020; ESPN will air 12 hours of esports including Rocket League, NBA 2K, and Madden; The Verge (online) 22. How will the sports media landscape evolve in the next 3-5 years? (trade-offs) • Host cities Bassam, T.; 17 April 2020; Study: Esports gambling revenue set to hit US$14bn in 2020; SportsPro (online) 23. User preferences for optimal sports media experience • Sports federations Daniels, T.; 4 August 2020; Eleven Sports rebrands to enhance women’s and esports content; Insider Sport (online) on OTT, top-2 box 24. OTT user experience layers • Leagues and teams Formula 1; 19 June 2020; Formula 1 Virtual Grand Prix series achieves record-breaking viewership; Formula1.com (online) 25. Sports media landscape over time • Media companies Joseph, S.; 13 May 2020; With live sports on hold, Adidas turns to video games; Digiday (online) 26. Has your organisation engaged with esports yet? • Sports marketing agencies Long, D.; 24 March 2020; eNASCAR race draws record TV audience for eSports event; NBC Sports (online) 27. Streaming and media consumption of gaming during Smith, N.; 12 May 2020; The giants of the video game industry have thrived in the pandemic. Can the success continue?; COVID-19 crisis • Sports ministries The Washington Post (online) 28. Perception of commercial success of rights owners’ • Sports tech firms esports initiatives UCI; 26 September 2019: UCI and Zwift sign Memorandum of Understanding for the development of cycling esports as a new cycling discipline; UCI.org (online) 29. Sports multi-layered competition ecosystem 30. Will esports become a mainstream viewership product for non-gamers? 31. “Return on streaming”, by genre and title 32. Top esports benefits for rights owners 33. Challenges for rights owners to set up an esports strategy

| 62 | PwC’s Sports Survey 2020 PwC’s Sports Survey 2020 | 63 | Our Sports Business Advisory team

The Sports Business Advisory team was established by territories throughout our network, we’ve delivered PwC Switzerland in 2012 and has evolved into PwC’s projects for a variety of organisations across the EMEA sport business hub for Europe, the Middle East and Asia. region. Since 2016, we’ve published PwC’s Sports Survey The team helps sports industry players design effective annually, checking the pulse of the sports industry on strategies, identify new growth opportunities and optimise growth expectations and a wide range of strategic and their operations to meet their business goals. Working organisational topics. We hope you found the fifth edition closely with PwC teams and functional experts in various of this publication insightful.

David Dellea Clive Reeves Head of PwC Sports Business Advisory Focus areas: sporting operations, Focus areas: strategy, organisation and organisation and gaming/esports commercial [email protected] [email protected] linkedin.com/in/daviddellea linkedin.com/in/clive-reeves

Alexander Stolz Robin Fasel Focus areas: media, digital and Focus areas: strategy, sports media gaming/esports and innovation

[email protected] [email protected] linkedin.com/in/alexander-stolz linkedin.com/in/robin-fasel-108a0b65

Clemens Kuerten Ioannis Meletiadis Focus areas: strategy, organisation Focus areas: strategy, hospitality and technology and ticketing

[email protected] [email protected] linkedin.com/in/clemens-kürten-71a419b7 linkedin.com/in/ioannismeletiadis

Lisa Daniells Fabio dell’Anna Focus areas: people & change, Focus areas: tax and organisational restructuring legal structuring

[email protected] [email protected] linkedin.com/in/lisa-daniells-1150561 linkedin.com/in/fabio-dell-anna-1799a4

Patrick Balkanyi Claudio Prante Focus areas: financial audit, Focus areas: deals strategy, assurance and risk due diligence

[email protected] [email protected] linkedin.com/in/patrick-balkanyi-2b217aaa linkedin.com/in/claudioprante

Credits

A big thank you to the European Club Association (ECA), Eurovision Services and UCLA Anderson School of Management, Claude Ruibal, Marcelo Pinto and Tonte Davies for their support growing the number of respondents across the world, as well as IRIS and HORIZM for providing valuable data to complement our analyses. Big thanks also to Michael Broughton, Guy Horne and Ciaran Quinn, who provided great input by reviewing this year’s questionnaire and Lefteris Coroyannakis for his editorial review. Special thanks to Lisa Machado for her creativity designing the publication, Marco Cabalzar-Gross for helping us with the promotion of the report, and last but not least, Gustav Baldinger, Dominik Hotz and Reto Brunner for their continuous support.

© 2020 PwC. All rights reserved. ‘PwC’ refers to PricewaterhouseCoopers AG, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.