Sports industry: time to refocus?
PwC’s Sports Survey 2019 View from The state of the Transformation Direct-to-consumer: The role of sports References and the top sports industry and innovation: engaging sports fans federations: contacts essential for the in the digital age what next? How to stay ahead Digital: the key driver future of sport Notes and sources for growth of the curve? A closer look at digital Federations on a journey media consumption of self-improvement Contacts Optimism in the face of The industry is waking up uncertainty (and playing catch up) The race for fans’ attention Effective strategies (and primary data) require focus Highest growth prospects Innovation requires for esports and football structure, but people are key to success Rights owners’ OTT platforms: Forget esports, are they delivering? what about gaming? 06 Women’s sport: from promise to real deal? Facebook’s approach to people and trying new A new dawn for agencies? 46 things
Innovation is about listening to your 08 customers 28 36 18
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 2019 respondents occupied a senior/C-level position through an online questionnaire distributed to within their respective organisations. The analysis 1.4% Africa Academia/public sector sports industry leaders around the world. Because in this report is primarily based on the collective 2.4% South America Sports technology company 5.5% Middle East they share our vision of establishing an independent opinion of the respondents. It is complemented by 7.5% 22.4% 6.0% perspective on the state of the industry, a number data provided to us by IRIS (Intelligent Research in Sports federation 10.1% 8.6% Australasia of high-profile sports executives supported us Sponsorship), as well as the team’s knowledge League/event organiser by sharing the questionnaire with their peers. and research. 46.7% This helped us ensure broader representation 8.1% Europe Brand/sponsor 14.3% 15.6% North America across regions and industry segments. The effort Other/consultancy was also driven by PwC and Strategy& Australia, 10.5% China, India, Japan, Middle East, New Zealand and Broadcaster/media company Russia. In total we received 590 responses to our 11.5% 11.6% 17.8% Sports team/club Sports marketing agency Asia questionnaire across 49 counties.
Source: PwC Analysis, N=590 Dear friend of the sports industry,
We are pleased to present you with the 2019 edition of our annual sports survey, which received a record 590 responses from sports industry leaders. This represents an increase of 120 respondents relative to our 2018 respondent base. We also saw a further improvement in the quality and seniority of the leaders we reached out to. I would like to take this opportunity to thank each and every one of you that took the time to provide us with your views.
This year, we have complemented our assessment of overall industry growth by zoning in on the opportunities presented to – and challenges faced by – sports organisations on an individual level. This is reflected in the content of the report’s three deep-dive sections, all of which take an organisational point of view.
These three section assess: (i) the importance of, and key enablers for, innovation within established sports organisations; (ii) the key benefits and challenges of direct-to-consumer content distribution and how commercially viable this channel is at present; and (iii) how sports federations are performing and where they should focus their efforts and resources in the mid- term.
In general, we see that sports organisations are playing catch-up in terms of innovation, the initial hype around direct-to-consumer streaming seems to be dissipating, and by and large sports federations have their work cut out to (re-)gain public confidence and ensure their relevance in the years to come.
These findings all underline the same key point: a great number of rights owners, and in particular sports federations, need to transform the way they do business. While different players will be at different stages along this long journey, we hope that the insights in this report are indicative of how you should go about effecting the changes needed for your organisation to flourish.
Yours sincerely,
David Dellea
Head of Sports Business Advisory
4 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 5 View from the top
How to stay ahead of the curve?
Future vs. past growth Top 10 sports by potential to Top three industry-wide Areas for improvement of grow revenues opportunities and threats sports federations
1 Improved fan engagement Esports Rugby Transparency and good 1 6 2 Enhanced media offering governance 56.6% 3 Improved live experience Protecting athletes’ rights 7 4% Football/ 37.4% Golf and well-being ∙ 2 soccer 7 average 6 4% 1 Shift away from traditional TV consumption ∙ Developing grassroots 34.7% 2 Access and popularity of alternative entertainment formats participation growth average 3 Basketball 8 Cycling 3 Dominance of major tech firms as gateway to content Past 3–5 years growth American Next 3–5 years Urban sports 4 9 football
5 Tennis 10 Cricket Success factors to Perception of commercial success of enable innovation rights owners’ OTT platforms
Exceeded Disappointing, should expectations be restructured 4.2% 88.6% 5.4% Top three benefits and challenges for rights 78.6% People owners implementing OTT platforms Structure 39.7% 20.0% Below expectations and strategy Don’t know/ so far, but still abstain promising 1 Access to, and commercial exploitation of, fan data 2 Ability to innovate sport formats through fan insights 94% 3 Increased global reach and viewership 30.7% of industry leaders believe In line with expectations that innovation is important 1 Ensuring a high quality of service or very important for sports 2 Creating enough content to generate long-term interest organisations 3 Developing an effective pricing strategy
6 | PwC’s Sports Survey 2019 The state of the sports industry Overall growth: digital is the key driver
The overall sports market is expected to • Africa and South America are emerging grow at a healthy annual rate of 6.4% in the and ready to catch-up. While we are still Average expected next 3-5 years, albeit below the 7.4% seen talking about small markets in relative annual growth rate in the past 3-5 years. In general, growth ex- terms, sports leaders expect the highest pectations are relatively similar to last year’s growth rates relative to the past 3-5 of 4.7% (overall) survey and remain robust. years. Each year, we ask a select group of industry leaders what their perceptions are concerning In terms of regional differences, there Breaking the results down by stakeholder, industry growth as well as the key opportunities are three groupings with different growth teams and clubs are the most optimistic, patterns: foreseeing stronger growth in the future and threats faced by the industry. We do this (9.1%) than in the past (8.0%). This may be • Europe, North America and the Austral- to provide you with macro insights on how our a reflection of their self-confidence in con- asia region are expected to see slower trolling a key asset in the sports industry: industry is likely to develop in the coming three growth rates going forward than before. the athletes and the stories surrounding to five years. In this section, we outline the We interpret this as a sign of saturation them that fans crave. key takeaways and examine what they might in the sports industry, compounded by mean for sports industry stakeholders. Overall, growing competition from other enter- tainment formats. sports leaders have an optimistic outlook for the future, buoyed in particular by the strong • With Asia and the Middle East having been the most promising markets over growth expected in digital media. the last decade, growth rate expecta- tions are stabilising but are still expected to remain robust for the next 3-5 years.
8 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 9 The state of the sports industry
Market growth outlook
Market growth outlook by respondents’ best known market In terms of revenue streams, digital media year, in this years’ edition respondents Percentage annual growth estimates over a 3-5 year period rights are expected to be the key driver of foresee slightly lower growth rates across overall growth, with growth rates of 9.7% all revenue streams. We interpret this as a expected over the next 3-5 years. This sign of concern and uncertainty around the Past 3–5 years is underlined by the fact that much lower business impact of changing consumption Next 3–5 years 7.4 growth rates are foreseen for traditional behaviour. 6.4 revenue streams, ranging between 1.9% and 4.1%. Interestingly, compared to last
Expected annual growth rate by revenue stream Percentage annual growth estimates over a 3-5 year period Overall
10.3 8.9 9.1 8.4 8.7 7.8 8.0 7.0 7.1 Sponsorship and Traditional sports Digital sports Ticketing and Licensing and advertising media media corporate hospitality merchandising 5.8 5.6 5.7 4.7 3.9 15.0%
Europe Asia North America Australasia Middle East Africa South America
11.5% Market growth outlook by stakeholder Percentage annual growth estimates over a 3-5 year period 9.2% 9.7% 8.4% Past 3–5 years 7.7% 7.8% 9.7 Next 3–5 years
7.8 7.5 7.4 5.5% 6.9 4.8% 6.0 6.1 5.9 4.8 4.5% 3.8% 3.4 3.2% 4.1% 4.3% 3.2% Sports Broadcaster/ Sports marketing Brand/ League/event federation media company agency sponsor organiser 1.9%
0% -0.3% -0.3% 9.1 -1.3% 8.0 7.7 7.0 7.1 6.6 6.5 6.0 -3.8%
2018 2019 Source: PwC Analysis, N=550
Sports Sports technology Academia/ Other/ team/club company public sector consultancy Source: PwC Analysis, N=550
10 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 11 The state of the sports industry
Opportunities and threats: optimism in the face of uncertainty
Looking at the opportunities and threats has the potential to make an above-average major tech firms as a gateway to content. affecting the ability of sports organisation to or very high contribution to industry reve- We interpret this as a sign of growing drive revenues, digital is both a friend and nues. As the sports world is still getting to (and justified) doubts as to whether sports a foe. grips with the topic, we think this area could organisations will actually be in a position provide a massive crossover in terms of fan to benefit from the growing opportunities To be clear: sports leaders are fundamen- engagement, helping gamers become fans offered by digital. There seems to be a tally optimistic. Whether it is due to psycho- and fans become gamers. pervasive concern that the massive media logical bias or not, sports leaders attribute conglomerates that are able to control both considerably more importance to opportu- Interestingly, respondents believe that the creation and distribution of content may nities (70.5%) than threats (47.8%). demand from emerging markets has rela- well be stealing the party. tively little to contribute to broader industry When considering specific factors that growth, indicating that no quick fix is ex- Echoing the results in last year’s survey, contribute to industry revenues, opportuni- pected by merely doing more of the same concerns around integrity may pose huge ties related to improving the fan experience in new markets. ethical concerns, but just don’t seem to came out on top. This applies to both the ladder their way up to the top of the agenda broadcast and the live product: to succeed, In terms of specific factors that represent a for sports leaders in terms of perceived sports organisations have to keep innovat- threat to industry revenues, sports leaders business impact. ing their approach to both channels, ensur- effectively pointed to two areas of concern: ing that they are offering more immersive, the shifting consumption behaviour of the interactive and personalised experiences younger generation (due to digital), and the than their competitors. resulting changing competitive dynamics of how sports content is distributed. Sports leaders also ranked synergies with The direct relationship with fans gaming and esports very highly, with nearly One point that stands out is sports leaders’ “ three quarters of respondents saying this concern with the growing dominance of is very interesting as it gives right owners an opportunity to bring them closer to their sport and Opportunities 70.5% 47.8% Threats potentially monetise them more Top opportunities to increase revenues in the sports industry Top threats to revenues in the sports industry effectively in the future. However, Percentage of respondents, Top 2 box Percentage of respondents, Top 2 box (“above average” and “very high”) (“above average” and “very high”) it is also a threat, because traditionally there has been an Shift away from traditional Improved fan engagement 84.9% 65.6% TV consumption intermediary that absorbs the Enhanced media offering (e.g. tech Access and popularity of 82.4% 59.5% firms, OTT platforms, interactivity) alternative entertainment formats risk by acquiring rights. Dominance of major tech firms Improved live event experience 74.9% 55.2% as gateway to content ” Murray Barnett Sports content saturation in Synergies with gaming/esports 72.9% 47.7% developed markets Head of Global Sponsorship and Commercial Enhanced sponsorship offering Partnerships at F1 Decreasing loyalty of fans (e.g. flexibility, personalisation) 69.4% 40.3%
New or revised competition formats 64.9% Piracy/illegal streaming 40.1%
Lack of trust in sports Demand from emerging markets 63.8% governing bodies 39.1% Amateur sports participation Integrity issues and tourism 50.5% (e.g. anti-doping, match-fixing) 34.8%
12 | PwC’s Sports Survey 2019 Source: PwC Analysis, N=590 PwC’s Sports Survey 2019 | 13 The state of the sports industry
Growth by sport: esports and football lead the way
For the second year running, esports example, will take on a life of its own and Another trend that stands out this year is the Ranking of top 10 sports by potential to grow revenues ranks first in terms of its potential to grow mobilise fans beyond the gaming commu- gap that is forming between the top-ranked Percentage of respondents, Top 2 box (“above average” and “very high”) revenues by sports discipline, and does so nity. sports and the rest of the field. This is a across all regions. It seems that sports lead- stark reminder that the fight for relevance ers do not expect the excitement surround- As truly global sports, football and basket- between sports may get tougher as the Flat-out Perennial Breakaway group Front of the peloton ing esports to die down any time soon. ball lead the way once more in terms of gap between the peloton and the pack gets sprinting powerhouses potential to grow revenues among traditional bigger. This poses the question whether the This year, we have split esports into two sports. Boasting leading properties that are diverse sports environment we have enjoyed categories: esports related to action, fantasy cementing their position as the creators of in recent decades will be able to continue to 88.4% or shooter games (e.g. League of Legends, leading premium content, both sports seem thrive in this changing environment, where 86.7% CS:GO) and esports related to simulated poised to continue their growth trajectory the “middle class” is struggling to keep up sports (e.g. FIFA, NBA2K). These came out across multiple markets. the pace. 80.2% first and second respectively. Contrary to shooter games, simulated sports face fierce An interesting change in this year’s ranking competition for fan followership from the real is the appearance of urban sports, which version of the sport. Fuelled by the growing we added to the list and immediately made 66.7% visibility of the FIFA eWorld Cup, the FIFA it into the top 10. This is testament to the eNations Cup and the newly launched UEFA growing crossover between sports and eEuro 2020, the jury is out if eFootball, for lifestyle. 53.3%
45.4%
38.6% 35.6% 32.6% 29.4% 28.4%
Esports Esports Football/ Urban American action/fanta- simulated Basketball Tennis Rugby Golf Cycling Cricket sy/shooter sports soccer sports football
Source: PwC Analysis, N = 563
14 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 15 The state of the sports industry
Women’s sport:
From promise to real deal?
With women representing 70-80% of the consumer market – through a combination of their buying power and influence – there is huge untapped potential in the female audiences of women’s sports
While certain sporting disciplines have ance records were broken, including the nounced they will become the title sponsor sporting assets. The FIFA Women’s World Broadcast Union, for example, 68% of the Overall, there has been a professionalisation done better than others in terms of world record when 60,739 fans attended an of the Women’s Super League in England, Cup in France is a great example, with users that tuned into their online platform of the women’s sporting ecosystem, one commercialising the female editions of Atletico Madrid vs. Barcelona match at the with the reported deal understood to be Nike releasing a commercial minutes after football.eurovisionsport.tv to watch match- that is increasingly being served by women their sports, women’s sport, and women Wanda Metropolitano in Madrid. The FIFA worth in excess of GBP 10 million. This USWNT’s victory in the final. es were men. As the popularity of women’s themselves, in large part due greater in sport, seem to have wind in their sails. Women’s World Cup 2019 also marked ultimately boils down to the fact that female sport grows, such figures indicate a broad know-how among women in and around We see women’s sport being powered several new viewership records, especially editions of various sporting disciplines are This makes perfect sense, of course. Fan enough appeal of women’s sport for spon- professional female sports. by gale force winds rather than intermit- in teams’ home countries. For example, the improving as entertainment products, which targeting through digital has unlocked un- sors and advertisers to successfully engage tent gusts going forward, with accelerat- match between England’s Lionesses and inevitably bolsters their commercial appeal. precedented marketing opportunities, and with both genders through it. All of these factors bode well for the inevi- ing momentum into 2020. the US women’s national team clocked a with women representing 70-80% of the table commercial growth that lies ahead for peak audience of 11.7 million, accounting Beyond football, women’s sports at large is consumer market – through a combination The greater attention brands and adver- women’s sport. There are multiple reasons behind this for over 50% of the available audience on the rise. While traditionally strong sports of their buying power and influence – there tisers are paying to women’s sport is also belief. share and displacing Line of Duty as the such as tennis continue to lead the way, is huge untapped potential in the female demonstrated in the greater respect given UK’s most watched TV programme. less known formats such as the Rugby’s audiences of women’s sports. to women in sport. Women are increasingly Firstly, in terms of basic demand for the Women’s Six Nations tournament are start- active in sports broadcasting for both men product, 2019 has proven to be a re- From a purely commercial perspective, the ing to appear on the radar of big brands. If the FIFA Women’s World Cup 2019 is and women’s sports, be it in the studio, cord-breaking year for women’s sport. sponsorship deals we are seeing for female anything to go by, however, women’s sport on the side of the field of play or on social Between March and April of this year, for athletes, teams and properties are increas- This positive trend is reflected in the way we is also a great medium through which to media. example, various women’s football attend- ing in value. This spring, Barclays an- are seeing brands activate around women’s reach men. According to the European
16 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 17 Transformation and innovation
The sports industry is waking up. Now it’s time to catch up.
With digital disruption accelerating across Silver recently put it: “We recognise that the board, pressure on traditional sports is we’re competing against every other possi- increasing. Our data shows that in Europe ble form of entertainment, nice weather or sports leaders are less optimistic about fu- anything else we could be doing instead of ture growth. They are also more aware than watching our games.” ever of rising threats such as the shift away from traditional TV consumption and access There is no doubt that sports leaders are to new entertainment formats. The writing fully aware of the imperative of innovation, is on the wall: sports organisations need to with nearly 94% considering the ability of innovate in order to address changing con- a sports organisation to innovate as either sumer behaviour and compete against new important (15%) or very important (79%). Transformation forms of entertainment and (any) other form of leisure. As NBA Commissioner Adam and innovation
Essential to the future of sport
How important is the ability to transform We surveyed sports leaders on their perceived and innovate for a sports organisation? Percentage of respondents importance of the ability of established sports organisations to transform and innovate, the extent to which they have related strategies in place, and the factors and initiatives they view as key to enabling and 4.4% Moderately 1.5% Slightly important implementing these phenomena. Our findings show that important sports organisations are largely playing catch-up and that their ability to harness the potential of their human 15.0% capital – and listen to customers and fans – will be Important determinative of their success or failure in the future. 79.0% Very important
18 | PwC’s Sports Survey 2019 Source: PwC Analysis, N = 540 PwC’s Sports Survey 2019 | 19 Transformation and innovation
Innovation requires structure, but people are key to success “Collaboration While 94% means playing one recognise the importance Developing the ability to innovate effectively “people” (talent, culture and leadership) and game, with unique of innovation, only is arguably one of the toughest challenges three factors related to “structure” (strategy, skills.” an organisation can face, irrespective of the organisation and collaborations). Interest- are currently 46% industry. The examples of Nokia or Kodak ingly, all the factors were rated as being Kasper Rorsted implementing a concrete struggling to evolve their products in line either important or very important to enable CEO, Adidas innovation strategy with changing customer behaviour is a stark innovation. However, one key message reminder of how even established compa- clearly emerges: beyond having a strong nies can stumble in terms of innovation. foundation in place, with an actionable strategy and clear KPIs, success will only We asked sports leaders to tell us what come if structure is followed by a modern, they think are the key factors enabling assertive “people” strategy. innovation. We listed three factors related to
After years of slow progress, sports organ- Beyond such leading examples, what is In other words, while nearly the entire Success factors to enable innovation and transformation isation are now fully aware of the need to the industry at large doing to harness the industry is aware of the need for sports Percentage of respondents, Top 2 box (“important” and “very important”) keep pace with technological and social benefits of innovation? According to the organisations to transform and innovate, developments. Indeed, their very relevance sports leaders we consulted, a lot more most protagonists still seem to depends on it – both on and off the pitch. needs to be done: while 94% recognise be playing catch up. the importance of innovation, only 46% are On the pitch, football is a good example of currently implementing a concrete innova- Structure and strategy 78.6% People a very traditional sport that is purposefully tion strategy. 88.6% adapting certain aspects of the game. While many sports have reflected technological Does your organisation have a clear strategy on how to drive innovation and transformation? advances in the rules of the game, football Percentage of respondents 1 1 has long been shy in this regard. In recent Actionable Diverse, skilled years, matters have accelerated: goal line No, we don’t one: 0.6% strategy with and talented technology, VAR and the use of iPads on we are fine as we are Don’t 2 clear KPIs 2 staff know/ the bench for performance analytics – while Organisational Corporate culture abstain 3 3 No, there is a incentivising at times controversial – are examples that structure, tools External Top-down long way to go 3.8% innovation are reflective of this development. and processes collaborations leadership and 5.3% around innovation Not yet, but there are and partnerships vision Off the pitch, innovation is arguably even encouraging signs more important. In North America, the 7.7% Source: PwC Analysis, N = 537 industry has long understood that revenue We are thinking about potential lies not only in the exploitation of it, but don’t know Our experience with clients is consistent Why is this the case? There is no single rea- from a company headed towards failure to rights related to their own competitions. A what direction to take 8.1% Yes, we have concrete plans and are with these results. Indeed, the majority of son. However, one of the main complicating the most valuable company in the world. great example is MLBAM. Created in 2002 46.0% implementing them the work we do as sports practice involves factors in sports is the regular prevalence of Asked about his opinion on leadership, he as a limited partnership between MLB (re)designing operating models for organi- politics, which is a big drain on innovation. broke it down to three principles: clubs as holders of digital rights, it quickly sations active in sports. As part of this, our Political motivations tend to preserve the thrived as a best-in-class case of innova- • Bringing clarity to a situation where clients make tremendous efforts to ensure status quo and push leaders to manage tion. Having developed leading solutions for none exists 29.8% alignment between strategy and organi- “upwards” towards the broader stake- baseball, the company took over all of the We are developing sational structure, using partnerships and holders of the organisation, as opposed to • Creating positive energy NHL’s digital properties in 2015 including a strategy collaborations as a way to boost their core focussing on empowering the talent they its website, mobile apps, operations and • Delivering success in challenging times capabilities. This is indeed key to laying a have to work and collaborate at their best in distribution of its digital streaming service in robust foundation for success. Neverthe- the face of growing market uncertainties. a USD 600 million deal. BAMTech, a tech- less, many organisations ultimately struggle While easier said than done, Nadella’s prin- nological subsidiary of MLBAM in which to make the most of the main asset they ciples are powerful ones that many sport the NHL was also a shareholder, was taken Satya Nadella, CEO of Microsoft, is a great have: the skills of their employees, both organisations could benefit from bringing to over in 2017 by Disney, which reportedly example of an excellent leader in a complex hard and soft. the fore. invested USD 2.58 billion for a 75% stake corporation. In less than five years, he man- in 2017. 75.8% 20.2% aged to turn Microsoft’s fortunes around Pretty much so Not really
20 | PwC’s Sports Survey 2019 Source: PwC Analysis, N = 540 PwC’s Sports Survey 2019 | 21 Transformation and innovation
An executive point of view from Jim Chaplin Q&A Peter Hutton CEO, SRI with Facebook’s approach to people and trying new things
Change is now firmly the status quo for “ sport and entertainment businesses global- ly. The pressures and complexities faced by organisations have increased exponentially, To get a better sense of how sports organisations can improve their forcing business leaders to evolve fast or approach to innovation, we sat down with Peter Hutton, Director, risk being left behind. To maintain relevance in a technology-driven world requires confi- Global Live Sports Partnerships and Programming at Facebook, and dence in self disruption and a mindset open asked him to share Facebook’s ‘secret sauce’ in this regard. to innovation, often alongside the introduc- tion of new skills.
In response to change, more organisations 1. You have seen many different sports 3. When looking to hire new employees, 5. Concretely, what can traditional sports are seeking leaders from beyond their tradi- organisations from the inside. What are are there any particular characteristics organisations learn from Facebook, tional domain. This trend towards a broader the main differences you have noticed you look for at Facebook? particularly in terms of innovation? view of leadership is encouraging for the since your time at Facebook? development of the industry as a whole, The hiring process is very different from I really like the fact that staff are encour- and for the creation of more diverse senior First of all, at Facebook we have a very what I’ve experienced in the past. In order aged to speak up in meetings regardless management teams. However, the risk of small team dedicated to sport worldwide, to find the person that fits best, we conduct of their experience, and that diversity is ‘organ rejection’ for out-of-sector hires rises which means we have to prioritise work numerous interviews. It was new for me actively promoted throughout the company. relative to the scale of change for both the that has a real impact. Nevertheless, we are that not only HR and potential manag- I’ve often been asked by people in sports candidate and their new employer. A move integrated in a very large organisation that ers conducted these interviews, but also organisations to share opinions with their to the equivalent role in a direct competitor is constantly changing. This is very exciting co-workers. The clear goal is always to find own top management, as they feel they are is well understood; a move across indus- as we get to work with people who not only the right personality fit and to harness a di- unable to do this themselves. Furthermore, tries to a different role in a distinctly different have a sports background but also broad versity of views and experience. Finding the here at Facebook you really feel that the or- cultural environment is a road less well skillsets. Combined with our knowhow, this right people really is a top priority around ganisation is continuously evolving. We set travelled. enables us continually to come up with new here and we put a great deal of effort into it. our goals every six months and adapt our solutions. structure accordingly without losing sight of the essential elements of our business. Today, the success with which leadership 4. How is Facebook learning from its teams assimilate new and different skills 2. How does Facebook empower its customers and partners? How are you typically increases when the hiring company employees to innovate? integrating data in the decision-making and the appointed candidate have a deep The culture of the company is very different process? understanding of their respective mindsets, from any of the organisations I’ve worked I’ve been at a lot of companies where inter- behaviours and – crucially – cultural fit. The at before. Overall, we have a culture that nal gut instinct normally wins the day. Face- risks can therefore be mitigated by meas- is clearly driven by encouragement of the book is different; we try to learn from case uring candidates’ expectations, developing product teams to innovate and try new studies and experience and are continually a comprehensive onboarding programme things. We are dedicated to giving everyone looking to improve. A concrete example and agreeing a vision for scale and pace of enough space to trial and error on ideas is our football council. Once every three change, within the context of the operation- while not losing focus on daily business. months we sit together with the European al realities of the organisation. The organisation is in general very transpar- clubs that have the largest Facebook fan ent and self-critical. There is a real desire base to learn from each other and develop ” to empower everyone to work on projects new solutions based on their needs. they find stimulating and speak up when they have concerns or ideas. We have, for example, a weekly digital Q&A with Mark Zuckerberg where any employee can ask questions.
22 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 23 Transformation and innovation
“It is essential for Delivering innovation is about listening to your sports organisations to customers, partners and staff understand the consumer through quantitative and qual- To better understand how to deliver itative insights and by building a innovation effectively, we also asked leaders consumer-centric culture inside to rate certain concrete initiatives. the organisation.” F1 launched F1fanvoice, an official online Initiatives to implement innovation and transformation community for fans to contribute to the Claudio Borges Percentage of respondents, Top 2 box (“important” and “very important”) sport via surveys, polls and forums. The in- Global Director Digital itiative allowed F1 to tap into fans’ ideas, all Planning, Adidas while fostering a strong sense of community Working with sponsors provides an and vested interest in the sport. unrivalled platform to drive innovation. Involve customers and fans in product development 75.8% Examples are countless, with the likes of FIFA also provided a great example by Microsoft, IBM, SAP or Alibaba taking on Collaborate with external partners (e.g. innovation launching a GitHub competition asking important roles as sponsors and innovation 75.7% hub, investment in start-ups, partnerships) football-passionate developers around partners. the world to think about solutions relat- Regular brainstorming Engage and 72.9% ed to voice recognition technology. The Working with partners does not neces- sessions with staff listen NBA, Man City or Bayern Munich are sarily mean sponsors, however. There is a other organisations that regularly organise growing number of organisations collabo- hackathons and similar events, inviting and rating with starts-up or innovation hubs. For incentivising experts to think about their Create an internal innovation department 38.2% example, UEFA recently launched a start-up challenges and develop suitable solutions. competition, gathering international start- ups to share experiences and help UEFA Spin off a separate business tasked 33.3% with innovation Something that is recognised by sports address and try to solve some of its current leaders as well, working with external business needs. In the United States, the Appoint an innovation manager in Structure and partners is another essential channel to NBA, which has a strong track record in 31.7% each department organise implement innovation and transformation this space, has teamed up with Warner Lab (75.7% rated this aspect as either important to develop new digital content solutions for Source: PwC Analysis, N = 538 or very important). basketball and beyond.
Initiatives related to engagement came out clearly Looking outside of sports, there are no shortage 5 steps of design thinking ahead of initiatives related to changing organisa- of examples of companies that have successfully The innovation journey starts and ends with your customer tional structures. This confirms that sports organi- integrated customer feedback as part of their sations need to bolster their ability to engage and product development and design process. 5. Test 1. Empathise actively listen to stakeholders if they are to master Get feedback for your Develop a deep understanding innovation. To be able to do so requires agility Perhaps one of the most inspiring cases is LEGO. prototype and engage in a of the challenge and your and the maturity to accept (temporary) failure as a After averting bankruptcy in 2003, it redefined its short-cycle innovation process customers’ needs necessary a step towards success. path to success by doing something very simple: to continuously improve it taking time to engage with and listen to its cus- This is best exemplified by the tenets of design tomer base. Through The Future Lab, LEGO de- thinking, which is anchored in the ability to open veloped low-risk, low-cost innovation techniques up the innovation process by incorporating and that led to the rapid creation of minimum viable Design acting on external input with agility. prototypes. Expanding on that, LEGO Ideas was launched, an online crowd-sourcing platform that 4. Prototype thinking 2. Define Among the options we presented to them, sports allows customers to share and vote for ideas they Transform your idea into a Clearly articulate the prototype so that you can problem you want to tackle leaders think that involving customers and fans in would like to see added to the product line. test all parts of your solution product development is the number one initia- tive to implement innovation and transformation The sports industry also features strong examples (75.8% rated this aspect as either important or of fans actively involved in the innovation process. very important). 3. Ideate Come up with multiple innovative solutions and select the most promising one
24 | PwC’s Sports Survey 2019 Source: Design Thinking model, by the Hasso-Plattner Institute of Design at Stanford (d.school) PwC’s Sports Survey 2019 | 25 Transformation and innovation
PwC Global Innovation 1000 The six characteristics of superior innovators
1. Aligning innovation and business strategies Employees need to be very clear in purpose as to why and what they are innovating. Resources should be funnelled into research and development that will have the most impact on future success, not things that will divert attention away from achieving relevant business goals.
2. Company-wide cultural support for innovation Overall company culture plays an essential part enabling successful innovation. An innovation mindset needs to be proactively integrated into both mission and organisational structure.
3. Top leadership is all in Executive input and support plays a large part in creating an innovative culture. Leadership provides vision to align the overall direction of R&D efforts, and importantly, is often the only thing able to overturn older methods of management and red tape that get in the way of innovation.
4. A customer-first approach Deeper, continuous and iterative customer insights are an absolute key capability in coming up with innovative ideas and have to be handled as critical to the success of the innovation process.
5. Choice of the right projects As demonstrated in this section, ‘Fail fast and fail often’ goes Silicon Valley’s mantra. While innovation does not happen by accident. It innovation may go through multiple stages, it is the decision is the result of deliberate actions to create making on which projects to ‘green light’ at the front end that enabling structures and populate these are most important drivers of long term success or failure. with people that possess the talent and
6. A holistic approach to innovation skills to make it happen. It is an iterative Simply throwing money at research and development will not process that embraces collaboration, result in success, and indeed, when done poorly, is likely to customer feedback, “fast failure” and push companies towards negative outcomes. Successful learning from mistakes. It requires innovator must exemplify all five of the above characteristics, not just one or the other. courage and a sense of overall purpose. For established sports organisations, the stakes for this purpose couldn’t be higher: remaining relevant in an increasingly competitive and disrupted industry. Source: PwC Strategy&, 2018 Global Innovation 1000, What the Top Innovators Get Right
26 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 27 Direct-to-consumer
Digital media consumption: a closer look
It is now universally accepted that the future This raises important questions for sports of sports consumption will (ultimately) be rights owners on how they approach their digital. While traditional linear TV will contin- own digital media distribution strategy and ue to play a fundamental role in the years to the possible use of OTT platforms, which come, with older generations continuing to we will address in this section in more spend a significant amount of time watch- detail. ing “the old way”, the trend towards digital Direct-to-consumer: is clear – and so is its growth potential. To set the stage for the debate, we asked IRIS Intelligent Research in Sponsorship Engaging sports fans in the digital age Across the entertainment and media to share a snippet of their latest consumer sector, content owners and media distrib- research on digital media consumption. utors are focused on the big prize: market Their study covers samples in the US, dominance “at scale” across digital media Europe and China of consumers that have consumption. access to the internet and have expressed an interest in sports (top 2 box).
Consumption of TV sports content through streaming Percentage of respondents, Top 2 box
2018 In the sports media space, we considered China Europe USA 2019 recent trends in digital media consumption, the many paths rights owners are using to 72.0% 68.0% distribute content through digital platforms, 58.8% 53.6% and the merits and challenges of doing so 46.0% 48.0% 39.6% 36.0% 38.2% direct-to-consumer. Sports leaders tell us that 31.8% successful OTT distribution is by no means a walk in the park and has been commercially 10.0% 12.0% underwhelming to date. We see OTT as a Millennials Non-millennials Millennials Non-millennials Millennials Non-millennials potentially impactful, albeit non-essential part (18-34) (35+) (18-34) (35+) (18-34) (35+) of understanding your audience through a Source: IRIS Intelligence | 01/2019, CAWI, N=1021 internet users interested in sports (Top 2 box). Europe includes France, Germany, Italy, Spain and United Kingdom. holistic fan engagement strategy.
28 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 29 Direct-to-consumer
In general, the online streaming of sports ested millennials, only 38% stream sports Most importantly, however, the Chinese content has continued to increase over the online compared with 72% in China and have an unrivalled affinity for online solu- past year, with percentage point increases 59% in Europe. The difference is even more tions, which inevitably extends to media of between 2% and 8%. A big driver has striking among non-millennials, with only consumption. been the growing number of traditional TV 12% streaming sports online compared providers making their content available with 48% in China and 40% in Europe. For its part, Europe has experienced a on digital platforms, along with a greater significant disruption of local markets, amount of sports content distributed digital- In turn, China’s strong numbers could be with OTT providers enjoying an increase in ly by rights owners and pure OTT providers. the result of the more modest number of popularity and consistently adding to their linear sports channels available to Chi- respective sports rights portfolios. Although Interestingly, however, the share of US nese consumers. This has offered greater each market has experienced differing consumers watching sports through digital opportunities for OTT providers, which have development, the trend towards digital channels is relatively small, which reflects duly entered the Chinese market, mobilis- consumption is ubiquitous, with nearly 60% the resilience of the domestic TV market ing nearly three quarters of mainly urban, (and counting) of sports-interested millenni- and the wealth of linear channels with sports-interested millennials to consume als consuming sports content online. The race for fans’ attention sports programming. Among sport-inter- sports content online. (and primary data)
Willingness to pay for the top four sports in the relevant country as part of streaming service As the ‘attention economy’ takes over, These partnerships beg the question: Percentage of respondents, Top 2 box sports leaders are clear that the ability to should rights owners be placing all their 2018 engage fans effectively is the number one eggs in the basket of intermediaries? China Europe USA 2019 opportunity to grow revenues, with 84.9% Beyond the attractiveness of tapping into of respondents stating so. Succeeding or their expertise and reach, the current fluidity failing at this will be determinative in deliv- in the media sector coupled with the limited ering sponsors that additional edge, while data shared by such intermediaries are 56.3% 59.0% offering fans additional options to consume cause for concern. 52.7% 50.8% 50.1% 50.9% 51.4% 53.0% 52.8% 43.7% 42.5% 43.5% content according to their preferences. Disney’s bundling of ESPN into their newly In order to do so, rights owners have launched OTT Platform Disney+ is a stark naturally teamed up with media and tech reminder that the media space is consoli- companies to reach and monetise fans with dating and going forward just a few players Millennials Non-millennials Millennials Non-millennials Millennials Non-millennials impactful digital content. The examples are will be calling the shots – and sports con- (18-34) (35+) (18-34) (35+) (18-34) (35+) countless: tent is no exception.
Source: IRIS Intelligence | 01/2019, CAWI, N=1021 internet users interested in sports (Top 2 box). • Leading platforms such as Facebook, Europe includes France, Germany, Italy, Spain and United Kingdom. Netflix and Amazon have released original content with properties such as “Data must be at the heart Formula 1, the NFL and football teams of all growth strategies. or athletes such as Tom Brady. As part of the analysis, IRIS also provided rent pay TV subscriptions and adding new Possibly for the same reasons, Europe This goes beyond CRM • Emerging short-form mobile video plat- data with regard to consumers’ willingness paid OTT services. and China also feature significant varia- by including device ID’s, form TikTok has also entered the scene to pay for the top four sports in the relevant tions between sports, although millennials with high-profile partnerships such as cookies, brower information, country to be part of a streaming service. Looking at regional differences, willing- generally showed a greater willingness the one with Borussia Dortmund. content mapping etc. to ness to pay has remained flat in the US to pay compared with 2018. A possible The first clear takeaway here is that and even decreased among millennials. interpretation could be that millennials’ • DAZN has continued its relentless develop a detailed picture consumers are generally willing to pay to Interestingly, this trend is not observable consumption behaviour, contrary to that international development through the of fans. It is the only way to access content, with over 50% of respond- across all sports: more detailed analysis of non-millennials, is less related to top acquisition of premium content, mirrored start understanding more ents across most regions and age groups suggests that millennials’ willingness to pay events or a particular team’s performance. by niche players like mycujoo for long- stating their willingness to do so. Year-on- for football and basketball has grown, while This is exemplified by the stark decrease in tail content. about how to sustain a high- year growth is particularly strong for millen- for American football and fighting sports it the willingness of non-millennials to pay for performance D2C strategy.” • Most interestingly, rights owners are also nials, while older generations seem to have has declined. This would demonstrate that sports that recently staged a world cham- partnering with hybrid organisations like plateaued. This could suggest a dilemma willingness to pay to stream sports is no pionship, compared to that of millennials, Sanjit Atwal 433 or COPA90, which blend agency on the part of older generations – one that longer a general question, but rather a con- which is much more stable. CEO, Halfspace and content production work with an im- is not faced by cord-cutting or cord-never crete reflection of rights owners’ and event pressive following on mainstream social millennials – of choosing between their cur- organisers’ ability to engage effectively. media channels.
30 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 31 Direct-to-consumer
Our respondents recognised this point, cal capabilities in place to make the most with 55.2% identifying the dominance of of this opportunity. In all too many cases, “Key to succeed in D2C major tech firms as a gateway to content rights owners are not yet in the position to is to start nimble and as a major threat to industry revenues. As a use fan data to their benefit, having long develop a strategy with result, rights owners across the board have neglected its importance while succeeding been compelled to consider distributing through the sale of traditional rights. As un- the right partners, invest in content direct-to-consumer, thereby further derstanding data is the key to success in a data and digital marketing developing direct fan relationships and the world where content is primarily consumed capabilities, and involve Rights owners’ OTT platforms: potential benefits this brings. Obviously, not through digital channels, rights owners that every rights owner has the core capabil- feel unprepared should act now to avoid fans and athletes in the are they delivering? ities or resources to get such a strategy falling behind. initiatives. Build your offering off the ground successfully. That said, we with the fans in mind, are of the view that in today’s environment Another top aspect mentioned by our enlarging the view on what Armed with the confidence that younger Perception of commercial success of rights owners’ OTT platforms every rights owner should have a direct fan respondents is the ability to increase global generations are willing to both consume Percentage of respondents engagement strategy together with a clear reach and viewership, considered by 70.1% they really like beyond the and pay for premium digital content, and vision as to whether or not a streaming of respondents as either important or very core sports content: think with a clear view of the benefits of distribut- Exceeded platform should for a part of that. important. Indeed, rights owners that have ing content direct-to-consumer, a growing Disappointing, should expectations entertainment.” be restructured been savvy in structuring their (digital) number of rights owners have taken the 4.2% To add some colour to the debate, we media rights deals have had the opportunity Carlo De Marchis step of launching their own OTT platforms. 5.4% asked sports leaders what they think are to ensure broader coverage. An interesting Chief Product & Marketing Officer These have varying degrees of maturity and the main benefits for rights owners of imple- case of a sport having implemented a long- at deltatre have experienced different levels of success menting their own OTT platforms. term – and so far successful – multi-plat- to date, with few rights owners having had form strategy is the NFL’s entry into the the courage (or contractual ability) to offer 39.7% Access to fan data came out on top, either German market. While selected games are access to premium content. Many of these 20.0% Below expectations so far, Don’t know/abstain for commercial purposes (80.1% of re- available free-to-air, all games are also avail- platforms have become outlets for on-de- but still promising spondents) or to generate insights enabling able on the streaming platform DAZN with mand original content or second-tier live product improvement (70.4% of respond- German and English commentary as well content, or are used as “back-up” chan- ents). Access is only the beginning, though: as via the league’s official streaming service, nels for streaming premium live content in many players lack the infrastructure and the NFL Game Pass. After having barely markets that were not covered by traditional know-how to derive commercial value and any awareness a couple of years ago, last media partners. insight from the data at their disposal. A lot year’s Super Bowl had a viewership share of them are still scrambling to get legacy of 40% on German TV. Given the mixed results to date, we thought systems to talk to each other, let alone have it would be a good time to examine the 30.7% In line with expectations Source: PwC Analysis, N = 516 the necessary CRM systems and analyti- commercial success of rights owners’ streaming platforms to date. How have things worked out so far?
Benefits for rights owners of implementing an OTT platform The responses of the sports leaders we Challenges faced by rights owners in implementing an OTT platform Percentage of respondents, Top 2 box (“important” and “very important”) consulted indicate that the hype around Percentage of respondents, Top 2 box (“important” and “very important”) OTT platforms as the commercial silver Access to, and commercial bullet for rights owners is over, with 45% of exploitation of fan data 80.1% respondents viewing results so far as below Ensuring a high quality of service 76.8% Ability to innovate sport formats 70.4% expectations or disappointing. Only 4.2% through fan insights Creating enough content to generate 75.1% think results so far have exceeded expecta- long-term interest Increased global reach and 70.1% tions, and just under a third view them as in viewership Developing an effective pricing strategy 68.5% line with expectations. (e.g. freemium, subscription options) Additional sponsorship/ 63.0% advertising revenues Identifying suitable implementation 66.2% In attempting to understand the reasons for partner(s) Complement offering of linear broadcasters 61.7% this, we asked respondents to outline what they felt were the greatest challenges faced Cost of technology and implementation 63.9% Additional subscription revenues 58.5% by rights owners in implementing such Competing interests with companies platforms. buying media rights 62.2%
Source: PwC Analysis, N = 513 Managing entrepreneurial risk 44.5%
Source: PwC Analysis, N = 514
32 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 33 Direct-to-consumer
Play
According to 76.8% of respondents, the demonstrated by numerous studies, there off fee or plenty of in-game transactions main reason has been the challenge of is no doubt that people’s willingness to pay that upgrade the experience. ensuring a high-quality service, followed for digital sports content is on the rise, as closely by challenges in creating sufficient consumers appreciate the value of access- What does the future look like in terms of content to generate long-term interest ing engaging and personalised content. sports media pricing models? It is clear that (75.1%). Rights owners face a big problem The difficulty lies in finding the right balance the paradigm of exclusivity and free-to-air in keeping pace with huge content produc- between free and paid content, and in vs. paid content has its days numbered. We tion and distribution machines like Netflix, ensuring an effective funnelling of fans’ believe rights owners will have to provide Amazon or DAZN that are competing for attention from free content to platforms that an effective entry-point to consume content the same entertainment budget. Especially allow for direct (or indirect) monetisation. that is free of charge, non-exclusive and smaller sports with less high-end compe- broadly accessible. From there, they will titions have issues keeping fans on their Looking outside of sports, gaming may have to develop an effective product and platforms. Unfortunately, simply shifting a provide an interesting example of suc- pricing strategy to funnel consumers in line linear TV feed onto a digital platform does cessful “freemium” models. Virtually any with their evolving preferences and needs. not make it more exciting or engaging for game has a free-to-play version that drives This will be painful in the short term as it the digital-first generation, which has more initial engagement. A price-sensitive – or will likely cannibalise traditional media rights and more demanding expectations of the uncommitted – gamer may continue on that revenues. Long term, however, it may be features live sports streaming should offer. basis. This provides only little monetisation the only way to maintain the appeal of potential, and yet expands the reach and sports content for generation Z. Developing an effective pricing strategy also popularity of the content. From there on, ranked high on the list of challenges, with consumers are funnelled into a full spec- Sports federations should carefully 68.5% of respondents naming it as either trum of value propositions with varying “ an important or very important concern. As monetisation models: a subscription, a one- reflect if future OTT income will balance out with reduced revenues from traditional media due to reduced exclusivity, as well as the costs In summary, there is no single way to engage need to have the sophistication of digital fans effectively. All distribution channels, advertisers to attract partners, the winners of to develop, maintain and run an be they direct or intermediated, should be tomorrow will be the players who are able to OTT solution with the same quality considered based on their respective merits build direct fan relationships and develop an standard. (and challenges). In a world where media and intimate understanding of their audience, be it sponsorship are converging and rights owners through streaming or other means. Stefan Kürten ” Executive Director, Eurovision Sport
34 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 35 Role of sports federations
Federations on a journey of self-improvement
Over the last couple of decades, the sports launched rival competition called the Inter- The global development of a sport needs a world has come under increasing scrutiny, national Swimming League (ISL), raising the common set of rules and a cross-border ef- Role of with louder demands for better governance prospect of further legal disputes. Although fort to ensure the integrity of competitions. and integrity in the face of recurring corrup- FINA ultimately brought its regulations in This requires stakeholders to come together tion and doping scandals. This has brought line with anti-trust law, such punitive tactics in order to agree upon joint outcomes and the role of sports federations into question, have laid bare the struggle certain feder- initiatives. We believe that membership sports with many commentators raising doubts as ations are facing to maintain a position of organisations with a representative govern- to whether they are fit for purpose. strength. ance model, although at times slow-paced, remain best suited to forging agreement A couple of relatively recent – and highly With the proliferation of new events estab- and coordinating efforts effectively. significant – developments have illustrated lished by private actors, should we not just federations that international federations in particular allow the free market to determine winners Furthermore, the important societal role will have to do more to remain relevant and and losers? If so, what role would be left for played by sport requires investment in cannot rest on their laurels. In 2017 the Eu- sports federations that are outperformed sports development in order to ensure a ropean Commission ruled that International by the competition? We are of the view broad and diverse base of participants and What next? Skating Union (ISU) rules imposing penalties that federations remain vital to the devel- talent. We believe that only not-for-profit on athletes participating in competitions opment of a healthy and sustainable sports organisations can genuinely work towards not sanctioned by them were in breach ecosystem, but in many instances must this goal. of EU antitrust law. Similarly, in 2018 the step up their game to remain relevant in International Swimming Federation (FINA) the governance and development of their That said, international federations must be threatened athletes with a two-year ban if respective sports. held accountable for their performance in they swam in the first edition of the recently relation to the above-stated goals.
How do you rate the performance of sports federations in the following areas? Percentage of respondents, Top/bottom 2 box
Needs improving Performing well Transparency and good 56.6% 20.0% As the sports industry has entered the digital age, governance The sports leaders we surveyed did not shy away from pointing to the areas where sports federations are under growing pressure from Protecting athletes’ rights 37.4% 25.0% performance has been lagging. Transparen- and well-being various angles. We asked sports leaders how they cy and good governance was identified as feel federations are performing across a number Developing grassroots participation 34.7% 28.3% the key area for improvement, with 56.6% of areas, and where they should focus their efforts stating that performance needs improving. Protecting the integrity of competitions 27.7% 29.9% Respondents also pointed to improvement in the next 3-5 years. We also reflected on the potential for protecting athletes’ rights and specific opportunities that gaming and esports wellbeing (37.4%), developing grassroots Commercial exploitation of event 23.0% 45.5% might provide. Our analysis shows that federations participation (34.7%) and protecting the integrity of competitions (27.7%). still have work to do to re-gain the confidence of Developing elite athletes 20.4% 44.0% the sports community. Also, federations need to focus on innovating formats and rules, broadening Governing the rules of the sport 14.5% 43.2% reach, and collaborating with investors and Organising competitions 12.5% 53.9% commercial entities. Source: PwC Analysis, N = 525
36 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 37 Role of sports federations
PwC Strategy& capability based strategy framework
Coherence “ Way to play: In what way are we going to position ourselves in the ay to pla We need to be faster, pro-active, marketplace to generate value for our customers and stakeholders? W y How will this differentiate us? “ more professional, with integrity. Product and service fit: What are we going to sell and to whom? Francesco Ricci Bitti How does this product fit with our capabilities and way to play?
President, Association of Summer Olympic International Federations C a
Capabilities system: What do we need to do particularly well p Right to
a d
b win to generate value? What allows us to deliver consistently? What n t i a i l fi combination of processes, tools, knowledge, skills and organisation it i t will make it happen? e c e s u ic v s d r ys ro e Right to win: How coherently are we bringing together our way to te P s play, capabilities, products and services? Do we have a “right to win” m compared to competitors?
Source: PwC Strategy&, Capabilities-Driven Strategy + Growth
Where should sports federations focus their efforts in the next 3-5 years? Percentage of respondents, forced trade-off among two options Effective strategies require focus Strengthen development of elite Grow and improve production and athletes and grassroots participation commercialisation of content
The sports industry is undergoing unprec- fit, which lead into the fourth and decisive Federations should be making innovation in 55.1% 44.9% edented disruption. With technological area: an organisation’s right to win. These formats and rules a centrepiece of their way advances creating new possibilities for both questions are not only relevant for private to play. Also, when balancing a federation’s content creation and distribution, sports organisations: sports federations also need sports development and commercial func- Protect traditions Innovate formats and rules and heritage fans are developing consumption prefer- to ask themselves where they stand in each tions, development should be prioritised. Way to play Way ences they even didn’t know existed a few of these areas. They are competing for 90.8% 9.2% years ago. In such an environment, where attention and relevance, not only with other Looking at products and services to bring the new normal is constantly evolving, fed- sports, but also with the broader media to market, sports leaders still think that erations face a big challenge in determining and entertainment industry. Needless to traditional sports should come first, while where to focus their efforts. What initiatives say, there is no one-size-fits-all to defining developing a complementary gaming or Focus on traditional sports Develop a complementary gaming and/or esports offering should be pursued? What angle should be a strategy. Every organisation needs to be esports offering also ranked highly. Thinking 53.5% 46.5% taken on new opportunities? What risks able to develop a unique approach as to of distribution, the long game for federa- are worth taking, and which should be how it wants to face the marketplace. tions should be to reach and engage the avoided? broadest possible viewership base over Maximise immediate To shed more light on how a federations’ short-term monetisation. Reach and engage the broadest possible base of viewers rights monetisation service fit
The list of open questions is long. To wade strategies may take shape, we asked and Product 86.0% 14.0% through this ambiguity, federations must sports leaders to pick from a non-exhaus- When thinking of their capabilities to exploit start by defining a strategy that works for tive set of strategic trade-offs. Take the events and content, federations should them. It is essential to set themselves on responses not as an end, but rather as a focus more on collaborating with external the right path by defining a clear set of ob- means to an end: sparking a debate about parties. There was no clear winner as to Partner with third-party investors and/or commercial entities Fully control own events and content jectives that enable organisational focus. strategy. whether to build resources in-house or spin off commercial or digital functions external- 72.0% 28.0% At PwC, we break strategy definition down What did we learn from the industry’s col- ly: our results indicate that both approaches into three key areas (see figure): way to play, lective wisdom? have merits. Develop commercial/digital capabilities system and product and service system Spin off commercial and/or digital functions into separate entity capabilities in-house Capabilities 52.6% 47.4%
Source: PwC Analysis, N=522
38 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 39 Role of sports federations
Forget esports for a moment, do you have a gaming strategy? When developing a gaming strategy, federations The staggering growth of esports has cre- from the gaming industry, which is where tunities for mobile gaming, and federations ated a new challenge for federations, who we believe their primary focus should lie. may consider how a portfolio of different must consider the following questions: like many other sports organisations are Debating esports without a gaming strategy mobile-first sports games can engage fans scrambling to distinguish real opportunities makes little sense as 95% of esports view- globally and grow their audiences. Further- from media hype or false promises. Sports ers are gamers. This critical point changes more, the gamification of sports provides organisations are increasingly engaging with the discussion for sports organisations and exciting opportunities to attract sports fans esports, and sports leaders are beginning introduces a number of new opportunities in new ways, creating unique experiences. to make esports a strategic priority. In that can help federations achieve their Interestingly, 64.9% of survey respondents fact, when faced with a trade-off between objectives. identified the delivery of better fan engage- focusing on traditional sports or developing ment through gamification as the most a complementary gaming and/or esports By prioritising a gaming strategy, federa- attractive gaming and esports opportunity Is it possible to govern the digital offering in the next 3-5 years, nearly half of tions can broaden their thinking beyond for federations. versions of our sport? respondents (46.5%) are of the opinion that simply organising a competition for their federations ought to focus on the latter. sports simulation game and consider different options that have greater poten- Although esports is the buzzword on every- tial to drive global reach, fan engagement one’s lips, a number of organisations are and revenue growth. Recent technological liable to forget that esports has emerged advancements have increased the oppor- Is there a leading simulation game for our sport?
Attractiveness for sports federations of selected gaming and esports opportunities Percentage of respondents, Top 2 box Do we have a relationship with the relevant game publishers? Deliver better fan engagement 64.9% through gamification
Organise simulated sports esports 57.7% competitions
License intellectual property to a game publisher 55.4% What assets and capabilities do we Distribute gaming content on own 38.7% have to create value within gaming channels and esports? Organise action/fantasy/shooter esports competitions 37.8%
Invest and develop an own game 25.7%
Other 13.1% How aligned are our different Source: PwC Analysis, N = 242 stakeholders on gaming and esports opportunities?
How can gaming drive our digital strategy?
40 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 41 Role of sports federations
As federations consider the most appropri- The challenge for federations is to develop ate way to engage with esports, they must assets and capabilities that create value “Sport fans are increasingly not forget that any pinnacle competition for game publishers to dissuade them from looking for “lean-in” enter- requires a thriving ecosystem at its base independently growing their own game tainment experiences and and a clear pathway to the top. All too ecosystem without involving them. often, attention is only paid to the top of the want to be part of a nar- pyramid and the base is forgotten, despite Ultimately, it is clear that gaming and rative instead of passively the latter being where the long-term value is esports offer federations new and exciting consuming content. Gaming often generated. opportunities to grow their sports reach, en- and esports will take cen- gagement and revenues. Has this message Federations that decide to engage with come across clearly enough to federations? tre stage over the years to esports should consider how they grow the The sports leaders we surveyed are not come, especially in a world whole pyramid around their selected games certain. 38.7% think that senior leadership where real and virtual and leverage their considerable experience at federations is unclear regarding which and expertise in increasing participation and direction to take. We believe this reflects experiences will eventually creating robust development pathways. the significant complexities of the gaming intersect.” Federations must work collaboratively with and esports ecosystem and particularly the game publishers to create a compelling challenge for federations to engage with it Christian Volk competition experience and grow the in an authentic way. Director eFootball & Gaming, FIFA selected game ecosystem from grassroots to elite levels. This will result in a long-term, mutually beneficial relationship that helps both organisations achieve their objectives.
Does senior management of sports federations fully appreciate the growing opportunities in gaming and esports? Percentage of respondents
Don’t know/ abstain Fully, it’s a top priority 4.5% 5.0%
15.3% Not at all, there is a 38.7% Sports federations need to step up their long way to go Somewhat, but they don’t know what direction to take performance if they are to continue playing a central role in the governance and development of their sports. To do so, they should establish focussed strategies, with clarity concerning the 16.2% way they are facing the market. They should turn They appreciate it and are starting to act to partnerships to ensure they have the right capabilities on hand to deliver. They need to 20.3% embrace innovation so as to be in the position Not yet, but there are to bring the products and services demanded of encouraging signs them to market. Ultimately, as the world around Source: PwC Analysis, N=242 them accelerates, sports federations need to act sooner rather than later to keep pace and avoid being left behind.
42 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 43 Role of sports federations
Partnership with third-party investors
A new dawn for agencies? Relevance of sports marketing agencies over time
Yesterday Until today Starting today
Birth of sports marketing Scaling of sports marketing Digital disruption of sports marketing
The age of double-digit growth, The age of shifting consumption behaviour, The age of “peaking” growth, rights birth of premium sports, surge of surge of tech companies, demise of war between traditional media players, global sponsors and Pay TV traditional media, growth of direct-to- globalisation of premium sports broadcasters consumer opportunities and OTT platforms 72.0% of sports leaders have stated In recent years, however, the role of agen- – is testament to this trend. Take, for that federations should focus resources cies has been gradually decreasing in many example, CVC’s reported GBP 225 million on partnering with third-party investors cases, compounded by a trend towards investment in the Rugby Premiership and or commercial entities, as opposed to in-sourcing by rights owners keen to max- reported interest in investing GBP 500 Cumulated reserves and Have to invest in new Had limited revenues and reserves fully controlling own events and content imise profits. million in the Six Nations Championship redistributed profits business models (28.0%). This result raises the question rugby union competition. of the future role of sports marketing As we are entering a new age that is rife Governed the sport Managed the stakeholders Manage risk on behalf of stakeholders agencies in the evolving sports with uncertainty, we are of the opinion that Will private equity funds also becomes Professionalised and Evolve expertise to manage ecosystem. agencies will see a new surge in relevance, agencies, will agencies act as private equity Rights owners Lacked resources and expertise in-sourced operations product lifecycle as rights owners are caught in the crossfire funds or will both find ways to bring their As illustrated in the chart, agencies have between stakeholders demanding a steady best to the table and collaborate? played a fundamental role in developing re-distribution of commercial revenues, and Watch this space… sports marketing and have been jointly the growing entrepreneurial risks related Provide content and Long-term, wholesale buy-out of rights Commission-based rights sales responsible for a significant portion of the to (digital) media distribution and D2C technology solutions strategies. revenue windfalls that have benefited fed- Distribute rights and sell Packaged, bundled and distributed rights Optimised fragmented markets erations and teams over the last 20 years. direct-to-consumer ISL, TEAM Marketing, Endeavour (IMG), In- The growing interest of private equity funds Share risk across initiatives front, MP Silva and Lagardère, just to name Provided advance payments Provided minimum guarantees in investing in commercial entities alongside and products a few, have all been instrumental. rights owners – albeit it highly controversial Agencies
Agencies as investors and Agencies established the market Agencies optimised the market solution providers
Source: PwC Analysis
44 | PwC’s Sports Survey 2019 PwC’s Sports Survey 2019 | 45 Notes and sources Our service offerings
Growth Opportunities and threats & Women in Sports Wrack, S.; 19. March 2019; Wanda Metropolitano’s record crowd shows English football the way; The Guardian (online)
Carp, S.; 3. July 2019; Lionesses’ World Cup semi-final UK’s most watched TV programme of 2019; SportsPro (online) Corporate Business Organisational strategy planning design Garry, T.; 20. March 2019; Women’s Super League: Barclays agree multi-million sponsorship deal; BBC Sport (online)
Draper, K.; 5. August 2019; Nike releasing a commercial minutes after USWNT’s victory in the final; NY Times (online) Independent Davis, K.; 13. May; 20 Facts And Figures To Know When Marketing To Women; Forbes (online) Governance and business review compliance Transformation and innovation: Essential to the future of sport and due diligence Boorstin, J.; NBA and NFL commissioners tell how they’re turning to technology to draw in fans; CNBC (online) Mega-event Fédération International Football Association; 04. June; The Hidden Technologies at the 2018 FIFA World Cup™; FIFA.com (online) Market analysis feasibility and impact Brown, M; 7 July 2014; The Biggest Media Company You’ve Never Heard Of; Forbes (online) and benchmarking assessments Perez, S.; 9 August 2017; BAMTech valued at USD 3.75 billion following Disney deal; techcrunch (online)
The Walt Disney Company; 8. August 2017; The Walt Disney Company to Acquire Majority Ownership of BAMTech; www.thewaltdisn- eycompany.com Gameplan A; 2019; the 3 C’s behind great leadership; Adidas (online) Our clients Gibbs, A.; 26. February 2019; Microsoft CEO Satya Nadella on the 3 qualities that make a great leader; cnbc (online)
Markowitz, J.;13 November 2018; Open Innovation at Lego – The Back Beat in “Everything is Awesome”; Harvard Business Review (online)
Formula 1; 25. May 2019); Formula 1 presents F1 Fan Voice; formula1.com Event Host Brands Sports Industry Group; 3 June 2019; FIFA explores voice assistant tech with virtual hackathon; sportindustry.biz (online) organisers cities Wolf, M.; 23. January 2018; „Hack Days“ beim FC Bayern - Mit Viererkette zum Erfolg; Handelsblatt (online)
Impey, S.; 23. January 2019; NBA and Turner sign up to new Warner innovation lab; SportsPro (online) Design Thinking Sports Leagues and Media federations teams companies Direct-to-consumer: engaging sports fans in the digital age Impey, S.; 23. July 2019; ‘Our story resonates in America’: How Borussia Dortmund found chemistry with TikTok. SportsPro (online)
Bosse, T.; 18. July 2019; Marktübergreifende Partnerschaft: Eurosport verkauft TV-Rechte an Dazn; Sponsors (online) Sports marketing Sports Sports tech agencies ministries firms Sports Business Media; DFL partners with 433 to boost Bundesliga social media presence; sportsbusinessmedia.com
Krei, A.; 05. Februar 2018; Super Bowl bringt ProSieben über 40 Prozent Marktanteil; DWDL (online) The role of sports federations: what next? & Partnership with third-party investors: a new dawn for agencies?
Haffner, A; 17 January 2018; Why the International Skating Union was found in breach of EU competition law; LawInSport (online)
Sportcal; 15 January 2019; FINA backs down on ban threat over participation in rival ISL; sportcal.com
Ahmed, M.; 13 March 2019; CVC seeks £500m stake in Six Nations rugby; Financial Times (online)
46 | PwC’s Sports Survey 2019 Our Sports Business Advisory team
The Sports Business Advisory team was established by territories throughout our network, we have 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 have published PwC’s Sports The team helps sports industry players design effective Survey annually, checking the pulse of the sports industry strategies, identify new growth opportunities and optimise on growth expectations and a wide range of strategic and their operations to meet their business goals. Working organisational topics. We hope you found the fourth 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
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Alexander Stolz Clemens Kuerten Focus areas: strategy, operations, Focus areas: strategy, innovation digital media and technology
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Fabio dell’Anna Patrick Balkanyi Focus areas: tax and Focus areas: financial audit, legal structuring assurance and risk
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Ioannis Meletiadis Claudio Prante Focus areas: strategy, technology Focus areas: deals strategy, and ticketing due diligence
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Credits
A big thank you to Guy Horne, Ciaran Quinn and James Carr, who provided valuable input by reviewing this year’s questionnaire. Special thanks also go to Lefteris Coroyannakis for launching this year’s survey process and his editorial input, Lisa Machado for designing the publication, Florian Brugger and Marco Gross for helping us with the promotion of the report, and last but not least, Gustav Baldinger, Dominik Hotz and Reto Brunner for their support.
© 2019 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.