It’s not exactly revolutionary to predict that digital marketing, the art (or rather science) of adding value to customers via digital means, is increasing in importance. The data speak for themselves.
Despite this, the digital marketing debate is currently focussed on whether digital should be treated as a standalone function or not. This relegates digital marketing to a tactical level, undermining the important strategic role it is playing, and will increasingly play in the future.
Sports properties must proactively plan and manage their transformation from a “traditional” business model to one that is fit for the digital age. To do this effectively, they will face five strategic questions: which customer segments are we (and should we be) serving?, what value proposition(s) are we providing to each segment?, how do we deliver this value?, what activities underpin this value? and how do we service our customers?
Across all five of these areas and over recent years, a dominant traditional and digital business model has emerged (see chart below). The former is characterised by the structuring, selling and delivery of rights to a predominantly business to business (B2B) customer and the latter by the production, selling and delivery of content for a predominantly business to consumer (B2C) target.
While this is an overly simplistic view, and betrays the fact that some characteristics are not exclusive to one orientation (e.g. rights management also plays a significant role in digital strategies), it illustrates the tensions between the two orientations and lays bare the trade-offs necessary to find the optimum approach. Sports properties can only go so far along the continuum from traditional to digital without diluting the value driven through a traditional orientation and vice versa.
Key customers: digital is driving a B2C revolution in sport
As the potential revenue from digital has grown, the major US sports properties (with some notable exceptions) have switched from exploiting their digital rights via a B2B, rights management model in favour of managing these in-house as part of a strategy to build digital communities of highly engaged fans. The MLB (through MLB Advanced Media) and emerging properties such as UFC are good examples.
While top live sports events are one of the last remaining appointments to view for fans, so-called cord cutting and improvements in live streaming capabilities globally are driving changes in fan consumption. It is no coincidence therefore, that the International Olympic Committee, as part of its efforts to be more relevant to younger fans, is finalising its own over-the-top channel (developed in-house by Olympic Broadcasting Services).
Value proposition and delivery: cost-based value propositions dominate digital
Currently, digital value propositions tend to be cost based (i.e. low cost to produce and low price for the end customer). For example, Yahoo! Inc.’s global live streaming agreement with the NFL (for the Bills vs Jaguars game in 2015) was based on the platform taking on no production costs. They took the signal produced by one of the NFL’s broadcast partners, financed their technical costs via advertising and made the stream free to view for fans around the world.
The big (linear) broadcast networks are still the ones investing millions in high-class, multi-camera live sport productions that drive value for audiences (and brands). Could it be that one day improvements in global live streaming (and advertising budgets increasingly shifting to digital) reverse this trend leading to the internet platforms making the big production investments and traditional broadcasters left to compete on the basis of cost?
The stadium experience (the core of the traditional business model), with the rise of fan engagement, has increasingly swung towards a value-based proposition. Fans are met with an array of activities on matchday, served food and drinks at their seat and able to use dedicated wi-fi networks. Sports properties also need to consider that as digital propositions become more sophisticated and value-based, the stadium experience may one-day swing the other way. For example, virtual reality may soon enable you to have a front row seat in the stadium from the comfort of your living room.
Activities: from rights management to content management
Rights management (structuring, selling and servicing rights) has been the mainstay of the traditional marketing orientation. The NBA generates most of its revenue from rights management-based activities (its current broadcast deals are worth $24 billion). However, by relaxing their “take-down” policies around user-generated content (and actively embracing this via the NBA Playmakers Platform), they recognise the importance of cultivating and managing communities to grow value for everyone. Nevertheless, there is obviously tension between permitting fans to repurpose and share content and satisfying a broadcast partner who has invested billions to acquire that content on an exclusive basis.
Service model: the rise of community management
The shift from the traditional rights management model to a community management model continues amongst sports properties. Facebook, Twitter and Snapchat are feverishly collaborating with sports properties. Off-the-shelf, white label social media platforms (e.g. Vixlet) make it possible for sports properties to run their own social networks and some sports properties are acquiring the capabilities to build or manage communities via marketing partnerships. A good example of the latter is Real Madrid’s tie-up with Microsoft which resulted in the development of a customer relationship management system (CRM) and the Real Madrid app.
Emerging sports properties are raising the stakes by putting greater emphasis on growing community reach and engagement. Formula E’s much talked-about Fan Boost, which drives social engagement, is a great example as is UFC’s approach to leveraging and growing their social media footprint through their fighters.
Managing digital transformation in sport
While it is difficult to put forward one single digital and traditional business model, the predominant characteristics described herein offer sports properties a model through which they can understand and proactively manage digital transformation (it can also guide savvy sponsors looking for the right sports property).
The digital marketing myth currently perpetrated across the (sports) marketing industry is that the debate should centre on the location of digital in the organisational structure. This is important, but only after the bigger strategic questions are tackled. These questions must focus on delivering value to the customer. In the end, for professional sport to survive and prosper, all roads lead to the fan.
About the author of this post:
David is a Chartered Marketer with more than 15 years experience in international sports marketing roles. You can follow David on twitter (@davidgfowler) or connect on LinkedIn (ch.linkedin.com/in/davidgfowler).
All opinions reflect those of the author and don’t reflect those of existing or previous employers.