Technological innovation is increasingly proving to be a genuine and attractive growth option for sports organisations. A growing number of media platforms venture capitalists (many working with athletes), hackathons, accelerators, incubators and sports tech showcases (such as that organised in the lead up to the Rio Olympics by the HYPE Foundation) dedicated to the sports technology space provide ample evidence of the growing influence of technology on the sports business.
How can sports properties use innovation for growth?
Tech innovation has its challenges, not least that it is a tempting bandwagon to jump on to disguise the lack of a marketing or business strategy. Activating Pokemon Go, doesn’t necessarily mean that you have a clear vision of how technology can drive business growth.
No matter what industry you operate in, Ansoff’s matrix remains to this day a valuable tool through which to explore your business growth options. H. Igor Ansoff defined four generic growth options based on targeting new and/or existing markets with new and/or existing products and services. The four “product/market” strategies can help us understand the potential that sports technology presents as a growth strategy for sports organisations.
Increasing your market penetration
This is the most common growth option. It carries the lowest risk as you are simply trying to sell more of an existing product or service (typically merchandise, tickets, and marketing or media rights) to a market that you already serve (fans, media companies or brands).
Formula E has enhanced the fan experience via their tie-in with Virtually Live that puts fans in the driving seat of a Formula E car. This is a classical technological enhancement to an existing experience that, if packaged and marketed effectively, can enhance the on-site fan experience and bolster the value proposition to fans.
Beacon technology is being hailed as a tool to help sports organisations capture lost revenue via hyper-targeted messaging inside stadia. Orlando Magic credit so-called “proximity technology” with a USD1 million increase in ticket sales last season.
Another good example of a tech-centric enhancement to an existing product (in this case sponsorship) which is sold to existing customers (brands) comes from F1 where F1 and Mercedes F1 have for the past few years been enabling sponsor Tata Communications to offer fans and innovators the opportunity to “submit ideas for solving real life challenges within Forumla 1 racing”.
Growth can be measured in many ways and sports organisations, like most companies, often focus on bottom line revenue. However, increasing the value of the brand should be considered an important barometer of growth (amongst other metrics).
The NBA has been an early adopter of chatbot technology and during the 2016 NBA Finals they trialed a Facebook Messenger bot that helped fans find content featuring the two competing teams. This is a good example of how the use of technology can help you to scale-up engagement with your brand (albeit, as many have pointed out to me, bot technology is perhaps not quite there yet).
Developing new products
Developing new, tech-driven products can range from the repackaging of an existing product to the introduction of a radically new one.
The LA Dodgers have pioneered the idea of sports teams creating their own start-up accelerator programmes. Their programme, run in collaboration with tech marketing specialists R/GA, offers mentoring, infrastructure and financial support to selected start-ups in exchange for an equity share in their business.
The benefits that this kind of forward-thinking approach can deliver to the positioning of the LA Dodgers brand (most notably amongst the business community) will go along way to justifying their investment in this programme (even if, worst case, their equity shares in the start-ups they mentor, generate little or no return).
The repackaging of the ticketing product in recent years including tech-driven developments such as dynamic pricing, paperless tickets and contactless payment is an example of how a traditional product can be re-modelled for a digital age and most importantly, add value by addressing customer pain points. For example, the MLS recently announced a partnership with SeakGeek to drive a new mobile-first ticketing approach.
Developing new markets
Market development involves targeting new markets or previously untapped sections of your existing markets. One stand-out sports organisation in this respect is the NFL. Swimming against the tide of reluctant broadcasters, with huge investments in NFL media rights, the NFL has successfully carved-out live content rights for distribution via OTT platforms.
As broadband speeds improve across the globe, cord cutting continues apace and some millennials (and the upcoming generation z) have little to no relationship with a TV, the NFL have recognised that a reliance on traditional on-air broadcast deals will not work long-term. They also see the opportunity that these technological and cultural changes could bring in terms of developing a previously untapped international audience.
This is the highest risk growth strategy of them all. Developing new products for new markets demands careful consideration and planning to succeed. This is doubly difficult in sport where a short-term culture (e.g. with coaches hired and fired on a whim and frequent changes in management / ownership) often pervades.
Disney recently invested a reported USD1billion to acquire a 33% stake in MLB’s tech spin-off BAM Tech. This placed a valuation on BAM Tech of c. USD3.5 billion. The development of BAM Tech (best known for its live streaming capabilities) by the MLB and MLB Advanced Media has been the ultimate example of diversification in the sports business.
Perhaps less risky is the increasing trend of many US sports organisations to invest in technology companies. In some cases, the investments are betting-related (driven by the likely return on investment should gambling laws in the US change in their favour) while other investments are part of broader partnership deals.
Amongst the organisations known to have taken equity stakes in tech companies are the NFL (e.g. equity stake in Sportradar US, a subsidiary of the Swiss-owned data provider), the NBA (e.g. equity stakes in FanDuel and DraftKings, the leading daily fantasy sports companies), MLB (e.g. equity stakeholder in FanDuel and DraftKings) and the NHL (e.g. equity stakeholder in Fanatics, an e-commerce platform focused on sport).
Don’t ignore the opportunity to grow
Virtual reality, augmented reality, 360 video and artificial intelligence (amongst other technologies) are creating new opportunities for growth in the sports business. Potential winners in the race to leverage this wave of technological opportunity include the progressive properties like Formula E and tech-driven sports like eSports and drone racing. The losers are likely to be sports properties that refuse to consider how technological innovation can support business growth.
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. All opinions reflect those of the author and not those of current or past employers.