In January 2016, Facebook claimed to have 650 million sports fans on its platform. This figure is likely to have increased to at least 700 million. Each Facebook user is worth on average $5 per annum to Facebook (according to TechCrunch) meaning sports fans could be driving as much as $3.5 billion in revenue.
There are two basic ways for sports properties to monetise Facebook and social in general: collaborate with the platforms on their terms (e.g. ad revenue share with YouTube, license content to Facebook, etc) or commercialise on your terms (e.g. charge sponsors to post or amplify branded content).
Collaborating with the platforms: the case of Facebook
Real Madrid were amongst a small number of top football clubs that had agreements in place with Facebook to produce video content for Facebook Live (FC Barcelona were reportedly being paid USD1 million for a 10 month period spanning the last football season). According to recent industry reports, Facebook did not renew these agreements and a new model is emerging.
Mobile and video are changing how Facebook will work with sports rights holders. Facebook are placing more emphasis on getting access to premium video content (including long form) as their deal with Fox Sports to stream several Champions League games in the 2017/18 season illustrated. They are also working on ways to better monetise this video content (via mid-roll ads) and will share 55% of ad revenues that are generated on top of a minimum guarantee.
As this new model is rolled out, top sports properties need to understand the value of their content to Facebook whether it is licensed directly or sub-licensed (as in the case of the UEFA Champions League / Fox Sports example).
Should Facebook be sharing more ad revenue with top sports properties?
Based on a top-down assessment (illustrated below), Real Madrid’s Facebook page could be worth $10-15 million to Facebook and a revenue share could be worth in the region of $6-7million.
Is this interesting for a club like Real Madrid? It is not game changing when you consider that the club earned EUR620.1 million (USD730 million) in revenue from the 2015/16 season (according to Deloitte), including EUR80 million (USD95 million) from the 2015/16 UEFA Champions League campaign alone (according to UEFA). More recently, they reportedly earned a staggering $10 million for one El Clasico match played in Miami.
Arguably, Real Madrid could claim that they are entitled to even more than a 50% share of the ad revenue generated by their Facebook page by virtue of the intangible brand value they bring to the platform.
However, even if a top sports property like Real Madrid was dissatisfied with the current rate of return from Facebook, would they seriously consider leaving such an important platform? To put it simply, if you are not on Facebook, with its 1.32 billion daily active users, you are nobody.
Facebook could also argue that Real Madrid generate (indirect) revenue from a range of Facebook functionalities such as the ability to enrich their customer database with data collected from their Facebook fans and the ability to integrate the “shop section” on their page.
Commercialising social on your terms
The media value generated by Real Madrid for their sponsors via their Facebook (105 million fans), Twitter (40+ million followers), Instagram (51 million followers) and YouTube (2.5 million subscribers) accounts, not to mention their presence on Snap, Google+ and Line, will easily run into the high tens of millions. If the club is able to convert this media value into revenue, the returns would dwarf the $6-7 million they could claim from a broader Facebook revenue share.
For all but a select few sports properties, locking horns with Facebook to claim a slice of their ad revenue would not go down well and would likely prompt Facebook to get tougher on attempts to commercialise their pages in other ways. Therefore, it would be more appropriate for top sports properties to focus on converting into revenue as much of the media value they can deliver to sponsors as possible.
What should sports properties be doing?
The sports business has struggled to find the right commercial model on social and it feels like it is still in an exploratory phase. However, its important to put the performance of the sports business in context.
A recent study by Digital Content Next found that premium publishers including The Financial Times, ESPN, Bloomberg, NBC, and The New York Times generated on average $7.7 million from distributing their content on third-party platforms (including Facebook, Twitter, YouTube and Snap) in the first half of 2016 (about $15 million per annum). Most top sports properties are not doing too badly by comparison in terms of their overall (or potential) revenue return from social.
There is no one-size fits all approach for sports properties trying to leverage social for commercial gain. Clear objectives help and these can be boiled down to a) building brand equity (i.e. taking a longer term approach and more suitable for a growing page / account) or b) harvesting brand equity (short-term approach and better for an established page / account with limited growth).
It never helps to have “all of your eggs in one basket”. In the case of Real Madrid, they are in a position of strength. They are building a strong, direct relationship with their fan base (with the support of Microsoft), have a presence on multiple social media platforms and have a stake in / presence on Dugout, club footballs premium video on demand platform.
While the potential returns from social media can be significant for the top sports properties, mid- to lower-tier properties with niche / long-tail content will need to be more creative. For these properties, emerging specialist-streaming platforms like mycujoo in football will play an increasingly important role in the search for revenue and complement a brand building strategy on the established social channels.
No matter your size, in the data economy, the ultimate digital strategy will leverage the reach of third-party platforms to drive audiences to your own platforms where you can build a direct relationship with your audience fueled by the data that comes with it.
About the author of this post:
David is a Chartered Marketer with more than 15 years’ experience in international marketing roles in sport. You can follow David on twitter (@davidgfowler) or connect on LinkedIn (linkedin.com/in/davidgfowler).