Sport’s Kodak Moment

Author: Carsten Thode / Aphetor, Founder | Read time: 6 min

It’s one of the most famous business books ever written, but I doubt that Clayton Christensen had sport in mind when he wrote “The Innovator’s Dilemma”. The book describes one of the biggest challenges any business can face: the difficulty of moving on from a business model that is working exceptionally well in the present – growing, highly profitable, meeting customer needs and technologically superior – in favour of an emerging business model which, at that point in time, has a smaller, less profitable market, inferior technology and is actually rejected by most customers.

Basically, “good management” itself is one of the root causes of an innovator’s dilemma. It’s not that Kodak missed the potential of digital cameras (in fact, an engineer working for Kodak developed the first prototype of a digital camera in 1975), or that Blockbuster Video dismissed video streaming as a fad or that Nokia underestimated the power of the smartphone. It’s just that when so much revenue, profit and growth are associated with an existing business, it would be the wrong decision to willfully sacrifice it.

Kodak was selling 800m rolls of film per year at an 80% margin. Do you really think it’s easy to give up on a business like that in favour of pursuing a market where the camera was as big as a toaster, took 20 seconds to take a picture, delivered low-quality images and required complicated connections to a television just to view?

Which brings us to “traditional sport”, which is facing an innovator’s dilemma every bit as difficult as the one faced by Kodak, Blockbuster, Nokia and Xerox. The difference, however, is that the force creating the disruption is less about a single, emerging technology and more about a paradigm shift in consumer behaviour, expectations and media consumption patterns.

It’s not hard to see the change coming. Every single sports conference (including SPORTO) and research report (check out The New Age of Sport, a new report from the Sports Innovation Lab) says pretty much the same thing.

If we focus on the young fans first, they really are defining sport differently and gravitating towards the sports that better reflect their values. Parkour, competitive tag, freestyle football and esports are not only definitely “sports” but tend to be preferred by this new audience. Young fans consume a much broader mix of content via a much broader range of channels, taking sport well beyond the “Live TV Moment” than has been the industry’s traditional focus. Moreover, they tend to have a much more “fluid” relationship with sport. Unlike older generations, new fans want to be creators, not just consumers, they use sport to express multiple selves, they embrace changing allegiances and they prioritise individuals over teams and nations. To sum up, sport is definitely playing a more integrated role in young fans’ lives – from how they want to engage with it to how they form communities, to how it drives interactions with their peers and how it fits into the broader cultural context and entertainment landscape.

But even though everyone can see this paradigm shift, sport continues to be governed by commercial structures and rights models that were invented in the 1950s. From broadcast and sponsorship rights to the IP structures that flow between governing bodies, leagues, teams, players and media, the central tenet of these models is “exclusivity”. Yet, it is this focus on protecting exclusivity that prevents sport from engaging this younger audience.

Formula One, for example, would love to launch F1 TV in the UK. Unfortunately, that won’t be possible until at least 2025 because Sky’s £1.2bn broadcast deal forbids it. In the world of football, sponsors of the world’s biggest football clubs are justifiably excited about getting access to the club’s fans. The problem is that the entry point for most young fans is via players’ social media channels. Of course, nothing in their deal with the club gives them access to that – all they can expect is a couple of hours with those players per year while the club makes sure that they always adhere to the “4 Player Rule”. And who wouldn’t want to see a live feed of what happens in the Athletes’ Village in Tokyo next year via Simone Biles Instagram feed? Watching Simone hang out with other athletes, exploring the city, preparing for her events, celebrating her medals – this is exactly the kind of content this audience craves. Sadly, that would violate the exclusive rights of the Olympic broadcasters and sponsors.

Still, even though these examples fly in the face of everything we know about what younger audiences want, they are exactly the right decisions to make given the current commercial structures that are in place. They are being made by very smart people for exactly the right reasons.

The problem is, Clayton Christensen said the same thing about Kodak.

The column was first published in SPORTO Magazine No. 13 (May 2019).