Author: Carsten Thode / Aphetor, Founder | Read time: 6 min
In my last column, I looked at “The Innovators’ Dilemma” in sports. The argument is simple: the commercial models that govern traditional sport are so profitable that it is virtually impossible to break away from them. But those same models are putting the industry at risk because they are inconsistent with the behaviours, expectations and media consumption patterns of the emerging audience.
Take the Premier League’s global broadcast strategy as an example. The Premier League will earn £9.2bn during the 2019-2022 rights cycle – there is no OTT platform or other distribution model that will be even close to being able to recreate that kind of revenue without a significant short-term hit. Similar analysis will be taking place across the sports industry, from broadcast deals to content distribution platforms, partnership models and even player contracts (including image rights), but the net result will always be the same, so, in the end, nothing will change.
It is a classic dilemma. The very thing that makes traditional sport so profitable is the same thing that makes it vulnerable: exclusivity. Exclusivity is the foundation of all sports’ commercial models. For example, media companies pay around $50b globally for the exclusive right to broadcast or stream well-defined content packages. Having invested so much money for those rights, they are justifiably obsessed with fully controlling and protecting them.
It also applies to sponsorship, where “Category Exclusivity” is a critical component of any deal. In my experience, “Category Definition”, which defines the scope of the exclusivity, is usually the most hotly contested clause in the whole contract – more than the rights fee itself. It is also the reason why brands and rights holders are so diligent at protecting themselves against any form of IP usage or ambush marketing that violates this prized right.
Beyond broadcast and sponsorship deals, exclusivity permeates every layer of the sports industry from player/talent deals to ticketing, media sales, IP usage, event promotion, licensing and merchandise. Essentially, exclusivity is the most valuable commodity in sport.
But this obsession with exclusivity is also the source of sport’s vulnerability.
Let me start by saying that I get it. I understand why athletes and rights holders ‘sell’ exclusivity and why media owners, brands and the other actors in this industry ‘buy’ it. I understand why it is so valuable and why everyone goes to such lengths to protect it. But I also think that it is increasingly getting in the way of how a young audience wants to engage with sport. Why do they need a Sky or BT Sport subscription to view Premier League highlights? Why can’t they rip content and add bespoke graphics to create clips to share with their mates on WhatsApp? Why can’t they live stream a key moment from on their Facebook Watch page? Why can’t they see what is going on in the Athlete’s Village at the Olympics in real time via the athletes’ Instagram feeds? Why can’t their favourite influencer use some in-game footage? Why is no one creating the behind the scenes or culture cross-over content that they would love? Basically, why isn’t the content they want available when, where and how they want it? “Protection of exclusivity” is the answer to all these questions.
We have become so accustomed to this way of doing things that it is easy to think that there are no alternatives, but of course there are. What about an ‘anti-exclusivity’ model which believes in the complete freedom of content: the more content, created by more people and distributed more broadly, through more platforms, the better. At the beginning, this model will certainly be less profitable and more difficult to monetise. Until someone starts with a blank sheet of paper and no revenue to lose and shows how it can be done by monetizing the audience directly through cryptocurrency-driven micropayments and gamification or by evolving the idea of “pay-per-view” to “pay-to-participate”.
Similarly, I think that sponsors get too obsessed with the idea of exclusivity. In all aspects of life, competing brands sit alongside each other. Everywhere you look, Heineken and Budweiser, Coke and Pepsi, Bose and Beats, Under Armour and Nike, BMW and Mercedes, Emirates and Etihad, Rolex and Omega are literally right next to each other – in stores, on the streets, in the media and certainly in the audience’s minds. What is the big deal if they are at the same sporting event too? In fact, they often are anyway …
Again, I think that there is a new, more inclusive model, where multiple brands are present and understand the need to ‘earn’ attention rather than ‘contractually enforce’ it. In the short term, brands will not be willing to pay as much for non-exclusive rights as they are for exclusive rights – until they start to realise that because the audience does not recognize the exclusivity they have paid for, it is not worth that much anyway.
The sports industry has been hooked on exclusivity for over 70 years – but unless it can kick its obsession with it, it might also be its downfall …
The column was first published in SPORTO Magazine No. 14 (October 2019).