Who invests now will stimulate growth post-vaccine

Author: Andrej Kandare | Read time: 9 min

“Things that were happening are just going to happen a lot faster,” said Vivek Ranadivé, the owner of the NBA Sacramento Kings, in an interview with Fast Company in June. A point of view that reflects that of Two Circles’ Kristian Gotsch about the impact of Covid-19 on the industry. Kristian Gotsch is responsible for leading Two Circles’ international presence across EMEA and overseeing of all Two Circles’ work with rights holders across the region. At the Sport Industry Awards in September, Two Circles received the Agency of the Year Award once again after three years and had a record of 23 of their clients shortlisted. While they continue to help their clients drive long-term commercial growth and technologically prepare them for the one-to-one relationship with everyone who comes or will return to their stadium, Kristian Gotsch took some time off to sit down with SPORTO.

SPORTO: The industry has been talking about going in the direction of direct-to-consumer business for a while now. What has the Covid-19 pandemic shown so far in this regard in your opinion?
KRISTIAN GOTSCH: The sports industry is moving from a B2B model to a direct-to-consumer model where growth will be centred around direct relationships between sports and fans. For rights owners, the future is about being able to deliver sports to the world in a new way, servicing global communities of fans personally. This is only possible by gathering and acting on rich fan data profiles – knowing more about every fan individually and being able to offer them value in ways that simply weren’t possible before.

Helping our clients embrace this – and adapt their commercial strategies to ensure they grow revenue rather than lose revenue as a result of this shift – has been a key focus in 2020 and why we launched Direct, our new three-year strategy, at the start of the year. Covid-19 is absolutely accelerating Direct, much like it is accelerating paradigm shifts in all industries. We see this already through the distribution of live sport via D2C streaming platforms – enabled because of limited fans in stadiums, and the need to give fans greater access to sport through media channels.

What does all that mean for the fans? Are we definitively stepping into a kind of hybrid sporting event experience? What are the advantages and possible disadvantages of products like Eurosport’s Cube which can bring players to the virtual studio?
Fans will be central to the new narrative of the sports industry, and we believe they will benefit by not just having greater access to sports, but also sports delivered to them in the ways that suit their day-to-day lives and demands. For fans, the future is about deep, authentic access to the sports they care about, with less mediation or moderation than ever before. They want sports experiences that seamlessly transcend devices, make sense in every context, and are deeply personalised for them at every touchpoint. Ultimately, it means fans will be delivered more of the sports they love in the way they want to consume it, both digitally and physically. And it is on rights owners to deliver that.

We’ve seen great amounts of innovation happen this year, but in my opinion, not all of it will stay for the long-term. We saw sports fans watch archive programmes in record levels in April and May as an alternative to live sport, but now live sport has returned, that has dropped off. That’s not to say archive doesn’t have value – on the contrary, we believe it has a growing value – but not all habits that developed during Covid-19 will stick.

Fans want sports experiences that seamlessly transcend devices, make sense in every context and are deeply personalised for them at every touchpoint.

You mention Eurosport’s Cube, which I think is another good example of this. It is a brilliant innovation that will surely play a role in broadcasting long into the future, but as soon as a presenter can interview a player in person, will they not revert to that? I believe where humans can have physical personal interactions, they will more often choose them – that’s human nature, and not even Covid-19 can change that!

A part of Two Circles’ portfolio is to prepare strategic modelling for your clients. Have you seen an increase in this type of enquiries, since probably everybody needs more scenarios at this time? How can everyone involved prepare for the future of the world of sports?
Yes, is the simple answer. Our current content series, Growing Out of the Uncertainty, has been precisely that: modelling, to the best of our abilities and the data available, how sport will develop long-term despite the clear negative short-term impact Covid-19 is having on the eventday revenue stream in particular. In all three main revenue areas we work with our clients – sponsorship and media in addition to eventday – we believe revenues will fall in 2020, but longer-term, post Covid-19 vaccine, they will thrive. Yes, sport – and other industries – is really suffering at the moment, but we see a strong light at the end of the tunnel. We just don’t know how long that tunnel is.

In sponsorship, struggling sectors will cut marketing spend, forcing properties to evolve their sponsorship businesses – meaning digital will become an integral part of the sports sponsorship offering, rather than a secondary add-on. This will attract a wider range of brands to sport and also help rights holders unlock unrealised potential in their sponsorship businesses.

In media, the model of selling live media rights to predominantly pay-TV broadcasters to drive commercial growth will have to change. This will see sports properties forced to create new media packages that deliver greater touchpoints with audiences, including D2C streaming services through which they can commercialise sports media directly.

And in eventday, once a vaccine is commercially available globally, the experience economy will resume its growth trajectory, and, as the ultimate live experience, we predict demand for sport will outstrip music, cinema and theatre and other live experiences. This means the teams, events and venues who invest in service and stadia now will stimulate eventday growth post-vaccine.

Matt Rogan, the co-founder of Two Circles and a speaker at the SPORTO Conference in 2016, said that we can expect to see a completely different set of skills in 5–10 years’ time working in the industry. What is the most sought-after skill at the moment for people wanting to become a part of the industry?
This is a tough question to answer as it depends entirely on the type of job. What I have seen over my career and my time at Two Circles in particular is that some things have always been crucial: self-motivation, energy and ability to build relationships.

But the additional thing that’s becoming important in sport, as the industry continues to professionalise, is to back up those soft skills with hard skills to make your case − in particular the ability to build a robust, data-backed case for everything you are marketing and/or selling.

Even the most powerful players in the business are struggling at the moment and are laying off their workforce in order to stay afloat, Wanda Sports Group 13% since Q1 2020, for example. How have people working in the industry been affected by the pandemic?
Professional sport is a diverse landscape, with multi-billion-dollar sports properties whose media footprint reaches billions worldwide at the top, all the way down to smaller, more local properties who rely heavily on eventday revenue.

At the top end, these properties have deep financial backing and are seeing this period through, albeit with cost-cutting measures and in some cases state support. And they have now established a model for hosting sport – in bubbles or with a robust testing process – even when Covid-19 cases are on the rise.

We predict demand for sport will outstrip music, cinema and theatre and other live experiences.

It is at the middle and bottom end where the situation is stark – these smaller properties are having to make the most cutbacks, which will only increase the longer they are unable to host games or have fans in their venues. And the longer it takes for a commercial vaccine to become available, the more likely it is they will go out of business without new private investors or public authorities coming in to support them.

What are some of the new products that you can mention where the logic “engage fans by data” comes to the fore in 2020?
This is a simple one to answer – any technology that enables a sports property to have and commercialise a direct relationship with a fan. First-party data, memberships, websites, clicks, views and logins – these will be the mediums through which sports and sports fans will create value for each other in the years ahead. But the right strategy will be dictated by a data-driven understanding of a sports fan’s individual relationship with a sports property.

“The Last Dance” documentary about Michael Jordan and Chicago Bulls dynasty has had a tremendous impact all around the world, there are opinions that highlights could soon be more valuable than live broadcast … What would you say the future holds for the content in sports?
We wouldn’t go as far as to say any other type of media programming will be worth more than live. Humans are addicted to the thrill of not knowing what’s going to happen next, and live sport delivers highs and lows time and time again. As long as this remains the case – which it has been since the time of the Ancient Greeks – brands will flock to market around it and fans will pay to watch it live, either through a third-party broadcaster or an owned, D2C platform. However, in 2019, live rights accounted for 86% of sports media rights value globally – whereas our data shows of total sports video content consumption, the average sports fan watched 55% live in 2019.

Covid-19 has illustrated our long-held view that the rights formats with the greatest opportunity for commercial growth are non-live rights, with innovative use of archive (such as The Open for the Ages), existing products reimagined (the ‘virtual’ NFL Draft) and new shoulder content (“The Last Dance” as you mentioned) all drawing in record viewers. To date, however, rights owners have prioritised the commercialisation of live rights, throwing in non-live media assets – primarily digital – into live rights packages without fully realising the commercial attention they garner.

Rights owners need to develop new packages by mixing and matching live, near-live and non-live rights. This will enable them to create a fit-for-purpose proposition for every media partner.

Going forward, rights owners need to develop new packages by mixing and matching live, near-live and non-live rights. This will enable them to create a fit-for-purpose proposition for every media partner and finally appreciate the untapped commercial value outside live rights in the process.

Slovenia was passionately involved in one of the biggest sporting events of the year, Tour de France 2020, with our cyclists finishing first and second. The viewing numbers for the postponed event were extraordinary. Has that proven how desperately sports fans needed “a fix”? How did you see this sporting event being organised?
For many, watching sport has been a source of light in an otherwise gloomy landscape. But this shouldn’t be a surprise: sports media as a genre has thrived since the dawn of mass market internet, the average person consuming 38% more sport media content in 2019 than in 2009 according to our data.

The Tour de France is one of the iconic global sports properties, with an ever-changing narrative, a global athlete base, and in 2020, it reached an incredible crescendo with Tadej Pogačar snatching victory. So, it was no surprise the media interest in the event hit record levels this year.

I was hugely impressed by the UCI’s and ASO’s “bubble” concept for teams and staff – given the number of athletes and support staff required to keep safe, the length of the event and the fact that everyone involved needs to move from stage to stage. They have really taken the bubble concept to the next level, and many other sports properties can learn from the approach as we continue to host sport in a world without a Covid-19 vaccine.

The interview was first published in the SPORTO Magazine No. 15 (November 2020).