Carlos Cantó, CEO of SPSG Consulting, collaborated this month with the american sports business media Play by Play Insights to give his view on the trends and challenges of the Sports and eSports industries.
The Professionalization of the Sports Industry & the Four Rings Model of Sponsorship
There is a clear shift in the sports ecosystem where entities have gone from being "teams" to "clubs" and are now becoming "companies. The growing professionalization was inevitable, given the maturity and influence the sector holds and there is a" strong push to recruit talented and capable individuals (either from the same industry or others) to help run these entities in a more efficient way.
The industry needs talent with soft skills, knowledge of the sports industry, project management capabilities and technological prowess. Technological knowledge will be imperative for the future, as technological advancements will only create more areas of sporting development such as team and player performance analysis, big data, applied artificial intelligence, security, automated services in stadium and facilities, geolocation and blockchain.
As we learn more about the business aspects and operationalities of the sports we love, there are various trends along with the growing professionalization in sports business:
Sportainment: Sports is now an important source of entertainment for fans on a global scale, and it is no longer enough to just provide the core service (the game or the competition). Complementary services as a must, as it not only temporarily enhances the audience experience but it provides further monetization options and helps expand the spectrum of the target audience. In this case, not only will avid fans watch the sport, but they will be joined by more casual fans who are interested in the other axes of the sport (entertainment, sociality, networking and leisure).
Not only will avid fans watch the sport, but they will be joined by more casual fans who are interested in the other axes of the sport such as entertainment, sociality, networking and leisure.
Sponsorship: There are three axes when it comes to sponsorship. First, the strategic component of the sponsorship should enhance the corporate identity of the company/brand and should link up closely with the different company policies and values. Second, there is a verticalization process where the properties/clubs open up their projects to the sponsors. This enable the sponsors to create content specific to these projects that will add value to the brand, the property and society as a whole. And finally, the third axis, is seasonal and offshoring activations which will add a lot of value to both the sponsor and the property being sponsored.
Both the sponsor and the sponsored property have to be aligned in order to achieve their common objectives. The main challenges when activating a sponsorship are seasonality and localization. Both parties must work at diminishing the seasonality and the localization of the sponsorship, as the focus is no longer just on the sport, but on everything that surrounds it.
Seasonal adjustments and the relocation of sponsorships: is important for sponsorship activation, especially when both parties (the sponsor and the property) realize that the sport is evolving and the goal is not only attract avid fans but casual fans as well. It goes beyond brand visibility at a local scale, and with this multi-objective approach, it allows for different goals to be reached with different audiences at the same time.
The First Ring of the Four Rings Model, is when the sponsorship is activated by the property within the stadium. However, the sponsor must not only activate the rights within the stadium or arena, but have to put together a plan to activate the sponsorship beyond the stadium. This would include the surrounding area belonging to the club or property, and this is the Second Ring. The Third Ring, is when sponsorships are activated are public spots such as public transport (buses, trains) or parking lots, for example, which affects the direct satisfaction of the fans. And the Fourth Ring, is activating the sponsorship on a global scale.
The Growing eSports Industry
In recent years, the eSports sector is making a significant breakthrough in the world. The volume of business it generates is estimated at between 600 million and 700 million dollars (according to Newzoo), excluding in the figure what is generated by video game companies, gambling companies, hardware companies, etc. And it is estimated that they will reach 1.5 billion dollars in 2-3 years. Undoubtedly, a vertiginous and remarkable growth that, however, does not reach, by far, what big competitions like LaLiga, Bundesliga or Premier League invoice, not to mention the NBA or the NFL (more than 13,000 million dollars).
The Three Pillars of the eSports Industry are the software companies (the IPs, the Titles, the entities that have the right to develop the games), the hardware companies (provide us with the joysticks and the screens), and telecommunications (wifi, internet, fast communications).
The eSports environment is highly complex and highly diverse, and we were now starting to see more and more non-endemic organizations trying to join the industry. Non-endemic brands such as DHL, Vodafone, Ziggo and Mercedes Benz are now partnering with esports to execute their marketing strategies.
ESports audiences do not appreciate being overexposed to brands, especially intrusive brands. In order to be successful, the Brands have to be authentic, should work towards the success of eSports and add value to the audience. Non-endemic are incorporating into the eSports arena but they may find that replicating their business model with traditional sports may not be the solution here.