Change your make-up

After three months in lockdown followed by the re-start of certain sports behind closed doors, there has been some time to reflect on the impact and consequences for the future of the sports industry.

This quote caught my attention: “Covid-19 is, without doubt, going to act as an accelerant for the long-awaited levelling up of the fan experience and the value attributed to the role and real data of the fan. Brands and rights holders are going to need to work far more collaboratively, strategically and creatively to build a more diverse, direct and accessible experience for the fans.”

So, we should probably not expect a full recovery before 2025? A little pessimistic perhaps but where is the evidence that sports administrators and rightsholders will make the necessary changes or invested ahead of the curve to recover from the impact of Covid-19?

In the retail industry, the pandemic resulted in the closure of bricks and mortar stores but dramatically accelerated online shopping in specific sectors such as the beauty sector. According to L’Oréal’s Chief Digital Officer, Lubomira Rochet, in e-commerce L’Oréal achieved in eight weeks what would otherwise have taken three years to do. However, certain sectors like beauty and grocery brands were better established online. In Q1 this year, L’Oreal’s sales were up 53% on the same period a year earlier. And, during the pandemic the online marketing budget was increased from 50% of total marketing spend to 70%. As a result, online sales responded, especially in less developed markets with a 300% increase in Latin America in April, and 400% in Africa and the Middle East.

Nice figures but this did not happen overnight. Back in 2013 L’Oréal set a target of selling 20% of products online by 2020 with half its marketing budget targeting digital. A target which has now been met, partially due to the pandemic. Future targets are now being revised where 80% of interactions are expected to be online with e-commerce representing 50% of total business.

This triggered my interest to see what one of the global sports, football, was reporting back in 2013. The introduction of UEFA’s Financial Fair Play break-even requirement was touted as helping football clubs achieve more sustainable levels of expenditure relative to revenues. Many people will have mixed feelings about the effect of FFP after the decision to allow Manchester City to participate in the UEFA Champions League next season. In the Deloitte Football Money League report for the 2012/13 season a few other trends were uncovered. Amongst others, the entry of clubs outside the ‘big five’ markets like Galatasaray into the Top 20, one-third of all clubs having owners or a controlling party residing outside Europe, 8% increase in revenue, increasing sponsorship from Middle Eastern brands and healthy growth of lucrative TV contracts. Essentially, on-pitch performance was cited as the key factor in longer term positioning, a point illustrated by Bayern Munich who won the treble and reached third place in the Money League report behind Real Madrid and FC Barcelona.

Hindsight is a beautiful thing and we can now ask questions about what investments were made in the sports industry to generate 20% of revenue from online sales or other non-event-based channels to mitigate a downturn like we are now facing with Covid-19. There is not a lot of public data available to address this point but there are always the usual suspects. Nike Direct was initiated as an umbrella for the brand’s direct-to-consumer activities in June 2017. Latest figures report an increase from $6.6 billion DTC sales in 2015 to $16 billion in 2020. This will represent around 35% to 40% of total sales for 2020. And probably more in the future.

Sports administrators need to pivot and change strategies if they want to re-engage with consumers and brands. If you continue with the same make-up as five years ago you will not be invited to the party!