The world of sport is catching up with the demands of the digital age, embracing and often improving upon digital innovations previously seen in other industries.

Sport and Digital innovation: are digital revenue streams and virtual fandom the future?

The industry of sport is often caught in a conundrum: simultaneously conscious of 'history' and 'real fans', whilst squeezing prices on almost everything. When the pandemic temporarily eliminated the live experience, all sports needed to innovate and fast. Are the solutions here to stay?

Peter Maxwell - Analyst

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The world of sport is catching up with the demands of the digital age, embracing and often improving upon digital innovations previously seen in other industries. Through this digitisation, sports organisations and teams are tapping into new revenue streams from fans who want to engage directly with their passion. The global sports market is forecast to reach $600bn by 2025 and $826 billion by 2030, with football having the largest share and about three times the next three biggest sports: American Football, Baseball and Formula 1.

Like many other industries, Covid-19 has been a catalyst in the accelerated adoption of digital trends within sports. As a result of empty stadiums and arenas, sport has had to diversify away from ticketing to generate new revenue streams. New ways of viewing enabled the emotional connection with fans to be maintained, while fans continue to feel they contribute to their team’s success through digital collectibles. Younger generations now expect engagement across multiple platforms and so television, as the traditional medium for consumption of sports content, is losing eyeballs to social media and streaming services. Sports have also recognised the need to build closer relationships with fans and the opportunities digital channels offer to collect useful data, which can then be used to customise content. 

Finding new ways to acquire new fans has been one of the key growth tactics for many sports in recent years. Giving viewers a more intimate, behind-the-scenes experience has become a notable theme, with both Amazon and Netflix producing engaging content on various football, rugby, cricket and NFL teams. This strategy has been effective for building interest and loyalty, while also driving overall success for an entire sport: Netflix’s Drive to Survive series ignited a fresh wave of global interest in Formula 1, and has made “the single most important impact” in North America for the sport, according to McLaren Racing CEO Zak Brown. Tennis, a sport which has struggled to stay relevant for the next generation and find new fans, hopes to replicate F1’s success with its own, newly announced Netflix series. Individual sports teams, clubs and franchises have responded to the demands of round-the-clock engagement by upscaling their in-house media teams and actively looking for new ways to distribute high quality content.

In football, keeping those newly acquired fans has brought new challenges. Younger fans in particular are not content with simply watching their sport on TV, often seeking on-demand interaction 24/7. Many sports are delivering on this need and the increase in ‘second screening’ by providing deeper data insights, multiple viewing angles or real-time highlights, while pushing the conversation along via social media. English Premier League club Arsenal created ‘Robot Pires’ – a name derived from a former player – a Messenger chatbot delivering analysis and updates in real time. 5G technology enables secondary content directly to fans watching live in-person, with many new stadiums integrating the technology as a matter of necessity. Telecommunications business Ericsson partnered with Ooredoo, a Qatari-owned mobile provider with huge penetration across the MENA region, to deliver that experience for the 2022 Football World Cup in Qatar.

Meanwhile, television networks are being challenged by streaming and social media companies for media rights. Facebook recently won the rights to stream the Premier League in South East Asia with a $250m+ deal, having already streamed MLB and surfing. Amazon and Disney+ have also outbid incumbent TV rights holders for sports rights. These platforms have the advantage of integrating user data with ecommerce to create personalised advertising, delivering improved conversion for e-commerce partners. Amazon-owned Twitch, primarily a gaming platform, has also expanded into sports, first into US sports and more recently in Europe. Amazon previously used the platform alongside Prime Video for ‘Thursday Night Football’ broadcasts in the US, and Australia’s National Basketball League also found a home on Twitch. Globally popular football teams like Real Madrid, PSG and Juventus have collaborated with Twitch to provide exclusive content in order to engage younger fans. Furthermore, integration with Shopify on Twitch represents a vastly superior merchandising opportunity compared with traditional channels. With sports further catering to second screen users, social commerce will likely represent a huge growth opportunity for athletes, teams and leagues across the world.

For fans seeking the most engaging experience possible outside of a stadium, virtual tickets are another option. Sports organisations have recognised that virtual tickets represent a revenue stream that does not cannibalise live attendance, but the concept is still in its infancy. For the 2021 season, Formula One offered fans two-day Virtual Paddock Club passes for $400, compared to an in-person trackside pass for a few thousand. La Liga North America, a venture of the Spanish football league, hosted exclusive watch parties presented by football legends on the LiveLike platform. With constantly growing fanbases, and static capacity constraints within stadiums, it is inevitable that virtual tickets are an area which continues to develop.

Following a trend seen essentially… everywhere, digital collectibles have entered the world of sports, most notably in football. Clubs such as Manchester City and PSG offered NFTs and cryptocurrencies, with global superstar Lionel Messi even being paid some of his signing-on fee in cryptocurrency fan tokens. Clubs may view this as a virtuous ‘cycle’: they create monetisable digital offerings to generate new sources of revenue, which in turn immerses fans deeper into their fandom, now on a global scale. Demonstrating the magnitude of digital collectables in this space is Sorare, a fantasy football platform based on NFTs, which skyrocketed in value to $4.3 billion in just three years. As a result, it is safe to expect many more sports to enter the world of NFTs in the not-too-distant future.

Overall, many major sports have proven themselves to be agile in adapting to the unique challenges of the past two years to grow audiences and revenues. As a happy by-product they’ve increased their global footprint to become more financially diversified and robust. While they overhaul their content strategies to acquire new fans globally, they’re also partnering with global media platforms to give fans ever-greater access. This has created interest and discussion around the sport, which is replicated on emerging media and social channels and thus engages younger audiences. Additionally, new revenues have emerged through social commerce, virtual tickets, and digital collectables, although all three are still in their infancy.

This accelerated diversification is a good sign that the industry is successfully future proofing itself and will continue to innovate to meet future challenges. The one truism that has been proven through this adoption of new digital technology, is that when it comes to sports, there really is no limit to fandom.