How the Pandemic is Driving Innovation in Sports Business

Flexibility is the name of the game.
How the Pandemic is Driving Innovation in Sports Business
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Founder and CEO of Complete SET Agency
7 min read
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The global health crisis has turned the world upside down, impacting every aspect of life. Social distancing is part of our "new normal". It's proven to be the most effective way to limit the virus’ spread. Unfortunately, it has also had negative consequences for the sports industry. It's affected everyone from the fans, athletes and broadcasters, to sports sponsors, arenas, retailers, universities, and every vendor that supports them.

The pandemic is an international health emergency that has killed tens of thousands of people and sent shockwaves around the world, plunging the global economy into the sharpest decline in modern history.

It all started for the sports industry in the second week of March, when the 2020 NBA season was canceled due to a sudden spike in positive cases among the athletes who were tested. The NCAA’s signature event, March Madness, was canceled shortly after. Professional leagues everywhere followed suit by suspending their seasons, disappointing fans around the world. Next came the one-year postponement of one of the world’s most-anticipated sports broadcasts, the Summer Olympics in Tokyo. And the cancellations keep coming.

An estimated $471 billion in revenue was generated globally by the sports industry in 2018, a 45 percent increase since 2011. But the coronavirus put a stop to that momentum. With so much money riding on this value chain, the industry had to find ways to innovate. Anything longer than a temporary shutdown would prevent the leagues from meeting their financial commitments to broadcasters. The immediate impact of no games would mean no TV deals, and no gameday income. No income could eventually bankrupt the teams.

Deepening the content pool

With these factors in mind, how has the industry strategically responded to this disruption? The sports industry is capitalizing on the recent spike in media consumption. In the absence of live games, broadcasters like Fox Sports and ESPN were charged with finding a way to keep viewers engaged. This meant deepening the pool of sports content available to fans. Everything from classic games, to documentaries, archived content and esports competitions have become a part of broadcast lineups.

Related: 15 Motivational Quotes From Legends in Sports

I reached out to Jeff Heckman, Global Director of E-Commerce of TOPPS about how they have pivoted business around the impact of COVID-19. After all, what's more quintessential to sports then trading cards? "Our Topps NOW product releases are based on capturing the top moments in sports as they happen," Heckman told me when we spoke. "Once the seasons were postponed, we had to pivot to offer Topps NOW MLB cards based on historical moments. We called it Topps NOW Turn Back the Clock and we offer one new card per day.  Luckily for us, we had been working on a new concept called Project 2020 where 20 top artists reimagine 20 iconic baseball cards.  Each day 2 new Project 2020 cards launch on topps.com.  We hoped to have a big kick-off event to launch Project 2020 but we had to scrap these plans due to Covid-19.  We now focus our efforts on creating digital content to support Project 2020 that we release each night on social media.  Lastly, we had a number of in-person sessions planned this spring with athletes like Bryce Harper, Ronda Rousey and Derek Jeter to capture content that ultimately would get used to develop new card products.  We had to shift to zoom calls and our team was able to adjust the video creation process to still create compelling pieces that we are running on our digital platforms."

Directo to consumer scores big

Direct-to-consumer (D2C) channels such as Game Pass have managed to fill the gap left by traditional networks, which structure their main programming around the evening primetime schedule. For example, the NFL has made every game since 2009 available on its direct-to-consumer channel, Game Pass. This strategy has dramatically increased daily sign-ups over the past few months. Industry analysts expect rapid adoption of D2C channels to be a key transformational trend in the sports industry, as many will stick with them once the pandemic subsides.

As consumers begin to adapt to this “new normal” in sports broadcasting, the decline in cable television will be accelerated, thereby reducing the broadcasters’ ability to earn ad revenue, and ultimately their buying power to purchase sports’ rights. As this fragmentation continues, leagues will look to their in-house teams to make smaller content deals with digital players, such as Amazon, whose Prime Video service has successfully live-streamed the UK’s Premier League’s games.

Related: What Adventure Sports Business Teaches an Entrepreneur?

Esports accelerates

Esports is another strategy that has transformed the sports industry, particularly the NBA. According to Mark Tatum, the NBA’s COO and Deputy Commissioner, esports like their NBA 2K competition have become a huge draw for fans, with players streaming from their homes. In addition to airing classic games every evening, they have used social media to host live quarantine parties with current and former NBA players – anything to keep their fans engaged during this time.

Millions of fans around the world are looking for content, and according to Tatum, “Our broadcasting partners are really understanding and we’re working with them on different forms of content. It’s not just the NBA, it’s all live sports…”

Another innovation from the NBA, in partnership with Turner Sports, was the removal of a paywall for League Pass, their subscription streaming service. By making payment options more flexible, their service has become attractive to a much broader fan base. MLB.TV and YouTube are doing the same thing for Major League Baseball. The traditional revenue structure from live television broadcasting looks a lot different when games are played without live audiences, but it is important to keep players safe too. One option would involve isolating entire teams, along with their management staff, into a single area. MLB is rumored to be doing this.

The sports leagues’ reliance on television broadcasters, and the reliance of those broadcasters on ad revenue, has been laid bare in this era of COVID-19. It has made clear the need for diverse income streams. Some of these new revenue models could include live monetization, such as gambling and gamified viewership, where viewers pay extra for in-depth statistical analysis, fan commentary, and other digital items.

How and when will live sports return to normal, pre-pandemic levels, for fans? Even two months in, there are many more questions than answers. Considering the unprecedented nature of the coronavirus, sports insiders have sought wisdom from the experts.

Flexibility is the winning strategy

I reached out to one such expert, Jim O'Connell President of Athletes First Partners, for comment on what his business is doing to adjust.  As a new division of their primary sports agency business, AFP focuses on sales and marketing for intellectual property holders and athletes. “The assets that strategically fit into partnerships have changed with the pandemic," O'Connell told me. "For the time being, there are certain elements of sponsorships that aren’t realistic. Live events, appearances such as autograph sessions or meet and greets don’t make sense.  Social activation, including self generated content, is a much bigger focus right now. The bottom line is we need to be flexible in what we sell and strategically push the most appropriate assets."

Business owners and sports fans stay tuned. The innovations happening now in in the sports entertainment business and market sports will likely be around for years to come.

Related: Qualities Necessary to Successfully run an Adventure Sports ...

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