Coronavirus steals live sport's crown

Pedro van Gaalen

Freelance writer

It's an unprecedented situation for the professional sports industry, with some federations, rights holders and sporting codes set to come out in stronger positions than others. As the sporting world slowly emerges from its coronavirus outbreak-induced hiatus, we take an in-depth look at the pandemic's impact on the global sports industry. 

Spectator sports flourish where elite athletic displays meet cheering fans and financial support from broadcasters and sponsors. In this paradigm, live sport is king.

 

And in a world starved of sporting action, fans across the world rejoiced when certain sports resumed play in June. 

 

But the contrast was stark. The Covid-19 pandemic has progressed at different rates in various countries. Infection rates are also at different stages based on the containment approaches adopted by governments. 

 

As such, while the German Bundesliga football tournament kicked off in spectator-less stadiums and the PGA teed off in Texas without fans on the course, the innovative new Investec Super Rugby Aotearoa tournament launched amid sell-out crowds, to record viewership figures.  

Sports and money

Live sport a money spinner

When sports federations host live events, fans buy tickets, media partners invest in broadcasting rights, and companies leverage the platform to boost awareness and entrench brand associations through sponsorships.

 

It's a lucrative business model. According to data from the World Economic Forum, the global sports industry was worth an estimated $471bn in 2018. A Business Research Company paper suggested that industry growth would continue, driven predominantly by spectator sports, to reach nearly $614 billion by 2022.

 

And all major sports rely significantly on income generated from broadcasting rights. Revenue data from the biggest sports leagues over the last five years indicates that global sports media rights were valued at around $50bn. The English Premier League, for instance, penned a contract with broadcasters in 2019 valued at $12 billion over three years.

$471bn

estimated value of global sports industry in 2018

$614bn

projected growth of sports industry by 2022 before Covid-19

$50bn

Global sports media rights value

covid-19 live sports

Coronavirus outbreak blows final whistle on live sports

But the global coronavirus pandemic affected every facet of this business model. The need to safeguard player and public health, and mitigate the possibility of a super-spreading event (SSE), like the purported football game at the San Siro Stadium in Milan, Italy on 19 February 2020, saw all major sports events at international, national and regional levels cancelled or postponed. 

 

Even the Olympics and Paralympics were postponed for the first time in the history of the modern games. The immediate impact was a loss of income from entry and ticket sales and lost revenue within the sporting event value chain in related retail and services industries such as travel, tourism, transportation, catering and advertising, among others.

Counting the Covid-19 costs

This has placed the livelihoods of those who rely on the sports industry at risk, including professional athletes, who have lost potential earnings from prize money and incentives. Many have also taken salary cuts and the resultant lack of exposure, combined with financial constraints, could force player sponsors to re-evaluate their contracts.
 
Event cancellations or postponements also represent lost or deferred sponsor income. Many federations, unions and event organisers have written off sunk costs, or incurred hard costs in rescheduling events. The International Olympic Committee's (IOC) decision to postpone the 2020 Tokyo Olympics by a year cost an estimated £2 billion, for example.

 
But it is through broadcasting where federations stand to take the biggest financial hits. As an example, data released by the Statista Research Department suggests that the Italian Serie A could post a revenue loss of €710 million, with the bulk – €540 million – related to lost broadcasting revenue.
£2 bn
Cost of postponing the 2020 Tokyo Olympics
€710 m
projected Italian Serie A revenue loss
supersport initiatives

Sports broadcasters adapt content mix

To fill the void left by a lack of live sport, broadcasters found ways to maintain engagement with viewers. Sports documentaries, retrospectives and archived content, and a boom in live esports involving elite athletes, kept viewers entertained with new or refreshed content.  

 

For example, in South Africa, SuperSport made more content available and launched new themed channels, including exclusive sports films and documentaries. And various broadcasters, together with sport sponsors, explored new engagement and content-sharing opportunities, such as live studio chats, behind-the-scenes footage, or sport-related lifestyle content.

Revenue losses have knock-on effects

While these content pivots helped to transform fan engagement, this model falls short of delivering commensurate returns on sponsorship spend. 
 
Without the spectator and viewership numbers that live sport attracts, corporate sponsors cannot justify their investments, which will likely place future spend under pressure. And a lack of sponsorship and broadcaster revenue will be financially devastating for federations, with significant knock-on effects for professional sports. 
 
“It will be a massive disaster for any sporting code if revenues dry up,” explains former Springbok flyhalf and rugby commentator, Joel Stransky. 
 
“No games mean no TV revenue and no gate money. While many sponsors continue to pay to retain valuable naming rights, without a return to live sport in the near future, it becomes a question of how long will they be willing to pay?”
 
The estimated cumulative revenue loss for the global professional sports industry in 2020 from missed event-day operations, media sales and sponsorship rights is a staggering $61.6 billion, according to a report by the sports marketing agency Two Circles. 
 
In response, federations have announced cost containment measures to ensure their survival during the Covid-19 pandemic. 
 
For example, SA Rugby announced an industry financial impact plan to cut R1.2bn from its budget by the end of the year. The plan was collectively designed and concluded by organisations representing SA Rugby, provincial unions, players and rugby industry employees in South Africa.
 
“The group identified our collective areas of financial risk and what savings had to be made and then identified a plan to mitigate those risks,” explains Jurie Roux, SA Rugby CEO.
 
“We have put together a plan that will ensure the industry will be positioned and resourced to get straight back to action as soon as we are permitted.”
$61.6 billion
estimated cumulative revenue loss for the global sports industry

Investec Super Rugby Aotearoa – Behind the scenes

Exclusive! VictorMatfield and @CindyPoluta in conversation with five of the Investec Super Rugby Aotearoa captains. #BestofTheBestRugby #Investec


Exclusive! VictorMatfield and @CindyPoluta in conversation with five of the Investec Super Rugby Aotearoa captains. #BestofTheBestRugby #Investec


Talent retention vital to deliver spectator value

Amid these cost-cutting measures, a major concern for federations and teams is their ability to keep their most valuable assets – their players. 

 

Rugby unions in South Africa experienced a player drain when the Covid-19 pandemic activated an escape clause in contracts, and the lure of foreign currency proved too lucrative for some players to pass up.

 

“The concern is that when teams lose top players like Malcom Marx, not only is the team significantly worse off, but you weaken the local system. This means that you not only lose a mentor who can nurture younger talent, but the franchise also loses a financial drawcard. This will detract from the game and the ability to pull crowds,” elaborates Stransky.

 

When the dust finally settles and play resumes in some form, the key to a rapid return to sustainability and profitability will be delivering rugby games that fans want to watch.

NZRU

Coronavirus pandemic breeds sporting innovation

And that's exactly what New Zealand Rugby (NZR) has delivered. Covid-19 had a significant financial impact on New Zealand Rugby, which faces a 70% decline in revenue in 2020 amid the global shutdown of sport. 

 

In response, the union completed a restructuring process that saw 25% of staff, with 40 people from head office in Wellington made redundant.

 

However, New Zealand was the first country to resume full-tilt rugby with the new Investec Super Rugby Aotearoa tournament, which kicked off on 13 June and has helped to limit financial losses.

The tournament pits New Zealand's five Super Rugby franchises – the Crusaders, Blues, Hurricanes, Highlanders and Chiefs – against each other and will run for 10 weeks. Each team will play a home and away game against all opponents for a total of eight matches. The team that tops the table at the end, wins the tournament.

 

It's a boon for international rugby fans, who are hungry for live sport, and for broadcasters like SuperSport, which will televise all the games, and the tournament's headline sponsor, Investec. 

 

According to Peta Dixon, Head of Sponsorships, Investec continued to support NZR as it worked on various contingency plans for the possible resumption of Super Rugby and the Rugby Championship in some form.

 

“The NZR had four different scenario plans for Super Rugby and the Rugby Championships, which they adapted as the situation evolved. We continued to engage and collaborate with the union to find out what they were planning. Our partnership approach and commitment has resulted in the great sponsorship opportunity offered by the Super Rugby Aotearoa tournament amid the crisis.”

 

And the figures speak for themselves. When the Blues hosted the Hurricanes, over 43,000 spectators packed into a sold-out Eden Park. According to media reports, it was the largest crowd for a Super Rugby match in New Zealand for almost 15 years. 

 

Similar scenes have played out at other stadiums across New Zealand, where attendance at the first four games averaged 26,000 – an increase of more than 105% on the wider Super Rugby tournament before it was shut down due to Covid-19, commented NZR chief executive Mark Robinson during a recent media conference call.

Viewership figures

Viewership figures

Television viewership also increased by 88%, according to Robinson. A combined 750,000 New Zealanders watched the opening Investec Super Rugby Aotearoa games and the Warriors-Cowboys NRL game in Australia when sporting action resumed.

 

And the Investec Super Rugby Aotearoa tournament is expecting even bigger crowds and better viewership numbers as the 10-week domestic competition progresses. 

 

Robinson adds that NZR is also working to relaunch international rugby, with 10 October set as a tentative date for a first Bledisloe Cup Test against Australia, but cautions that everything remains fluid.

 

"We’re still working through a whole lot of details and scenarios around the trans-Tasman bubble, border, quarantine, isolation and all those sorts of things. There are numerous variations to possible Bledisloe Cup and Rugby Championships competitions, but we’re simply not in a position to finalise any of that yet with any certainty.”

Dixon is confident that this innovation will deliver ROI on Investec's sponsorship and unlock additional value at a time when live sport has been decimated globally.

 

“Ultimately, the value of TV rights is about the product and the viewership numbers – one needs the big games. Getting the most eyes on games is the fundamental principle in the sports industry's ability to generate advertising revenue and deliver business value,” adds Stransky, who believes that the impact of Covid-19 is the perfect catalyst for change.

 

“The current need to limit international travel may prompt a change in competition structures, or may require a complete overhaul of the rugby season and where teams play. It might even encourage a return to traditional rugby tours, which would promote rugby enormously by taking the game and its stars to areas outside of major centres,” says Stransky.

rugby sponsorship image

A new model for sponsorship value creation

Ultimately, the survival and long-term sustainability of the sports industry will require a collaborative effort between federations, rights holders, broadcasters and sponsors.


“While sport will remain a massive passion point, the pandemic has forever changed the sponsorship landscape. The depressed global economy means federations and rights holders will need to relook their pricing, and increase value add and maximise ROI to retain or attract sponsors,” continues Dixon.

 

“Sport sponsorship must evolve beyond branding on a jersey. It needs to become a financially viable commercial offering because sponsorship money will be in short supply after the crisis.”


As a consequence, sponsors will increasingly demand multi-platform solutions. These should leverage traditional media at live events, on-the-ground supporter engagement, and engagement via digital channels that extends reach and impact beyond match day. But this will require investments from sports federations and broadcasters, at a time when many are cutting costs to remain sustainable. 


In addition, federations and rights holders will need to recalibrate media rights to reflect the market conditions and ensure that broadcasters can afford them amid shifting consumer spend and content consumption preferences, which are increasingly fragmented.

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