As a result of the pandemic, European football clubs are facing a £7.5 billion loss across two seasons of football.
Football must understand, fundamentally, it is entertainment. Entertainment competes in the attention and experience economy, and many other properties (Netflix, Disney+, NBA, Apple, Peloton, Amazon, etc.) are delivering to football fans more effectively, efficiently, and with more viable (and new) commercial models.
It is time for European football to explore the revenue opportunities of being a player in the sportainment space.
The next season (2021-22) is just around the corner, and smart money should bet that most European stadiums will not be at full capacity from the first match. Furthermore, there is research from Harris that suggests many fans will not come back until herd immunity is achieved across the continent.
To survive, and eventually thrive in the post-pandemic world, European football, as well as other major sports, need to evolve — to grow gills. (That means prioritizing creative and innovation-generating processes over everything that gets in the way).
Change is difficult in the best of times, especially when managers are obsessed with historical markers instead of shaping the future. Now, the context is even more challenging. Many clubs have weak financial foundations, and urgent short-term cash flow needs. They face continuous disruption to their core revenue streams, from media rights to player transfers. The discourse around European football has stalled around existentialist topics such as the European Super League and new competition formats.
In our view, the discourse must shift to the new context, brought on by Gen Z’s attitudes, preferences, and consumption habits, and accelerated by COVID.
The three main revenue streams for European soccer clubs continue to be media rights, sponsorship and gate revenue (which are paltry compared to their American counterparts). In the last ten years, media rights specifically have been the main source of growth, although we are observing market corrections (for example, KPMG’s Football Benchmark reports Premier League media rights have declined 22% in the latest cycle). This resulted in a complacent business approach by many clubs who depended on media rights for up to 70% of their revenue, giving little attention to developing other business lines and growing at the gate and via partnership innovation (rather than slapping logos on kits, LED boards and backdrops).
A model based on one main source of disruptable revenue is not sustainable and entails serious risks as demonstrated recently in France, where the main broadcaster MediaPro canceled its contract with the league just a few months into the competition, leading to unprecedented financial distress. Clubs must look deeper into their existing assets, intellectual property, and new forms of content, and then monetize like crazy!
There is substantial room for revenue growth via deeper corporate partnerships that are anchored by innovation, such as La Liga’s global alliance with Microsoft that is anchored not by signage, but by a joint effort to transform the digital experience of football fans via the Global Sports Innovation Center. Understanding how to monetize data via business intelligence and direct-to-consumer models is untapped in football. Matchday revenue is often less than 20% of the revenue pie, as most clubs have not gone cashless, tickets are not digital, secondary market models remain in the dark ages, food and beverage is an afterthought, retail is still brick and mortar and premium seating lacks imagination and diversification. The old school season ticket model results in very low occupancy (typically below 75%) for most European leagues. Opportunities to increase revenue/square feet and develop adjacent properties are not prioritized. This is even before considering all the business models made possible by technology and popularized by new-age platforms such as Clubhouse, Tencent Music, Fortnite, TikTok, SoundCloud, Twitch, and Discord.
We used to serve fans with centralized, uniform, timed content they love. Now, they are creators and want to engage, immerse, and share content differently. In the next five years, advanced analytics, new content technologies, engagement platforms, and AI will unlock new experiences and business models across the physical and digital divides. D2C will be the main enabler of revenue diversification in the years to come. Content distributors and sponsors will expect it in football, and it will help football clubs to target customers with new services, products, and experiences.
Many of the European football organizations still lack fan relationship management platforms that are powered by underlying technological solutions such as CRMs and CDPs. This puts them at a disadvantage to every other entertainment and experience provider out there.
Consider this: Amazon, arguably the best D2C brand in the world, reported in its annual report that it has over 200 million unique monthly visitors in the U.S. and monetizes them at an annual revenue of over $1,000 per visitor. FC Barcelona, one of the world’s most famous brands and highest revenue generator among pro sports globally, has 380 million fans, but only generates an average of 3€ per fan per year. The gap in monetization is considerable and can only be closed with the introduction of new business models and revenue streams.
Media rights cycles on the horizon at different football leagues could still provide a healthy foundation, but future growth is unlikely to come purely from media rights as they have over the past decades. Revenue diversification and the introduction of innovative digitally enabled business models must be the path forward for the industry.
That, and a healthier football player wage: Revenue ratio, which favors the professionalization of the organization through new processes, people, and technologies, is the “secret sauce” to unlocking value and protecting European football from the inevitable shifts in consumer behavior.
Marshall Glickman is CEO of G2 Strategic, Maheta Molango is former CEO of RCD Mallorca and Mounir Zok is CEO of N3XT Sports. In 2020, they created 3MS Consulting, an executive level advisory firm focused on European sports properties.