Sport can only develop economic and social charisma if it brings people together and moves them emotionally. That’s exactly where Covid-19 hit sport. Digitalisation has only partially mitigated this, but it has sharpened the focus on the economic foundations of sport.

Review – Digitisation and sport

As part of PwC’s Sport Survey 2016 [1], a survey of decision-makers in sport revealed that the future of sport will depend on how sport organisations use new technologies. More than two thirds of the representatives of Olympic federations were of the opinion that the use of new technologies is the decisive driver for new business models in sport. In fact, a complex economic ecosystem has emerged over the last decades in which digitalisation is present in many areas. Data-based decisions and the creative use of digital image data are gaining importance in both economic and sporting terms. In this context, digitalisation is not a substitute for gut feeling and passionate decisions, but a complement. It also enables efficient forms of production and markets – on the one hand around the development of and trade with athletes, teams and expertise, and on the other hand around the valorisation of derived values (brand values, media rights) and the creation of derived products (e.g. betting). Last but not least, sport is also closely linked to the further development of digital technologies (Formula 1 model). In the PwC Sport Survey 2017 [2], the question arose as to whether sport is the market with the greatest digital disruptions of all. With technologies such as augmented reality or drones, new competitions can be invented. Like e-sports, these new forms of competition want to be perceived and recognised as sport. Based on the criteria of SportAccord [3], this claim may be justified. An even more data-driven economic ecosystem has developed around these new forms of competition, in which different markets are mutually dependent. In the Covid-19 crisis, the great importance of digitalisation for sport became visible. Today, it no longer takes surveys of decision-makers to realise this. Digitalisation facilitates the survival of sports organisations. Regardless of whether it is “conventional sport” or “new sport”, sport needs sources of income and therefore economic appeal. But it can only develop this if it brings people together and moves them. This is exactly where Covid-19 hit sport in particular. Many events did not take place at all and when they did take place again, spectators were excluded. But thanks to digital media, some organisations were financially less affected than others. This leads us to the question of how sport – especially professional sport – works economically.

“Content is King” – it’s all about digital content

What is the most important economic good that sport produces? James Pallotta, co-owner of AS Roma, gives a clear answer: “Don’t look at us as a sports team; we want to become a global content company” [1]. Sport generates digital content (= digital products with stories) that can be monetised. Digital content, precisely because it is digital, allows instant and global distribution and therefore has great potential for monetisation. Business Model Innovation in sport will further explore these digital channels. With the Covid 19 crisis, sports organisations have been forced to accelerate this process. Sport is therefore a content business and the content, in the case of traditional sports, is generated at an event that takes place physically in one place. However, the Digital Swiss 5 project during the lockdown was an example of how this does not have to be the case for cycling. The Tour de Suisse was able to organise the first digital cycling races within a few weeks with its extensive partner network. Each racer was able to push their watts at home on their bike using a smart roller trainer that could adjust its resistance to the topology and send performance data to a central server. An animation was rendered for the viewer and alternated with images of the rider sweating at home. This Swiss production was not the only one of its kind. Nascar races in the USA continued in virtualised form and Sky Sport broadcast “FIFA 20” video games in which Premiere League players represented their clubs. Alongside these transitional solutions, however, the road back to physical competitions has proved a long one. Only slowly have relaxations allowed training routines to return to normal. The question that arose was whether and when it would be possible to complete the current season. The Bundesliga was the first league to resume operations with ghost matches. In these big leagues, the main part of the clubs’ income comes from media rights. In smaller leagues, it’s a different story. When a large part of the revenue is generated from ticketing and catering on match day, the financial pressure of ghost matches is much higher. Competitions without physically present spectators allow organisers to market their content in a digitalised form. But the decisive factor of sports content is emotion and there is the further challenge. Despite glued-on faces of real fans, the cardboard spectators in the stands in the Taiwanese baseball arenas even seem a bit stiff, but the sports broadcaster Sky has announced that it will experiment with computer-animated spectators to increase the “watchability” of their games. These measures do not seem like long-term solutions. For the emotion, people have to go back to the stadiums.

E-sport – the big winner of the crisis

E-sports does not have to struggle with these problems. Although e-sports now fill entire stadiums, it is easier for organisers to switch to a purely virtual format. The content is generated where the action takes place: In a virtual space. E-sports had already overtaken football in terms of economic growth before the health crisis [4] and has a very high level of professionalism: More players who play e-sports can now make a living from their sport than tennis players. During the crisis, e-sports were able to fill the void left by the absence of conventional sports and events. Competitions are streamed on dedicated platforms. The number of viewers on these platforms can be tracked precisely, for example via TwitchTracker for the Twitch platform [5]. Comparing the user figures from April and May 2020, the daily number of viewers on the platform increased by over 50% percent in May 2020. Between 1.2 million and almost 4 million viewers consume e-sports on Twitch at any given time. E-sports are still very controversial in many circles, but from a purely economic point of view, they are certainly no longer. The International E-Sport Federation (IeSF) is strongly campaigning to be recognised as an official sport. For example, it is being discussed whether e-sports tournaments at the 2024 Olympic Games in Paris will be held as a “demonstration sport”. The experience from the Covid-19 health crisis could possibly also play a role in this decision.

Conclusion

Understanding sport as a content business helps us to look for digital solutions suitable for lockdown. For the time being, however, the question of how emotions can be conveyed digitally remains unresolved. The example of e-sports at least provides us with interesting illustrative material, because e-sports is the big winner of the Covid-19 health crisis in sport.

References

1. PwC (2016). PwC’s sport survey 2016, https://www.pwc.ch/en/publications/2016/PwC_Sports_Survey_Aug%202016.pdf
2. PwC (2017). Sports: the most disrupted of all industries?, https://www.pwc.ch/en/publications/2017/pwc-sports-survey-2017.pdf
3. SportAccord (2011). Definition of sport, https://web.archive.org/web/20111028112912/http://www.sportaccord.com/en/members/index.php?idIndex=32&idContent=14881
4. PwC (2018). PwC’s sport survey 2018, https://www.pwc.ch/en/insights/sport/sports-survey-2018.html
5. TwitchTracker (2020). Twitch viewers statistics, https://twitchtracker.com/statistics/viewers

The series

Part 2 will be published on 14 August 2020. Part 3 will be published at the end of August 2020.