Digital Sport’s Rupert Pratt and Thomas Smith recently sat down with Nielsen Sports Managing Director for the UK & Ireland, Spencer Nolan, to discuss Covid-19’s impact on sport media rights and the commercial sport landscape.
With the news that fans won’t be present at live events until October at the earliest, and even then, with a reduced capacity, Nolan believes that understanding the remote fan is key to surviving and thriving as the pandemic continues to slow down the global sports economy.
In this interview, we go into detail on a whole range of topics including:
- Nielsen Sports’ reaction to Covid-19
- How the pandemic has caused an acceleration in the shift towards digital
- Increased collaboration between clubs and partners
- The difficult conversations between rights holders and partners around compensation for lack of return on investment
- The importance of understanding the remote fan
- The adaptation of new digital inventory across the industry
- Nielsen Sports’ Whitespace Valuation Service
- The recovery process, including; winners and losers, the digital landscape and Covid-19’s legacy
See below for the discussion highlights.
First of all, thank you for speaking with us today. An obvious place to start is how have Nielsen coped with the Covid-19 lockdown, and how are you approaching the new normal?
SN: Obviously sport has been affected as much as anyone or any industry, if not more so. Our point of view is that we focus on our people, our clients and our processes. On our people side, it’s all about the safety and wellbeing of our staff and employees. From a client point of view, we’ve had a massive slow down but we are still engaging. For example, initially we did a number of workshops during lockdown that assessed the impact of Covid-19 for clients and generally for the industry, as well as how they go about communicating with their fan base while no sport takes place. Now, it’s all about the resumption of sport, which has so far been relatively successful from a rights holder point of view. The process point of view for us is, we’ve had time to look at some training and automation of our business that maybe we haven’t done before.
So, as we come to the new normal, our mission is shaping a smarter sports and entertainment market with the best insights, the best people and the best tools to do that. With the new normal, our insights are more important than ever. We see ourselves as a trusted brand. We’ve had clients say: “We see you as an essential service. We’ve had to cut others but we know now more than ever we need your data and insights to help us in the new normal.”
Do you get the feeling that the pandemic has accelerated the shift towards digital and the data-driven side of decision-making in the sports industry?
SN: I certainly think on the digital side, yes, we have seen an acceleration. Engagement through digital content, monetisation or creating value through digital content have certainly accelerated in the last 6-12 weeks, potentially more than it had in the last 6-12 months. As a result of the COVID-19 situation, we saw a 74% surge in Instagram TV posts, while Instagram stories also jumped by 31%. Long-form content has performed much better than it would have historically. Whether that will continue to happen now that we are easing lockdown will still be a question mark. On the other hand, data and insights have been a long-term trend with more people using data to drive decision-making and more people coming into the industry.
Sticking with digital content, different sports clubs and their partners have really had to think outside of the box in terms of engaging fans online during the lockdown. How do you think Covid-19 has and will lead to greater collaboration between clubs and partners?
SN: Right holders and brands have been engaging with fans primarily through social media platforms. Think of all the archive footage we saw when there was no live sport, all the quizzes and different challenges. We saw more virtual reality. Esports and gaming became more popular with people at home.
From a home health point of view, Sport England came up with Join the Movement and there was the Nike Play Inside Play for the World campaign. These were really good pieces that had mass engagement when people were at home. A different take was home sport, Team GB’s inventive and imaginative Isolation Games generated around 800 million views on TikTok. These all came to the fore alongside things like Novak Djokovic and Andy Murray’s Perfect Player and David Beckham on a Zoom chat with the Real Madrid Galacticos.
When we talk about interactivity, a good example was Manchester City’s Design your own City Kit with Puma. This was for people with kids at home who needed something for homeschooling. This added that interactivity between fan and rights holder and also introduced an authentic way for the brand to communicate with fans. This is so important because you can overdo the messaging and you have to be really careful to not say the wrong thing.
We saw lots of bad examples, be it Sports Direct or even people going on furlough from Liverpool Football Club. These really had some negative connotations early on. It’s about being careful with it, but there are lots of opportunities to do some interactive pieces between brand, rights holder and the consumer.
A lot of what Nielsen will be doing is media analysis and return on investment, you’ll be quite close to that front-end valuation. What could you see happening in terms of the conversations between partners and rights holders around compensation for lack of return on investment?
SN: It is still to some extent the great unknown. I’d say that at the moment it’s been a bit of a mixed bag. I think we’ve seen brands recognising the struggles of the rights holder and being supportive. Does that mean that rights holders are having to put more assets into that partnership to compensate for lack of…? Yes. We are going to start seeing a bit more of that.
If we look at football, brands are not necessarily going to be cutting their budgets because the advice is that you should try to maintain your share of voice or increase it, even in a downturn because we see the benefits thereafter. However, we know that sponsorship is more difficult to measure sometimes. So that’s why we are starting to see a bit of pressure for increased access going into those renewals.
As domestic seasons come to an end, sponsors and rights holders can sit down and have a conversation to evaluate and negotiate. Are you seeing a scenario where sponsors will be looking for compensation or demanding more assets next year?
SN: If we are talking about the Premier League then, actually, the media values will, potentially, increase. The full schedule has been completed, with more games on free-to-air and different kick-off times. So actually, whilst all the audiences haven’t yet come out, the general increase in numbers means that media value won’t have actually gone down. However, I think given the timing and the scrutiny on brands’ own budgets, there will certainly be clauses next time around in case things go bad. Will performance clauses become more the norm…? We haven’t had an answer for that yet. I think we have seen it in the US but it hasn’t necessarily translated to the UK market. I can see performance-based metrics and clauses in contracts to ensure, if this happens again, there is something that at least alleviates or can compensate the brand.
The Premier League is a good example, clearly the flooding of the broadcast with games has resulted in more return on investment for partners. Obviously, it is not like for like, media asset versus hospitality or access to players etc. Do you see a point where partners could potentially be up on their return on investment once you aggregate the different values?
SN: As I say, from a media point of view then yes, that could be the case, just pure media value. However, as we know, it’s not just media value that brands are looking at now. It’s about that fan engagement and the business impact that they are generating for their brand. So what rights holders have to do better is understand the value they are giving to the brand, which in some cases is just a very engaged audience.
Where I see the change is with digital content, which we have talked about, because there is going to be more value there. Previously, it hadn’t been monetised, it had been thrown into contracts. Now, in the new normal with no fan attendance, it’s more about the remote fan base and engaging with that audience digitally through social media or other platforms. That is where the clear value lies, and I think we now have to see how it goes into the contracts at a slightly increased value than it would have done before.
And on that question, are you seeing more investment into new digital inventory? Obviously content is quick to turnaround, but I’m thinking of fan engagement tools, widgets or, I’ve seen what Watford have done with Reactoo doing enhanced dual screenings. Are you seeing a lot more investment in new platforms beyond just ‘more content’?
SN: For sure, this is how sports properties are innovating. Another example is Dortmund live-streamed a cyber party that attracted nearly three million fans in China. The Milwaukee Brewers did a Zoom happy hour that maxed out the platform’s capacity. These are all assets that do have value and I think now, it’s about the rights holder trying to monetise that in the next renegotiation potentially with existing and/or hopefully new partners.
Although it’s not the same, behind the scenes footage for digital content will also be important. The Last Dance, which most people have probably heard of, was four of the top six most-watched programs amongst 18-34-year-olds in a downturn. Our reporting showed that the show’s ESPN broadcasts were averaging 6 million viewers across the first four episodes. Having that non-live footage, I think will play more of a part.
The last point I would mention is around the second half of the year and when sport returns. We are going to see more posts, more engagement and more video views. This will also create a lot of wastage, as it will be harder to cut through the increased competition and clutter. So the question is, how do you reach fans and be smart about your content? How do you refocus a campaign for an event that is disappearing or has been delayed by 6-12 months? (Digital) content must be SMART – Shareable/Memeable/Accessible/Relatable/ Topical.
What do you see as the commercial legacy from this initial period? Is it greater investment in non-broadcast and digital inventory outside of just more content?
SN: Yes. We are certainly going to see more of that. There is more pressure on the rights holder to try to find a way to monetise an engaged fanbase and community. Whether it’s through creating more inventory and putting it through existing deals or carving it out for new brands to come in.
It is worth talking about the evolution of the fan as well. The fact there is now remote fans with sports remaining behind closed doors until October at the earliest. Even then it won’t be a full stadium like we are seeing in some of the markets. For example, Vietnam recently had 30,000 people in a football stadium, so it can happen. Let’s assume our stadia are going to be a quarter full at best. How do we assess the means to enhance the fan experience for those remote fans? Can partners connect through AR and VR, through exclusive remote tickets? Understanding consumer attitudes towards mass gatherings, travel and health are more important than ever now. Understanding your wider fanbase, not just your direct fan at this stadium is more important than ever. Therefore, outside of purely digital it is that understanding of the remote fanbase and potential fans that we will start to see a bit more focus on from a rights holder point of view.
We’ve spoken a lot about the digital side of things. One article that Nielsen sent over to us at Digital Sport last month was about the Whitespace Valuation Service. How successful has that service been and similarly, how successful do you think clubs have been in making the most of newly available assets in empty seats inside stadiums?
SN: I would say, again, it’s probably mixed. The whitespace analysis shows that there is clear value. In this case, again it’s media value, it’s exposure of a brand on the TV screens.
But it’s about being able to carve it out, it’s about being able to put a number next to it that clients can go to market within the downturn. Our whitespace valuation placed the space around the tunnel and dugouts in a bracket of £200k-£600k, while seating behind the goals fell under a value of £70k-£200k.
We’ve primarily seen that with existing rather than new partners, ensuring they get that exposure and giving them right of first refusal. There has been some success, but it’s not going to replace matchday revenues and attendees.
It’s good, and it’s nice for us to be able to demonstrate the value that pitch-side space has for clubs to go to market but it’s not an easy sell to new partners if you’ve got existing brands who are questioning the value they are getting just from a media return.
The last question that I’d like to ask is a big question, what will the financial impact of Covid-19 over the next 6-18 months be, what does the recovery look like and who are the winners and the losers? Are the winners those who have and will be able to adapt to the new digital landscape and make the most of new fan engagement tools?
SN: That’s a great question. I don’t think there is going to be an easy answer. The trends that we are going to look at, which are what we’ve talked about, are accelerating digital – including continued digital engagement, developing new growth areas like CRM and the digital customer experience, making sure that is good and strong. We are going to see more collaboration; rights holders working with partners to innovate and develop new assets. There will be more cause-related marketing, other content types, flexible payments and then there is a bit around just rethinking the model. How do we enhance the behind closed doors environment? How do we rethink our stadia or our attendee design? How do we understand our fan behaviours more? I think those that understand these questions, we will see as winners.
However, it’s hard to say, is it going to be a bit of a bifurcation of the haves and have nots? I think from a media rights point of view, in terms of exposure, the Premier League and F1, will maintain their presence on key pay channels. But, what then happens to secondary and tertiary sports? Media rights knock into sponsorship as these sports need exposure to maintain relevance and awareness. So it will be interesting to see how that pans out. We know that the likes of Sky and BT have also been hit by C-19 and are continuing to look at other types of content outside of sport and live sport.
I think those that are planning for next season in the right way will be winners. We are still going to see the economic dropout of a lot of clubs, in let’s say the overall football league, they are going to be up against it. Will they have parachute payments come through? We saw the WSL getting a payment from the Premier League, can that continue? Being financially prudent is going to be important in the next 6-12 months for everyone.
Finally, which sports or regions do you think are relatively well set up to insulate themselves from this? When you look at all your analysis, what is going to happen in the traditional broadcast sector? What is going to be that financial legacy or commercial legacy around Covid-19 in the future as we look back?
SN: Another really hard one to answer. We could use the example of Vietnam with full stadia already, whereas, we know every market will be slightly different depending on governmental and scientific advice on when attendees can come back into a mass gathering environment. The sooner the better on that of course, but it is dependent on country and governmental pieces.
There are differences in sports where some are less reliant on the crowd. We know in football here in the UK, the Premier League is less reliant on matchday revenues versus media rights, whereas at the lower end of the pyramid it’s the inverse of that and so they are the ones that will clearly struggle with no attendees at their game. So can they keep going if there are no crowds next year… probably not without investment. So how do PL/FA support the pyramid for football and their own benefit going forward? It will be similar for all major sports.
We might also see private equity and venture capital becoming more prevalent with distressed assets. It’s a difficult one to say, but you always think the bigger and stronger will be more robust as they have the financial resources to weather it better. The top, large and well-funded rights holders will continue to do well.
I think there is a bit of haves and have nots and I think there is a bit about certain regions faring better in the short/medium term. Right now, in the US, it’s not looking great, but are we going to have this chat in a year’s time with all crowds back and we are just seeing more of an economic recession? That will impact everyone, sport maybe less so, but if consumers are impacted, brands and their budgets are impacted as everything is interconnected. Ultimately, that is going to hurt everyone and it’s those who are better able to understand the value that they bring to the table that will win out.