The key to the future is an ongoing, two-way relationship with fans
According to Matt Rogan, Chairman at Two Circles and Executive Director of ESP Properties, the increasing expectations of fans to be treated as individuals and the declining cost of technology represent two key trends which are driving disruption and a moment of opportunity for sports rights holders. Matt, who will be the key-note speaker at SPORTO 2016, shares his views about future revenue opportunities for sports properties and broadcasters, the importance of understanding the audience as individuals, explains why data is the enabler in that it encourages us to embrace learnings for sports from the likes of the music industry and Amazon.
Two Circles helps sports properties unlock their potential for commercial growth. You are one of the leading agencies in the business. What would be your general advice when trying to build a valuable business proposition for a sports property in this content-cluttered world?
If I had three things to choose the first would be: “Understand your audience”. By that I don’t just mean to do research on your fans, customers … I mean to genuinely understand them as individuals. It is one thing to say that 35 per cent of last season’s ticket holders are among the richest 10 per cent in our country and it is another thing to say 35 per cent of last season’s ticket holders are among the richest 10 per cent of people in our country and we know which ones they are. That makes a big difference … So, firstly understand your audience and secondly then develop the marketing capability to be able to talk and listen to them as individuals. Let me explain the second point. If I am a leading sports team nowadays I am not sending one message to a million people, I am sending different types of messages to different types of our audiences at different times – and often using different marketing channels. If I use a football example: I might be a season-ticket holder of the club for ten years, it might be the first year I am a season-ticket holder or I might have come back for the first time after three years being away or actually. Equally I might be fan of U16 or another team of the club. This brings different marketing challenges – and opportunities. My number three would be to understand the opportunities that you as a rights holder have, to put number one (that’s individual level intelligence) and number two (marketing capability) together to think differently in the way in which you talk to fans, sponsors or broadcasters … ultimately to drive all revenue streams through a customer-led approach.
How do you see the development of the rights holders market around the world and their marketing approach in the recent years? What changed the most in your view?
What is definitely true is that that over the last ten years you and I as customers of any brand have an increasing expectation of being talked to as an individual. When I land at the airport I know that airline will text me about the experience on the flight, when I buy a new CD from Amazon I expect them to tell me five other albums that are alike … In every part of life we have an expectation to be treated as an individual and the reality is that the cost of the technology for any brand or rights holder doing that has declined massively. And yet it is only very recently that sport as a whole has put these two trends together … If Amazon, cinemas or airlines behave like that, we need to behave like that, too. So rights holders are now beginning to understand the opportunities. We are tending to find that those sports properties that put those trends together are starting to become much more sophisticated in the way in which they think about their revenue opportunities. They are starting to ask questions like: “Should I sell my broadcast rights directly to a broadcaster or – if I know that million people will care about my sport – should I just go direct to them with an IPTV channel?” or “If I have an international fan base around the world: should I be launching an international paid membership product or should I just be running a free product with video advertising around it?” This development is asking more interesting questions of forward-thinking rights holders, and ultimately puts more control in their hands.
Your mantra and approach is characterised as data driven sport. You said in a recent interview: “Data is the enabler …” Can you put that in perspective of your work with clubs and other clients? Which are the toughest challenges you face and how do you try to solve them?
In order to be able to launch a digital TV channel that talks to Karen in China, Peter in Italy and Thomas in USA, what enables you to do that – and not have to necessarily go to through a broadcaster – is the data. You need to understand Thomas, Peter and Karen as individuals and have direct relationships with them. Data is much like a block of Lego – not very interesting in isolation, but very powerful in combination with other blocks.. The biggest challenge we tend to find when we start our journey with rights holders is often that customers’ data, the enabler, is all over the place. So, in the Premier League football clubs, on average, customers’ data will be held on over 30 different places; they might be in ticketing systems, hospitality systems, web and content systems, social media systems … So one of the biggest challenges can be when the client comes to us and says: “Help. We don’t know where to start.” The other big challenge is connected to technology, since often software providers have told the rights holders that a piece of technology will answer to all their problems. We have more than fifty clients and we haven’t in one instance seen that technology on its own did solve the problem. Technology often gets in the way of pulling data together in a smart way rather than supports it. Certainly clients don’t always realise that it takes more than technology. Typically, what we tend to find with a client we start at in that position is that they have been communicating and sending the same message to all fans at the same time because that’s just about all they are able to do – they’re strangled by poorly suited and often oversold technology. What that means is that fans and supporters have switched off. The output of not having all the data synthesised and managed coherently is ultimately lack of fan engagement.
Two Circles is now part of WWP, the leading communication group in the world, led by the visionary Sir Martin Sorrell. In his discussion at IEG Conference in Chicago with Mr. Alexander Koppel from the Red Bull Media House one very interesting point was mentioned: “We used to have to understand the audience, now we have to be part of the audience …” How do you see the understanding of the audience/fans?
The imperative of agencies and the rights holders they work for is to help them listen as well as talk. It is about a two-way on-going relationship. Just like Amazon is doing when you engage with their platform. Two Circles becomes a part of the audience, too, and so we are the one listening through our work. I think Mr. Koppel is also referring to the breakdown of the market-place in this disruptive age whereby brand, rights holder, broadcaster and fan were distinct and separate. Nowadays we are seeing more of a collaborative partnership between the agency, rights holder, brands and customers … ultimately in this digital world, unless everyone is listening to each other, nothing will happen.
Connected to brands and sponsors: Many brands are nowadays content creators and there are more unconventional approaches between sports and brands to find the best fit and achieve planned goals. In that scope – what would be your definition of sponsorship? And could you imagine a brand with a unique approach to the sports environment like Red Bull becoming a sponsor partner of global mega events like the Olympics or FIFA World Cup?
That is a tough question. The definition I would suggest would be that sponsorship is a commercially driven marketing partnership created between two parties whose customers share key aligned interests. It is not merely any business partnership or any marketing partnership. The reason Aviva would do it with Premiership Rugby or VISA with the Olympics, for example,is because they recognise a share aligned interest between each other’s customers. To that extent you continue to see organisations like Red Bull doing really interesting things not just on their own and turning themselves into rights holders and creating something like the Air Race, for example, but will continue to engage with more classic marketing platforms as they do with F1. They might take equity ownership in the way in which they invest, like in F1 through a team, but ultimately it comes down to recognising that if customers, potential customers and influencers we are trying to reach have the same interest space as a sports property holds, then they will continue to be valued in that partnerships. Ultimately it is just about understanding the science of customer alignment and the art of being able to engage distinct audiences with content that really grabs them and is meaningful to them. That’s where – from my perspective – the real value is being driven from a sponsorship whether it is business-to-business, business-to-consumer or business-to-employee.
If we take one angle from the NFL Super Bowl as one of the leading sports marketing properties … Brands pay millions of dollars for advertising time on TV and opinion makers, the audience and media then “judge” which brand “won” and which “lost” during the air time or in the build up to the event on social media …
The first thing I would say about judging and “who won and who lost” is non-sense. A lot of the media commentary around sponsorship generally really frustrates me, because if you look at objectives for Lloyds TSB in a local partnership for London 2012 Games and then you compare them to global partners like GE or Coca-Cola, they are completely different. Super Bowl is a classic example … If you look the roster of brands who are advertising around the event: some have the official affiliation, some don’t, some of them are looking for exposure and buying ratings with certain influence type that they believe will help customers’ purpose and some are doing some actually smart tactic in light of bigger sponsorship. So if a media commentator assumes that they have the same objective then all he is doing for me is reinforcing naivety of most media commentary around the marketing space.
What is your view on buying ratings and advertising vs sponsorship relationship? If we take sport as a media – in advertising industry there is no other such case …
In my experience around leading the sponsorship team at MTV Europe where I worked for 4 years, the objectives of our partners like Vodafone, Intel, Replay Jeans and other brands which sponsored MTV Music Awards were thinking smartly about how to use advertising component as part of a 360° integrated campaign. So it wasn’t just about buying ratings at that point. Those who were purely advertising around it often had very short-term objectives around brand recognition, which I think is becoming less prevalent in Europe now. I notice this still has a key role in the US and Asian markets, however. Ultimately I prefer the use of sponsorship for long-term, deep customer engagement reasons. In this context sponsorship becomes a kind of venture capital. Spending an amount of money under the assumption it will be monetized over three or four years, with a clear business plan against it. Proper planning I think is really important from the sponsorship perspective. If you take that venture capital analogy: you invest in year one, you buy a business and you look to drive value for business as a result for three, four, five years … When WPP bought Two Circles they are hoping to see ten years’ and more value for that. I think any brand or media commentator who says after three weeks of a sponsorship that worked or that didn’t work is just massively naïve. What is the lifetime value of a customer you acquired through that sponsorship? You are only going to know that three years along the line.
Media and also sports consumption changed dramatically in the recent years. Although sport remains one of the rare non-predictable and exciting contents to follow live, TV is not the only channel to follow it. TV rights prices for mega events increase every year. How do you see the challenges for TV broadcasters and their 360° approach to fully monetise the rights?
Brilliant question. When I was in the music industry at MTV, basically at the beggining of iTunes, all of the sudden somebody has discovered that there was a chance to monetise music differently and ultimately sell it directly to the customer. There was suddenly no need to go through traditional retail. That was a disruptive moment for the industry, different people came in and are still applying different ways to monetise the opportunities: if you look at Spotify, Sound Cloud, iTunes … that completely changed the way the music industry worked. I think we are undergoing the same now with sports broadcast rights. The biggest challenge for broadcasters is how to cope with the fact (like it was for MTV 10 years ago) that it is now possible to distribute content directly to the customer. It gives a lot more power in the rights holder’s hands. I can sell my sports content to a broadcaster in America, who can distribute that to fans in Ohio in a traditional way, or – if there are enough fans out there – I could sell that as a digital subscription product with a far less complex supply chain and likely better margins. That is a completely different business model, where I can go directly to the customer. I might not be getting overall broadcast reach, but I will be hitting my engaged base. I might not get big rights fee cheque, but I might be selling monthly subscriptions. In the sports broadcast community that creates an opportunity and a threat. Everyone is in a scramble to work this through … Disney has bought one third of MLB streaming division, ESPN is launching a digital channel … It takes me back to my MTV days – times of disruption are fascinating to live through. For sports broadcasters, the imperative is not to panic but to work through with the smartest distribution model for themselves. Also, sports rights holders cannot to start to think that they have five pots of gold at the end of the day, but to realise that they have more options if they think things through. If we can learn something from the music industry, it is that there will be completely new players in the market and that the customer will win in the end. If I am passionate about music, changes in technology help me find new bands and consume new types of music … The same will be true for consumers of sport and broadcast products, it is just that the channels for consumers will be different.
You mentioned in an interview that if you could change one thing in the industry that would be long-term – at least 3 years – planning of sports properties …
We see more capacity and desire to plan in those rights holders whose circles are necessarily long. Some of the most impressive organisations in UK in terms of planning are those who are Olympic governing bodies for individual sports or the Olympics themselves, which have 4-year cycles. That creates the ability to plan and follow the model … setting up, delivering it, review, go again … We noticed that some clubs are able to have long term planning cycles, which is certainly true of those clubs where there is stability in ownership. Clubs with the most consistency and stability in ownership tend to attract the best industry talents to run their businesses. From our experience, it is easy to show over the course of three to four months which part of our clients’ marketing is not working, and why. Data provides the evidence for this. And the trick is to stop doing the half that is not working. Better than spend six days a week marketing is to spend one day a week planning, two days executing, one day listening, and last day working the plan for the following week. From the marketing perspective it is absolutely possible to put more thinking and less execution into the marketing side of clubs, leagues and governing bodies.
Some brands are media, some sports properties are data-packed fan engagement centres in one way … In your opinion, what does the future bring?
With regards to broadcasters: it is a turbulent market, but turbulence brings opportunities. And it is a marathon, not a sprint. This might be twenty years of turbulence, so it is important for organisations to build long-term plans. From the sponsorship perspective it is about sponsorship having granularity of data and insights to be able to properly compete with other media vehicles and use of brands’ investment capital. From a sports marketing agency perspective, the future is absolutely around having to say: “we can empirically show that our work made you this financial return.” For those who can’t work on such level, things could become tough.
This text was first published in the SPORTO Magazine No. 8 (October 2016).
Sport Media Focus