Sport’s blank page: COVID-19 crisis gives marketers and sponsors time to reflect, review and restructure

In a wide ranging interview with sports journalist, LUKE ALFRED, the CEO of BMi Sport and founding member and CEO of SS Network, David Sidenberg, talks about the impact of coronavirus on sport, rights holders, broadcasters and sponsorship. The silver lining, he says, is that sport has a blank page that could be filled with the ‘incredible learnings’ about sports fans and their media consumption habits.

The coronavirus pandemic has raised a variety of threats (and questions) in the sports industry. These relate to live sport, the broadcast of live sport and the relationship between rights holders and broadcasters. But they also relate to sponsorship, legal issues, public health issues and the role of government going forward.

But first…

Q: How will the news of ABSA pulling out of the Premier League sponsorship impact on the PSL and sport sponsorship?

A: While much has been made of ABSA’s announcement that they will not be exercising their contractual right to further extend the PSL partnership, for those in the know, this should however come as no surprise. In fact news of ABSA’s eminent departure pre-dates COVID-19 and was first publicly voiced towards the end of last year.

Similarly, any reports of the ‘death’ of the PSL – as once famously stated by Mark Twain – are greatly exaggerated.

In many ways, sport mirrors the broader economic climate and sponsorship by association is no exception. It’s of course true that traditional sport, like all business, is under more pressure than ever before. But whether we are speaking of the PSL specifically, or sport and the sponsorship market in general, it’s simply too early to pronounce on the long term impacts.

Yes, there will definitely be some casualties, a few market corrections and hopefully even some new brainchilds, but there is no doubt both the PSL and sport in general will bounce back. The underlying value is too great to simply be discarded.

For me, the more pressing question is, despite the challenges, how can we take advantage of this moment? I cannot remember a time in all my years in this industry where we have ever been able to push the pause button like now. So before we get going again and the opportunity is lost, now is our chance. We have a unique opportunity to review, rethink and where required, restructure everything – a period, if you like, of almost forced collaboration, where so much can be improved upon – so let’s not waste it.

Q: The sports industry in South Africa seems remarkably free of rancour so far during lockdown, i.e. no spats between rights holders and federations, no pushback from sponsors who aren’t seeing their product on television etc. Fair comment?

A: Yes, I believe this is currently a fairly accurate assessment. Ironically, our federations are for once in a more fortunate situation than many of their international counterparts because loss of match day revenue here is minimal. For most major sports bodies, leagues, teams, etc. they generally have four sources of revenue:  Broadcast, Sponsorship, Match Day (ticketing and hospitality) and Merchandising and Licensing.

While broadcast and sponsorship are not surprisingly the biggest sources of revenue worldwide, the latter two can contribute up to say 30-40% in major markets. By comparison in South Africa, broadcast and sponsorship revenues (particularly for the big three) are often responsible for more than 85% of income.

Additionally, because there’s no play, there’s no travel, no accommodation, no opening up of stadiums, lights, security etc. and that can translate into short-term savings. Some federations (like SA Rugby) have reduced player salaries. Also, unlike Europe, for example, where Canal+, BeIN Sport and now others refused almost immediately to pay their final broadcast rights fee instalments to the associated leagues (LFP, etc.), our broadcaster(s) (SuperSport) has not yet blinked.

Most sponsors I have spoken with are looking for solutions and compromise – wait things out if you like, until there is more certainty – noting that by nature sponsorship is a long term partnership – so rash decisions to save a quick buck (no matter how necessary these budgets may soon become) could have significant strategic and public relations repercussions downstream.

Q: The lockdown happens when the sports industry in South Africa is already challenged?

A: Even prior to the COVID-19 crisis, we were asked by many of our clients to consider the impact on sponsorship media return on investment ROI arising from the lack of coverage this season/year by the SABC. Concerns had been further heightened by speculation that the ICASA Sports Broadcasting draft regulations will be pushed through in September – despite the significant challenges exposed during the hearings in early 2019.

The financial difficulties faced by the SABC are not new – but the impact this is beginning to have on sport and the sponsorship industry reached an unprecedented level when the 2019/2020 PSL season launched under a self-imposed blackout by the national broadcaster. Other major events of national importance including the 2019 ICC Cricket World Cup, Fifa Women’s World Cup, INF Netball World Cup, and IRB Rugby World Cup, which all featured South African teams received little or no coverage by the National Broadcaster.

And now – all bets – and arguably all live sport – are off for the time being

Q: Do you see the landscape plunging into complete crisis?

A: This really depends on whether or not SuperSport blinks – i.e. begins holding back on broadcast rights fees – and whether or not rights holders are prepared to find solutions for their sponsors and/or arrange for compromise payment structures. If, for example, SuperSport freezes all future payments to, say, the PSL until play resumes (an unlikely scenario), or, worse, pulls a Sky/BT sport and demand a refund, the house of cards could fall quickly.

Broadcasters have come up with different responses to the crisis of no live sport. For example: Sky allows customers to pause subscriptions during the pandemic; Canal+ makes premium channel free to view in response to Coronavirus; DStv has opened news channels for free, even to non-subscribers, and, in general, broadcasters are desperately trying to find ‘new’ archive content to fill the void left by the lack of live sport.

But broadcasters are faced with a two-sided coin: if they freeze subscriptions, the revenues required to buy or retain content dries up, but if they don’t, they risk retaining their premium subscribers who are receiving little extra benefit for the price. What’s really required is creative solutions and partnership with all stakeholders, especially with the fans in mind.

Q: Is there any upside to no live sport?

A: Despite the pessimism, there are upsides to the current moment. For example: The situation will create a buyer’s market for sponsorship rights. There will be huge value in the market for brands brave enough to commit budget rather than wait until a return to normality. Secondly, there is an opportunity for brands to support the sporting organisations/properties that will be most affected financially by prolonged disruption to the calendar. Thirdly, this is a unique opportunity for esport to shine – and reveal how powerful a platform this is to not only reach audiences previously difficult to find…but also how it can complement sport and sponsorship marketing efforts.

Finally, the period may allow time to connect with the most valuable asset for any rights-holder: the fan. It is time to build up a new view based on so-called ownership of data, engagement, and understanding the fan’s needs. As we near the end of the first phase relationship between sport and social media, largely based on huge over-claims of reach and relevance, we now need to take a closer look for evidence of deep fan engagement.

Q: How do you see the second half of the year sponsorship-wise?

A: There is evidence that suggests in times of trouble with reduced marketing spend from competitors, the opportunity to cut through the clutter is enhanced. These times require bold leadership and informed risk taking. To do nothing and wait for life to return to normal risks losing your opportunity to turn fan pain into engagement, appreciation and loyalty.

It’s equally important not to compromise long-term relationships or reputation by reacting negatively. In short, it’s a case of being practical and level-headed about managing the situation, but equally about being incredibly open towards finding the best fix to fill the void for all stakeholders involved. On the plus side – the crisis may lead to a better understanding of the interdependence of interests within the sports industry. We’re going to find out not just how resilient that ecosystem is, but how collaborative it needs to be for everyone to get through this.

If there is a silver lining, I believe we will come out of this period with incredible learnings around sports fans and their media consumption habits.

So maybe all of this, right now, is sport’s blank page.

BIO: David Sidenberg is one of the sponsorship industry’s most influential thought leaders and alongside his company BMI Sport Info, are credited for the lead role they have played in quantifying the impact sports marketing budgets contribute to their clients bottom line results.