The Argument For A New Commercial Model Pt II – Ben Wells

So what does the new model look like? In my last post I argued that football clubs (and sporting organisations in general) needed to react to multiple rapidly-evolving dynamics around it to create a new commercial model. This model is absolutely predicated on ownership of the customer.

In the current model, everything comes back to media. Fifteen years ago, most top English clubs split their commercial revenue reasonably equitably between TV revenue, commercial income (sponsorship, retail etc) and matchday receipts.

In recent years, that pie chart has become far more heavily skewed in favour of TV and whilst Manchester United have done an unbelievable job in generating new commercial revenues, for the rest, they are utterly reliant on the FAPL itself continuing to do their heavy lifting for them.

In the early days of the FAPL, it was widely accepted that the relationship between top flight football and the then nascent BSkyB was a perfect example of symbiosis.

However Sky’s business model has evolved to such an extent that where satellite TV 20 years ago was seen as a luxury, now (as part of its quadruple play approach) it’s more of a utility.

For sure, Sky benefits from owning FAPL rights but its existence is arguably no longer tied to it. Football meanwhile, runs along pretty much the same lines as it did in 1992/3, just with higher prices and ever higher operating losses.

The FAPL have done a phenomenal job in growing the central TV revenues for its constituents, especially in recent years.

Westminster and Brussels have continually tried to make it easier to create competition but since the turn of the century we’ve seen NTL, On(ITV)Digital, Setanta and ESPN dip their toes in the water and then either withdraw tactfully (ESPN) or disappear into the mists of time (everyone else).

There is always talk – of al Jazeera, of Apple TV – but so far it’s been just talk. BT Sport have so far proved the mostly likely serious long-term challenger to Sky’s hegemony and for now everything looks rosy: no doubt the tender process currently underway for the TV rights for 2016-19 will provide another bumper pay day for all concerned. No doubt this will also mean still higher transfer fees, ticket costs and even higher losses.

However I suspect this will be the last big deal of its kind. Where football goes after 2019 in my view, will be down to football.

Four years doesn’t sound like an especially long time but in “Generation C” terms, it’s an eternity. Without labouring the points made in previous posts, even now people just aren’t watching TV as they used to.

The broadcasters have recognised this and consequently, have made multiple delivery platforms available as they strive to understand what their customers want and to try to stay one step ahead of them. Meanwhile, sport sits back and waits to see what’s put on the table.

We, as an industry, need more leverage. We need to understand better what drives the broadcasters’ commercial imperatives and be prepared to invest in the tools we need to gain a greater element of control over our own destiny and reduce our absolute reliance on a relationship that is no longer symbiotic.

During a great chat last week with Fiona Green, we absolutely agreed that a D2C media model is around the corner. Google are hovering in the wings but have made it clear they won’t pay for rights. Our current model has no room for such players but should we be making it hard for D2C operators to enter the market?

I had lunch last week with another industry professional, who, like me has been a football supporter since we were young. We might now get to see our boyhood team once a season, we buy no merchandise, our value to our respective clubs is negligible.

However we both spend more than £70 a month with Sky and are tied in on long-term contracts. We both agreed that if another, more convenient, cheaper operator was to offer us the same content we would seriously consider switching.

There is no emotional attachment to the broadcaster, as we are always told there is with our club, but the question of who owns the customer in this context is absolutely clear. Until football redresses that balance, it will remain gratefully in debt to its broadcast paymasters.

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Ben has seventeen years’ experience on the marketing side side of sport. Having spent six years at Chelsea FC, where he was Head of Marketing and a year as Commercial Director at Reading FC, Ben has set up his own consultancy, specialising in improving business model elasticity through genuine long-term customer engagement programmes. Prior to his time at Chelsea, Ben spent nearly four years at Redmandarin, the strategic sponsorship consultancy. Follow Ben on Twitter @ben_wells1 This blog appears regularly athttp://benwells1.blogspot.com.

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