Non-traditional revenue streams for Australian and global rights-holders (Part 2)
Non-traditional revenue streams for Australian and global rights-holders (Part 2)
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Following on from part one…
6. Esports
The Esports market has grown from a niche subculture into a sizeable one, that was estimated to be worth just over US$1.38b in 2022. As video games continue to become entrenched into everyday life for millions of people, it’s projected to reach $5.74b by 2030, facilitated by an ongoing digitization of the world, increased smartphone usage, and by the consistent creation of new teams, tournaments and companies. Many sporting organisations such as the NFL and European soccer clubs own Esports leagues, teams and players.
The IOC and NBA are two notable global sporting powerhouses who’ve also ventured into this space
The most recent entrance came from the IOC who launched the Olympics Esports Series 2023, a competition that includes 18 video games across 9 sports - Archery, Baseball, Chess, Cycling, Dance, Motor Sport, Sailing, Taekwondo and Tennis.
The NBA has been a global market leader in Esports since creating the NBA 2K League as a joint venture in 2017 with Take-Two Interactive, the owners of the 2K video game franchise. Through this partnership, the NBA has turned playing a basketball video game, into a global spectator sport and new competition.
Esports not only provides an opportunity to create new direct revenue, it’s a platform for rights-holders to expand their brands and attract new, young audiences who gravitate to Esports instead of traditional forms of sports and recreation
The expansion is mutually beneficial for both sides though… Rights-holders such as the NBA provide gaming platforms with the ability to leverage their brands and sports superstars to attract hundreds of millions of new fans to their platforms.
Esports has been a success for some, not others
Although there are now millions of eye-balls within the Esports world, the business model has started to be questioned by some, as the reach and engagement hasn’t yet translated into major revenue. Media rights are the biggest revenue-generating tool for traditional sports, however given that gaming is streamed for free across platforms such as Twitch and YouTube, commercial conversion hasn’t taken place within broadcasting. Sponsorship remains the predominant revenue driver.
The Australian Esports industry is far less-advanced than the global one
In early 2017 the Adelaide Football Club and Essendon Football Club purchased professional Esports teams but had to divest not long after due to the financial pressures they suffered as a result of the pandemic. The AFL also partnered with Riot Games (owner of League of Legends) at around the same time, but the activation of this partnership has been limited, potentially also due to pandemic pressure, and the AFL having to redivert focus to it’s core revenue streams.
Although the AFL has had its own video game for more than two decades, it’s audience has been limited. Competitive gaming has a network effect - the more people play, the better the experience. Given the code appeals to an Australian-only audience, the AFL hasn’t been able to capitalise on the network effect that comparison games such as NBA2K and FIFA have had the opportunity to do.
The launch of the E-League
Seizing the opportunity to take advantage of the network effect scenario in late 2017, Football Federation Australia (FFA) launched the E-League - a new competition in partnership with Fox Sports and Twitch, designed to connect fans of the global phenomenon EA FIFA game with the A-League, putting more football into more homes across Australia.
So far, the E-league can be classed as a success as the online streaming channel has at times, drawn higher ratings than the average A-League match.
7. Sports documentaries
Major streaming platforms have increasingly been recognizing the power of up-close-and-personal, sports content. For years, Netflix have resisted the urge to follow their competitors and bid huge $$$ for live sports rights, noting that:
“We’ve not seen a profit path to renting big sports… We’re not anti-sports, we’re just pro-profit.”
Instead, Netflix have pursued a strategy focused on building a portfolio of prestige sports documentaries that includes The Last Dance (Michael Jordan), Drive To Survive (F1), Break Point (Tennis) and Full Swing (Golf).
In comparison, competitors such as Amazon have taken a dual approach to sports - bidding on live rights, but also producing sport documentaries. In Australia, they have produced a run of localised documentaries such as The Test (Cricket Australia), Making Their Mark and Kick Like Tayla (AFL).
Amazon reportedly paid the AFL $10m for documentary rights and the players from the Australian Cricket team who featured in The Test supposedly received more than $80k each, collectively $3.5m.
Rights-holders receive multiple commercial benefits from streaming partnerships
Although it’s much less than bidding for live rights, a streaming service could easily spend millions acquiring the rights that enable them to produce high-end sports documentaries. Once acquired, streaming giants then spend millions of dollars on marketing them to ensure strong viewership and a return on their investment.
Drive to Survive is the most prominent example of a series that not only provided a direct revenue stream to the rights-holder (Liberty Media), but also turbo-charged the popularity of F1. For example, the F1’s event attendance and broadcast viewership in the US has doubled since it’s release in 2019, which helped F1 secure an additional $15m in their annual TV deal with ESPN.
It’s not only the tier-1 sports and most high-profile sports starts reaping the rewards though - Tennis’ Break Point documentary has helped raise the profile of rising tennis stars, and the Kick like Tayla documentary has allowed young audiences, and in particularly females, with a chance to better connect with Tayla Harris and the women’s AFL competition.
Welcome to Wrexham adopted a new commercial model
Taking a different approach to sports business, Rob McElhenney and Ryan Reynolds bought a fifth-tier English football club to create “Welcome to Wrexham”. This is a very unique example of vertical integration of sports media - a trend that PWC believes will become more common in 2023, and onwards.
The commercial benefits off the back of this Welcome to Wrexham’s raised-profile has been enormous
The PR and media coverage that Wrexham have received has enabled them to secure new sponsorships from blue chip brands such as TikTok and Expedia - something they would’ve never been able to do beforehand. The increased coverage also allows Reynold’s to promote his Aviation American Gin through the teams training apparel. In addition, ticket sales increased 161% and their social followings increased 364%+.
Their has been an explosion of sports documentaries
Taking note of the successful partnerships between sport and the streaming giants, others are trying to cash in on this content strategy. Among the crowd, Kayo teamed up with the Melbourne Storm to create In Due Time…
Also, the NRL partnered with Stan Sport to produce Dawn of the Dolphins which followed the launch of the league’s newest team. This documentary is particularly valuable as it enables the Dolphins to quickly build it’s brand from scratch, connect and engage with new fans, and generate revenue through traditional methods.
The explosion of sports documentaries is great news for rights-holders
As the demand for sports documentaries continues to grow stronger from sports fans and streamers, so will the the pool of new revenue available for sporting organisations who sit on the supply-side.
8. New technology - Web3, Metaverse, NFTs, AI
Technology is quickly altering how fans can interact with their favourite teams and there is a generational shift taking place within sports - from older passive fans who engage through traditional and linear means, to younger and more active fans who seek out more ways to meaningfully connect with athletes and teams. Recognising the potential of technology, sporting organisations are responding to these shifts in customer behaviour and building new platforms to enhance the fan experience, building closer bonds with fans through Web3, NFTs and the Metaverse.
The NBA has been at the forefront of technological innovation, creating new properties that generate new direct revenue streams, and facilitate the growth of existing ones
In 2020, they created NBA Top Shot, an online forum allowing fans to trade NFT-based clips of game highlights. NBA Top Shop facilitated more that $800m worth of transactions between early 2022, and when it was established in 2020, including one single LeBron James slam dunk NFT which sold for more than $500k.
More recently, they’ve launched the Reimagined Global NBA App - an “all in one destination” for NBA fans that features behind the scenes footage, new and existing shows, and access to the NBA vault. The AI-centric app was developed alongside Microsoft, the league’s official cloud and AI partner, and uses machine learning to created more personalised content.
The NBA’s new integrated AI-powered digital platform has provided an important launch-pad for the NBA’s other new innovations:
NBA ID: A new global membership program offering fans benefits and rewards from teams and sponsors, such as members only experiences, ticket promotions, prizes, voting access and other rewards
NBA All World: a real-world mobile basketball game where “NBA lifestyle meets the real world metaverse”. It’s the Pokémon Go of basketball that allows users to play play short one-on-one games on local basketball courts.
The technological innovation at the NBA is relentless. Adam Silver also recently unveiled a new feature in the NBA app that allows fans to scan their own avatar into a live NBA game, replacing the NBA player.
The NBA are by no means the only global sporting organization aggressively pursuing a new and immersive digital strategy to attract new fans and revenue - In fact, most others with large amounts of resources and capital are following suit.
In Australia, the AFL, Cricket Australia, NBL and Tennis Australia have all been forming immersive digital strategies of their own, and of the group, Tennis Australia is the most advanced…
The Australian Open was the first grand slam to enter the metaverse with the highly successful AO Artball that first launched in 2022, providing fans and investors with the opportunity to purchase one of 6,776 NFTs linked to 19cm x 19cm areas corresponding to sections of the real-life court at Melbourne Park. The program was linked to live match data which allowed it to provide prizes to to those holding the NFT of the winning shot in any of the 400+ matches. The AO Artball NFTs were priced in Ethereum cryptocurrency for approximately $446 at the time of minting in 2023. This program has grown legs in it’s short lifespan, morphing into a rewards program and enabling NFT-holders to claim a pair of complementary 7-day ground passes to the 2023 tournament.
In 2022, the AFL announced a 5-year partnership with Animoca Brands and the launch of the new AFL Mint brand - the home and official marketplace of AFL NFTs
Similar to the AO Artball program, AFL Mint has been created to deliver rewards and merge online experiences in the metaverse with real-world experiences, via exclusive events, ticket upgrades, hospitality, experiential zones and exclusive merchandise on game day within stadiums. The AFL’s first drop of NFT collectibles was a major success with the limited edition “Ripper Skipper” drop selling out in 12 hours.
Following suit in 2022, Cricket Australia took the first official step into the world of NFTs by partnering with BlockTrust, enabling cricket fans and investors to own and trade NFTs of some of the most memorable cricketing moments in Australian history. The NBL also “slam dunked” themselves into the metaverse when they announced a partnership with BlockTrust too later that same year.
More to come…