Real Madrid President and Chairman of the European Super League, Florentino Perez recently stated, “Football has to evolve, like life, like companies, like people, like mentalities do.”
The rationale that Perez placed behind the European Super League (ESL) was to save football from itself. He quantified the issue by claiming 40% of younger fans aged between 16 – 25 are not interested in football, as a direct result of lesser quality games. As a response, the European Super League (ESL) therefore set out that the ‘biggest’ clubs in the world would play each other on a regular, closed cycle, with the aim of guaranteeing future revenues for those involved and the game as a whole.
In further defence of the ESL, Perez and other founding fathers consistently pointed at today’s imbalanced economics of football as a reason for change, which in a roundabout way, is a point I think most football fans agree with. However the singular financial focus of the ESL fell way short of acceptable for football communities across Europe.
In a bizarre series of events, we’re now seeing the ESL unravel in the face of vehement protests from fans, players and the football establishment. All 6 English clubs have withdrawn from the proposed tournament and there are numerous reports that the remaining European clubs are set to follow, which no doubt restores faith for some fans. Unquestionably this has given clubs a stark reminder that delivering for their fans needs to be the starting point for any new business models.
To answer this question, we need to reflect on the business model of modern football clubs to understand where their priorities lie and why ‘football the company’ has grown so rapidly.
Revenue from the big 5 European leagues has increased by 9% CAGR for the last 7 seasons, reaching its peak in 2018/19 at a staggering €17BN, which comparatively would place it mid-table in World GDP figures. This growth is largely driven by increased broadcaster spend, with the average cost per Premier League game increasing from £4.3MN in the 2010-13 seasons, to £10.2MN in the 2017-2019 seasons.
With half the world’s population viewing themselves as a ‘football fan’, the sport’s scale is also very appealing to sponsors. However, whilst there’s been a steady increase in kit sponsorship over the last decade, proportionally, broadcast revenues still heavily outweigh sponsorship (by ~15x in 2018/19 Premier League season).
As depicted in the simple model below, these indirect revenues provide crucial injections of cash for clubs to invest in performance improvements, such as new players and facilities, or growth-related marketing campaigns. This attracts fans and fuels other commercial activities for clubs, and this cycle has tended to repeat itself with a tenure loosely aligned to those of the broadcaster and sponsorship contracts.
Although larger clubs tend to receive a bigger piece of this pie, proportionally smaller clubs are often more reliant on broadcasting revenues to stay buoyant, proving it to be a lifeblood for all involved. To grow commercially, it appears clubs – in particular the English Big 6 – have focused on dialling up their broadcasting income rather than looking elsewhere for opportunities to unlock value. Hence why the ESL was initially so appealing.
Today, broadcasting revenues are mediated by third parties and are largely based on team reach/performance. This means clubs relinquish full control of the size and shape of these revenues, making them far less reliable as a source of income. This exposure was recently placed under the spotlight in France when the broadcasting deal between MediaPro and the LFP collapsed. Canal+ capitalised on the opportunity and have now filled the void, but reportedly at a reduced €670MN for the domestic broadcasting rights, which is just over half of the €1.1BN it was expecting.
Clubs may also be missing out on an opportunity with their overreliance on broadcasters and sponsors. Looking across the Atlantic, The NFL has recently agreed to a 10 year deal with Amazon, CBS, ESPN/ABC, FOX and NBC for $100BN, which is by no means a small sum. The 5 broadcasters are spending so much because they know fans want to watch the games and they’ll use this to drive their subscription volumes and establish 1:1 relationships with fans. Great for them, but there’s an argument that the NFL has sold its soul for a fee and Tien Tzuo, CEO of the subscription platform Zuora and author of the Subscribed, has summed up the missed opportunity well.
“Today the most successful brands in the world are skipping over intermediaries and third party channels in order to establish direct relationships with their customers. Look at what Netflix has done for entertainment. Look at what Tesla has done for automobiles. The NFL could have done the same thing for football, but they opted for a cheque instead.”
In support of the ESL, Perez stated, “when you don’t have any income other than from television, you have to find a solution to make more attractive matches that fans all over the world can watch with all of the big clubs”.
Here lies the problem. In an attempt to try to reimburse pandemic-induced losses, the ESL was designed to raise broadcast revenues, but the question was never asked whether fans wanted the proposed new tournament. There was too much focus placed on the left-hand side of the model, instead of the right. With their backtracking, English clubs now have to regain the trust of fans and deliver experiences that meet their needs.
There is an alternative approach though – one that delivers commercial benefit and doesn’t rely on dialling up indirect revenue sources or selling your soul to broadcasters. A business model that’s underpinned by the fan. One that offers more of the propositions and experiences that fans want, and drives their engagement from these to build deeper and longer-lasting relationships with them.
In our opinion, this new approach for clubs is made up of 3 parts:
Last year, WWE was one of the few sporting organisations that successfully rose to the challenge of vacant ticketing revenues, by creating a state-of-the-art virtual arena, aimed at re-creating the experience of an in-person crowd at home.
WWE posted record-level revenues for 2020 despite the pandemic, which they credited to keeping many digital events open (9).
As part of efforts to grow its global fan base last year, the UFC continued to make localised content for regional audiences across the US and Canada, Latam, EMEA and APAC. With fans unable to attend fight nights, personalisation was key and the UFC delivered against the audiences’ desire for tailored content.
UFC saw its number of Facebook followers increase by 75% in 2020 to 53.1MN. Instagram followers grew by 31.2% to 24.2MN, while YouTube subscribers rose 25.6% to 10.7MN.
With such an array of events across the calendar year, Silverstone faced a challenge of connecting their propositions to deliver unified experiences for fans. Working with our partners, Thunderhead, Silverstone created a digitally agile engagement strategy to connect with fans throughout the year.
Since focusing on creating an e2e fan experience, Silverstone has seen a 10% uplift in new fan acquisition, a 12% uplift in Clubhouse memberships and a 15% efficiency saving in the sales process.
A fan centric approach will help to rebalance the commercial models of football clubs by providing 4 major benefits:
So future revenues are more secure, which makes owners happy, and fans are provided with experiences from their club that has them at its core. It’s such a win-win that it makes you wonder why direct-to-fan isn’t higher on the agenda for football clubs.
The nation has witnessed an overwhelming backlash towards the ESL in recent days. We’ve seen the emotional scenes of former player, Petr Cech, pleading for more time from aggravated Chelsea fans outside Stamford Bridge. Influential names such as, Alan Shearer, Gary Lineker, and the legendary Eric Cantona, all releasing videos of disapproval, along with many other current and former pros. Even Boris Johnson somehow managed to find time in his schedule, threatening to use “a legislative bomb” to halt ESL proceedings. So, if there’s one lesson to be learnt from the last few days; it’s that fans matter.
This has sent a clear message that fans have a voice and are not afraid to use it. The good news for clubs is that a fan-first business model offers a better opportunity for sustainable growth, more so than broadcasting deals.
With football commercials firmly in the headlines, there’s no doubt the door has been opened for more financially focused conversations amongst fan groups. Now, perhaps more than ever, there’s an understanding that football is and always will be a business. For clubs to grow, there has to be a level of financial robustness to invest in performance.
Unquestionably, football is at an inflexion point and to re-quote the wise words of Perez, “football has to evolve”. Currently, the economics are imbalanced and how we maintain the longevity of the beautiful game needs to be addressed. But it has to start with the fan and we’ll see a much higher degree of openness towards change, so long as it delivers value to the fan communities of the world’s most popular sport.
© 2023 Manifesto Growth Architects Manifesto Growth Limited, is a company registered in England and Wales with a registered office at 9 Castellain Road, London, England, W9 1EY.
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