Written by
Sören Fillet
7 mins read
Why Sports Clubs and Brands need to look at esports to connect with existing and new fans
Live sports events where you can welcome fans in the stadium are off the table again now a new coronavirus wave hits. This has a huge financial impact on clubs and brands sponsoring events. Starting with esports and launching a gaming tournament platform can help brands and sports clubs to solidify their revenue streams. Esports are a great way to reconnect with sports fans and get revenue streams up again.
In this read, we talk:
After a blissful summer lull, much of Europe, again, saw COVID-19 cases mounting and threatening to overwhelm health care facilities. Governments rushed on implementing stricter measures to slow down the further spread of the virus. Enter lockdown 2.
In some countries, professional sports leagues had already resumed. When picking up campaigns, some clubs decided to let fans back into the stadiums, albeit in drastically diminished numbers. Or they were planning to. The presence of fans during games is currently dialed back almost everywhere.
FC Barcelona has to cut down wages due to revenue losses
It may be needless to say, but the pandemic hit the sports industry hard. Analysis suggests that revenue in the sports industry will be under 74 billion U.S. dollars in 2020 as a result of the crisis. That’s almost half that of the pre-COVID-19 estimates.
Why is that? Many sports organizations are still relying on traditional revenue streams such as sponsorship, hospitality, membership, merchandise and match-day.
With no games to attend and as a consequence no spending on merch in the club’s fan shop or drink and food stands, the revenue stream is already out of balance. Then there’s also uncertainty about next year’s income: fans who are having financial difficulties due to the crisis might be doubting whether they’ll renew their membership.
Income losses are causing major issues
The situation is so bad that big clubs are even negotiating lower wages with players. Spanish top professional football division LaLiga published the salary caps of the 20 first division clubs. FC Barcelona loses the top position in the ranking with a minus of over €270 million. Barça is only allowed to pay up to €382.7 million in wages now.
“Clubs will have to reduce the salaries of their players, there’s no other remedy.”
Javier Tebas Medrano, President @La Liga
Same for cycling teams. In a piece on the impact of dwindling sponsorship revenues, sports economics professor Wim Lagae from the KULeuven says worldwide income from sponsorship has declined by an average of 25%. As a result, riders will also have to deal with losses; a survey by the riders union Sporta shows that the majority of the professional riders lost about 30% of their income during the first lockdown.
And then there are still sports such as basketball and volleyball that in many countries hardly get any exposure on television. Professor Lagae continues that the loss of live games where they welcome their fans may prove to be a death blow.
I fear an acceleration in bankruptcies of all sorts, which will also mean that the men and women on these teams will have to make significant sacrifices. For indoor sports, the crisis could really end in a bloodbath.
– Sports economics professor Wim Lagae @ KULeuven
Can you still pay all of your employees?
Besides sports clubs, many brands are struggling too. Coca-Cola sales fell by 28% due to Costa Coffee shops closing in the second quarter of Q2, for instance. The company decided to let off some 4,000 people due to the loss in revenue. That’s just one example showing how COVID-19 is impacting businesses.
For brands that include advertising at sports games in their marketing mix, one of the reasons for the decrease in sales is, of course, the fact that they’re losing an important touchpoint with consumers.
This may well again mean a loss of income for sports clubs. Due to uncertainty in the market, some companies are decreasing marketing budgets to preserve capital. Recent industry surveys have highlighted the potential impact of loss mitigation measures. A US-based survey conducted in April established that 31 percent of sponsors expect pro-rated agreements and refunds. Two Circles, a specialist in data-driven sports marketing, forecasts that rights fees will tumble from $46.1 billion (£37.3 billion/€42 billion) last year to $28.9 billion (£23.4 billion/€26.3 billion) in 2020.
This may well have a knock-on effect on start-of-year revenues for 2021. So what can you do to make up for the losses?
(Re)connect with sports fans thanks to esports
Now live sports with big numbers of fans in the stadium are out of the question, fans are turning to digital alternatives, like esports. Esports is a form of sport competition using video games. Professional gamers get together to compete in a multiplayer environment either individually or in teams.
Both for sports clubs and brands, getting started with esports is the way to go. By setting up a gaming tournament platform or starting digital advertising campaigns on such a platform, you can get fans engaged again. And in doing so, you can secure revenue streams and return on investment.
During the first lockdown in March, professional esports organization Team Liquid stated that viewership was up 30% higher than any other month in the company’s history. Streaming platform Twitch went from 33 million to 43 million viewers between March 8 and March 22, surpassing 3 billion hours-watching time on the platform.
This rise in the audience is also convincing brands to sponsor esports tournaments. Newzoo reports that in 2020, sponsorship will reach $636.9 million, up from $543.5 million in 2019.
Big brands like Coca-Cola, Nike, Mercedes-Benz and T-mobile already started investing in esports as a way of brand activation. And for good reasons. Leading consulting firm McKinsey reported that globally, the industry hit $950 million in revenue in 2019 and is expected to reach $1.1 billion in 2020. Most of the revenue (58 percent) will come from sponsorships, which grew by 17 percent compared with 2019. The esports audience is projected to hit close to 500 million enthusiasts and occasional viewers in 2020.
Why should you invest in esports and a gaming tournament platform?
It’s a powerful activation tool
It allows you to host competitions that reach your audience up to 24 hours a day and 7 days a week in these times of physical distancing.
Users can play or watch competitions around the clock, significantly increasing the amount of time they come into contact with your brand. With some smart activation tactics, such as adding a scalable reward system mixing sponsored items with lottery tickets for bigger prizes at almost no cost, you can keep fans coming back.
You can reach new and bigger audiences without exponentially increasing the costs
In Southeast Asia for instance, gaming is gaining tremendous momentum from the rapid growth of mobile and Internet users.
But also to reach Generation Z, those born between 1994 and 2010, esports is a better medium. In a recent study From Nerdy to Norm: Gen Z Connects Via Gaming conducted by Whistle, 68% of Gen Z males agree that gaming is an important part of their identity. Having grown up with smartphones in their pockets, Gen Z eschews traditional television viewing and subscribes to digital habits – which forces clubs and brands to get on board with esports if they want to groom and engage a new generation of sports fans.
You’ll gain more data insights to leverage in campaigns
On top of reaching these new audiences, the gaming tournament platform will give you valuable insights into how to engage them. To date, there’s little data available on this topic. By setting up a gaming tournament platform for your fan community, you can start building a database and understand this audience better. For instance when users are most active, or what in-game merch they like best.
You get to benefit from the opportunity to get fans to spend more
Right now, your best chance to gain profits is to make the shift in revenue model from one-time game sales to a digital ecosystem of in-game merchandise.
In this article, we cover the top 10 reasons why investing in online tournaments on a gaming tournament platform today is crucial. Quickly find out why!
Great examples of sports clubs and brands picking up esports
Proximus, one of the biggest broadcasters of live sports in Belgium, and the Belgian Pro League launched the Proximus Pro League e-Cup. To keep sports fans digitally engaged, they partnered up with StriveCloud to create a competitive digital arena. They did that by setting up a gaming tournament platform. Here, fans could register to represent their favorite Pro League team, enroll in FIFA tournaments, communicate and challenge each other, and connect with the club and players in a competitive way.
A quick overview of the staggering results:
- over 2,000 fans signed up in the first hours of activation
- +3,000 matches played in the first 2 days
- + 12 hours/day online time spent by some players
Get inspired by the Proximus Pro League e-Cup: read the full case study
German football club FC Bayern München organized its own esports events: the FC eFootball.pro Cup and the Allianz Esports Cup. In the first event, pro athletes from different sports, genders, and ages competed in a Pro Evolution Soccer, a video game simulation of football. In the second, fans competed against each other on Bayern’s gaming tournament platform. All games were also broadcasted on the club’s official YouTube channel.
Take-aways
The absence of fans at live sports events throughout the COVID-19 pandemic has been felt strongly. The revenue streams of sports clubs and brands who are advertising at events are heavily impacted.
A solution for this revenue loss? Getting into esports. By diving into the world of esports with a gaming tournament platform, you can create a digital alternative to live match-days. Besides connecting with your existing fans and attracting new ones, you can leverage the platform to gain insights into gaming audience behavior. With this information, you can then improve marketing campaigns.
Football clubs like Bayern München have experimented with it and were able to reconnect with their fans. As for businesses, esports are a great a way of brand activation – big brands like Coca-Cola, Nike, Mercedes-Benz and T-mobile are already making good use of this new ‘medium’.
