Sports Invests In Live Experiences In The Age Of Streaming
BY ADAM GROSSMAN
This week’s announcement of Apple TV+ is a show the sports industry has seen before. Not only does Apple join the ranks of Disney, Amazon, Google, and Facebook in owning streaming video platforms that can feature sports content but it also enters a space of sports-focused platforms that includes ESPN+, B/R Live, DAZN, and FloSports.
Apple’s entry into streaming video also seems like another blow to the live experience for the entertainment industry. The prevailing wisdom in content creation is that consumers want to consume content how, when, and where they want. Why go to a venue to see a performance, movie, or sporting event when the content can be delivered directly to a television or mobile device.
Apple’s launch of iTunes was arguably the turning point in the content delivery story. The iTunes Store and the ability of millions of people to legally download the specific songs they want directly to an iPod, iPhone, or iPad seemingly made both the live concert and CD obsolete. This had devastating results for the music industry with revenues shrinking from $38 billion in 2003 to $16.5 billion in 2013.
This revenue decline is largely attributed to the belief that the music industry failed to react to the change in audience preferences for consuming music. The “Luddites” had built a physical infrastructure around concerts and CDS that did not belong in a digital era and were not making investments in ways that could best monetize the future of music.
This made the announcement of multiple major sports venue projects around the same time that the company arguably most responsible for changes in audience consumption is launching a new streaming platform all the more surprising. This ranges from three venues spending millions of dollar to “replace their existing scoreboards with larger, flashier entertainment systems” to the San Diego Padres announcing a new concert venue at Petco Park. The announcement of a new, $50 million esports arena being built for the Philadelphia Fusion team is even more unexpected given that esports popularity originated from fans watching their favorite athletes and competition on streaming platforms.
Why would sports organizations be making these types of investments in live experiences in the age of streaming video and digital distribution? The music industry can serve as a guide for this rationale. Last year was a “record-setting year in the concert business, with more than $10.4 billion in sales, representing 152.1 million tickets.” The top-ten music tours in 2018 grossed 10% more in revenue 2018 than in 2017.
This does not necessarily mean that more people are coming to concerts than before. Concert revenues continue to increase because ticket prices continue to increase. This is evidence that shows that people who want to attend concerts are willing to pay an increasing amount to have the unique experience of seeing their favorite bands in person. This is occurring at the same time that iTunes and streaming services such as Spotify and Pandora continue to build audiences.
That is a bet that the sports industry appears to be making via these venue investments. Fans that want unique experiences will pay more to attend live competitions even in the face of or because of the growth of streaming services with sports content. This should be welcome news for the teams and leagues that have struggled with the attendance issues in recent years.
This is also good news from a corporate partnership perspective. More specifically, the fans attending venues for games or competitions are more likely to be the fans that companies want to target. Coming to an event when they do not “have to” (i.e. they could watch the event on a streaming platform) while also potentially paying more for the experience is a clear sign of a fan’s interest in teams or athletes.
The growing importance of live events demonstrates why B6A’s Corporate Asset Valuation Model (CAV) examines both the quality and quantity of engagement when it comes to sports partnerships, in particular when it comes to non-media assets. More specifically, declining attendance would mean declining partnership ROI using more traditional metrics. However, companies are looking for the ability to reach an engaged, lucrative audience. Live events such as games, competitions, and concerts provide unique opportunities to achieve this goal and the CAV demonstrates that value as part of our overall partnership analysis.
That does not mean that sports industry leaders should follow the “if you build it they will come” mantra. Fans will still need to have compelling reasons to leave their homes and have a great experience while in a venue. However, the continued growth of streaming platforms may signal the renewal rather than the end of the live sports experience.