Morning, afternoon, evening everyone - Joe here - welcome back to edition #31 of The SEG3 Report!

Today’s edition looks at the obstacles to innovation across the sports industry, the English Football League launching an Innovation Lab & WPP collaborating with Roblox to bring advertisers to the platform.

Contents: Edition #31

• Report unearths obstacles to innovation across sports industry

• English Football League launches Innovation Lab

• Roblox & WPP team up for Immersive Advertising

Let’s dive in…

Sports Leadership Report unearths Sports Readiness for Innovation

The Sports Leadership Benchmark report, released by PTI, asks C-Suite executives from across UK & Ireland about their short and long term sentiment about the financial prospects of their respective organisations, which areas were forecast to grow (or shrink) and by what extent, what the blockers are to growth, the importance of data in their future growth plans & the current sophistication of the industry in regards to technology.

Why you should care?

I’ve long appreciated the PTI teams no bullshit approach to the realities across the sports industry. 

As much as the legacy business model has worked (spectacularly well may I add!) for the past 30+ years, the headwinds that the industry now faces mean it is no longer rainbows and roses, and it cannot continue to be just business as usual.

What headwinds? Well, these…

With these trends being here to stay, there is, and should be, change afoot. I’m confident that many readers of this newsletter are already planning accordingly for technological & business model innovation, but as ever I was intrigued to get a temperature check on where the wider sports industry is in its transformation and where there is still room for growth.

And there were a few findings that caught my eye:

1. 40% expecting major growth in D2C/Digital Products over the next 5 years vs 2% expecting a growth in media rights

In essence, many brands expect to refocus their business model to centre around the most valuable asset that sports brands have and many crave - fans.

Thank goodness. As an industry, I think it fair to say we have become expectant of our fanbase - even exploitative in some regards of the fans loyalty. Just because fans have our brands at the centre of their identity, it does not mean that we can underserve their needs, all whilst squeezing more and more out of them.

No more. Fans want (and should expect) better.

With the (expected/inevitable) decline in media rights over the coming 5+ years, the revenues lost here will need to be made up in the aggregate elsewhere. But this will not be a quick fix, it will require a concerted effort to not only change the culture, but also skill sets internally. It is however essential to make that change now to continue to thrive in the future.

With the 2nd & 3rd obstacles at loggerheads, the 4th obstacle will become more important than ever - bringing in the right expertise, creating a ‘smart risk taking’ internal culture and delivering insight driven investments in technology will mean sports brands can enhance existing (or build new) products and experiences that mean they can start a journey that will:

1. Retake ownership of the relationship with their fan and recapture the value

2. Start to gain a wider understanding of the consumption & engagement patterns of their fans

3. Then be able to deliver more personalised & relevant communications and experiences to their audience

4. And get to a point where they have definitive numbers on their fanbase, which can put them back in the driving seat for rights and partnership negotiations

Sports is the envy of many global consumer brands. They already have the reach to four corners of the world and a fanbase with undying loyalty - that’s why it is so imperative that they have the right technology and data strategy in place to be able to efficiently nurture and grow their fanbase, so that when the day comes of media rights dissipating, they’re much further along the line than where they currently are now, which is…

2. 50% of rights holders are commercialising less than 10% of their database

   This stat was perhaps the one that shocked me most. It is truly wild.
   
   On one hand, it is frightening to think how much is being left on the table, but on the flip side, it is actually incredibly exciting to think how much room there is for growth when the large majority of value is still yet to be captured.

So whereas the current strategy is to try and squeeze every last penny from the 10%, focusing on having a more comprehensive and rich database of your whole fanbase will loosen the reliance on these superfans, which should allow you to:

• Improve your relationship with those superfans - it’s very likely they’re consistently being bombarded with sales messages; with more usable data and thus insight, there is a wider net to be able to monetise, which leads me to point 2:
  

• A longer term view on monetising the fan - the report refers to lifetime value (LTV) and average revenue per customer/user (ARPC/ARPU), and I absolutely agree that this is the direction of travel for sports to break the cycle of short-termism when it comes to driving revenue.

The below summarises it perfectly:

Which leads onto my final observation…

3. Looking for efficiencies vs top-line growth

I’ve been banging this drum for quite some time. It’s always lauded to drive new revenues, and as we’ve discussed above, there are a number of strategies that can be put in place to make this a reality over the coming months and years. And revenue growth should always be an objective.

However, saving a pound is just as good at making one, right? If anything, it could well take less effort to do so!

The report dives into the lack of a joined up approach to technology procurement, with 43% of executives owning up to not having a company wide process. This can lead to purchase of multiple solutions that are trying to solve the same problem, and not one singular source of truth / dashboard for all staff from multiple departments to work from. This just creates fractures and siloes.

And when lack of budget is the number 1 obstacle to growth, yet 36% are planning to spend over £500k on tech in the next 12 months, there could well be quite a few pounds to be saved and reinvested by spotting those inefficiencies early.

Overall, I’m extremely bullish on the continued success of the sports industry. They have done the hard part and captured the audience's loyalty - and with more strategic and sophisticated integration of technology into their business operations, they’ll not only remain some of the most powerful brands across the globe, but grow to become more pivotal across other areas of culture.

EFL announces Innovation Lab

The English Football League (EFL) has opened applications for its EFL Innovation Lab. This initiative aims to support startups and innovative projects that can enhance the fan experience, improve club operations, capture and analyse data & more. Selected participants will receive mentorship and resources to help develop their ideas, as well as opportunities for pilot programs with the EFL’s 72 clubs.

Why you should care?

Well, after the first story of today, this is a welcome move by the EFL.

The MLS (who just announced their second cohort), the NBA (with Launchpad) and others have pioneered this approach over the last few years, and have had numerous applications to their programs from emerging tech brands.

As much as it is important for these major leagues to stay on top of trends and have exposure to the latest and greatest tech innovations, the ones who are really feeling the pinch and in need of finding new solutions that help them to make money, save money or engage their fans further are the ‘Tier 2’ clubs, governing bodies and leagues, so I’m pleased to see the EFL announce this initiative, as you’d assume there will be far more openness from the 72 clubs to test and trial new solutions.

EFL Chair, Rick Parry said:

The innovation lab is set to focus on finding solutions for:

• Fan Engagement

• Operational Efficiency

• Data Capture & Analytics

& just about anything actually…

A few thoughts:

1. Investing in the start ups

I’m a big believer that more leagues should have venture arms to be able to invest and support start ups. They have the capabilities to be able to supercharge these businesses growth through their own clubs and wider ecosystem, and therefore can be valuable partners very much worth these start-ups having on your cap table.

Much to the sentiment discussed earlier of more long-term thinking at sports brands, there is also a real opportunity to get equity positions early in game-changing start-ups, nurture them and help accelerate their growth, and then guide them towards an exit. This is a completely new revenue stream that not many sports brands are currently exploring, yet with the amount of inbound brands receive from technology suppliers (hundreds!), they have early exposure that they can use to their advantage, whilst also potentially being able to…

2. Become the technology supplier

The EFL have said in the application process that they may decide to invest in some of the suppliers at the end of the program, whilst also saying they may ask for exclusivity for the UK / from their competitors.

If the start-ups and the EFL are able, within the program and pilots, to co-develop new solutions that have use cases across the wider industry, there is then even the opportunity for this to be white labelled out to other brands (whether internally to EFL clubs) or to other sports brands, which again can help to drive completely new revenue streams for the league.

For those of you that attended SEG3 London in June, you’ll have heard the International Olympic Committee discussing how they’re centralising their marketing tech stack, which they will then provide to the organising committee for future games, saving them time, effort and money by just working with central body (the IOC) to deliver it.

The EFL has the opportunity to do something similar here, with the added benefit of working alongside a venture studio, that can help to provide expertise, capital & network to help scale the business from an idea/start-up to a fully fledged business.

It’s an exciting model. If you’re interested, you can check out the application for the innovation lab here.

WPP & Roblox partner to drive advertising

WPP and Roblox have announced a partnership aimed at exploring the potential of immersive media and gaming for global brands. The collaboration will focus on creating engaging advertising experiences within the Roblox platform as WPP seeks to leverage the popularity of gaming to enhance their brand partners reach.

Why you should care?

Brands have been activating in Roblox for many years now, but there have been a number of changes over the past 12 months or so in an effort to make the platform more amenable to advertisers and media dollars, as a pose to innovation dollars (as we covered in Edition #26).

So with Roblox targeted advertisers, working with WPP, arguably the largest advertising agency globally, is a smart move.

Roblox, with the launch of a number of updates this years has unlocked and made a number of things possible like eCommerce, immersive ads & sponsored game promotion; all of which lend themselves to the traditional media landscape and buying processes that agencies like WPP do for their brand clients regularly across social, OOH etc.

There were some interesting points in the release that you should take note of:

1. WPP and its media investment company, GroupM, will join the official Roblox Partner Program as an agency partner to work directly with Roblox to establish a long-term measurement advisory relationship
   

   Measurement is, and will continue to be, the thorn in Roblox’s back. You only need to look at Hindenburgs controversial research (although with them being short-sellers, their report does need to be taken with a pinch of salt). Their claims certainly do have some merit however - many consumer brands that have been involved in our shows over the past few years have spoken to the need for more detailed insights and analytics from the platform. More concrete measurement figures means they’ll be able to showcase the effectiveness of their campaigns internally and thus unlock larger media budgets to reinvest, which is good news for Roblox.
   
   If WPP are working alongside Roblox to standardise the measurement tools used on the platform to make them in-line with the current media buying process, this could well incentivise more brands, and their agencies, to invest budgets into the platform, which would be a huge positive for the growth of the platform and the wider ecosystem.
   

2. WPP and Roblox will also work together to pilot a first-of-its-kind Roblox certification program for marketers to deepen their expertise in the platform’s ecosystem.
   
   If I’m reading into this correctly, Roblox & Sawhorse Productions produced something similar a month or two back to allow brands to experience and begin to understand the platform - just without the certification. Perhaps they’ll utilise this experience as part of the learning experience?
   
   In any case, I’ll be intrigued to see what will go into the certification, but brand and marketing managers becoming more up-to-speed with how the platform works, the nuances and the benefits to engaging with its global audience will only be a helpful step. They could also attend SEG3, but that’s a given, right? 😉

Certainly one to watch, but exciting to see the large media agencies taking note, and integrating UGC platforms into their advertising strategies for major global brands.

In other news this week…

Here is a quick round-up of other stories you should be across from the past 7 days:

• OpenAI & Agora collaborate to launch real-time conversational AI

• Universal are bringing SEGA’s Shinobi to the big screen

• How Anime took over the world

• Sky files lawsuit against Warner Bros over Harry Potter series

• Sony’s Transmedia approach for Ghost of Yotei

• Karate Combat to launch layer-2 blockchain on Hedera - p.s. check out more of a deepdive on this story on Sporting Crypto here

Working on anything cool, or do you have a press release you would like us to cover? Send it in for the chance for it to be covered in next week’s edition!

That’s all for now - thanks again for reading the latest edition of The SEG3 Report!

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