Sports could offer new mobile revenue streams

By Darryll Adler

LONDON -- In tough times the promise of new opportunities no matter how elusive are so much more appealing than when things are good. Last week's Financial Times Conference, "The Business of Sport", demonstrated this very point. Sponsorship -- one of the major sources of revenues for the sporting industry -- is under threat.

Similar to many other services, the world of sponsorship is rapidly changing and it clear in this global economy that the sophistication of the US sponsorship model is in the process of being adopted by Europe.

This week’s change of title sponsor for the NASCAR season in the US is a clear indicator that some of the more established brands are withdrawing from what may be seen in this volatile economy as punitive sums of money to back very high profile sporting events.

Balancing the economic realities are the ambitions of the soccer team Real Madrid. Ex-Spanish cap and now Deputy General Manager for Sports for Real Madrid, Emilio Butragueno Santos demonstrated the value attached to rights as understood in these changing times.

Control and ownership of all aspects of the organization’s team players "including potential acquisitions such as David Beckham" was paramount. The key to successful marketing strategies is ownership of assets, which can create a powerful tool in a less than buoyant market.

Despite the gloom, one positive note reared its head throughout many of the presentations the need to respond to change. New standards were required such as better stadium, as endorsed by Steven Moore, Senior International Vice-President of IMG, who spoke of the multi-purpose usage of the future UK national stadium at Wembley; new products must be developed to attract new sponsors; sponsorship must offer creative and cost effective solutions; and new revenue streams must be developed.

Wireless technology

In light of the belief that change can produce opportunities and although scheduled as a topic for late in the second morning of the conference -- wireless technology dominated some of the discussion throughout. Instant almost real-time live footage via handheld was seen as a marketing solution of the future; and a potentially substantial source of revenues for both events and their sponsors.

The old guard sponsorship market such as Soccer and Formula One expressed their confidence in the benefits of new technology but this begs the question, will mobile, (wireless or handheld, call it what you will) be the driving force for new revenue streams, or will it be just another victim of the hopes and aspirations of business looking for the future quick fix?

Let’s look back.

A recent innovation is the Internet. How did the Internet play out for the world of sport? It is hard to tell as almost every major sports website has proved to be an invaluable, value-added. But not necessarily profitable. Without a guaranteed revenue stream, the Internet has established itself as an expected and accepted fact of life. But for many also a costly venture.

It has taken the established media with guaranteed revenues such as subscription for television and advertising for print — to cash flow the less costly, but essential websites. In other words, in the absence of a cash-generating vehicle, subsidies are required. (It should however be noted that sports websites are attracting sponsorship. This may be due to the cost cutting times we live in, and/or the profile of the sports addict.)

Call charges

In sharp contrast to the early days of the Internet, the mobile industry has an inherent cash flow call charges. Nevertheless it is not all good news for the networks, as many have fallen foul of what was to be the holy grail and are now burdened with massive debts to unload from the purchase of unproven, technology licenses.

As mobile networks seek partners to create additional revenue opportunities, the sports industry plans to vie for a share of these profits. And the two might form the perfect dream team if costs are small enough to commit resources to yet another uncertainty.

With a limited number of distribution networks and ever tightening controls on rights, there are a number of teams contesting the trophy. Producers of handsets; network owners; technology platforms; content providers, rights owners; and the various middlemen, are all circling their prey the sports addict.

But which player would you back in this game for control of revenues? Who will be the likely winners in this new, potentially optimistic scenario?

It’s hard not to imagine that by 2006 a large number of football fans around the world will want to access the score/results/footage of crucial games during the football world cup. If they cannot watch from home or the office or be in the sports bar, or pub or club with their friends, they will be grasping their wireless handset watching almost real-time action and waiting for that moment of truth.

This offers a huge financial opportunity for the sporting world and no doubt the game of winners and losers will be played out over the next couple of years and the sponsors will want to cash in. But who will claim the grand prize?

Andrew Collis, HP Director of Corporate Strategy & Global F1 spoke at length at the Conference about their recent success when "a wireless bridge" (private wireless network) communicated critical "data transfer" information, i.e. "live telemetry from the garage to the race car" at Le Mans. And the result was a win for all concerned.

Many applications

Wireless communications has many applications in the world of sport, and high-tech companies enjoy nothing better than demonstrating their products in a high profile sexy, environment. If they work, they can be applied to both the business and the consumer market on a much larger scale; and sport provides the glamorous and highly visible platform.

HP are hard at work to position themselves as a technology leader in the wireless market. They have hooked up with IMG and through this partnership, Mobix Interactive have developed a service formatting digital content for the handheld market.

Also taking a lead is the BBC, who looks like a very strong contender. Currently playing many positions in the field with digital cameras, ownership of content and a very strong brand in other established media such as television and the Internet, the very integrated BBC looks like it might be a winner in what might become a very crowded market over the next 12 months.

And if for example, the BBC can retain control of the rights to distribute live footage in an appropriate format to the distribution networks such as Orange and Vodaphone (who ultimately control their own output), then it is probable that they will negotiate either a one-off fee; share of telephone revenues; or most likely a combination of the two. High quality content will be at a premium.

In a world where digital is just round the corner and 3G will soon be a commercial reality (interim technology in the short term will suffice), one major hurdle remains: the competing and conflicting platforms around the world. History often dictates that the number 3 stands out (e.g., there were three players trying to dominate the VCR Market, and Sony and Phillips found themselves the losers, even though Sony offered a better quality product). The same scenario might be true of wireless.

Content is king

Because sport and other entertainment unifies the world and global products proliferate, technical barriers will naturally fall away in the belief that -- when it comes to the media world -- content really is king. Ultimately, only the cost of access differentiates (at the high end) or commoditises (at the low end) a product and service.

As the US languishes behind the rest of the world in regard to mobile phones -- it took text messaging a vote for your favorite American Idol (Pop Idol in the UK) to kick start the industry -- it continues to watch and wait as other markets such as Europe take the lead.

Crucial to these early days is content, and no one should ever underestimate the powerful force of entertainment/sport/celebrities in today’s communications industries.

But questions still remain. Will the live action be good enough? Will the delivery be fast enough? Will the picture quality be clear enough on my handheld to make the seamless transition from live action to instant almost real-time delivery a saleable proposition? And at what price?

If you want to be a player in the game and you offer a technology component you had better move fast to align yourself with what can only be two winners: the rights holders and the distributors of content.

Score a goal, cross the finishing line, or play that last winning point at Wimbledon these great sporting moments past and present will always attract a large audience. In the future there is every expectation that the sports world can capture these live images and deliver them to a worldwide, mass market. And the middlemen who in the early days facilitate this seamless transition from live action to instant high quality replay had better watch their backs.

History dictates that very few care about the technology behind the service, which leaves only the two key players to slug it out for their share of the pot of gold.