Russian Football Premier League: A comprehensive study of the economics of Russian football

Regular football fans – and football industry insiders – have plenty to look forward to in Russia. In the run-up to the 2018 FIFA World Cup in Russia this summer, our colleagues of the Sports Consulting Practice at PwC Russia has joined forces with the Russian Football Premier League to survey the country’s top league. In the report they explore areas such as infrastructure, commercial deals, attendance and fan engagement – and benchmark the finances of the cream of Russian clubs against their counterparts in the leading European leagues.

In this blog post we introduce a few of the key findings by way of a taster. The authors − Oleg Malyshev, Aleksander Kardash and Anastasia Shalimova at PwC Russia – report that top Russian football is making up ground, both in sporting and business terms, on the leading leagues in Europe. The four most promising developments are as follows:

State-of-the-art infrastructure and technology boosting fan enjoyment and revenues
Currently in its sixteenth season, the Russian Football Premier league has formulated a strategy designed to maximise commercial revenue over the next few years. By providing better insights into the economics of the Russian game, the first survey of the league, conducted by PwC and entitled Russian Football Premier League: a comprehensive study of the economics of Russian football, is an important stepping stone towards this goal.

Obviously the upcoming FIFA World Cup, to be held in Russia this summer, is generating a great deal of excitement. But the league – and its member clubs – are determined to actively leverage the effects. The World Cup is giving clubs a great tool to attract people to watch the game, both regular fans and VIPs. Many of the stadiums built for the World Cup will debut this season. The new Saint Petersburg Stadium is already breaking match-day attendance records, new arenas are due to open in Ekaterinburg and Rostov-on-Don, and Dynamo Stadium in Moscow will soon reopen after a massive overhaul. The RFPL is also spearheading the adoption of new technology, with a new fan identification system about to be launched and video assistant referee systems currently being installed in stadiums.

Economic innovation also kicking off in Russian football
Technological innovation is being accompanied by the adoption of state-of-the-art business approaches. Russian football is becoming increasingly popular abroad, watched by fans in more than fifty countries and regions including Europe, Central and South America, Israel, China and the UAE. Twenty companies have purchased broadcasting rights to RFPL matches.

This growing popularity is one of the reasons sponsors are becoming more interested in top Russian football. Alongside increases in match-day revenue we’re seeing sponsors pay more attention both to the league and the clubs. The league’s title sponsor is Rosgosstrakh, and other important sponsors include Nike and Liga Stavok, a sports book.

New venues and technology-enabled means of direct-to-consumer sponsorship activation (such as social media, email, SMS and chatbots) are making it more interesting for FMSG companies to invest in advertisement in football.

Online no longer a mere sideline
Online sales are a big deal across the entire league. Most clubs now have online ticketing and merchandise stores, building up a strong presence on social media. As a result, some clubs now generate up to 80 percent of their regular ticket sales via online channels – their own website and mobile apps or third parties such as online ticketing aggregators. Even the average club already generates around 40% of total sales online.

Clubs are also pretty savvy when it comes to driving attendance by using promotions or offering free tickets or discounts. While only a third of RFPL clubs already use customer relationship management (CRM) systems to provide personalised service and boost fan loyalty, nearly half of all clubs plan on adopting CRM systems during the season.

UEFA penalties forcing more prudent financial management
Because of UEFA Financial Fair Play rules designed to help clubs achieve financial sustainability by striking a balance between their income and expenditure, clubs are required to be more prudent in terms of what they spend, and look for more and more ways to boost commercial revenues.

This vigilance is bearing fruit. Having paid UEFA penalties under the current rules, the financial activities of several clubs continue to be monitored. But there were no fines for violating financial fair play rules in 2016-17. These financial improvements are resulting in healthier competition on and off the field, and more attention paid to young local talent.

Conclusion: plenty to get excited about in Russia, both on and off the field
While there are still areas for improvement, in this World Cup year there’s plenty to get excited about in Russian football, with promising new developments both on and off the field. Clubs have increasing financial incentives to improve their sporting performance, build the loyalty and engagement of their fans, and modernise the way they go about their business. And they’re increasingly harnessing this potential by adopting smart technology and business approaches.

If you’d like to find out more, check out the report − Russian Football Premier League: a comprehensive study of the economics of Russian football  – or get in touch with me to discuss the opportunities in football and other sports in Russia.

Sports – the most disrupted of all industries?

Today, we published the 2017 edition of PwC’s Sports Survey, an annual publication launched last year with the aim of measuring the pulse of the sports industry.

We asked a wide variety of sports industry leaders about the challenges and disruptive forces that are prevalent today. Our key findings back up the view that sports may well be one of the most disrupted industries out there…

Hot growth rates cooling off?

While industry leaders expect the sector to continue to grow, they believe annual growth rates will slow down from 8 to 6.4% over the next three to five years. This confirms that the sports industry is reaching a decisive inflection point, where sustained growth may well be the privilege of a few premium properties in the future.
These growth rates need to be taken with a pinch of salt, however, as they reflect the respondents’ subjective viewpoints. Historically, the sports industry has grown between 3-5% year on year. Nevertheless, the message is loud and clear: sports leaders no longer have sky-high confidence in the industry’s continued growth.

Changing habits, increased competition

More generally, 57% of respondents consider the shift in consumer behaviour among younger generations as the top threat faced by the industry. This comes as no surprise given how media is mostly being consumed nowadays, i.e. via mobile and on demand. In this “new” paradigm, sport finds itself in competition with an increasing number of alternative entertainment formats.

eSports on the rise

When looking at specific properties, eSports is seen as a key growth area, ranking as the second highest in terms of forecasted growth potential after football. This backs up the recent hype surrounding this format, which is ideally packaged for commercialisation among millennials.

Olympics facing challenges

The Olympic Games and winter sports, on the other hand, are showing signs of slipping down the appeal rankings of global sports properties. This is also evidenced by their apparent decline in TV ratings, especially among the younger population.
In the case of the Olympics, for example, NBC reported a 17% decline in ratings for primetime coverage of Rio 2016 compared to London 2012, with a steep decline of 25% among the all-important segment of adults aged 18–49.

VR here to stay

68% of respondents believe it to be only a question of time before virtual reality (VR) will have an impact on traditional TV broadcasting, thereby enhancing the sports viewing experience. Nevertheless, respondents expressed that further technological advances are needed if VR and AR are to reach their full potential in this regard.

To read more about the above findings, among others, click on the below link to download an electronic copy of the report, which includes deep dive features on the future of the sports rights market, wearable and sensor technology, and virtual and augmented reality. Happy reading!

Download survey

 

Contacts

David Dellea
Advisory Director
Tel. +41 58 792 2406
david.dellea@ch.pwc.com

Lefteris Coroyannakis
Senior Associate
Tel. +41 58 792 1578
lefteris.coroyannakis@ch.pwc.com

The future of sports sponsorship: what are tomorrow’s winning strategies?

A few weeks ago, the executive director of an international sports federation bluntly told me that while I see the industry growth as ongoing, that was not what he was experiencing: “In fact”, he told me, “it’s getting much tougher to get sponsors and deal values are flat if not decreasing.” I hear this viewpoint more and more, especially among those involved in the sponsorship of second- or third-tier sports.

Over the past decades, the development of sports sponsorship has been driven by brands’ ability to reach the masses via linear TV distribution and associate with the values of the specific sport and its athletes for effective activation. As a result, multinational brands have been flocking to global events, as have national brands with local events. Only a few brands – with Red Bull leading the way – have been able to take sponsorship to another level, seeking direct access to content by sponsoring athletes and creating own events, often outside the framework of traditional sports.

What is happening today? With the rise of the mobile, millennial consumer, the priorities of brands engaging with sports are changing significantly. There are three main drivers behind this change:

1. Millennials interact with brands very differently, with authenticity and identity being top of their agenda. While exposure through mass media continues to be important, brands now have to consider a wide variety of factors to ensure that their sponsorship decisions result in authentic engagement across multiple dimensions.

2. Millennials are active consumers seeking high levels of engagement, often becoming the broadcasters themselves. User-generated content is leading and shaping opinions. Brands are capturing this by treating millennials not only as consumers, but also as content creators.

3. Media consumption is also changing, with growing fragmentation across channels and devices. Consumption of linear TV is giving way to digital consumption, which is reinforced by the proliferation of the types of media that can be consumed on demand (e.g. highlights, data/statistics, behind the scenes content, personal posts of athletes and fans). Brands can now choose from a plethora of channels to drive their messages home.

How does this change in priorities translate into concrete sponsorship opportunities? We will increasingly see three clusters of sponsors:

1. Those that (can afford to) secure big-ticket sponsorship deals will continue to push for the mass exposure delivered by global premium events, while in parallel demanding for increased integration within the property, acquiring special rights to access content and drive engagement. Their campaigns will be fully CRM-enabled, highly dynamic and targeting fans with the right content, through the right channels, at the right time.

2. Those that have typically been engaged with second-tier properties will increase their demands on rights owners. They will demand guarantees or negotiate variable compensation models depending on exposure, which will be difficult to provide as linear programming continues to dwindle. They will also require increased digital reach across channels as well as ready-to-use activation strategies and content, facilitating their engagement with fans.

3. Those that opt out of sponsoring traditional events, as Red Bull did decades ago already. These brands will consider the opportunities presented by the decreasing costs of producing engaging, authentic content (e.g. via a GoPro or even an iPhone camera), striking the right “storytelling” tone by building relationships with a new set of digitally native opinion leaders (athletes, teams, bloggers, etc.), and the ability to segment and reach their audience directly via social media channels.

What does this mean for sports properties and event organisers?

Premium sports properties and events will continue to thrive as they continue to deliver mass audiences through linear TV. Nevertheless, they will also have to evolve their media distribution strategy to maintain the edge over the long term, considering the current transition from linear TV to digital/mobile/OTT solutions. This will require a more professional and analytical approach to distribution, with bespoke commercial strategies and implementation that no longer fits into the box of traditional agency-style media rights sales.

Second- to third-tier properties, however, will be under growing pressure, requiring a greater effort to develop effective strategies. Various options present themselves:

• Adopting a niche strategy that aims to fully dominate a specific target audience across geographies. This will require event organisers and governing bodies to make hard choices by focussing resources on fewer and clearer segments, tailoring event formats to their selected target audiences. To boost such a strategy, we expect properties to strive for greater control on activation rights related to athletes and teams.

• Placing their bets on geographical expansion, most particularly towards Asia, with public investments and infrastructure developments acting as a compounding force. Such strategies will be a high risk, high returns exercise, as they will require a significant effort in developing sports participation at a grassroots level before an effective commercial strategy can bear fruit.

• Developing partnership strategies with other properties to increase critical mass and boost synergies. By transforming their fragmented single-sport events into a coherent multi-sport festival, these properties will engage with host cities, spectators and media followers with a broader proposition.

To conclude, irrespective of the strategy adopted, properties and sports will have to change their approach to content management across the board. Simply producing engaging, linear content, even if live, will no longer be sufficient to keep the attention of increasingly demanding audiences. For brands, it will be essential to refocus attention on building a strong, coherent and authentic brand identity. This will require a greater ability to gain more control and access of the core assets of the sport: athletes and teams, their personalities, their stories and their values. Ultimately, that is what sports sponsorship is increasingly all about.

Contacts:

David Dellea
Advisory Director
Tel. +41 58 792 2406
david.dellea@ch.pwc.com
https://www.linkedin.com/in/daviddellea/

Lefteris Coroyannakis
Senior Associate
Tel. +41 58 792 1578
lefteris.coroyannakis@ch.pwc.com
https://www.linkedin.com/in/lefterry/

PwC’s Quarterly Sports Industry Q&A

 

PwC’s Sports Business Advisory practice sat down with David Lampitt, Sportradar AG’s Managing Director for Group Operations, to talk about the company’s exponential growth, bright future, and all things sports technology.

What has been keeping you busy lately?
In one word: opportunity. Sportradar has huge ambition to realise the full impact of sports content, either by itself or in partnership with other leading businesses. This ambition is showing no sign of abating any time soon. I’m excited about what that opportunity means: new markets like eSports; new products like our work on Next Gen Stats with the NFL; new partners such as the EPFL; and new inspiring colleagues to work with and learn from. Of course, this opportunity also brings intricate challenges. Three years ago, we were 750 employees. Today, we’re closer to 1,850. Working with my colleagues to find the systems and initiatives to effectively handle that growth and keep everyone aligned is a daily challenge. Plenty to think about, and of course, plenty to celebrate.

Sportradar has been making headlines in recent times. How have you experienced the last six to nine months and how would you describe the atmosphere in your camp?
On a local level, around a year ago, we moved offices from leafy Richmond in outer London to a new location at the heart of London’s City. We gave ourselves what I thought was ample room for growth – 12 months on, we are already approaching full capacity! For me, this is an everyday reminder of what is happening across the company, from our new office in New York to our new premises in Manila. It allows me to maintain a keen sense of our pace of growth and integration. I think the exciting work we are doing, be it our integrity partnerships with FIFA, data partnerships with the likes of the NFL and NBA, providing statistical solutions to Google, Twitter and Facebook, is really energising our teams around the world. That said, we aren’t resting on our laurels here. Growth and recruitment may be driven by that kind of showreel; but long-term employee and partner retention comes from cultivating and maintaining the right culture and values.

What are the main services that you offer and where do you see growth opportunities?
This is a tougher question than it seems because we offer a huge range of products and services. Historically, we are best known as the leading solutions provider to the sports betting industry. We’re capable of providing a bookmaker with almost everything it needs to offer a top-quality service to sports bettors from data, to odds suggestions, to risk management, with some virtual games for good measure. On the back of that, in 2005, we launched our Integrity Services, which leveraged our betting expertise and data into what today is recognised as the best and most reliable betting fraud monitoring system. Through this powerful solution, we are able to monitor over 180,000 sporting events a year for match fixing. In more recent years, we have developed our Digital Sport offering, which provides sports data and data-related products to a whole range of business sectors: major media companies, digital publishers, app developers and fantasy sport providers, among others. And then there is our audiovisual business, where we supply streaming content to betting companies as well as having our own OTT platform.
Ultimately, wherever sports data and content is being put to work for the benefit of growing revenues, driving fan engagement, delivering insights or attracting eyeballs, we are there, providing the raw materials to power that process. Being at the confluence of these growth areas – sport, entertainment and betting – means that we are surrounded by growth opportunities. We just need to make sure we pick the right ones.

What do you perceive as your biggest challenges in achieving your potential?
I think that the pace of change in technology, and its uses in society, means that we are only scratching the surface of the many exciting opportunities to drive sports data and content-driven solutions. There are certain tech developments that we already see on the horizon: smart glasses, augmented reality, virtual reality and weara­bles, all of which are already pointing to new data collection and data display opportunities. As a tech-driven business, keeping up with this changing landscape to ensure that our products are not overtaken by the pace of change is a constant challenge. As a result, we’ve set ourselves up to remain agile, even as we increase in size, so that we can be as responsive as possible to these and other developments.

To wrap up, what would be the one sport industry development beyond Sportradar’s immediate areas of interest that you think consumers should look out for over the next 12 months and why?
Since most fans cannot attend actual games in person, how to replicate that experience has always been a consideration for the sports and media industries. Live venues have always worried about the impact of remote consumption, whether at the dawn of radio, or TV. But virtual reality could genuinely be a game changer. The conditions are aligning as competitions and clubs have created a huge amount of engagement from those who cannot be there but are increasingly demanding an authentic experience. Virtual reality could come to create a personalised experience that could end up being better than the real one. Want to get the “best view in the house”? Virtual reality could provide the solution. Want to share the experience with your dad in Australia and your mate in South Africa in a “virtual living room”? You got it. Personally, I am excited to see how this virtual experience unfolds – and I think it will principally unfold through the shared social experience because social interaction and communication has underwritten almost all the major tech advances in recent years, from mobile technology to social media. Having said all that, I do still hope the live stadium experience answers the challenge and makes sure that seeing live sport remains a uniquely attractive proposition.

Contacts:

David Dellea
Advisory Director
Tel. +41 58 792 2406
david.dellea@ch.pwc.com

Lefteris Coroyannakis
Senior Associate
Tel. +41 58 792 1578
lefteris.coroyannakis@ch.pwc.com

Insights: Football leagues 2.0

The last two decades have seen a significant increase in the global appeal of sports leagues and teams which have broken national and continental boundaries. Some leagues, most notably the Premier League and the NBA, have been pioneers in taking their sports to new markets, with others following suit by leveraging their brand and sporting achievements in pursuit of the commercial opportunities presented by new markets.

As an example, the recent launch of a new brand identity by Juventus FC, who swapped the Torino crest for a sleeker and more neutral logo, was welcomed by sports marketers as a bold move to establish the team as an ambitious sports brand that is not confined within the limited geographical and commercial borders of Italian football. On the other hand, Juve fans in Torino were more sceptical about the move, expressing their fear that the club is losing its roots and affiliation with its home city.

Another interesting trend is the rise in new football leagues in the US and Far East paying hefty sums to attract talent to the top of their game from established European leagues, such as Shanghai International Port Group F.C.’s acquisition of Brazilian stars Hulk and Oscar, while at the same time trying to nurture home-grown talent. Although perhaps not sustainable, for sports brands the commercial attractiveness of these markets is undeniable.

Based on these developments, what are some of the scenarios we might see play out in the future?

1. Geographical expansion of leagues and clubs 
With leagues and clubs generally not being able to scale their business internationally at the desired pace, a potential geographical expansion to new territories could start with early regular season games being played abroad (similar to the NBA). This could pave the way for the creation of new inter-continental league formats with the participation of teams from multiple continents.

2. Creation of a new closed league system in Europe with guaranteed spots for top teams based on their commercial and sporting performance
Euroleague Basketball pioneered the first closed league system in Europe, and although it is embroiled in an ongoing dispute with the FIBA, football clubs and governing bodies can draw many lessons from its experience. So far, the UEFA has managed to stave off any breakaway efforts to create a European Super League by working closely with the ECA and conceding more privileges to the elite clubs. Nevertheless, top European clubs may well continue to seek to increase their popularity and revenues across borders by developing a more attractive competition format with guaranteed spots and a match schedule suitable for their international fan base.

3. Proliferation of new leagues and formats leveraging existing sports brands, such as e-sports or women’s leagues
Paris St-Germain, Manchester City FC and FC Schalke 04 are some of the latest clubs to create e-sports franchises in the hope of tapping into new demographics and geographies. Additionally, women’s football has gained significant popularity in mature sports markets through the performance of their national teams (e.g. USA, Japan, Australia, Canada, UK), representing fertile ground for the expansion of women’s football leagues.

In sum, as big football clubs shift their focus to new fan bases to sustain their growth, the commercial appeal of scenarios such as those mentioned above will become increasingly difficult to ignore. Keep an eye on our site for all the latest developments.

Contacts:

David Dellea
Advisory Director
+41 58 792 2406
david.dellea@ch.pwc.com

Ioannis Meletiadis
Advisory Manager
+41 58 792 1462
ioannis.meletiadis@ch.pwc.com

 

PwC’s Sports Survey 2016

As the sports industry continues to navigate choppy waters, its ongoing growth is becoming increasingly dependent on its ability to adapt to the global megatrends that are shaping business decisions around the world.

In order to gauge the mood among leading international sports federation executives, we conducted a survey that assesses the extent to which demographic and social change, shifts in global economic power and technological advances are affecting decision-making in the sports industry.

The key findings of the survey include the fact that leading sports executives remain largely optimistic in the face of the many threats faced by the sports industry, are increasingly investing in digital solutions, and see the Asia Pacific region as the industry’s priority growth area.

CaptureSportFor more information, the full set of findings of the survey and the insights that we were able to derive from them are summarized and accessible in our report, entitled PwC’s Sports Survey 2016.