fcbusiness THE BUSINESS MAGAZINE FOR THE FOOTBALL INDUSTRY 28 fcbusiness THE BUSINESS MAGAZINE FOR

THE FOOTBALL INDUSTRY 29

fcbusiness.co.uk | MAY 2015MAY 2015 | fcbusiness.co.uk

WORDS Diego Valdes - Sports Business Institute Barcelona IMAGES © 2015 SPONSORs Verlags GmbH

DIGITAL MEDIA

Football clubs have three main revenue streams - broadcasting revenue, matchday revenue and commercial revenue. How can digital platforms be leveraged in these areas?Commercial revenue consists of licensing, merchandising sales, image rights and sponsorships. Nowadays more corporate sponsors are demanding not only digital awareness but also conversion. So the challenge is finding how the club can deliver digital platforms that can provide this. In licensing, apart from the traditional physical products, there are new digital services that require the image rights and intellectual property of the club to create platforms, mobile games, social media apps, etc. All these types of licensing agreements can be potential

new revenue streams.

Digital is also changing the way we consume media. People don’t

just want to see the matches in real-time on their TV sets. They want to watch them live or rerun on their mobile devices, game consoles, IPTV, etc. So aside from the content there is also the demand to select the content on demand and watch on the preferred device.

There is also a bigger interest in enhanced content like statistics, multi-camera approaches and new editorial offers beyond the classical highlights resume, training and press conference material. This is affecting the way broadcasting rights are negotiated and managed.

Regarding matchday attendance, there are many clubs that are having difficulties in selling high value products like season ticket packages. Several factors like expensive pricing, the fragile economic situation and the enhanced offer of new media platforms make it more attractive to stay at home instead of going to the stadium.

In this case, an adequate CRM strategy becomes very important. You need to identify the fans that are already buying spare tickets, merchandising or digital content and profile them more in depth with additional signals from database info or social media behaviour on the club's platforms. In all of these cases

digital is transversal and has changed the way fans search, find and consume products and services around a sport property.

What challenges do you see with these new business models?The big problem is that these new projects need to be tested and in most cases they will initially fail. It is an innovation environment with new types of products, services and business models. So you have to go through an iterative process to test several hypotheses you may have about your product or service proposal. Yet you cannot guarantee revenues

or clearly defined objectives.And that is the problem within

football clubs. Football clubs work under traditional business models in which the lion-share of their income is still dominated by the classical revenue streams. Clubs still obtain a lot of money from the sale of TV

rights, transfer fees, sponsorships and ticketing. All the new digital innovations are a small part of the revenue. In some big clubs it may represent a 5% or 8% of their income so they don’t get enough resources.

It is a classical innovator's dilemma where you miss the opportunity to innovate and master the business models that can re-shape your sector because you act in a logical way. You focus on the businesses that you already know and run successfully that are generating revenue for you today. Most organisations are not able to confront this challenge and resolve it, and football clubs are no exception.

What are the most common mistakes made by sports properties today in digital marketing?The biggest strategic mistake is not connecting new digital platforms with concrete business models and value drivers. We may justify our superficial approach by saying that we are enhancing the brand, and generating awareness.

But football already has that. Why do Real Madrid, FC Barcelona, Manchester United and others have millions of fans on social media? Because they have massive coverage in traditional media: matches with high ratings, newspapers, radio and other media that cover them extensively. And because of this it is very easy to follow them on Facebook or Twitter, not because of a very specific or sophisticated campaign.

How do I connect social media to an affiliation programme, for example? Let's say that the managers of the programme know that if they get the name, email and ID of a potential new subscriber they will be able to provide a sales conversion rate of 10%. And that may mean 30 Euros per subscription a year over a five year period. In this instance you have a very clear conversion rate and ARPU (Average Revenue per User).

Suddenly, 80 million potential “fans” appear on Facebook yet monetising them becomes the challenge. How can we make them pass through the 10% conversion rate process into the affiliation programme? What are the ways to achieve this? These are the questions that not so many are asking themselves because they are more focussed on engagement, generating likes, etc.

What is your advice for digital managers of football clubs? What are the keys to success as we look ahead?Understand that we are working with innovations and that we are looking for a business model within organisations that already have successful ones in place. People in digital areas must understand that they need to find value, create platforms, and engage with fans via social media with the focus on finding a scalable business model. They need to be ready to fail over and over again but understand why they fail, so they can adjust and improve in the next incremental sprint of their project.

However, Boards of Directors, CEOs and Presidents inside clubs need to understand that digital business is pure innovation. There are no proven business models. They cannot ask for minimum guarantees or return on investment the same way they do with mature business models.

They must be ready to embrace disruptive decisions like taking these digital endeavours out of the core structure of their sports properties and let them set their own strategic approach objectives, P&Ls, iterative processes, etc. They need vision to understand that if they keep this type of structure in permanent comparison and competition with their proven business models they will just kill any possible hint of innovation.

So my advice is for both parties. If both sides don't work together it doesn't matter how much patience or how professional the digital teams may be. They will not provide any real value. ◼

BUILDING A DIGITAL BUSINESS IN FOOTBALL

Former Digital Business Manager at Real Madrid and now Regional ProjectDirector at PMI Wunderman, Oscar Ugaz, shares his experiences andprovides valuable insight into setting up a successful digital business model within a football club.

This interview was reproduced courtesy of The Sports Business Institute Barcelona (SBI). SBI offers executive training in the areas of marketing, sponsorship, athlete representation, event management, digital media and communications. If you are looking to start or advance your career in the football/sports industry visit www.sbibarcelona.com for more information.