Applying marketing science to sport - why rugby's paywall move might be a big mistake...

Rugby union is a sport "teetering on a financial cliff edge...it’s been quite an eye opener."

Those were the words of IRFU head honcho Philip Browne speaking in the Irish Times in March. Like all businesses, covid has had a massive effect on rugby's coffers. The game has ground to a halt and unlike Formula 1, NBA or the Premier League, won't return until August. In almost all major playing countries, players have been asked to take a 10-25% wage cut.

So the news that  CVC is to buy a 14.5 per cent stake in Six Nations Rugby for a sum in excess of €400 million last week was hailed as an incredible boost. The private equity firm has already spent over 600 million on acquiring stakes in European rugby leagues over the last two years.

Rugby union is actually a young game in a professional sense. Having resisted a move to professionalism for decades (unlike its close cousin rugby league), union only took the plunge in 1995. Even then, it was a largely reluctant move, borne from Australian magnate Kerry Packer's backing of a breakaway pro league.

Since then, rugby has muddled along, trying to find a way to preserve the power of the traditional big boys, grow the game and structure its myriad leagues. It has also suffered from a lack of strong, consistent global leadership.

CVC have now rode in on their white horse. The company has previous experience in building profitable sporting brands. Between 2006 and 2017, they turned a $2.1 billion investment into a $4.4 billion sale to Liberty Media. They seem to be focused on the short term, quickly building and then selling sports rights on.

Rugby needs this shot in the arm, so there's plenty of excitement about what might be upcoming.

But also some fear too.

Bob Fernley, the former deputy team principle of Force India F1 team, accused CVC of trying to "extract as much money from the sport as possible and put as little in as possible".

In particular, the mooted plan to put the 6 Nations, rugby's second biggest competition behind the quadrennial World Cup behind a paywall has caused concern.

Paywall

This has never happened before. The 6 Nations has always been available on terrestrial television and has always drawn in enormous viewing crowds because of this.

But, backed by CVC and in an attempt to grow the game's revenue, the body that runs the 6 Nations is said to be pondering whether to accept a ￡300m bid to bring the Six Nations off terrestrial television until 2024 at the earliest.

In Ireland over the last decade rugby has blossomed into a true mass sport. While claims that Ireland is 'rugby country' or that it's our new 'national pastime' are completely overdone, the success of Schmidt and Kidney's teams has propelled the game into our consciousness.

After finally working its way into the national conversation, rugby might be about to change the subject away from itself.

As both a marketer and a rugby fan, I hear plenty of alarm bells ringing in my head about this decision.

While I understand the short term impact, there are also challenges.

If I apply some of the laws of marketing science, you'll see why.

What would marketing science say about this?

The ideas put forward initially by Ehrenberg in the 60s, and then honed, sharpened and popularised in the modern era by Sharp, Binet & Field and others, have had an enormous impact on marketing, and particularly how we think about targeting people. Without getting into the details (for that, you can read How Brands Grow or any of Binet & Field's work), some of the core, proven tenets of growth include:

Good marketing focuses on the short and long term. Marketing works in two ways. The first, sales activation, produces an immediate response. The second, brand building, creates memories that influence future behaviour. In order to grow, brands need a mixture of both activation and brand building. They need to prime their audiences and seduce them before converting them to purchase.

To maximise growth and profitability, talking to your existing customers isn't enough. Reach is strongly correlated with effectiveness. Brands need to drive penetration (the # of buyers in a market who buy the brand in a given period) and nudge light buyers towards their brand.

Light buyers are incredibly important. 'Negative binomial distribution' or NBD applies across all major categories, and illustrates that no matter what you're selling, it's likely that many of your customers will only buy you fleetingly each year. Attracting large numbers of light buyers is critical for brand growth.

Often, marketers get transfixed with driving loyalty, frequency or short term sales growth. These are important metrics, but to really be profitable and to grow over the long term, you need to reach lots of people, ideally by creating some sort of emotional impact while nudging them by keeping your brand easy to remember and purchase.

Finally, brands should focus on driving mental and physical availability. Mental availability refers to the probability of a consumer thinking of your brand in a buying situation. A brand can achieve greater mental availability than its competitors if it’s easier to access in consumer memory in more buying situations and for more consumers. Physical availability refers to the breadth and depth of your distribution in time and space.

The loyalty myth

So we know that for most brands, growth depends on market penetration and attracting light buyers.

But does sport play by the same rules?

Surely sports fans are far more loyal and attached to their sport and indeed their teams than people buying washing powder or beer?

Well yes, to a degree. Sport cultivates a sense of fervour, fandom and loyalty that a trip to the supermarket or the pharmacy certainly doesn’t. There'll always be a small set of hardcore 'ultra' fans who will spend money to support their team no matter what happens.

Many people will always be a fan of one sport but not another. Think about all the GAA snobs, soccer lovers or indeed wax jacket rugby alickadoos you’ve met in your life.

But in general, the same rules I spoke about above in marketing science still apply to sport.

In order to grow their revenue, a sport needs to drive penetration amongst light buyers. In other words, it needs to continually attract new fans who might also be interested in other sports, getting them to spend their money on tickets, merchandise or memberships. 

A sport is in competition with a 'category' of all other sports (and indeed all other entertainment options) to secure spend from a huge audience of mostly disinterested people.

It needs to drive 'mental availability' and stay top of mind / salient. It needs to plan for the long term and 'build the brand' while also reaping the benefits in the short term.

It needs to reach lots of people and focus on getting lighter buyers to part with their money, instead of trying to get ultra loyalists to part with a little more.

Colin Lewis pointed out this brilliant Simon Kuper piece that illustrates how the laws of growth apply to football.

Basically, global football is a huge market filled with light, stay at home fans that clubs try to attract and entice. Many fans dip in and out of live attendance. Most fans never enter stadiums. Many fans support multiple teams and many fans (GASP!) change their allegiances. 

So it seems that the laws of marketing science categorically do apply to sport. Once you realise this, rugby's paywall decision becomes even more strange.

Extravaganzas

This is why the most successful rugby clubs of the last decade have invested in big, irregular events in large stadiums that attract people who might be kindly called ‘fair-weather’ - people who sort of like rugby but aren’t part of the inner circle. These extravaganzas often include half time entertainment, fireworks and cheaper tickets. They’re more event than rugby game.

Think about Leinster’s yearly Christmas game in the Aviva Stadium which attracts 3-4x their normal attendance, Saracens irregular games at the London Olympic stadium, or the originators of the practice Stade Francais, who held events at the ‘Stade De France’ that were more reminiscent of a burlesque show that happened to have a bit of rugby thrown in.

This is also the reason why major football clubs invest so heavily developing their fandom in markets like China, Africa and the US. The locals might not be able to attend games. Some might not even know all the player names. But when it comes to merchandise sales, social media engagement and buying pre-season friendly tickets, a fan in Beijing, Lagos or Philadelphia is often as important as one in Liverpool, Manchester or London.

The problem for rugby is that by putting 90% of its games behind a paywall, it will be doing the exact opposite. It will be pretty much relying on existing fans and limiting the access of incidental light fans to a sport that's already (relatively) small. It will be limiting its mental availability, decreasing its reach drastically and speaking only to those who are loyal enough to buy a subscription or spend to attend a game.

That's the exact opposite of what marketing science says you should be doing to grow a business.

In Europe, where the commercial heart of the game lies, elite level rugby will essentially be off FTA television for 3 years and 11 months of every 4 years. Only the Rugby World Cup would be fully free to air to local fans. All other major club and international tournaments (6 Nations, Rugby Championship, Autumn Internationals, European Cup and all club/provincial leagues) would be unavailable to those who don't want to fork out for multiple subscriptions.

Viewership could collapse.

Something similar has happened in cricket, where a move to paywall has led to a sharp decline in viewership and thus interest in the game.

Even football, which is a far bigger, more mature game with a much larger ‘buyer base’ across the world has plenty of ‘free to air’ opportunities for light fans to tune in, from Champions League on terrestrial television to the big showpiece events like the World Cup, FA Cup and European Championships. 

What's the right decision?

Now clearly this is a very difficult decision. Because of its immature status as a professional game, rugby is still finding its feet and honing the commercial model. The pandemic has put many clubs, national bodies and indeed players in perilous positions. Traditional superpower Australia is a basket case and the sport there seems to be dying. The game is starved of money.

A fresh injection of cash in the short term, combined with the promise of a better marketed, more commercially viable game is mouth watering.

But as marketing science will tell us, you need to both water the plant and pick the fruit. You need to full the funnel with fans and bring more people into the game for the long term while also creating commercial success in the short term.

The danger is that putting even more rugby behind a paywall, particularly a competition with the tradition and mass appeal of the 6 Nations might just bury rugby's notoriety and cement its status as a small, secondary sport played by only 12-15 nations. Like the brilliant line that's often used about women's sport and its scandalous lack of representation in the media - 'if you can't see it, you can't be it'.

We might be overlooking the fragility of the thread connecting rugby with the public. It is not a sport that necessarily appeals to everyone, and making it even more impenetrable to the light, occasional fan might harden this divide. It might bring in short term cash but consequently wreck the rugby 'brand' in the long term.

Nobody who loves the game wants that.

Shane O'Leary

@shaneoleary1

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