So where does football go from here?(part 2)
It's fair to say that a lot of domestic fans are disillusioned by modern football. There's a disconnect that has deepened throughout the Premier League era with these fans believing that football sold its soul to the corporates a long time ago.
Looking at the statistics does start paint a picture of how this divide has emerged. For example whilst the average wage for a UK worker in 2020 is around £29,000, the total wages of Premier League players in 2018 amounted to £2.837 billion. The majority of that pot is split between the 500 players that make up the 25 man squad for each club. So in any given week the average Premier League player has earned more before Tuesday lunchtime than a fan on an average wage earns in a year.
Further, according to the KPMG football benchmark report in 2019, the cost for a fan following their team had increased by some 31% over the previous five seasons. So with the players earning such vast amounts which seem to increase each season and the cost of watching football inflating at an even greater rate, it's a natural conclusion for fans to see a direct correlation.
Fans also love to see British born players wearing the shirt - even more so if they're a local. Apparently a young player in the UK today has a 0.012% chance of playing in the Premier League. The top flight is dominated by foreign players that naturally fans can't identify with in the same way that they might have just a generation ago when the likes of Ian Rush, Paul Gascoigne and John Barnes were the iconic players.
Even if a local lad does break through, does it really feel like "he's one of our own" when he drives a Bentley, lives in a mansion and holidays in Dubai with movie stars and models? Similarly with so few heroes on the pitch for fans to relate to, their club's boardroom is also likely to represent interests much further from home.
The owners of clubs are no longer successful local businessmen but American and Chinese private equity firms or Gulf State sovereign wealth funds. Just a couple of decades ago £100 million could buy a Premier League club and provide a hefty transfer kitty to strengthen the squad. That same level of investment now might just buy half a Jadon Sancho when all the fees are stacked up.
So how has football evolved to disenfranchise fans, who is making all the money and what happens next?
In order to predict what the future might look like for fans, we have to understand how the status quo has been established, which we distil to three distinct paradigms that now significantly overlap to form a complex value chain.
Matchday Paradigm (since 1800's to present day)
The original business model in sport involved only two parties - the clubs who charged an entry fee to the match, and their fans who paid to watch. This was the period that perhaps fans now reflect on as football's golden era, with clubs having predominantly a local fanbase and the match day revenue comprising the majority of a club's income.
In terms of the infrastructure required to start participating in this market, the club only required a stadium and at this time, all the parties involved in were physically present in the stadium on a match day. Of course being physically present meant that all fans had a very active role to play on a match day, as they reacted to the flow of the match and were themselves immersed in the experience. For a fan, nothing beats actually being there.
In terms of wealth creation, clearly the major beneficiary in this paradigm was the club, for example possibly the most commercially successful club in the UK, Manchester United have created £2.35 billion in value (i.e. market capitalisation) since they were founded in 1878.
Broadcast Paradigm (1990's to present day)
Although live matches were broadcast prior to the launch of the Premier League in 1993, this proved to be the dawn of a new era with Sky's vision for the scalable product that it would become. This entirely changed the dynamic of the business model, with a vast new audience now able to enjoy live football. Initially this had the effect of expanding the domestic market but subsequently attracted a global following with the Premier League now broadcast directly to approximately 600 million homes worldwide.
Unlike the fans that are in the stadium, the vast majority of the viewers are a passive audience in that they are unable to interact in the match from their sofa.
Although Sky's monopoly to broadcasting live Premier League games was eventually broken by BT Sport, an oligopoly remains. To participate as a broadcaster requires hundreds of millions of pounds in infrastructure, plus a few billion required to secure the rights. As a result the sector as seen little disruption with the protagonists Sky creating massive value.
As an illustration to quantify just how much value in comparison to an elite Premier League club, Sky's net profit in 2018 was £1.17 billion or £50.86 per customer (23 million subscribers). Manchester United's earnings in the same financial period were £26 million or 4p per fan (using a denominator of 659 million fans stated in their 2012 IPO prospectus).
Taking a slightly wider perspective, in the 2018 season, 13 clubs made a profit and 7 made a loss with a cumulative profit of £465 million so it is clear that the greatest value accrues with the broadcaster as the distributor of the product rather than the clubs that create it.
Within 28 years, Sky created £30.6 billion in value between 1990 (when founded) and 2018 (when acquired by Comcast).
Social Media Paradigm (late 2000's to present day)
Although social media had been around for several years, it was only really towards the end of the 2000's that these platforms began to play an integral role in the football ecosystem. Twitter, Facebook, Instagram and YouTube now each play their own significant part and have again caused the dynamic to evolve.
Football clubs, players and fans have used these platforms to make announcements, distribute news and content, share experiences and opinion as well as interacting with each other. The global audience that was previously restricted to a passive participant in the broadcast paradigm is now an engaged community that can contribute to the conversation.
In fact some fans have established their own significant followings on social media platforms through non-linear content such as blogs, podcasts and vlogs. There has been a significant migration, particularly amongst younger fans, to consumption of these forms of content whilst the popularity of broadcast media has waned.
Early success stories of high profile "fan content creators" include Arsenal Fan TV, with 1.25 million YouTube subscribers and Empire Of The Kop with 1.8 million Twitter followers. Although at a nascent stage, the evolution of social media has facilitated an army of fan content creators producing proprietary content with each one growing their own core following. Rather than requiring significant capital expenditure on infrastructure, social media platforms mean that any individual can effectively build their own media production "company" with a global reach using only a smart phone and a WiFi connection.
However there is good reason why social media companies will provide potentially massive distribution for content. Every social media user provides their content to the platform absolutely free of charge and the platform monetises the engagements between the audience and the content by harvesting that data to profile and segment their users.
Facebook themselves claim that over 60% of all sports fans around the world are on their platform. When you consider that 75% of sports fans say that they post on social media during matches and 73% believe that it's important to be able to access content 24/7, it's indicative of just how important sport and its fanbases are to the social media giants.
In only 16 years since 2004, Facebook has created £750 billion in value which is quite astonishing when compared to the 142 years that it's taken Manchester United to create £2.35 billion. It's fairly clear that by clubs and fan content creators engaging with their online communities through social media platforms, financially the only beneficiaries are the tech giants. Apparently the sports industry values vanity metrics of likes and follows ahead of cashflow!
Decentralised Paradigm (2020's and into the future)
Social media is a business model that has lead to value creation at an unprecedented rate but anyone who has watched Netflix documentary The Social Dilemma will be aware that the behavioural science that unpins their algorithms raises some serious questions around the application of their users' data. In addition to these ethical considerations, users are also becoming increasingly more savvy to the value of their own data and content.
What history has demonstrated is that market dominance is rarely sustainable. Consumer behaviours change and markets evolve, new business models and technology emerge and consumers migrate to a better option.
Imagine if new technology enabled a business model whereby content creators and social media users were paid for their content. Or there was a browser that blocked all pop-up ads and paid its users for surfing the web. How about apps that pays users to walk (?!) or pays fans to follow their team whether they are at match or creating content.
Actually, that technology is already here - it's just not mainstream yet. It's called distributed ledger technology or blockchain which sound like techie buzzwords, but the concept is surprisingly simple. It could be game changing - though that's for another blog article!
The content platform is called Steem and they have paid out over $60 million to contributors. The browser is called Brave and they already have 8 million users who will be paid in an asset called Basic Attention Tokens. If you want to be paid to walk, join the 10 million other users on the Sweatcoin app and at FanHub, we're building the app that pays fans to follow their team.
Just yesterday Scotcoin announced that they will distribute up to £2.5 million in their digital asset to season ticket holders of Scottish clubs - a one off payment equivalent to £100 each. FanHub's vision is to reward fans with a payment each and every time they attend a match, thereby creating liquidity for fan loyalty. When mainstream adoption for these concepts arrives we believe that many industries will look very different to now, including sport.
We see a mass migration to a new economic system built on human-centric capitalism.
Whilst the clubs were the main beneficiary in the first paradigm, the broadcasters have had their era of generating massive profits and the social media companies currently own a cash cow, we believe that it will be the fans will be the major winners in the next paradigm.
At the dawn of Web 3.0 (or the "internet of value"), we're likely heading towards a decentralised paradigm where consumers no longer need banks to hold our cash or social media platforms whose servers hold the data from our digital footprint. Rather than the bank that profits from holding our cash and the tech giant that monetises our data, the consumer will leverage the available decentralised ledgers (via decentralised apps known as Dapps) to earn that revenue for ourselves. When you consider that advertisers spend around $60 billion per year seeking to reach sports fans - there's some significant cashflows to be re-distributed in a new value chain without the middlemen. Exciting times of you're a fan!
For in that paradigm that awaits us, rather than being treated as customers, fans will be financially rewarded for being supporters whether that includes attending live matches, creating or consuming content. FanHub are well underway in building those foundations.
And as we'll explore in the final part 3, a market always gets what it wants eventually.
Often, the earliest signs that change is imminent is when an increasingly significant proportion of that market becomes increasingly discontent with the way things are.
Sound familiar?
Co-Founder, FanHub | Fan loyalty rewarded ??
4 年Great read, roll on part 3!
Powerful stuff Gareth!
Fundraising and communications for UK & US non-profits: Trust Fundraising, Campaigns, Websites & more ?? | Life & Business Coach ????????
4 年Fascinating, thanks Gareth Lippiatt !