What is the future of the sectors most affected by COVID-19? 

Sports and events are among the sectors most affected by the global health crisis caused by COVID-19 we are currently experiencing. This is not only due to the economic repercussions of the change in their business model, which we will see below, but also because they are two of the sectors that involve the most physical movement of people, which generates more excitement, in terms of entertainment.

The Spanish first football division alone, in the first part of the 2019-20 season, had moved more than 5.3 million people who went to a stadium to cheer for their teams. If we count the second division, the figure rises to more than 7 million people. This is data that undoubtedly suggests the large economic amounts derived from it.

These data from Statista on COVID-19’s impact on other sports competitions at an international level, in terms of revenue loss, are revealing: 

• Postponement of the 2020 Olympics – $277 million (this figure may vary depending on the final date of the event).
• Postponement of Euro 2020 to the following year – 300 million dollars.
• Cancellation and postponement of F1 races – $602 million
• Cancellation of the remaining 259 NBA games – $350-450 million (also depending on the final date of reactivation)

At a quick glance, we can understand the macroeconomic framework faced; not only by sponsors and advertisers in these publicity spaces, but also by the organising companies and sports teams that support these leagues and sports. Faced with this situation, brands have begun to restructure their strategies, offering alternative content to users so that they don’t feel that the brands and distributors of this type of content are clinging to a temporary silence. On the other hand, these large distributors are already researching parallel business models to help alleviate the economic downturn.

These movements are already having an impact on the estimates made by different specialised media, such as the one we see below about the movement of advertising investment, where traditional media would end up losing 12% of the investment with respect to the previous year and digital media investment would increase by 4%.

Several qualitative studies (such as Kantar’s Covid-19 Consumer Barometer) suggest that consumers do not expect a freeze on advertising campaigns, as it would negatively affect brand awareness. We must, therefore, think about how to optimise and increase the performance of all actions, finding the most suitable platforms where consumers are comfortable with the content offered, as long as it provides a differential value.

Uncertainty is another factor that will force companies into new scenarios where creativity and speed are vital in order to avoid becoming obsolete. Since the beginning of the health crisis, we have seen the implementation of drastic legislative measures that have changed our daily lives. However, as we approach the Re-Launch phase, we will undoubtedly see other regulations to prevent a second wave of contagion, such as exhaustive capacity control at mass events or the regulation of international travel. Both the current measures and those that may come later are factors that will force us more than ever to think about super-digitalization and home-driven marketing, concepts that we introduced in our notes for Marketing and Communication Directors, as a means to boost business.

Super-digitalization as a survival mode

Regulatory measures, the change in investment trends, and new consumer habits have led (and will continue to lead) to super-digitalization in the different markets that will take place through the customer experience, among others:

• NBA COO Mark Tatum explained how he has changed his content strategy to mitigate the disappearance of live game broadcasts. They are now broadcasting documentaries, archive content, classic games or online competitions between players themselves. Their intention is to keep consumers awake and, above all, to continue to be essential in their agendas so that they continue to hire the services of operators, and advertisers continue to find value in paying for these advertising sites. 

• La Liga Santander did the same and launched itself with the creation of La Liga Santander Fest, a festival that took place 100% on Youtube via streaming and in which, with the help of important football players and singers, they raised funds for the production and purchase of medical equipment.

There are many artists who, after the cancellation of their concerts, announced that they were going to perform one-to-one streaming concerts, with the intention of overcoming the barriers of distance and being able to offer their content in a radically different way. Without a doubt, going to a live concert is a unique experience, but thanks to the work on user experience it is possible to create a unique experience for the users, contributing a differential value at the same time. In economic terms, it is undoubtedly an opportunity to offer consumers a product that had not been considered with such interest until now, given that the situation had not demanded it, and that, touching the right levers, can be highly profitable.

However, there is one aspect that we cannot leave out, and that’s the fact that the change in consumer habits and content that companies are already beginning to offer could lead to a possible change in the companies’ personal buyers. According to data from one of the latest studies by Global Web Index, Generation Z is about 60% more likely to consume online video game tournaments than the average Internet user, and millennials are 50% more likely to consume live conversations with their favourite athletes or watch their behind-the-scenes. Meanwhile, Generation X prefers, by 40% more than the average, to watch archived sports content.

These data have many implications. We are no longer dealing with generic content that usually attracts large masses of users with very different interests such as live match broadcasts; now, the importance of adjusting to the demand of each profile to achieve retention and to continue consuming the brand’s content is vital. However, these new digital products and solutions will not be enough to retain users and improve their experience with the brand in the medium term, in an environment like the one we are facing. There is still a long way to go and many decisions to make.

The entertainment events sector will have to reinvent itself and find a new business model through digitalisation. For the moment, we have seen alternatives such as live broadcasting of songs in the case of concerts or alternative content such as training, make-up tutorials or shows such as Cirque du Soleil. However, these alternatives are not currently generating a direct return on investment as ticket sales or merchandising would, and those responsible for these companies have the difficult task of exploring new avenues of income to complement the traditional ones:

1. Dealing with the current phase in which there are still physical restrictions.
2. Anticipating a change in consumer habits once the Re-launch scenario arrives.

Won’t this search for new revenue streams and alternatives to physical events cause a shift in trends by analysing costs and discovering a more optimal ROI than that achieved through traditional actions? No doubt it will be interesting to see how technologies such as video conferencing with artificial intelligence and augmented reality make their way into this type of event.

What will happen when we reach the Re-launch phase?

The coming super-digitalization will not only have a short term effect to alleviate the effects of the lockdown we are currently going through, but it will also affect the medium to long term strategy of the companies. That being said, it won’t affect everyone equally.

Within sports and events, there are different types of players who will face different recovery scenarios depending on their current strategy, sector and future projection.

1. Homebound economy / CPG. This is the case of the NBA as mentioned earlier. They offer other types of alternative content (classic games, online competitions between players, etc.) that are capable of generating a desire to subscribe to the channels that offer these contents, thus maintaining their business model.
2. Frozen economy. National (FIB, Arenal Sound, etc.) and international (Coachella, Tomorrowland, etc.) festivals have seen their business models paralysed by the arrival of the COVID-19 and the legislative measures taken. For this reason, the need to find alternative solutions, through super-digitalization, has emerged in them to sustain sources of income capable of sustaining their businesses.

The new paradigm will not only affect the business models according to the aforementioned scenarios, but it will also impact on such basic aspects as competition. The disappearance of companies, such as modest sports teams or small physical event organisation agencies, as a result of scarce resources to transform their businesses and/or to obtain sufficient liquidity to deal with the situation, will be a factor to take into account. We are facing a market in which some competitors will disappear, but new ones will also emerge with disruptive ideas capable of putting in check the established situation that had taken place until before the health crisis.

With this, a market will open up in the application of the advantages of technology and digitalisation will be a must in any business strategy. More than ever, companies will have to overcome the physical barrier and attend to home-driven marketing by putting users and their experience at the centre and where the creation of a robust and flexible business culture will be essential to cope with any external or internal change in the organisation.