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The Value Gap - why sports teams are undervalued and how to re-think your business

Updated: Dec 3, 2021



Headlines such as these may be no more than attention grabbing – but there is no doubting that the top flight Sports Teams (and even more so their Players) have a huge global & genuinely loyal following. Even when scaling back to core fans, Sports Teams have substantial and largely untapped customer assets.


The Sports Industry is of course adept at monetising (indirectly) this following via highly lucrative broadcast and traditional sponsorship deals. in 2019, Manchester United generated US$0.91 Earnings per “follower” across their 1bn followers.


When you compare this figure with the likes of Facebook, you can see a value gap emerging. In 2019 Facebook generated $ 7.26 ARPU (average revenue per user) on their 2.4bn active users. Twitter on 386m active monthly users generated $ 9.03 per active user. Netflix in the same year generated $ 20.85bn on 167m subscribers an ARPU of $ 124.8.


None of this is stated as a comment on either Manchester United, Facebook Twitter, or Netflix. But it does highlight one of the key differences between Sports and other businesses. Facebook and Twitter are global digital platforms that provide “targeted paid access” to users for advertisers. Netflix is a global content provider that provides “paid access” to users to content. Manchester United is a Sports Teams that syndicates its content via a number of channels. In Sports the concept of Direct 2 Consumer (D2C) – is largely limited to game day (roughly 350,000 people per year) across tickets, concessions, retail. The rest of the engagement is indirect via Broadcasters, OTT and via Brand licensing.


In a perfect world a Sports Team would look at each fan as an asset and through a narrow lens. Who are they? Where are they? How do they currently interact with the Team? How do they currently interact with other fans? What is their level of participation and value? With this view in place – you would build a personalized proposition to best engage with that fan (or at least that group of fans – termed “look-a-like”). This proposition would be crafted to add “return on experience” for that fan group and to enhance their level of participation thereby increasing the “return on investment” for the Team.


But as we know the world is not perfect – and there are many challenges in creating this “narrow lens” (technical, political, communications etc..). This however should not stop us from looking to implement some consistent thinking across the organization and start to recognize the levels of loyalty that fans offer. Retailers and Airlines have long understood the impact that personalized experience and loyalty can bring to both attracting and retaining customers.


Airline loyalty programs are massive businesses in and of themselves. In some cases, they’re more valuable than the rest of the airline’s operations. Take American Airlines’ case, this year the carrier plans to use the AAdvantage program as collateral for a federally subsidized CARES Act loan. And as part of that process, the carrier had the loyalty program appraised. Just how much the program is worth? Between $18 and $30 billion, according to AA’s CFO Derek Kerr.


Today, American Airlines “AAdvantage” program is deemed more valuable than the Airline itself. Why? – because it represents a platform with millions of members on one side and lots of partners (of which AA is only but one) on the other. Partners who are buying the loyalty of members by offering them points. For AAdvantage (as a platform) this means they get cash-in from partners and pay out for flights. In doing so they make a cash profit of approx. $ 270 per redeemed flight.


Setting aside the complex economics going on here – what is crystal clear is that the AAdvantage loyalty program is not only about rewarding AA passengers for flying AA (they only make a much smaller margin on those direct flight rewards), no the purpose is to act as a platform whereby 3rd party partners can buy points to access the 100million members. Even on the lower end of $18bn that’s $ 180 per member.


At that level that would place Manchester United’s value at $ 24.8bn [on 139m stated core fans]. According to Forbes, Manchester United were worth $ 3.8bn in May 2019. That's a value deficit of $ 20bn. Why because Sports has not implemented Loyalty Marketing programs to represent a platform with millions of members.

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The theme of this Master Series is that with some help, and some knowhow, Sports teams can use data driven loyalty marketing to identify a wider cross section of fans and to develop an effective D2C transactional engagement with each fan. .


Through this series of articles will look at 'the what" and 'the how' of this. We will provide the key strategic information required to kick start your program. At the very least we hope to promote a healthy discussion within your organization, and maybe even spur some action to Re-think the Business of Sports.


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