Sports leagues and executives have to embrace technology  

Sab Singh and John Bruel, co-founders and principals of US-based Avila Partners explain why sports leagues and federations must make a concerted and public effort to seek assistance from experts in hardware and software technology in order to revitalise the industry.

In sport, references to millions and billions of dollars are common as we talk about player contracts, sponsorship packages, broadcast deals, and owner net worth. According to Street & Smith's SportsBusiness Journal, the overall sports industry itself approaches $200bn a year. And increasingly, technology is playing a larger and larger role in the growth of this industry. Yet there seems to be a lack of industry-backed research and development of such technology, which in the long run, is not in the best interest of league and team owners and executives.
Professional leagues and teams are the beneficiaries of new technologies, and they test out these technologies if and when they have a proven ability to perform - generally by driving new revenue or cutting costs. Yet many up-and-coming companies that are developing new products need the financial and industry expertise of league and team officials, of investors who are intensely aware of the industry and its associated opportunities and pitfalls. Their lack of consistent support and guidance, while certainly not solely responsible, does play a role in the decrease of funding we have seen for companies with sports technology and internet-related offerings. How does a young company get proof of concept or even complete product development without some strategic assistance?
The broad and deep reach of major sports into the American culture gives the industry not only many opportunities, but also the responsibility to assist promising companies. Sportvision's 'First and Ten line' (the yellow, on-screen marker) in American professional football is popular with many fans and the details of the technology are slowly creeping out. Dartfish's SimulCam system got a huge boost by being a feature of NBC's coverage of the 2002 Winter Olympics. Who knows where and how often we might see innovative new technologies appear - on the news, entertainment, work training, etc. And the role of sports in the growth of much of the new broadcast media, cable and satellite and internet cannot be understated. In an interview with John D Solomon of the New York Times, Mark Lazarus, president of Turner Sports, said: "The one thing we have learned is that sport drives new technology. That trend will continue given its live nature and the fanaticism of viewers. Their appetite will lead the way. Is it internet? Pay per view? We don't know. But sports will be the driver."

Leveraging the power of the sports industry

We have seen some solid partnerships - the NHL and Sun Microsystems, Yahoo! and the FIFA World Cup, and RealPlayer and everyone - but still, one would not be wrong in challenging one aspect of Lazarus' statement. Unless some of the biggest entities in sports - i.e., the major professional leagues, broadcast partners, and influential sponsors - take on more of a development/nurturing role, many companies and/or technologies will not reach a point where the power of the sports industry can be leveraged. The sports world must develop business models that support new products and services that will provide an adequate return to the major players in the sports world, whether that return is terms of financial gains, increased attendance and viewership, or brand loyalty.
This will surely not be easy. With so many stakeholders, many of them seemingly (though actually maybe not) direct competitors, it may be hard to make such an effort a high priority for everyone at the same time. And because so many groups really do need to buy into the new model, the entire process may be seen as impossible.
Why the urgency? Because it is not easy to raise capital or secure important business development agreements in a tough economy. And while many companies in other industries 'wait out the storm', the problem in sport is that when the storm does pass, the market will not be any more used to supporting these companies because it is not part of the sports industry's makeup. And that needs to change.

Change is vital in the sports arena

Change is necessary because we are seeing that type of support in other industries, some of which compete with sport for the consumer's leisure dollar. Sport viewership is higher than it was 10 years ago, but it is spread out over a much broader spectrum of options. As a result, ratings across the board are down. Attendance is also down because of the breadth of entertainment options as well as steadily increasing prices, a sometimes-flawed product, and some unlikable personalities. Teams and leagues are making investments into some new features - mostly new stadiums and bobblehead dolls - but not a lot of innovation. Because this type of R&D is conducted in other industries, sports could be in danger of losing some of its share of the psyche that supports its very existence. As in any industry, cutting or ignoring R&D saves the short-run expense but robs future revenues.
Two facts work strongly in favor of the major leagues as assisting innovation: their financial resources and the openness of their fans to such advancements. For example, 71% of National Basketball Association fans own a PC while 67% own a cell/mobile phone; and for the National Hockey League, 75% of its fans own a PC while 71% own a cell/mobile phone. Baseball and American professional football fans are seeing their numbers in these areas growing as well.
Even with these pluses, this will not be an inexpensive, nor short-term effort. The leagues must make a concerted, and public, effort to seek out input from experts in other industries - hardware and software technology especially - to assist with this undertaking. And they must work among themselves. Companies attempting to harness the power of technology and the internet by themselves most often get it wrong, and at a high cost. It may be hard to think that the five (now including Nascar) major US leagues, which do battle for viewers and spectators to some degree, would work together to develop something that might benefit one party a bit more than the other parties. However, it is not unusual to see major players in other industries, e.g., Microsoft, Intel, Sun Microsystems, AOL Time Warner and a host of other companies, forming alliances to develop standards for various technologies and business practices so that they can all benefit exponentially in the long run. That type of forward thinking should be going on with the major leagues, which have the money to fund this type of coordinated effort.

Innovation and financial return

There is an obvious dilemma concerning new technology: while new innovations provide great amenities and benefits for television viewers and game spectators, they should also provide a respectable return for their investors. What is being proposed here is not intended to be either charity or a perpetual money-losing project. These technology features cost real money, and networks, leagues, teams, and facilities often need sponsors to help defray the cost. And that is what it should be - a sharing of cost. Putting this assumption of cost strictly on the sponsorship market is irresponsible and unrealistic. Sam McCleery, a vice president of virtual advertising pioneer Princeton Video Image states, "We need leagues to provide funding like venture capitalists. They have to say that they want more things like this and are willing to help pay for them." Then we will see both the innovation and financial return that the sports industry deserves.

This article first appeared in Avila's 2003 Sports Funding Report. For further information and to order the report see www.avilapartners.com/arksports

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