Awareness vs Financing Conundrum for New Sports Leagues
We often talk about the major sports leagues around the world due to their popularity and visibility. With markets becoming more fragmented and many new sports coming to the fore in recent times, today I will discuss a common conundrum that new sports leagues face. Two key challenges that new sports leagues struggle with are:
- How to finance the new league?
- How to increase the popularity of the new sports league?
As with any business venture, the owners of new sports leagues first need to determine how they intend to finance the league. The main avenues for sports financing are:
- Media Rights
- Gate (Tickets/Memberships)
Initially, sports with smaller fan bases are more likely to focus on sponsorship as the main avenue for initial funding given that this is the easiest to achieve at a community level. For the purposes of this article however, I will focus on new sports leagues established where sufficient fan interest in the sport already exists. Examples of these include cricket’s Big Bash League (BBL) and football’s A-League in Australia, the Professional Futsal League (PFL) in the USA and the Trinidad and Tobago Super League (TTSL) football. Each of these had or have a large potential fan base, but they all faced the conundrum of gaining a wider audience vs gaining a larger pool of funds for development.
Conflicting Needs of New Sports Leagues
The Need for Financing
New sports leagues will need financing firstly to put together an administrative team that can set the whole system up. Many of the major global sports leagues in existence today were set up by volunteers in the 1800’s before being professionalised later down the track. To run a successful professional sport in the modern market however, a fully professional management and administrative team is required.
Once the administrative team is in place, new sports leagues will require infrastructure. The most significant costs are likely to be playing fields (stadiums, arenas etc.) but they will also include things like media infrastructure.
The greatest expense of most sports leagues are of course the athletes’ salaries. Depending on the league these vary from as low as 40% of expenses to 90%+.
It is not cheap to run and grow a professional sports league. Given that media rights are such a significant revenue source for so many leagues around the world, it is easy to understand why new sports leagues put a lot of resources into convincing TV networks that they have a product worth financing.
The Need for Awareness
New sports leagues are likely to struggle with attracting fans to the sport early on as they enter already established sporting markets. It is difficult to stand out. The league will need to be visible to fans in order for them to even consider following it. In simple marketing terms, new sports leagues need to create awareness among potential fans in order to grow. To do so, they need to reach as many potential fans as possible. This is perhaps not the only way, but it is definitely the quickest way to gain broad appeal among fans.
Developing a broad appeal is not just about getting initial fans through the gate. New sports leagues must also look to ensure the future of their sports by generating interest among younger fans. Eric Cantona once said: “You can change your wife, your politics, religion. But you can’t change your favourite football team“. Sports fans are highly loyal, and the implication is that if you can convert a fan to your team or sport while they are young, they will remain your fan forever.
Which way to go?
There is no clear answer to this. New sports leagues will each face their own challenges and so different decisions are likely to be made. Consider the two case studies below.
Prior to the A-League launch in 2005, Australia had a national professional football competition – the National Soccer League (NSL). The NSL faced many challenges, but the most significant were that the Australian government’s Crawford Report deemed it to be financially unviable and that despite large football participation numbers, the league drew weak audiences. Football Federation Australia (FFA) therefore decided to create the A-League based on a North American league model.
Until this point, football in Australia had been aired on Free To Air (FTA) TV and only on smaller channels. Due to this, it wasn’t able to generate the financing required to sustain the model, and it didn’t appeal to the Pay TV broadcasters because of the niche nature of the clubs at the time (mostly tied to immigrant communities).
The FFA therefore chose the need for financing as the priority for the A-League. The new Pay TV model of the Hyundai A-League gave the league the stability it needed to grow. On the other hand, it arguably also stunted growth as Pay TV subscriptions provided much lower potential audiences thus lowering the potential for attracting future fans.
In the two most recent media rights deals, the A-League has moved to a hybrid model where they simulcast one match a week on FTA and Pay TV, and the others remain exclusive to Pay TV.
Big Bash League
Cricket in Australia had a very different issue to the A-League. Prior to the Big Bash League (BBL), cricket’s popularity was waning. In a modern market where attention spans are limited, cricket, in both its previous forms (One Day and Test cricket) didn’t fit consumer needs. T20 cricket had already been successful in the UK and India, so the decision was made to bring it to Australia.
In the first two seasons, the BBL actually went the same way as the A-League and chose Pay TV. With this system, “An average crowd of 15,973 watched on as executives, shareholders and players of the new system sensed the BBL struggling” (Source: The Roar).
In season 3, the BBL changed its strategy. They accepted a relatively modest by Australian standards $20m a year over five years from Channel 10 (an FTA channel) for the rights to the BBL. Since then, the BBL’s popularity has skyrocketed. As the Sydney Morning Herald states:
Network Ten have played a huge role in growing the BBL which has transformed from a domestic competition into a global phenomenon boasting the seventh highest average attendance of any professional sporting league in the world, and a television audience that consistently tops more than one million viewers per night.
The most common alternative used by new sports leagues is a mixed model with both a FTA and a Pay TV component as mentioned with the A-League in its recent seasons. This allows new sports leagues to hedge their bets and accept significant financing, while also using a portion of their games to attract wider audiences.
Over-the-top content (OTT)
OTT is a relatively new phenomenon, and to date most sports organisations have been using it for additional content. Recently however, there have been more moves to put live games on OTT platforms.
The most notable perhaps was the NFL streaming the 2015 Jacksonville Jaguars vs Buffalo Bills game on Yahoo. For such a huge sports league to make a foray into OTT signifies that it could really have a future. Nevertheless, there was debate about the actual success of the trial.
Another notable move is that ESPN launched an OTT service primarily to complement its Pay TV offering, but also to hedge against the risk of OTT taking over (Source: Variety).
Smaller sports leagues and federations can also use services such as mycujoo.tv. Mycujoo seeks to ‘democratise’ football “by creating a platform to allow small and medium size football clubs, leagues, federations and competitions to have room just for them“.
I would expect there to be many more examples of live sports on OTT platforms in the near future.
I hope this post has given you a bit of an insight into a key challenge that new sports leagues face. As with any strategic endeavour, deciding whether new sports leagues are better off first chasing financing or awareness requires analysis and deep thinking.
I’d love to hear your thoughts on the awareness vs financing conundrum facing new sports leagues. Please also share your insights on any other alternative models that sports organisations use.
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