The Internet ? why rights holders should get on line

01 April 2000

Sam Rush

Sport - A Natural Partner For The Internet

Sport - and sports rights holders in particular - have reaped great benefits in recent years from the realisation, by a vast range of companies (be they potential broadcasters, sponsors or licensees), that sport is the ultimate marketing tool of the 1990s. Nowhere are the consequences of harnessing the huge commercial potential of sport more apparent than in the broadcast industry where cable and satellite broadcasters have launched and sustained themselves on a diet of innovative sports coverage. The resulting commercialisation of sport has had more than a pure economic benefit, however, as it has enabled a number of sports to extend their public appeal and their fan base and to plough money back into sport at grassroots level. In light of the developments of the last decade or so, rights holders ignore the Internet at their peril as the Internet is the perfect tool for building on these economic and other less tangible benefits.

The Internet Bandwagon

Like the major UK retailers, those associated with the UK sports industry were initially slower to appreciate the potential of the Internet then their US counterparts. There was a general scepticism as to whether consumers would accept the web as a means of delivering sports related content in light of the established wisdom that nobody surfed the web except students and 'computer boffins'. A dramatic sea change has occurred in last 12 months however with the realisation that the more typical surfer (rather like the typical BSkyB subscriber) is likely to be a sports fan in his 20s/30s with plenty of disposable income. Thus we have seen the establishment of numerous Internet based sports operations such as Sportal, the Sports Internet Group and 365 Corporation all of which are currently shopping for rights as if there were no tomorrow. The next 12 months will be an interesting time as we see the roll out of sites and services acquired in this shopping spree.

A Host of Opportunities

The Internet has two primary benefits for rights holder. The first benefit is commercial. The Internet offers rights holder numerous opportunities to supplement their existing sponsorship and other commercial programmes as well as seemingly endless new commercial opportunities.

If a rights holder launches its own web site, either itself or through a consolidator like Sportal, it will be able to add to its traditional sponsorship programme (and potentially leverage a higher rights fee for an enhanced package of rights) by granting sponsors the right to display their logos and possibly some sponsor created content on that web site. The sponsor can also be given the opportunity to brand discrete elements of the rights holders web site such as its on line shop and, possibly the right to add its goods to the inventory on sale in that shop. A football club, for example, could launch an on line shop selling not only its own licensed merchandise but also a range of its sponsors' products. Even if the sponsor is not given the opportunity to stock the shelves in the virtual shop day in day out, it could be given the right to carry out occasional promotions and offers for its goods.

The rights holder will also be able to grant sponsors the right to maintain valuable hypertext links from the rights holders site to the sponsor web site. The ability to provide links from one web site directly to another and direct traffic from your site to that of a third party is in itself an valuable income generating activity as the site owner providing the link will levy a fee for doing so and/or charge commission on the amount of traffic or number of "hits" that the other site receives through the hypertext link.

As alluded to above, the Internet gives rights holders who have major licensing programmes but do not maintain their own brick and mortar retail outlets the ability to establish virtual retail outlets on line and perhaps make all of their merchandise available in one place for the first time. The beauty of the Internet (and the reason of course for its immense impact) is the fact that it is accessible just about anywhere in the world. Clubs and teams are therefore able to reach their fans wherever they may be and offer them commercial opportunities which would not be cost effective if offered through traditional sales or promotion channels. One example of the effects of the Internet's ability to reach customers which other mediums cannot is the decision by Wembley National Stadium Limited to offer Wembley collectibles and memorabilia for sale by way on auction via following the knock down of Wembley Stadium next year. Football fans from all around the world will on able to go on line to bid for items ranging from the goalposts to pieces of the hallowed turf or the twin towers. Not only does using the Internet as the medium for the sale enable Wembley to reach fans it might not otherwise be able to but the potential size of the audience and hence the potential number of bidders enables Wembley to offer items for sale that might not be cost effective to offer via a traditional sale.

The second of the two principle benefits referred to above also rests on the global reach and ease of accessibility of the Internet. Rights holders are able to maintain increasingly immediate contact with sports fans. The Internet can be used to provide information such as fixtures dates and travel news, break stories such as transfers and management changes as well as provide the wealth of historical information and statistics that sports fans crave. By offering fans the ability to respond with their views or perhaps to post those views to a chat room, rights holders can use the Internet to canvass opinions, carry out surveys and above all to maintain a link with the grassroots fan.

Internet Television

It is the global reach and accessibility as well as the interactive qualities of the Internet which enable quick and effective communication between provider and recipient and give rise to possibly the most significant aspect of the Internet for sports rights holders - Internet TV. For many the possibility of on-line ticket and kit sales, hypertext links and all are only a side show to the main act of the sports event live on line. They hope that in time, fans will log on to watch a game, select their seat, their camera angles and commentators, visit the club shop and sponsor's tent and even order their half time snack on line - all from the comfort of their couch.

At present, although there is a ready made market for sport on line, the low capacity or bandwidth of domestic telephone lines means that programmes can only be shown at 2-3 frames per second whereas a video is usually transmitted at 8-12 frames per second. Because of the time delay the results are rather like watching a security video and obviously compare poorly with coverage on satellite and cable. However whilst the technical limitations may currently make the Internet the third choice (after the television and radio) for monitoring sports events, the technology industry does not stand still. Despite the current dispute in the UK between BT and the Office of Telecommunications over the roll out of BT's ADSL (asynchronous digital subscriber line) technology, it is only a matter of time before telecommunications networks in are upgraded to the broadband capability required to transmit video and other high volume data.

When the technology becomes available to support Internet TV, sports programming will be the "must have" or "killer" content that will be used to drive the roll out of new broadcast web sites in the same way that it has been the driver for selling subscription to the pay TV and for set top box sales. This will obviously put rights holders (of least of sports with a proven record with audiences) in a very strong position - assuming of course that the rights holder has not already sold its valuable Internet rights to a broadcaster who saw the future before the rights holder did.

Whilst Internet broadcasting has yet to prove itself, the possibility that it may soon do so is already influencing the marketing strategies of sports rights holders and the negotiation of rights deals. Much analysis is being carried out by rights holders and broadcasters alike to see whether Internet broadcasting rights have been pre-sold or pre-acquired under previous broadcast agreements. There is likely, therefore, to be some complex technical and legal analysis of the definition of terms seemingly as mundane as "broadcast" and "television" which may ultimately give rise to some expensive litigation.

The Inevitable Risk Factor

While rights holders nervously trawl through lengthy legal agreements, hoping valuable rights haven't been given away, full exploitation of the commercial potential of the Internet continues to be delayed due to the difficulty of applying traditional legal principles concerning the creation of contracts and legal obligations and the allocation of responsibility for published material on the Internet. This has resulted in much uncertainty as to the scope of legal liabilities imposed on those doing business on the net which has discouraged some companies from getting on line. Unfortunately there is no easy answer to this problem at the present time. The European Commission will eventually implement the Electronic Commerce Directive to harmonise the legal position throughout the European Union which may bring a degree of clarification to the legal situation. For the time being however each rights holder needs to factor the inherent risk of doing business in an uncertain legal environment into its decision to go on line and to consider the best way for it to manage this risk in light of its commercial objectives. Luckily these inherent risks can be managed through the correct technical infrastructure and proper contractual arrangements with the Internet marketing agency, web site designer, host or ISP, as the case may be, thus making the possibilities of the Internet available even to faint hearted technophobes.

First published in Sports Business in April 2000.