Filling the void in games without an audience
For the 2020-2021 season, European football has suffered an estimated loss of 4 billion Euros, the NBA has calculated 500 million dollars, the NFL 1,300, and the MLB 200.
We will hopefully be dancing our way out of this pandemic darkness soon and we can start to think about how the economic landscape will change. What will be the economic consequences for startups and especially the ones related to sports? How can the innovation and solidarity we are seeing serve as a motivation to move faster?
In the short term, there are clear winners and losers. Home exercise, home delivery, eSports, distance education, teleconferencing, streaming entertainment (i.e. Netflix and Disney+) are all hits. The losers include live sports and music, traditional retail, travel and transportation, hotels, restaurants. Flexible and remote working has been shown to work and the genie of home working is out of the bottle. The transition to “online everything” has been accelerated dramatically. This favours eCommerce, eGovernment, eSports and cloud computing will continue to see high growth to support the increase in online services.
For startups, COVID-19 will increase the time required to get to cash flow breakeven by six to 12 months. Professional fund investors are increasing their allocation of funds to the portfolio companies they believe in to help them survive. Investors have been hit again by a so-called “black swan” event which is a surprising, unpredictable event with serious consequences. The last black swan event was the financial crisis of 2009 only 10 years ago. Overall, this makes investors more cautious about investing in businesses which will be loss-making for long periods. They will want to see fewer years of financial losses during which a company could be at risk from yet another black swan event.
At the moment, investors are preoccupied with their current portfolio and it will be hard to get their attention for investments in new projects until the second half of 2020. Afterwards, the outlook for raising venture capital may actually have improved as venture capital (VC) funds need to invest within a four year investment period. Investors still have large amounts of cash to deploy and less time to do it.
Good companies always emerge out of recessions. More than 50 tech unicorns were founded during the recessionary years of 2007-09. Over half the companies on the Fortune 500 were founded during a recession or bear market. In difficult moments, consumers focus on their more basic needs: health, wellness and security. Startups may need to change their business strategy to reflect consumers’ preferences as the world recovers from the coronavirus.
Global downloads of Skype, Houseparty and Zoom all surged by more than 100 percent in March, with the latter proving particularly popular among people meeting up virtually while being confined to their homes. Zoom was downloaded nearly 27 million times in March, up from just 2.1 million times in January.
Teamworks, an online communications platform used by professional and college sports teams, has just announced a $25 million Series C fundraising round led by Delta-v Capital. The app used mainly in the USA by players, coaches, and staff streamlines communications such as file sharing, scheduling and travel plans.
In the sports world, although events have been cancelled we now know that fans are also interested in watching eSports. Live streaming of eSports in Italy grew 66% between February and March. According to Twitch Tracker, games streaming has experienced a global explosion in popularity. This increase will include a large number of new eSports fans who are likely to continue as fans at a lower level. These fans are typically younger and can bring new blood to traditional sports clubs.
At the moment, videogames are disconnected from traditional sports. Sports clubs have an interest to bring videogames and live sports together. A recent example is the announcement that Formula One is running The Virtual Grand Prix Series featuring current 2020 F1 drivers alongside champions from eSports and other sports personalities. Also, top-tier Mexican soccer league, Liga MX has launched a FIFA tournament for its players to compete against each other in the popular soccer video game. The eLigaMX by BBVA Tournament will start and be shown on TUDN in the U.S.
There could be a bright future for clubs which engage their fans by merging physical attendance at matches with virtual experiences. Perhaps the sports stars of the future will have virtual avatars who can play in virtual teams to entertain fans when they cannot be at the stadium.
Being a fan is about the sense of community with the club and the other fans. We have seen how home workout classes delivered virtually have their own sense of community. Nike’s launched its campaign “Play inside, play for the world” to encourage people to exercise indoors. This has had a great impact, with participation by many sports celebrities. The subscription-based service includes studio-style streaming workouts, progressive training programs and expert tips from Nike Master trainers. It may not be the same as going to the gym or a training session with your club but it has value.
In the long run, sports clubs will want to provide more virtual experiences to build community with international fans who have less opportunity to attend matches. The frequency of virtual events is likely to increase. And they can use their famous players to increase the excitement and desire to participate.
Sports clubs could sponsor the development of videoconferencing and chat applications better suited to virtual sports events. Who knows what features sports fans want?
The sports industry can learn a lot from the start-up mentality to rebound. Focus and togetherness will be key. The industry will need to adapt, innovate and change to rebuild. “Every storm is followed by a rainbow” and there has never been a better time to learn, plan and think ahead. There is so much already changing around us and new opportunities for all to contemplate.
Tània Vié Riba