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5 key things to consider before investing in a sport IP
Traditional sports like cricket, and football have always had a large population of fans, and drawn in crowds. However, in the last few years newer sports have taken a centre stage (eg Kabaddi), with a number of sports also changing formats to adapt to the viewers needs. Jitendra Joshi, Co-founder and Director of sports management company SportzConsult helps potential investors by analyzing the key factors that determine the success of a sports centric IP.
Whether it is the T20 format in cricket, or Futsal, a 5 a side football format, sports is changing to increase viewership, and participation. Due to this there has been an increase in the number of sports event IP’s. Sports Event IP’s can be of 2 types. First are the events in the professional space. It could be an investment in a franchise, a league, a tournament or maybe a celebrity. Second are the amateur sports events. These are participative events for non professional players. The things to consider before investing vary slightly between the two.
Investment in sports event IP is like any other business decision. Market size, competition scenario, threat of substitutes, scalability, level of investment, break even period etc. are the typical parameters in the consideration set for a business decision. Drawing parallels from them, there are 5 key things to consider for a sports event IP. The major revenue streams for a professional sports event IP are television broadcasting, sponsorship and marketing and gate receipts. While, for participative sports focus is on participation, and format. Hence the parameters for each closely revolve around these –
1. Quality of product – The quality of competition represents the foundation that defines the attractiveness, and ultimately, the basis for success of a sports property. A compelling event with easy to understand competition format and rules and popular heroes has the ability to attract fans and provide monetisation opportunities. Well thought-out, timely and exciting changes to competition rules, calendar and format may make the event more intriguing for the general public, thereby enhancing its sporting and commercial appeal.
2. Fan and Participant mix – The number and quality of fans makes a huge difference to the success of any sports event IP. The number is a reflection of the popularity of sport. The more popular a sport, the more fans the property is expected to have. Further, the spending power of these fans ultimately defines the commercial attractiveness of the property. For example a rich urban audience of the English Premier League will be termed more lucrative than the non-urban lower income fans of a wrestling property.
3. Scalability – For professional sports scalability in terms of number of spectators, value of sponsorship, merchandise, reach of viewership impacts the long term attractiveness of the property. On the other hand for participative sports, it is important to focus on number of participants, number of cities/ schools, etc. which impacts the long term attractiveness of the property. The format of the games also play a role in scalability. For e.g. the reach through a marathon is way higher than a restricted player strength sport like cricket. Also, in order to scale, the execution ability of the organizers in terms of both operations (e.g. infrastructure availability) and marketing is critical.
4. Risk – Another critical factor is whether or not the IP is protected. The non-buy in of the respective federation can be detrimental to an event’s success. Other stakeholders are also important and should have the investment capability (deep pockets) to sustain the property in the initial few years before the fan loyalty and participant stickiness is built. Also, for professional sports, an avenue for exit is a key consideration factor.
5. TV friendly – For professional sports especially, the reach of sports properties can be significantly extended through media and broadcasting. Additionally, and especially for smaller properties, digital channels and mobile internet offer further potential to reach fans through various channels such as online video streaming, web TV and video-sharing websites.