The ‘Cost-of-Living Crisis’ in the UK is still biting hard.
In the month since we last wrote about its impact on sport, mortgage rates passed 6% – creating a potential timebomb in the housing market that is as bad, if not worse, than the housing crash of the late 1980s. Something has to give – and at the same time, a survey of UK sports fans found that 46% were attending fewer sporting events, and 41% had cancelled at least one TV sports subscription.
Two years ago, coming out of Covid lockdowns, we wrote that economic crises tend to cause money to move in one of two ways: to quality or to price. Those in the middle, who are not able to compete on either front, are squeezed.
During the last Christmas period, for example, Harrods (quality) began offering gourmet Christmas lunches for £450 per person, while Asda (price) launched a new range of frozen Christmas dinners that could feed a family of five for £22. More than 100 times cheaper.
In sport, who is Harrods and who is Asda?
The supply of sport in the UK is vast – not just in terms of the different types of sport on offer, but in the different levels.
Football, the UK’s most popular sport by far, has four tiers of professionalism in the men’s code in England alone.
We’ve seen record attendances, season ticket waiting lists and new sponsorship deals for the Premier League (Harrods) while Notts County (Asda) – which broke almost every attendance record in the fifth-tier National League last season – has allowed season ticket-holders to renew for as little as £199 for its upcoming return to the English Football League. For those used to cutting their cloth, not much has changed.
But the truth is, the vast majority of UK sports rights-holders are neither Harrods nor Asda – they exist in a Squeezed Middle, and aren’t set up to compete on either quality or price. And for rights-holders in the Squeezed Middle, this current crisis – running in parallel with continued technological innovation and post-pandemic behavioural change – is creating a perfect storm. Although there’s nothing perfect about it. The opposite in fact: it’s going to place even further pressure on their business models.
Plenty of proof points demonstrate this – too many to list here. But consider the National Governing Body (NGB) sector for one. British Basketball Federation chairman Chris Grant this month said that, a year out from the Olympics, the organisation is so lacking in resources it cannot employ a single person full-time.
While in the last 12 months, not one major Olympic NGB was able to sign a primary sponsor, with the biggest deal of the year – British Cycling’s tier-two sponsorship with Shell – bringing significant amounts of criticism. In parallel Müller ended its long-running main sponsorship of UK Athletics after seven years. UK Athletics is currently on teetering on the brink of bankruptcy.
This isn’t a situation unique to athletics. Headlines in rugby, cricket and the second and third tiers of football report of similar tales of woe – the result of unsustainable commercial models.
And all rights-holders in the Squeezed Middle need to be taking note. Economists predict the Cost-of-Living Crisis will last possibly until 2028, and those unsustainable models – trying to grow revenues in a business built around live events, which are limited by number and venue capacity and whose cost-bases are rising with rampant inflation – are the norm.
With Unofficial Partner – the leading sports business podcast platform – we will be discussing the need for sport to move towards a new commercial model with a focus on rights-holders operating in the Squeezed Middle, showcasing the shift that needs to happen, alongside clients to give first-hand and real-life examples of the transition.
Spoiler: the shift comes by moving from an event-led businesses into digital media-led businesses that service large audiences serviced every day of the year (primarily online), with events being just one of a wide, diverse menu of options for how the audience can be monetised and have their fandom deepened.
Our first podcast with Scottish Rugby’s Head of Business Development Charlie Simpson is out on Tuesday June 27.
Ben Wells, CEO, PTI Digital
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NOTES FOR EDITORS/FURTHER INFO
PTI is a strategy and technology consultancy specialising in sports and entertainment. Its Digital Transformation Pyramid is unique in the industry, providing an end-to-end approach from strategy to execution across the entire technology stack. In focussing on driving long-term cost efficiencies and revenue generation we aim to enable our clients to create more sustainable, more profitable businesses.