Globalising. Australian Sport. Strategic approaches for Australian National Sporting Organisations and Professional Sports Clubs to compete globally

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1 Globalising Australian Sport Strategic approaches for Australian National Sporting Organisations and Professional Sports Clubs to compete globally July 2012 AUTHORS: Paul Diviny, Phil Noble PRACTICE AREA: Financial Services TOPIC AREA: Superannuation

2 Globalising Australian Sport Australians love their sport, and Australia is one of the most saturated professional sports markets in the world. With increasing pressure on Australian sporting organisations to grow revenue, international expansion presents a potentially attractive proposition. Whether they realise it or not, Australian sports are already competing in a global landscape. Most sports played in Australia are played internationally and are therefore already a part of a global competition for talent, audience and sponsorship. There are only a few truly indigenous Australian sports; most notably Australian Rules Football. Even here, the ability to transfer athletic talent has seen Australian Rules footballers move to the NFL. When it comes to competition for audience, the rivalry is with all sports, international and local, and other forms of entertainment. The global nature of sport presents both threats and opportunities for Australian National Sporting Organisations (NSOs) and Clubs. Threats: Bigger leagues lure home-grown talent away from domestic competition (e.g. Basketball, Golf, Football). Offshore leagues take a share of the local sports entertainment audience (e.g. English Premier League, NBA). Opportunities: Far bigger audiences offshore can be tapped into Bigger sponsorship deals are possible when the audience is multi-national Less lucrative competitions elsewhere can be viewed as talent pools to be drawn from to improve the quality of the local product. Australian NSOs thinking of going global, can learn a lot from some prominent examples of international leagues or clubs that have successfully done just that. There are two main strategies which have proven successful for international sports which have gone global: Firstly there are those who started with an already strong brand, and then leveraged that on a global stage to create brand pilgrims. Then there is a second group who started with a smart model, or way of doing things, and made strategic investments internationally and applied that same secret recipe. Strategy A: Create brand pilgrims. Use the unique brand, cultural, or historical aspects of the original and authentic article to create global followers and keep them coming back. B: Apply the secret recipe. Leverage the proven operating model to create success in foreign markets International Examples The NFL and Manchester United have used their special cultural facets to sell their merchandise and TV rights worldwide Major League Baseball and the City Football Group have leveraged their experience in running leagues and clubs, and investment in technology & systems to expand their influence to other clubs globally 2

3 Organisations who create brand pilgrims Selling the NFL along with it s intrinsically American feel has allowed it to reach 210m fans worldwide. The NFL launched an ambitious international push in 1991 by creating a European league complete with European clubs and players, new stadiums, infrastructure and a gargantuan marketing budget. After early success with audience numbers, things turned sour; diving ratings and plunging game attendances resulted in losses of around $7m per season and the league finally closed in 2007 after 15 lossmaking years. The NFL s failure in Europe was a painful lesson for the organisation. Apart from not having European talent to work with, the customers didn t want a replica, they craved the real thing American accents, Astro-turf, oversized foam hands, tailgate parties and the Super Bowl. In other words, what people coveted was bite sized chunks of American culture for consumption, embodied in the original authentic product. After the failure of the European league, the NFL switched to creating brand pilgrims by promoting TV rights and merchandise of their home competition in international markets. The NFL still actively grows the audience in Europe through promoting the NFL International Series played at Wembley Stadium. Importantly, this isn t an imitation product but three rounds of the regular NFL season. Manchester United has a unique history and this has fostered a huge and loyal following which underpins the financial success of the business. Manchester United has one of the most loyal fan bases of any club. The tragic 1958 Munich air disaster which claimed the lives of 23 of its players and officials created a strong emotional bond between the club and its fans which has left a lasting legacy. In addition, United built a formidable onfield record from the early 1990s, winning 13 of the last 22 Premier League Titles. On the back of this, they implemented an aggressive commercialisation strategy selling the Manchester United brand, including Red Cafe's in Asia and many regional sponsorship deals. Purchasing merchandise allows customers to feel part of this unique family which has driven international sales to record levels. Recognising that pilgrimage is not possible for all fans, regular international tours are held in the off-season to promote the brand and team. What these organisations have in common, is that they recognised their strengths and played to them. 3

4 Organisations who apply their secret recipe Major League Baseball, with 145 years of managing professional team sport, have learnt a thing or two about how to run a league. By developing its talent, off-field people, processes and its infrastructure, the City Football Group improved Manchester City s on-field performance leading to increased loyalty and fan numbers. Using their knowledge and experience, MLB have been successful in supporting baseball s expansion in Japan, Korea, Europe, Central and South America, the Caribbean and Australia. Their strategy differed however from the NFL s Europe experiment as the new leagues were intentionally localised using MLB technology and knowledge, rather than MLB culture and values. Baseball has long been a leader in sports innovation, and this capability to look beyond what is done today is a strength that it can continue to leverage. Introducing portable food and drinks to the audience - the now ubiquitous hot dog salesman was born at Yankee Stadium in the 1920s. Installation of lights in stadiums, allowing games to be played at night increasing attendance by a factor of between two and three. Use of electric scoreboards, to improve audience attention and engagement. Meticulous recording and publication of game statistics to tap into a niche market of sports fans. Use of sabermetrics sophisticated statistical analysis of player/club performance (aka Moneyball) to improve management and predict outcomes. This has been taken up in cricket, soccer, AFL and golf amongst others. The meteoric rise of Manchester City s onfield success, including two Premier League titles in the last three years, has been credited to the wide sweeping changes made after its purchase in 2008 by the City Football Group, owned by a member of the Abu Dhabi Royal Family. Huge amounts were spent on acquiring international class players, but also on developing a sustainable model for success including a training campus to nurture young talent, and professional standards of organisation management. Part of Manchester City s model for international expansion relies on making strategic investments in international clubs and applying their sophisticated junior development, R&D, sports science, coaching and training systems to improve the club s performance. Investments to date include Melbourne City FC (renamed from Melbourne Heart FC) and New York City FC. Both investments have been completed in partnership with local sports clubs, Melbourne Storm and the New York Yankees. Elements of the Manchester City branding such as the colours and global sponsors are blended with artefacts of the local city and/or club such as the crest in designing the club badge. 4

5 Australian sporting organisations have also used the pilgrims strategy to win The VRC successfully sold the Melbourne Cup to an international audience. The Victorian Racing Club (VRC), holder of the Melbourne Cup, employed a pioneering strategy to elevate the race with a rich history to new heights. The VRC did this by exposing the event to an already deep talent pool and associated fan base in the UK, France and Japan. The VRC successfully lured these horses by offering larger prizemoney than these horses would usually compete for, and actively broke down the considerable barriers to moving horses across the globe. Today, the Melbourne Cup is watched by over 700 million people worldwide making it one of the most attractive sponsorship propositions in Australian sport. The current major sponsor, Emirates Airlines, has signed a five year deal which contributes to the $6.2m per year prize-money. The most successful sports and clubs understand their weaknesses as well as their strengths and apply a strategy which leverages the best of their organisation Tennis Australia leveraged the scorching Australian summer to defend the Australian Open s status as a grand slam. Tennis Australia is another example of an Australian national sporting organisation that has recognised the value of their unique event (the Australian Open), and successfully defended its status on the international stage. There was a time, when the Australian Open s status as a grand slam was considered to be in jeopardy. However, by learning from Wimbledon s technique of accentuating the English nature of their event, the organisers realised that they could leverage the Australian summertime culture to increase the Open s attractiveness. Just like the NFL, the event showcased Australian summer culture to northern hemisphere viewers looking for an escape from winter. More recently, Tennis Australia has focussed on treating players and support staff like royalty in order to keep them coming back, rather than spending their off season at home. Tennis Australia has also carefully invested in facilities and constructed feeder tournaments to maximise the success of the Open as well as extending the Australian tennis season from December to late January. 5

6 The challenge facing Australian NSOs Not all Australian NSOs are positioned quite as well as the VRC or Tennis Australia, with strong brands and deep history. For the lucky few, reflecting on core strengths and considering creating brand pilgrims or leveraging a secret recipe will help to develop an international strategy that works. For sports that don t have a strong starting position, the key question becomes how to cement a sustainable place in the global ecosystem? Two options for consideration include: 1. Becoming a feeder league for more established competitions. This might include exporting the best talent, but also working hard to bring them home, when possible, to promote the sport or represent the nation. Association Football is a great example of how a sport can achieve success in Australia without being a part of the largest international leagues. With huge grass-roots participation numbers as well as producing world class players, Australia has a prolific talent pool that punches well above its weight globally. As the local league has strengthened, it has become more competitive and made significant inroads to the Asian market, boosted by Western Sydney Wanderers winning the AFC Champions League and hosting the Asian Cup in In fact, many of the world s biggest sports were once created in exactly this fashion. For example, just about every successful form of motor sport was once a niche player. Rugby League split away from Rugby Union over a hundred years ago, and the two have competed in some way ever since. A niche form of the sport, Rugby Sevens is set to become an Olympic event in Cricket has gone through two cycles of successful niche attack in the form of the 1 day game, and more recently Twenty20. If Australian NSOs aren t thinking about their international strategy, they should be. Whether the goal is global domination, survival, improving the talent base or simply capturing a larger portion of the audience pie, sports need to be thinking about how they actively fit into the global landscape. There are a range of options available, and choosing which one is most likely to succeed is a tough assignment. Tougher still, is having the conviction to play out a bold strategy that reshapes the game as it is today. However, one thing that will be true of the right strategy is that it recognises and encapsulates the particular strengths and positioning of the sport within the international landscape. 2. Establishing a niche support base that can be grown globally. Changing the duration of the game, bringing an outdoor sport indoors or changing the rules in a radical fashion have all been used effectively before to grow appeal to a broader audience. 6

7 About SPP Strategic Project Partners is a generalist, strategy consulting firm. We support General Managers on difficult strategic and operational challenges. Established in 2005, SPP has delivered successful outcomes for a broad range of commercial and Government sector clients. As a result, we have strong relationships with many businesses, from Top 50 listed companies through to small enterprises. When we deliver our projects, whether it s a strategic study or the implementation of largescale change, we focus on: Strong project management Clarity of outcome An obsessive focus on project benefits Robust, fact based analysis Simple communication Bringing experience to bear About the authors David Mackay Associate Director David leads SPP s work in the Sports, Media and Entertainment sector, providing advice to National Sporting Organisations, sports clubs and entertainment providers with a specific focus on creating sustainable models for commercial success. David assists organisations in developing and realising business growth and operational strategies from early stage new ventures to major corporations. David is a passionate football fan and keen runner. Nick Scarborough Senior Consultant Nick built and ran his own online retail business. More recently, he has established experience developing strategies for clients across many sectors. Transferring best practices across industries has been a key source of value that Nick has brought to clients. Nick is passionate about evolving sport through innovation, and also loves golf and thoroughbred racing. Trademarks and images used in this whitepaper remain the property of their registered owners Contact us Strategic Project Partners David Mackay m e david.mackay@spp.com.au Insight Influenc eimpact Associate Director 7