Maximising the potential of the Lockdown Period in the Sports Sector

21st May 2020 Sports Law

Introduction

It is noticeable that the communications we have seen across the sports sector have shifted from one of shock and trepidation to now showing a determination to establish a way forward.

By its very nature, Sport as a diverse multi-cultural entity, has an inherent ability to adapt to the changing environment that has been forced upon it. Now is the time for Sports International Federations (“IFs”) and National Governing Bodies (“NGBs”) and all their members and stakeholders to make plans to come out fighting and be even stronger after this period of inactivity. In sport, as in life, those rights holders, stakeholders and governing bodies that do not reflect and adapt, may well be left behind and eventually lose participants/ consumers or spectators/ customers mind-sets and thus be consigned to history.

There can be no doubt, whilst the vast majority of sports fans will be pining for things to return to the way they were, some will reflect and ask themselves if their lives are any the poorer for not watching and/ or participating in hours and hours of sport. In essence, whether they have rediscovered the value of other aspects of their lives, and whether the absence of hype and the social pressure to immerse oneself in professional sport, has led them to appreciate that actually a bike ride with the family is more rewarding than an afternoon in front of the TV watching three games of football.

The Sports that fare best will be those that recapture their audience and participation and adapt to the inevitable rules that will govern social interaction in the near future. Now is the time to be positive and with proactive reflection make plans to lay the foundations for success when we face the new sporting environment. Of course that is easier said than done with the current firefighting but hopefully this article will provide some initial guidance on some of the aspects to take into consideration.

Economy and Darwinism

There is huge potential for the whole sports industry to in effect be re-booted after the lockdown is lifted, whether that be periodically or more immediate. This presents the organisers and rights holders with an opportunity to resume play or action with all their issues ironed out. When else will they have this extended time to reflect on the way forward, particularly when everyone is going to be fighting over the same financial resources (consumers, broadcasting and sponsorships) at the end of the day and whenever we start to return to “normal”. Those sports that are first out of the blocks with a desirable and investible product, will have the chance to seize on the commercial opportunities that may exist. But the sports and their members that are built for the long haul will survive the inevitable downturn in the worldwide economy – survival of the fastest, strongest and fittest! 

Internal Reviews

The necessity to introspectively review the Internal Organisation of Sports IFs and NGBs is key to achieving Best Practice Governance structures and policies. There are a whole raft of issues for governing bodies/ administrators to review including in brief:

  • Effective operating models and organisational structures by modernising constitutions, the Regulatory and Rules framework, Codes of Conduct and Disciplinary processes. In this regard, smaller sports arguably have the potential to be more versatile, responsive and can adapt quickest. Look at golf and angling who have managed to lobby the UK Government that they can be permitted to resume activity by demonstrating that their members can and will self-regulate to comply with the Government’s requirements. The smaller the ship the quicker it can turn.
  • Public Funding – by demonstrating good governance NGBs can explore relief funds and try to increase funding within the sport. There has been discussions in tennis that the top earners set-up a fund in conjunction with the bigger corporate stakeholders (the ITF, Tours and Grand Slam tournaments) supporting their fellow athletes.
  • Develop the amateur side of the sport with increased participants/ consumers trying some sporting activity for the first time, NGBs will need to avoid discrimination, eligibility and accessibility issues. By providing better coaching, better facilities and embracing the Duty of Care, consumers will feel safe and be more inclined to commit. This can be achieved by making provisions for personal injury prevention, addressing the hygiene and impact of medical/ healthcare aspects in sport.
  • Developing and demonstrating reliable risk management policies and programmes – again the consumer will want reassurance around Data Protection and Safeguarding issues.
  • Creating performance programmes to provide healthy competition but avoiding the scrooge of Drugs in Sport.
  • NGBs can iron out some of the issues that have crept in to their sport surrounding employment/ selection/ funding aspects – with particular consideration on central contracts, representation at international level or in major events. There could be review of the transfer process and consideration of the impact of Brexit on the Free Movement of Persons and Services.
  • Review the role and framework for Agents, Advisors and Third Parties – this could be introducing a cap on compensation in transfers or sponsorship deals. Some of these aspects can be seen as losing the resources out the game or sport. This is not sustainable nor commercially acceptable to the wider public who are the sport’s consumers and customers and are losing or have lost faith in the direction of travel and may turn to other sports or hobbies/ pastimes to which they can better relate.
  • Consider branching out to e-sports by embracing technology and other media channels/ platforms. Some figures from e-sport tournaments run by several broadcasters during lockdown are an eye opener especially where professional sports people have participated. This could be the real battleground for commercialisation within sports going forward. 

A review of external commercial suites of rights in sports properties

  • Investment from Governmental Organisations such the National Sports Councils and UK Sport has significantly assisted sports NGBs to compete internationally. Further investment, particularly in politically sensitive geographical areas (nationally and internationally), will be available and we have seen in recent years that the Middle East Kingdoms are investing in sport. This will be a natural source of financial assistance that some sports require but it may come with increased scrutiny, principally in regards to issues relating to integrity.
  • It is to be expected that commercial relationships will be tested over the next few months and years, but that does not mean that relationships cannot be prepared for the future. There will need to be a better sharing of resources and it will be those that look outside of the box for goodwill and added value which will bond together and be better longer term.
  • All Venues and Event Management, including Promotors and Image Rights Holders will need to adhere to Government policy in regards to Public Health and Safety and mass spectator or participant events. That said we have already seen that sports can successfully lobby the UK Government (the Department of Digital, Culture, Media and Sport) to permit certain formats of sport returning. NGBs will have to be inventive (and flexible) with different formats of their sport to enable it to be played out as an activity. This presents opportunities and threats.
  • There has already been a lot of talk about some Merger & Acquisition (M&A) activity within the sports sector. The tennis and golf tours might consider merging, as well as having their rights acquired or renegotiated. Investors might consider this as an opportunity to diversify their investment portfolios, which could bring new comers to the market, with new commercial opportunities and new events.
  • Customers/ spectators – clearly live attendances at stadiums cannot be beaten for a sporting atmosphere, but that does not mean that time could be used now to consider how to enhance and expand fan enthusiasm, by reaching out to them through new or other mediums or platforms. This presents more merchandising and ticketing opportunities. 
  • Hospitality and Exploiting sports data with fan engagement during the match-day experience, and on-site activation live at the events. We are starting to see deliveries to seat, push notifications, coupons for match shirts etc. Clearly this might be problematic with the use of Personal Data and indeed the protection of that data. There is also the need to protect and Rights Holder’s Intellectual Property from Ambush marketing. All too often in sport, not enough is done to develop branding with the financial aspects of a sponsorship deal often overriding the added benefits of branding and customer loyalty.
  • Providing dynamic Consumer interfaces through Broadcasters and New Media technology distribution channels will be a competitive market. We have already started to see the benefits of the Over The Top (OTT) and online streaming of events or matches, this will lead to an increased monetisation of the process. For some smaller sports there is a possibility to develop Artificial Intelligence, Virtual Reality or Artificial Reality to engage and enhance the fan’s experience.
  • Commercial sponsors, partners, suppliers – with effective licensing, loyalty could be rewarded with better engagement with the rights holders who could become more imaginative with their offerings for enrichment of the commercial relationship. 
  • There have to be considerations for calendar congestion, with spots IFs and NGBs owing a Duty of Care to their members, athletes and others impacted on bringing live sport to the masses, there will have to be a dialogue to share the calendar’s resources to the advancement of all sports world wide. For example, late starting league seasons in 2020/2021, European and World Championships and the postponed Olympics. See another blog on the Duty of Care and the Return to PL action here.
  • Consideration of Human rights and Trade constraints with the free movement of persons and goods taking into account Brexit, taxation and financial planning issues (HMRC investigations and INTEPOL tax enquiries) and the impact of Covid-19 travel restrictions.
  • Doping and Corruption – match fixing, gambling, bribery work with other organisations in order to have better and more in-depth investigations and inquiries to protect the sporting brand and product. Without integrity in sporting competition it is difficult for commercial entities and the public consumer to engage in the sport/ product/ brand.
  • There is the need for effective sports regulation with any misconduct properly policed, sanctioned and enforced. E.g. Manchester City FC and their alleged breach of the Financial Fair Play Rules and Contentious Ownership/ Sponsorship arrangements.
  • The handling of disputes in the sports sector, from dealing with on-field offences to full Mediation/ADR in sport, including Selection and Funding disputes has the potential to bring the sport into disrepute and therefore turn away a prospective participant or spectator.

E-sports

The growth of e-sports over the last decade or so has been incredibly vast and has seen the current pandemic leading to the traditional sporting world leaning on its e-sports channels or platforms more than usual. However, e-sports have also been affected by the withdrawal of their live events too, although less affected than traditional sports they still have the benefit of the spectacular of a live event. It should be noted that the more popular e-sports have no connection to traditional sports. E-sports events are multi-faceted and are filled with sponsors, interactive experiences, arts and culture. 

Due to the growth of e-sports, it rightly stands out as an independent industry but there are a huge number of positives to be taken from the fans engaging in e-sport versions of traditional sports. We have seen an immediate requirement to engage fans with the preliminary option of seeing sports stars turning their hand to the e-sport version of their sport for the enjoyment of fans at home. This engagement could be expanded in due course to increase publicity and participation of both aspects of the sports. In time this will bring greater commercialisation with brands and sponsors wanting to be part it, this investment can bring cyclical development opportunities to NGBs and IFs.

In the absence of live sport BskyB and other sports broadcasters have staged esports events particularly football and F1 featuring not just footballers and Formula 1 drivers but also celebrities and sportsmen from other sports. Whilst these events do garner the attention of traditional sport watchers as the viewing figures show they are in effect ’exhibition events’ rather like celebrity charity matches and should not detract from the fact that the performance level of the professional esports players is of a much higher standard. It should also be borne in mind that the elite esports players are ‘superstars’ in their own right.

Clearly an event between professional esports players and professional athletes would be of interest as it would showcase that the neurological motor skills involved in esports are similar but different to the actual sport with concentration and stamina having greater relevance than sheer athletic ability. 

Major Events

With or without insurance policies in place to protect against Postponement, Cancellation, Abandonment and Force Majeure, several annual events including The Open Golf and Wimbledon have been cancelled. Several event organisers are having to balance returning to regular events and waiting until full spectator attendance is possible. A subject we have covered in other blogs here.

Conclusion

One aspect which will take a considerably long time to overcome and that will require multi-governmental agreement will be the limitations on world-wide travel for those involved in bringing sports and events to life. This predicament and lockdown restrictions allows for IFs and NGBs to utilise this time to be positive and proactive in undertaking their internal and external reflection. They should want to be fully fitted to the new world and new society in order that they are not left behind. Mohammed Ali once said that the fight was won or lost long before he danced under the lights. It could be said that these quiet times present a great opportunity for athletes and particularly sporting organisations to be ready for the exciting times ahead!!

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Nick Lewis is a Partner located in London in our Sports, Commercial and Healthcare Law department

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Stephen Taylor Heath is a Head of Sports Law located in Manchesterin our Corporate and Commercial department

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