Sport’s asset bubble

Will there be a global sporting financial crisis?

The implosion of Tiger Woods last year was reported in the business pages; this is because Tiger is more than a person, he is a brand.

It is a status he shares with other leading sports ‘personalities’. The idea is that product endorsement by the likes of David Beckham, Roger Federer or Michael Jordan actually leads to consumers modeling their purchasing habits viz that same endorsement.

What David Bekham knows about mobile phones is probably up there with my knowledge of Canadian fungi, but it must work as Motorola paid him a truckload of cash to endorse their Razr phone. In fact, a lot of pseudo science has been peddled around trying to quantify how much product endorsements are worth.

Given that a lot of this “research” bleeds from the marketing industry, most of it can be dismissed out of hand.

Marketers do know that human beings aren’t rational. From this it flows that neither are marketing budgets. Most of it is just simple psychology aimed at making people feel like they belong. It works well in societies where real social networks (as opposed to facebook) are parlous or have collapsed, such as suburban Australia, especially at the more affluent end.

Exhibit A in this regard is Firepower.

Product endorsement by sports personalities is just a subset of the power of celebrity that has been growing since the mid-twentieth century.

Such endorsements are not new. Pope Leo XIII once endorsed a plonk laced with cocaine (left), which probably explains Tony Abbott.

Even if celebrity sports endorsements do work to some degree it is probable that their audiences, globally, are shrinking.

There may be more people watching, but as a percentage of total potential audience sports are in decline.

I base this assertion on declining TV audiences. No doubt many sports watchers have simply shifted medium, but that doesn’t help sports organisations whose main income stream is from traditional media.

Cricket Australia has a revenue stream of about $150 million, a fact it attributes to income from media. Cricket Australia isn’t doing media deals with the profusion of dinky little blogs and message boards that can keep you very up to date with matters cricket. They do their deals with the likes of Foxtel and Channel Nine who, in turn, rely on cricket’s drawing power to grab eyeballs and thence advertising and/or subscription.

It’s a simple business model that has two big, terminal problems. One; audiences for TV, especially free-to-air, are in decline; and two, advertisers are getting much more targeted in their marketing spend, leaving TV ads as poor value for return.

Radio has been through this revolution and the result is revenue from radio ads is a lot lower, the ads are cheaper, and the products they now flog are a lot more downmarket, generally speaking and radio as a whole is becoming a shoestring operation with a decreasing accent on celebrity.

The current crop of Australian players are already not loved by the Australian public, as David Sygall pointed out in the Fairfax papers a few weeks ago.

That cricket is aware of the potential damage this could do is undeniable. Sygall reported the market research they are doing. Also witness their ham fisted attempts to control the image of their ‘product’ by keeping news agencies from reporting test matches unless they signed ‘we love you’ waivers with Cricket Australia.

It is worth noting that if Cricket Australia’s revenue stream declines, so does the share going to the contracted players. So the deflation from lost media revenue will flow through to deflation in player’s incomes.

I’m using Cricket as an example here, but you could equally apply it to AFL, Rugby League, Rugby Union and Football. Globally, football will remain strong because of its sheer weight of numbers, but Tennis, Golf, the American sports and global Rugby must be getting nervous.

Sport as a product faces some big problems when it comes to the dreaded monetization. The problem that many of us have suspected for some time – that elite sports people and their organisations are paid far too much – is coming home to roost.

Celebrity is so vacuous that it relies on constant attention to survive. Paris Hilton knows that if the eyeballs stray elsewhere, they may never come back.

Sport as a business faces the big problem of continuing to attract eyeballs in a day and age when its very elitism and the carry on of its 'celebrities' alienates many viewers for a host of reasons that it isn't worth dwelling on at this time. Hence their need to turn to the vulgarity of 20/20 in cricket in order to feed the popularity beast so essential to the mainstream media outlets.

There is an alternative that is unthinkable to the moneymen surrounding elite sport. Sports could always return to being a past-time; an activity, rather than a spectacle.

But, who is going to endorse your product or watch your TV show if everyone is out there playing sport? Besides, humans are far too passive to reject the verisimilitude of spectating.

Actually doing it – as Nike suggests – requires more effort than western consumerism could stand.