The threat of the Sharing economy to Sports Finance

Michael Broughton
Jul 27, 2017 · 4 min read

One of the great ‘known’ secrets of the sport industry is the Season Ticket. It is a wonderful financing strategy that the sport of business has used for generations.

It’s fantastic because the fans genuinely believe the season ticket is about them. The concept gives them the opportunity to attend all the games that they would like to attend and they are happy to stump up the cash in advance to ensure they have the access to all those events. They are even delighted to get onto the list that enables them to have this right that they literally get into queues to do so.

What few of them truly comprehend is the fact that the primary goal of the season ticket is for the sports team to front load their financing. Depending on the sport they receive the cash for many of their tickets 3–5 months prior to an event even taking place. Even if it just sat in a bank they would make a profit off this strategy but study the time value of money and you will realise why sports have used this tactic for so long.

A recent phenomenon that has become en vogue across an increasing number of industries has been the rise of the Sharing economy. Wikipedia refers to this as “transactions that are done via online market place…as a means of describing a generally more democratized marketplace.”

Sport has started to embrace this philosophy by signing deals with companies such as Uber which are seen as exemplars of the sharing economy model. These are much heralded but really are not much more than well positioned sponsorship arrangements https://venturebeat.com/2017/01/12/uber-manchester-united/ and not a reflection of the burgeoning sharing economy.

Listening, however, to a recent podcast by the Ringer between Bill Simmons and Nathan Hubbard (the former Ticketmaster CEO https://theringer.com/bill-simmons-podcast-d3868264a984) started to get me thinking.

Nathan raised the point that the Season ticket is under threat. This is highly understandable in the US where three of the main leagues have between 40 and 80 home games and the commitment to attend that many events is simply too great. The NFL with only 8 home games and some of those lost to international events appear protected by the scarcity factor.

So, could European Football and other sports be at risk?

It doesn’t take a great leap to suggest that it could be. Whilst many clubs and leagues will point to the fact that they have sold out season ticket allocations and have high attendance rates that ignores the fact that in many ways those tickets are currently bought by ‘brokers’. Some may be professional/semi-professional and others are legitimate fans but both sects are acting as brokerages.

Season ticket holders can make every event but its becoming less probable and the incidence of sharing your ticket, paid or unpaid, with friends and others is increasing. Some of this happens via the platforms clubs provide or support such as viagogo or SeatGeek but many will happen 1–2–1. Of course, the club or venue have no idea how much this is happening as the outdated technology used in most ticketing instances doesn’t track the user simply that the ticket was used to gain entry. Therefore, the data the venue has will probably suggest that the season ticket was used in over 90% of all matches.

Many will continue to argue that fans will continue to buy season tickets and that the instance of re-selling or sharing is relatively low and not a risk to the rightsholder or their financing plans. If however we return to the Uber example it becomes less obvious.

Owning a car has in many ways been seen as a rite of passage at 17 (or whatever the legal driving age is in your country) and the vast numbers on the road make it feel like that is simply never going to change. The rise of Uber, Lyft and even businesses like car2go start to put that model under pressure. A recent A16Z podcast (AndressenHorowitz) suggested that car automation would precipitate a massive change in ownership structures with car sharing on demand becoming the primary form of transport rather than ownership.

The following are two interesting reads on the matter:

https://medium.com/the-wtf-economy/i-don-t-own-i-uber-68a5f5d8e0ae

https://techcrunch.com/2016/07/19/car-sharing-leads-to-reduced-car-ownership-and-emissions-in-cities-study-finds/

So, in a world where Access becomes more important that Ownership are season tickets really that safe? In the UK you have the EPL being forced to show more games, the launch of new products such as iFollow and a plethora of ticketing platforms provide the ability to secure game day tickets in many ways. It could be argued therefore that access has never been greater which will begin to apply greater pressure on the ownership concept. Coupled with busy lives and the model may begin to adapt to new consumer patterns.

It may be that the fact football has c.18–22 home games per team that they fall more in the NFL than the MLB bracket but that shouldn’t stop the Finance Directors from taking a look at their financing models and perhaps start preparing for a world in which the fan doesn’t feel obligated to stump up the cash 4 months before kick off.

Written by

Partner at Sports Investment Partners - The specialist investors in Sport. Lover of all sports, serial retweeter.

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