The Business of Sport Olympics

The Business of Sport Presentation by Sir Martin Sorrell, WPP plc The themes I will aim to cover • The economic importance of sport • The cultural importance of sport • The good and the bad of new technology • What you need to do to future proof your sports brands The economic impact of sport The Quadrennial impact Global GDP Growth 1980 - 2000 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1980 +59% 16% +34% GDP Growth % +62% 1985 1990 1995 2000 Impact of the Olympics in additional GDP Direct GDP Impact ($ Billions) 84% 10 7 5 2 1 Seoul Barcelona Atlanta Sydney Athens Source: “The Economic Impact of London 2012” Nottingham University 2006 Impact of the Olympics is diffuse % increase in activities Barcelona 1992 306 120 72 Construction Employment International Visitors Intern Calls Source: Ferran Brunet “ An Economic Analysis of the Barcelona 92 Olympic Games Impact of the Olympics on house prices 350 300 250 200 150 100 1986 1988 1990 Psta/Per Square Foot (1985=100) 1992 Source: Ferran Brunet “ An Economic Analysis of the Barcelona 92 Olympic Games Impact of the World Cup on host country GDP % Increase attributable to the World Cup 2.20 0.60 0.30 Japan Korea Germany Source: Bank of Japan/FIFA/Bundesbank/WPP analysis Impact of the World Cup on German beer consumption 130 -7% 120 +2% Beer Per Capita Consumption (litres) 110 2000 2001 2002 2003 2004 2005 2006 It even impacts the financial markets The cultural importance of sport “Games are central to the human experience. Outlets for aggression, universal forms of entertainment, metaphors for the struggle to survive” Greatest Games Ever Played – Mark Frost Sporting activity is one the of key underpinnings of community “How much do you have in common with the following?” 2.95 Your parents 2.72 People with the same hobbies as you 2.41 People working at the same place as you More in common 2.37 People who enjoy the same TV programs as you 2.30 People who are the same age as you 1.98 People who read the same newspaper as you 1.81 People who come from the same town or area as you 1.81 Your neighbours 1.78 People who wear the same kind of clothes as you 4 = a lot 3 = a fair amount 2 = only a little 1 = virtually nothing Sports/ hobbies Religion political affiliatio n Me Work Families Friends Home Source: The Henley Centre 2006 Some brands are creating sporting communities Rare communal experience comes with a high price premium Cost per thousand (CPM) of Superbowl spot 60 US$ CPM 50 40 30 20 10 0 1970 1980 1990 2000 2010 Source: Group M / MediaEdge:CIA The price of live, large, communal experiences is likely to increase even further as fragmentation and ad avoidance increases % Share of Advertising Impacts 40 35 30 25 20 15 10 5 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 20 05 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 Attitude to ads (1990-2005) 55 50 45 40 35 Multichanne TV Ads are annoying I enjoy TV ads as much as programmes 30 25 20 15 10 ITV 1999 20002001 20022003 20042005 2006 2007 f f Source: MindShare, TGI This has made sports brands some of the most powerful in the world Top 10 Most Valuable Global Brands* Bonding Advantage Performance Relevance Presence 22% 53% 60% 68% 85% Beijing Olympics 19% 63% 80% 83% 86% *BRANDZ 2006 Millward Brown Optimor Some are highly adept at exporting their brands on a global basis – creating further value 5 NBA Finals FIFA World Cup UEFA Champions League Table Tennis World Cup Summer Olympics Chinese Premiership Football League China Basketball League Asian Cup Vitality™ 0 The English Premiership International Badminton Championship Shanghai Grand Prix Women’s Volleyball Championship Championship Golf event Championship Golf Tournament China Tennis open Winter Olympics -5 -45 0 25 China Tangibility Successful brands in China Average Event Superior 28% 59% 75% 78% 84% 56% 89% 95% 97% 98% 15% 36% Preferable OK 55% 60% 79% Relevant Tangible China This makes global sporting entities very valuable to brands Samsung is a more powerful brand by tapping into the Olympics Sports Interested Bonding Advantage Performance Relevance 14% Not 10% 30% 35% 38% Difference +4 +6 36% 41% 46% +6 +8 Presence 63% 53% +10 McDonald’s and Olympic fans Beijing Olympics One of my favourites Preferable 19% 63% 80% 83% 86% 33% Current users Key targets 21% Use rival brands 46% Non Fast Food users Who are they? Users 16-34 years INDEX (average =100) 58% Rivals 44% Non-Users 15% 132 101 33 McDonald’s Olympic fans are younger and non Fast Food fans are much older TV watching and advertising Users Watching TV is my main leisure pursuit I find advertising a waste of my time Rivals Non-Users 89 107 91 108 117 90 McDonald’s target are hard to reach with TV and they reject advertising. Getting to them via sponsorship of the Olympics is therefore even more valuable. Budweiser is worth an additional $9 billion because of sport Sports fans Bonding Advantage Performance Relevance Presence Not Sport Difference +7 +14 +9 +9 +2 11% 42% 53% 56% 83% 4% 28% 44% 47% 81% This in turn has fuelled the growth of the global sponsorship business $ Billion 45 35 30 25 +67% Global Sports Sponsorship Spend 20 15 10 5 Asian Sports Sponsorship Spend 0 2000 2001200220032004200520062007 (f) Source: GroupM 2007 And from this large global sporting brands have exponentially driven revenue Olympics Global Revenue $USbn NFL TV Rights $US million 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1.25 0.53 0.28 19931996 34% per games (7.5%pa) 4,000 3,500 3,000 2,500 Broadcast 2,000 Domestic TOP Sponsor 1,500 1,000 500 +49% 2.54 1.85 0.66 0.58 19972000 2.23 0.80 0.66 20012004 0.97 0.87 20052008 (E) 0 1970 2006 Source: IOC; NFL; Harvard Business School; PWC; WPP Estimates But nothing fails like success While broadcasters offer a lot of money, their audience is getting older Median Age of US Olympics Audience (1992-2004) 46.2 44.9 41.7 38.7 1992 1996 2000 2004 This fact of life is being priced in by the markets Broadcasters Core ITV TF1 New Media Core eBay Amazon CNET Yahoo Future 39% 52% 51% 26% 61% 48% 28% 21% 25% 36% Future 72% 79% 75% 64% 80% Canal plus 49% Antena 3 Sinclair 74% 62% 38% Google 20% Average 59% 41% Average 28% 72% Notes: Core value = EPS / cost of equity Future value = share price – core value Share data as at 12 / 06 Source: Bloomberg/WPP analysis Change is being driven by the young The young interact with media in different ways Kids and Teens Watch TV on Other Devices Ages 8-12 Internet Ages 9-14 Ages 12-17 27% 25% 33% PSP/Handheld videogame system iPod/Mp3 player 12% 13% 12% 11% 4% 4% 7% 7% Cell Phone 2% 0% 5% 10% 15% 20% 25% 30% 35% Source: MORe, Base= Youth who watch TV Worryingly for many in this room, they take their habits with them 26 24 22 20 18 16 TV Consumption (Hours) Born in the 1960s & 1970s •Average age of PlayStation user •1995 & 2001 Born in 1985 •Age group • • • • <17 18-34 35-54 55+ •Sony PS 1 (1995) •37% •50% •13% •1% •Sony PS 2 (2000) •14% •68% •18% •1% Born in 14 1989 12 10 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Source: BBC Lives Study Age Source: TGI Moving to an IP world is not just a challenge for broadcasters Broadcast World IP World Consumers choose level of interactivity, create control and share content Consumers shown content Networks bundle content Consumers bundle content Scarcity of content and access Scarcity of time and attention Source: MindShare 2006 Community movements present a challenge and opportunity Community On Demand On Demand Linear network Linear network Linear network Past Source: WPP Present Future How do you prevent ambushing in cyber space? adidas nike What you need to do to future proof your sports business – 10 points to think about 1. Understand your competition 2. Develop a customer mindset 3. Understand what you have to protect, enhance and explain 4. Are you talking to the young? If not, why not? 5. Don’t rely too much on one partner 6. Start understanding best practise MLB Advanced Media is largest live event producer in the world. Ability for MLB to show games not broadcast on TV. Initial investment (2000) $1million per team, now valued between $2 – 2.5bn. Source: WPP 7. Audit your long tail Scarcity Abundance - AOB (Athens Olympic Broadcasting) produced 4,000 hours of live Olympic coverage - NBC broadcast 1,210 hours, BBC broadcast 250 hours on main channels (plus up to 4 additional streams) 8. Think of ways of growing the franchise – and value Broadcast Sporting content Live Non-live Non-broadcast Broadcast Sporting content Live Non-live Non-broadcast 9. Create more contestable markets and start to talking to “new” media players 10. Think about what digital inventory you can offer sponsors and partners Thank you msorrell@wpp.com