COVID as a digital accelerator
Updated: Jul 24, 2020
In a recent digital strategy report Mckinsey argued: “The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight. A world in which digital channels become the primary or sole customer-engagement model and automated processes become a primary driver of productivity. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior.
If a silver lining can be found, it might be in the falling barriers to improvisation and experimentation that have emerged among customers, markets, regulators, and organizations. In this unique moment, companies can learn and progress more quickly than ever before.”
As an industry acutely affected by the pandemic this change has been keenly felt in sport and media. The effects of the pandemic have exposed which organisations had structures in place to cope with rapid change and which were developing the digital strategies that would enable them to flourish in a “world in which digital channels become the primary customer-engagement model”. For tech companies serving the sector, it has also shown which companies have viable business models and are delivering long term value for both the industry and their investors.
You can also see the pandemic’s effects through the massive polarisation in the fortunes of different organisations, even within the sports and media sector. For example, Peloton’s share price has doubled in six months, while Disney+ subscribers reached 54 million in less than six months from launch. This is in stark contrast to the huge pressures facing teams , governing bodies such as the FA and RFU and content owners such as DAZN.
At Sports Loft we have seen first hand how this has been playing out. From the urgent need to find a solution to the lack of crowd noise in stadiums for broadcasters, to a greater willingness for clubs, leagues, broadcasters and agencies to experiment and try new things. For example, Sports Loft member Spalk have seen sales cycles shorten from “months to days” during the pandemic as remote production has been adopted at scale, a clear example of “falling barriers to improvisation and experimentation”. This has prompted lots of discussion with industry execs and investors that we talk to everyday about which types of companies will benefit from the COVID-induced digital acceleration. We see four types of companies benefiting the most:
1) Companies who have a product where adoption would have happened anyway but it has been accelerated by COVID. At Sports Loft, this includes companies such as Spalk, who have benefitted from the rapid adoption of remote production technologies. It also includes Zone7, as players are now at heightened risk of injury with the return to play and Greenfly where content creation and distribution can be done irrespective of the athlete’s or influencer’s location.
2) Companies where a new use case has become more mainstream as a result of Covid, and is here to stay. For the parents amongst you, Google Classroom is a good example. Did it exist before COVID? Yes. Did my kids’ school use it? No. Can I imagine the school not utilising it once school is (hopefully) back in September? Absolutely not. At Sports Loft, Formalytics fits into this category. More broadly, the “watch parties” being offered by the broadcasters will move from “niche” to mainstream as people have used it and will stick with it going forward.
3) Companies which were concentrated on the “physical place” such as stadiums, but have been able to find new ways of utilising their technology to serve a broader set of customers. These companies are normally a bit more mature, with management teams that can make such a leap and a track record of success with their customers so that they can bring their client base along with them. At Sports Loft, this would include Satisfi who were very focused on the in-venue experience, now with their new products aimed at serving a broader fanbase; Fevo who have been able to broaden their “social cart” from ticketing to wider e-commerce.
4) Companies who are enabling their customers to build direct relations with their fanbases. In a world where “digital channels become the primary customer-engagement model” (to quote Mckinsey again) then companies who can help their customers develop these D2C channels will only benefit. At Sports Loft this includes companies such as Pumpjack who help teams increase the value of their first party fan data and Covatic who identify the best “windows of opportunity” for fans to consume content.
These are four areas where we believe companies can benefit from COVID driven digital acceleration. However, there are also areas where we are less bullish. In the past few months, we have been very aware of the emergence of a number of companies solving very specific problems caused by COVID, for example, a lack of crowd noise from stadiums. These solutions echo the many companies we have seen in the last few years who have a very good idea that can be used in a sponsorship activation, but often there is a natural shelf life, with brands, teams and fans naturally moving on to something else. Whilst the value of “focus” is undeniable, it’s hard to build a viable business in the long-term if it is focused solely on a very specific issue that will only be “top of mind” for a finite period.
The companies to watch are those capitalising on the direction of travel established by COVID whilst building long-term value for the industry and for their investors.