Virtual Reality for Sports - the Next Big ing?

Virtual Reality for Sports - The Next Big Thing? posted: 08/08/2015

by Tomas Robertsson

Back in January we noted the emergence of Virtual Reality (VR) as a serious alternative to the traditional and digital broadcast model for consuming sports. We concluded that this was an area that should be closely monitored, even though we thought it might be a few years before the technology presented itself as a viable alternative. While we were right concerning the first point, VR in sports might become a reality sooner than anticipated.

Virtual Reality for Sports

In sports media we often describe our industry's evolution in terms of major paradigm shifts. These shifts tend to be driven by new methods to consume content. These innovative methods breed new user habits, which in turn lead to numerous market opportunities. For example:

Radio - This was quite possibly the dawn of the sports media industry. For the first time ever, live sports could be enjoyed away from the actual venue.

Television - The consumer could enjoy live video of the event from the comfort of their living room.

VCR - Viewers were now provided with the option to record broadcasts and watch whenever they wanted.

Internet - Users are now able to instantly access sports content and connect with leagues, teams and players like never before.

Online video - Television is now extended to the online space, thus providing users with the opportunity to stream online video to computers.

Mobile devices - The Internet and online video are combined into a portable device that provides an even more interactive, engaging experience.

Despite the benefits, every paradigm shift presents some sort of disruption. The disruption is rarely immediate and revolutionary, but rather, a gradual evolution. Often, the initial reaction to new technology by the established players is often dismissive and complacent. History is full of these examples:

The radio craze will die out in time. - Thomas Edison, American Inventor, 1922.

Television won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night. - Darryl Zanuck, 20th Century Fox, 1946.

There is no reason anyone would want a computer in their home. - Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977.

I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse. - Robert Metcalfe, co-inventor of the Ethernet, founder of 3Com, 1995.

There's no chance that the iPhone is going to get any significant market share. - Steve Ballmer, USA Today, 2007.

So, within this context, the big question on our mind is whether VR will join the list of technologies above and bring a paradigm shift to the sports media business. Is it the Next Big Thing ?

For many of us who have tried it, the answer is definitely YES.' The ability to put on a VR headset, connect it to your smartphone or computer, and completely immerse yourself (as if you were there) in an event thousands of mile away is incredible.

Imagine a Man United fan in Australia who has never experienced the atmosphere at Old Trafford and most likely, never will. With VR technology, they will be able to buy a virtual ticket and experience the match as if they were there.

The possibilities are endless. They could pick a seat behind the Man United dugout or at the Stretford End. What about standing with the teams in the tunnel as they wait for the referee to lead them onto the pitch? What about sitting with the team in the dressing room after the match? The options would only be limited by where you can place a camera.

As a Man United fan living on the West Coast of the US, it is hard not to get excited. So let's assume for argument's sake that my excitement is not simply a fad and that this really is the Next Big Thing - another paradigm shift. That leads us to a number of very interesting questions as to what the impact could be on the sports industry.

Rights

The first question is who owns the rights? Is VR an extension of the broadcast rights (so the broadcaster owns the rights)? Is it an extension of the venue experience (so the team owns the rights)? Or is it a completely new rights category to be sold and exploited by the rights-owner (i.e. the Premier League)?

There are also a number of questions related to the business model. Is it part of your cable subscription or is it sold as a standalone direct-to-consumer pay-per-view or subscription model? Are the rights sold on a territory-by-territory or on a worldwide basis? Do you sell league-wide rights as is done with broadcast rights (i.e. the Premier League) or do you sell it on a team basis as is done with tickets (i.e. Man United)?

These are all very important, yet complex questions.

Business Case

In the end, it will probably come down to numbers and revenue maximization. So let's do a little exercise. We'll use the Premier League and the NFL as an example (top leagues in terms of rights revenue in Europe and North America):

Premier League:

o TV rights fees: ca $4.5bn/year (2016-19)

o Matches: 380

o Average rights fee per match: $11.8m (including matches not televised)

o Average ticket price: $68.36 (2014)

o Average attendance: 36,176 (2014-15)

NFL television rights:

o TV rights fees: ca $6.3bn/year (2015-2022)

o Matches: 332

o Rights fee per match: $19m (including matches not televised)

o Average ticket price: $84.43 (2014)

o Average attendance: 68,397 (2014)

Let's assume that VR tickets sell for 25% of the average value of a ticket (so $17.09 for BPL and $21.11 for NFL). So how many multiples of the average attendance would the BPL and NFL have to sell to match their current, very lucrative TV rights fees?

NFL would require to sell a little more than 900,000 virtual tickets

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