For a number of years IBM has been involved in professional sports through various leading events including The Masters Golf and the four tennis Grand Slams (Wimbledon, US, Australia and French Opens). Its level of participation covers the systems that enable these events as well as the ways in which fans engage with them, but most of all through the impressive set of analytics it provides both the fans and sports participants alike.
For example, in tennis IBM is responsible for collecting and analysing all of the data that is produced by every shot in every game in every match. That data is often used by players to understand their own performance and that of their opponent. IBM has for a long time also been responsible for tournament websites and more recently mobile apps.
Over the last few years IBM’s involvement in sports has increased and it finds itself working with numerous partners to create and deliver solutions to not just events but individual teams such as Texas A&M (US University that plays American Football). As a result the company has come together with an ecosystem of partners to create a unified offering: the IBM Sports and Entertainment Consortium. Other members include US architecture, engineering and interior design behemoth HOK; technology giants such as Alcatel/Lucent, Juniper and Schneider Electric; and communications providers like AT&T and Verizon.
For IBM this venture involves multiple parts of the business including its digital agency – IBM Interactive Experience (iX), its business consulting capability – Global Business Services and its technology services arm Global Technology Services.
What is interesting about the direction taken by IBM is that it goes beyond the typical technology services and business transformation support that the company’s consulting and integration practice offers. In the formation of this sporting ecosystem / consortium, we see IBM strategically moving to oversee the entire end-to-end sports process in a bid to ensure a fully unified and integrated digital, design and construction experience. This is in order to better drive the fan experience and engagement.
The lead coordination role that the IBM Interactive Experience team is set to take within the consortium, highlights where the company believes the real leverage will be in the goal of driving top line revenue growth. Certainly it is a sensible strategic direction when the digital sophistication and capabilities to engage and impact a fan’s experience extends beyond just thinking about the underlying connectivity infrastructure of a venue.
That said, there is a limit to shaping all aspects of the sporting process, and this will make bottom line profitability, another goal of the consortium, a more collective control point as we outline below.
Modern sport is a complex business
Sports and teams use technology in all facets of what they do, not just fan websites and mobile apps but in the training and selection of athletes. The consortium will address all of these needs through three key pillars of Engagement, Performance and Optimization. These pillars will cover the complete lifecycle of a sport and not just the few hours, days or weeks when most people tend to be watching. Sports and their fans today want and need services that are year round (24/7 in some cases), because today’s major sports function year round and around the clock.
This group has the potential to offer customers a broad range of sophisticated capabilities across not just technology, but venue architecture and construction and other support services such as telecommunication and security (physical and cyber). One place where this combination of organisations can come together to create value for a team, its venue and its fans is in delivering venues such as the new billion dollar Atlanta Falcons Mercedes-Benz Stadium that should open in 2017. While the consortium, because it has just been formed, was not involved in the Mercedes-Benz Stadium agreement, it provides a robust example of the kind of projects and contracts that they could look to go after.
What projects like stadium development from the ground up demonstrate is the level of integration between the many facets of the modern sporting business. For example, integration between the physical venue and the digital fan experience is essential, both of which may seem removed from one another, but are actually closely related. An example might be that the in-venue mobile experience (mobile app) for fans requires physical infrastructure such as Beacons or network connectivity that is part of the venue.
Modern sport is a highly complex and expensive business. In many cases there are a number of individual businesses including ticketing, hospitality, merchandising, media, real-estate and talent management. The new consortium seeks to address creating venues and providing fan experiences (both in-venue and via digital channels) and other key concerns. These include reducing the use of energy in order to both save money and be more green and the ability to shift expenditure from traditional Capital Expenditure (CapEx) to a more services based Operational Expenditure (OpEx).
Being businesses these ventures have to inevitably generate revenue and be profitable. And so the consortium will seek to support customers in these areas. One way of doing this is to help convert more fans into customers. Currently many of us may support a team or watch an event but how many of us generate revenue for it? It is here where IBM Interactive Experience can help its customers provide channels through which fans can more easily become customers whether that’s purchasing tickets, merchandise or other newer product and service offerings such as live game streaming.
This will be achieved through a combination of services including marketing, commerce, data management and web services (APIs). Most noticeable perhaps, and IBM’s latest USP, is that it can bring to bear powerful predictive and cognitive analytics via IBM Watson. Of course Watson is ever central to everything that IBM is doing as is Design Thinking which is also a core part of the Sports and Entertainment offering.
Some questions to be answered
Providing sports events and teams with a one stop shop for everything from building a new venue to maximising an athlete’s potential is a strong proposition but it does raise some questions. The initial group of partners appear very North America centric and so how the consortium will address a more global market remains to be seen (big sports today is global). Though there is nothing to stop the consortium from expanding to reflect regional providers. Perhaps the biggest query will be around the complexity of modern sports and by extension the complexity of the consortium’s internal dynamic.
For example, while IBM remains the Consortium lead, will a customer approach the consortium as a whole? Though IBM does not intend to utilise every member of the Consortium every time, what if a customer wants to use some partners but then other suppliers who provide the same services as some of the other consortium partners? How will the partners manage the complex relationships that exist within professional sports such as the relationship between a team and the sport’s governing body or third parties such as content distributors (TV channels/ broadcasters for example)? Or where venues are used by a team but not solely owned or built by them?
While the consortium offers tangible benefits for both its ecosystem of members and the sporting industry in general, further clarity is required to qualify that such a one-stop shop can work to deliver the levels of growth potential, profitability and overall financial returns for this particular market.
There is no doubt that each of the partners has a first class pedigree in what they do but these can be sizeable projects with multiple considerations for customers and one wonders if being a consortium will help all members or create complications as each seeks to promote and sell their own individual services.
We will have to wait for the answers to these questions as many of the projects that the consortium will be doing will take time to emerge and be delivered. This is clearly a long term investment for all players including IBM although there is the potential for more short term rewards. A team may not build a new venue very often but refreshing their fan experience (especially digital channels) is something that all teams could and should do regularly.
Big potential for IBM and others
Ultimately, this is an interesting move by IBM especially when one considers how well it has already done in the sporting field with its powerful analytical capabilities and underlying IT infrastructure and services. All of this was delivered outside of a consortium that includes such diverse capabilities as it is now proposing. That said the business of sport has never been bigger both in terms of global reach and money.
Soccer is now a global sport and the English Premier League alone generates revenues of almost $5bn per year. US Baseball and Football pull in $9bn and $11bn respectively. The 2012 London Olympics which involved several large construction projects cost $14bn. And in the last 10 years Formula 1 racing has added new circuits in Bahrain, Austin (Texas), Singapore, Sochi (Russia) and Abu Dhabi with each amounting to a size $1bn spend. These are large, complex and long term projects but represent giant opportunities for suppliers. The new consortium is betting that bigger will be better when it comes to winning such projects. Given the value of sporting franchises today and in the future, we are minded to agree with them.