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Hogan Lovells identifies seven key trends to watch in the sports sector

Like many other sectors of the economy, COVID-19 has wrought havoc upon the sports world. However, the pandemic has also opened up opportunities. Hogan Lovells’ Sports, Media & Entertainment group provides insights concerning key trends in the sports sector as teams resume play and welcome back spectators.

Key trends to watch in the sports sector

1. Re-opening with caution

The onset of COVID-19 this year brought an abrupt halt to major sports events in the United States and globally, leading to billions of dollars of losses. Now that sports play has resumed, the industry is facing a new reality.

In the U.S., the major leagues—including Major League Baseball, the National Football League, the National Hockey League, Major League Soccer and the National Basketball League—are still looking for ways to bring their fans back into the stands. In the UK, the government recently put on hold a plan to allow some sporting venues to admit spectators with strict safety standards.

“Welcoming fans back raises a host of issues, including the need to conduct health screening, and the privacy concerns associated with the collection of health data,” said Hogan Lovells Partner Craig Umbaugh, Global Head of Hogan Lovells’ Sports, Media and Entertainment Group.

“Sports teams, event organisers and venue operators aren’t used to handling health data, which is regulated differently from the consumer data that these organisations typically collect—such as fan experience and merchandise data,” Umbaugh said. “As businesses decide which measures will be implemented for fan health and safety, anticipating privacy concerns will help build trust and create an experience where fans feel safe.”

Another issue associated with reopening is potential liability if people contract COVID-19 following attendance at games. There are discussions in the United States about seeking federal legislation that would include liability protection for promoters, teams, and venues that host live events in accordance with applicable health and safety guidelines.

2. Investors look to Europe

Even before the pandemic, investment in European sports franchises was an increasingly attractive alternative to U.S. teams. This continues to be true.

“International team audiences are growing, revenues are increasing, and teams are likely to become more profitable,” said partner Matthew Eisler, who is Global Co-Head of the firm’s Sports group. “The moment seems ripe for interested investors to look into cross-border team ownership opportunities.”

Advantages to investment in Europe include the opportunity for greater growth, since the market for sponsorship and naming rights in many foreign countries isn’t as mature as it is in the U.S. Different ownership rules in Europe enable investors in teams to have greater involvement in the decision making. Further, the ability to sell player contracts in Europe provides investors with diversified access to cash flow.

“Another key investment driver in Europe is the growth of the popular profile of football across the continent—beyond its traditional powerbase in the UK and Spain—which has led to more lucrative television and streaming rights,” noted partner Raj Panasar.

Investment in Europe may also be affected by efforts to cap salaries. “This summer the English Football League approved salary caps, which previously only existed in the UK’s English Premiership, French Top 14 and Pro 14 (all Rugby Union) said partner Daniel Norris. “However, the European Union has rejected salary cap proposals in football as an unlawful restriction on competition, so it remains to be seen how widespread salary limits will become.”

3. Private equity looks to sports

Private equity firms are sitting on historic levels of investable “dry powder” that needs to be deployed for them to raise new funds. Despite the challenges that COVID-19 poses for event-based industries, the sports sector is viewed as one of the hottest asset classes available right now.

“The sports and live-entertainment industries were booming before COVID-19, and private equity still sees sports and entertainment assets as high cash-flow businesses that, while mature, will still experience extraordinary growth,” said partner Mark Kurtenbach.

While founders of private equity funds, in their individual capacity, own numerous U.S. professional sports teams, the funds themselves largely have been prevented in the past from owning teams because leagues required individual controlling ownership and limited debt leverage. But these restrictions are loosening. MLB and the NBA have opened the door to allowing private capital groups to acquire minority ownership in professional teams, and Major League Soccer is considering a rules change that could allow investment funds to take minority stakes in clubs.

Despite the recent stop in play, professional sports have seen an explosion of private funds focused on acquiring minority stakes in U.S. professional teams and even controlling interest in European teams.

“These funds include some of the most savvy and experienced sports executives around,” noted partner Michael Kuh. “They can quickly and efficiently do their diligence and execute on deals, even when complicated structures and issues are involved. This can be extremely attractive to leagues, teams, and sellers.”

Outside of team ownership, private equity investors are acquiring ancillary sports and entertainment businesses, bringing with them the PE mindset—an emphasis on profitability and growth.

4. Growth of individual outdoor sports

With many gyms still closed or operating at reduced capacities, and fitness classes on pause, sports enthusiasts have rediscovered the appeal of outdoor activities that can be enjoyed while maintaining social distancing, such as running, cycling, golf, hiking, and fishing.

“Amid significant economic retraction, outdoor brands are seeing positive economic impacts,” Kurtenbach said. “The uptick in individual outdoor sports presents significant opportunities for private equity and strategic buyers, and we expect this trend to drive M&A activity.”

We’re still early in this cycle. The growth in individual outdoor sports has only taken off in the last few months as the effects of COVID-19 have spread. We expect this growth to fuel increased M&A activity resulting in further consolidation across outdoor sports.

5. Rise of niche sports

Another trend picking up steam is the migration of sports from traditional pay television to digital platforms. This can create new opportunities for non-marquee sports.

“Sports fanatics have been abandoning expensive cable sports packages in favor of mobile and subscription services offering popular, underexposed sports,” said Kuh. “COVID-19 didn’t start the move away from pay television, but surely accelerated it.”

The shift to mobile devices and internet streaming (OTT) service presents a prime opportunity for emerging sports to develop audiences and attract sponsors. These include women’s soccer, rugby, professional lacrosse, and action sports such as climbing, board sports and BMX and mountain biking. Many of these niche sports have devoted fan bases that will pay for programming.

6. Growing use of technology

While American sports have made innovative uses of technology for some time, the use of technology in sports is expanding globally.

“In the UK, the results of incorporating technological advances have been mixed,” Norris said. “In tennis, the plan to replace line judges at Wimbledon with hawkeye technology appears to be well received. Cricket has honed its use of technology to a degree that almost any player or spectator would consider materially beneficial. However efforts in other sports, notably EPL football, have been less successful in their infancy.”

The expansion of 5G wireless technology, over-the-top media platforms, and augmented and virtual reality will affect sports media rights, marketing, and fan interaction. New technology will change the stadium experience, encouraging stadium modernisation, and will be a key part to any growth in sports betting in the United States. The challenges of producing live events during a pandemic has led to new opportunities for cloud-based and autonomous production technologies for sports media.

“Whether we are talking about apps, data analytics, wearables, or new hardware, we can expect to see tech deployed to enhance fan engagement and improve athlete training. Teams, leagues, sponsors, and others will be on the lookout for joint ventures, investment opportunities, and ways to integrate new tech,” said Kuh.

7. Re-thinking funding for stadium improvements

Even before the pandemic, municipalities were less likely to spend public dollars on new stadium development, and sports team owners and public officials were looking for new partnerships to generate revenue for stadium upgrades. With the financial pressures brought on by COVID-19, this trend is likely to accelerate.

“In the face of growing resistance from cities and states, more teams are getting creative in identifying revenue streams for future stadium development that also benefits the city,” said Umbaugh.

These plans include funding stadium development and maintenance through real estate projects surrounding stadiums.

Hogan Lovells’ Sports, Media & Entertainment group

Our Sports, Media & Entertainment group advises major league sports teams, world-class media and entertainment companies, media streaming companies, media content developers, and investors. The group’s industry-focused experience extends to licensing and protection of content for video and television broadcasting, music, and web-driven streaming; commercial operations such as sponsorships, naming rights, and brand protection; corporate transactions; management of stadium and arena projects; and free speech issues. We offer clients geographic reach that few firms possess.

Information and data privacy law heavyweight joins Pinsent Masons

Multinational law firm Pinsent Masons has hired partner Jonathan Kirsop as a key addition to its leading data privacy and information law offering.

Jonathan advises a wide range of clients on data privacy with particular focus on the financial services sector. His range of expertise spans contractual and regulatory advice, data subject access requests, international data transfers as well as providing broader technology, data and commercial expertise.

He joins the firm from Stephenson Harwood where he established and led the information law practice within their commercial, outsourcing and technology team.

Jonathan will assist in the further development of Pinsent Masons’ information and data privacy law capabilities in London, particularly to the firm’s financial services clients, as well as working with partners within the rest of the UK, across Europe and Asia Pacific offices.

Simon Colvin, Head of the Technology, Media and Telecommunications practice at Pinsent Masons said “Data and privacy is at the heart of the business for most of our clients. As the regulatory landscape continues to evolve, Jonathan brings valuable expertise to support clients, particularly in the heavily regulated financial services sector, as their needs for support and advice on all things information and data privacy law grow and become more complex.”

Laura Cameron, Head of Risk Advisory Services at Pinsent Masons said “The demand for data and privacy advice has increased exponentially and it has become a boardroom issue for businesses. Jonathan is a key addition to the firm at this time, as the continued development of technology and indeed the strategic use of, and protection of, data is a business critical issue for all organisations.”

Industry predictions: Technology, Media and Telecom sector trends

The technology, media and telecommunications (TMT) practice at Deloitte, the business advisory firm, has today announced its predictions for the UK TMT sector in 2019. The news comes following the launch of the eighteenth edition of Deloitte’s TMT Predictions 2019 report.

Deloitte’s TMT Predictions 2019 report – summary:

Smart speakers will be the fastest-growing connected device in 2019, with expected growth of 63% year-on-year to reach £5.6bn in revenue worldwide

Global 3D printing revenues from large public companies will rise by 12.6% to surpass £2bn, representing a significant but small proportion (0.02%) of all manufacturing revenues

c.20 handset vendors will launch 5G-ready devices in 2019, with 50,000 5G-enabled handsets to be shipped in the UK by the end of the year.

Smart Speakers: the hear and now

Deloitte predicts that smart speakers – internet-connected speakers with integrated digital assistants – will be the fastest-growing connected device in 2019, with 164 million units to be sold globally, up from 98 million in 2018. The smart speaker market is expected to grow by 63% year-on-year to £5.6bn in revenue, with a global installed base of a quarter of a billion by the end of 2019.

As of mid-2018, 12% of UK adults, approximately 6.2 million, had access to a smart speaker. This compares with 22% of adults in urban China and 19% in the USA. With 8% of global shipments reaching the UK, UK revenue for smart speakers will reach £44.8mn ($56.7mn) in 2019.

Paul Lee, global head of research for technology, media and telecoms at Deloitte, comments: “Smart speaker adoption has seen phenomenal growth in recent years. With improvements continuing to be made, demand for smart speakers could be in the many billions of units, possibly even higher than for smartphones. In the future, smart speakers have the potential to be installed in every room in a house, hotel, office, school and even beside every hospital bed.

“Significantly, smart speakers have, literally, a world of opportunity for growth in non-English-speaking countries. So far, the vast majority of these devices have been sold to markets with English as the primary language. As linguistic software improves, demand will continue to soar, particularly if these speakers appeal to customers speaking Chinese, French, Spanish, Italian, and Japanese.

“We expect smart speakers to be the seventh most-used consumer device this year, and it may take some years before this technology’s true impact is felt. Mass adoption has yet to happen, voice recognition accuracy has plenty of scope for improvement, and there are still relatively few apps available.”

Radio: Revenue, reach, and resilience

Radio, the 99-year old traditional medium, will maintain its hold on UK media consumption, with 47 million people listening to radio weekly or more often. Global radio revenues are forecast to increase modestly to £31.6 billion, still many multiples of emerging media formats such as eSports, whose revenues are likely to be 40 times smaller.

Globally, Deloitte predicts that nearly three billion people will listen to radio weekly in 2019, and that total radio revenue will reach £31.6bn ($40bn), a one per cent increase from 2018.

Lee comments: “Due to the rise of on-demand media and streaming services, many underestimate the influence radio still holds. The perception that video or indeed streaming has killed the radio star is simply not the case. Whether it’s in the car, over breakfast, or even at work, the vast majority of people in the UK still have at least one ear on the airwaves during the course of the day. Radio is alive, well and enjoyed by all ages.”

The UK is the fifth largest market globally for annual radio revenues, with revenues of £1.3bn ($1.6bn) in 2017. The US is by far the largest market (£17.2bn/$21.8bn) followed by Germany (£3.1bn/$3.9bn).

Lee adds: “Radio advertising is underestimated, with many unaware of the influence it holds for brands. As traditional media and television viewing figures continue to struggle, listening figures for radio are holding steady. Radio will continue to play an integral role in advertising campaigns for years to come. In a world where digital changes everything, radio may be the exception.”

3D printing: Growth accelerates again, but remains niche

Deloitte predicts that sales related to 3D printing by large public companies will surpass £2.1bn in 2019 and £2.4bn in 2020, growing by 12.5% year-on-year, more than double its growth rate compared to just a few years ago.

This growth will be driven by faster printing speeds, larger printing volume and, crucially, an increase in the number of materials able to be printed. Metal is expected to overtake plastics and represent more than half of all 3D printing within the next two years.

Lee comments: “In 2019, 3D printing will finally start to make its mark. Companies across multiple industries are using the technology for more than just rapid prototyping. 3D printers today are capable of printing a greater variety of materials, which mainly means more metal printing and less plastic printing. Plastic is fine for prototypes and certain final parts, but the trillion-dollar metal-parts fabrication market is the more important market for 3D printers to address.

“Bionic prosthetic limbs for children for instance, which are usually costly, particularly due to the need to replace these frequently as children grows, have been revolutionised by the introduction of 3D printing and can now be produced for a mere £20.”

5G enters the mainstream in 2019

2019 will also see the first mass-market generation of 5G-enabled handsets go on sale. Deloitte predicts that around 20 handset vendors will launch 5G-ready handsets in 2019, with the first available in Q2. Approximately one million 5G-enabled handsets will be shipped by the year’s end, out of a projected 1.5 billion smartphone handsets which will be sold in total in 2019. In the UK, 5G shipments will number around 50,000.

Julian Rae, Technology partner at Deloitte in Cambridge, concludes: “The introduction of 5G handsets expected this year will look a lot like 2010, when 4G phones first entered the market. There will be a lot of noise in the first year from vendors vying to be first to market, and relatively little action from consumers. We’re not talking about an overnight switch to faster connectivity with lower latency, we will see 5G used by consumers in hotspot locations in the next two to three years, with mass adoption by 2025.”

To hear about the above TMT Predictions and more, Julian Rae and Paul Lee will be hosting the Deloitte Telecoms, Media & Technology Predictions Breakfast Event in Cambridge on 13 February at 1 Station Square, Cambridge, CB1 2GA. For more information please contact [email protected].

How AI and NLP will affect the media industry

One of the most visible of these technologies has been the use of artificial intelligence (AI) as well as Natural Language Processing (NLP), in process of collecting data and analysing it.

Publishing industry across the world is going through challenges. The dynamic nature of technology trends demands its continuous evolution from publishing to a digital media company. Progress has been made in terms of both content platforms i.e. the move from purely print to a variety of audio-visual avenues (such as television and online news portals, among others), as well as in terms of technology used to gather and publish information. One of the most visible of these technologies has been the use of artificial intelligence (AI) as well as Natural Language Processing (NLP), in process of collecting data and analysing it.

NLP is an area of AI which aims to produce effective human-computer dialogue by teaching computers to understand, organise, analyse and reproduce coherent sentences. NLP software uses a variety of models to achieve this – such as analysing large amounts of data to ‘learn’ a language and its rules as well as relying on manual input of the same rules. Currently, NLP algorithms enable large amounts of data to be absorbed and processed in order to give users the latest stories before they are discovered manually. Mobile news apps like Inshorts, NDTV and others use this process to display snippets in the notification bars, allowing users to be informed of trending stories with minimal effort. The ultimate aim is to allow computers to not only create sentences but to understand the direct and indirect meaning of those generated sentences. This would mean that the articles would contain perspectives too, rather than just facts, showing that the computer was smart enough to understand the language.

In the media industry, the concept of language can be extended not only to written words but to images and videos, as content types have become more diverse over the years. AI and NLP, hence, now possess a larger pool of data to work with and automate so as to generate news reports and other forms of required content.

They can do so in a variety of ways:

Data collection & Analysis

For a media company, there are two facets of data collection. Content in media industry is generated in all possible media formats (viz. text/image/video and audio). Text mining and NLP plays an important role in gathering semantic information about text, audio and video content. Relevant keywords, sentiments, and entities, along with topic classification is computed through NLP. Image classification is used for face detection or finding important parts of an image. All this data is then used to build a knowledge graph for ease of content search, recommendations, and relevant content syndication. The second part of data collection is around collecting time series data on what content is consumed by the end user. This helps the algorithm match user interest with content meta data to serve relevant content.

Real time serving data of web and mobile content helps the publisher to figure out trending content, which is attractive from advertising perspective. Additionally, it enables investigative reporters to obtain all known mentions in and around a topic they are working on within a span of minutes. The data obtained from text mining also serves as a learning process for the computer in order to develop its language skills for future endeavours. For a media company this requires significant investment in developing the infrastructure to collect and analyse large volume of data.

Insights Utilisation

The insights obtained from text mining allow for trends to be identified and leveraged in order to solidify a target audience and appeal to their interests. While this is applicable to new content, feedback from already published content allows for its improvement by using adaptable keywords. Historical analysis of trending content helps the editors focus on the topics they would want to write and distribute across social media. This means that when journalists are assigned specific beats, the algorithms showcase all the stories that relate to the beat immediately based on past data. Social listening tools imbued with NLP algorithms are the preferred mode of gathering the data necessary to achieve this as they can also gather insights into advertising along with long-form content. By serving relevant ads for a target audience, the ROI for the advertisers can be improved resulting in increased revenue for the publisher. High performing advertising campaigns, for example, then become templates for future campaigns and low-performing ones can be analysed for their defects.

Customer Feedback

Along with improving organisational content, NLP algorithms can also help formulate responses to questions posed by both customers as well as journalists. This would enable the system to also track the effects of the response across media platforms to determine the industry scenario. A direct outcome of this report would be the ability to weed out incorrect or ‘fake’ news that may be published by backlinking their sources and exposing their inaccuracies. Websites that publish spoofs and parodies, for example, can be identified and the information they disseminate fact-checked before it goes viral. Smart AI programs would be able to perform these semiotic analyses to determine accuracy.

The media industry today is becoming more dynamic and embracing technology at a faster rate to ensure that its progress can be harnessed. AI and NLP enable computers to understand semantics and determine the best course of action to be taken with respect to content dissemination based on the analysis of industry feedback.