Understanding How Data Analytics Drives Long-term Fan Engagement

Several driving forces are reshaping the sports industry. First, the easing of ownership rules has brought a significant influx of capital into the sports industry, given the industry’s massive growth potential and its predictable and emerging revenue streams. For instance, Europe’s five largest football leagues saw investments from private dealmakers increase from $73.8 million in 2018 to $5.4 billion in 2022.¹ These investments – particularly from private equity, pension funds and sovereign wealth funds – typically have a defined timeframe in which the investors aim at maximizing the returns. This has driven a sharp increase in the focus of sports organizations (teams/ leagues) on a stronger return on investment (ROI). 

Another prominent driving force – growing complexity in how sports organizations must serve their core stakeholders – fans! The relationship that fans have with sports organizations is increasingly nuanced and multifaceted, especially due to the fragmentation of the media industry. The rise of social media, saturation of sports content and the emergence of a global fanbase have changed the ways in which fans connect with their favorite teams, making it harder for sports organizations to keep fans engaged.

To keep pace, sports organizations are increasingly investing in data analytics to gather fan insights. However, gathering fan insights alone is not enough; leveraging data analytics to monetize these insights is key. This is where focusing on fan lifetime value (Fan LTV) helps. Fan LTV helps sports organizations develop a more comprehensive understanding of fans’ needs and preferences which they can use, in turn, to unlock new revenue streams by driving long-term fan engagement. 

This research note explores the above drivers in more detail, explains the power of data analytics in maximizing fan LTV and enlists a few practical recommendations on how sports organizations can leverage fan LTV. 

A Deeper Dive into the Sports Industry Transformation Drivers 

Four core drivers are reshaping the sports industry: 

• Diversifying Investor Landscape & the Increased Focus on a Stronger ROI: In recent decades, US sports teams’ valuations have grown faster than the S&P 500. Outsized valuations, coupled with the opening-up of ownership opportunities have made professional sports organization an attractive investment bet. Consequently, investments – particularly from private equity firms – are on the rise. But these growing investments also increase the pressure on sports organizations to expand their focus from current profitability to future revenue growth through fan engagement, in order to achieve strong risk-adjusted return for investors.

• Evolving Fan Viewership Habits & the Rising Competition for Fan Attention: The ways in which fans interact with sports organizations is rapidly changing, especially given the change in fans’ viewing habits – from traditional cable subscriptions to streaming services. Moreover, the diversity in fan preferences across international markets significantly adds to the complexity. This challenge is further aggravated by the increasing competition for fan attention owing to the fragmentation of the media landscape. These factors make it imperative for sports organizations to meet these evolving fan preferences through hyper-personalized experiences that can forge and deepen long-term fan engagements. 

• Emergence of New Revenue Streams & the Broadening Focus on Fan Value: Changing fan habits, rising technological advancements, increasing investor influence and the changing sponsorship landscape are just a few factors that have led to the emergence of new revenue streams for sports organizations. These factors have created new monetization avenues for sports organizations that can be unlocked by creating and measuring a more targeted and holistic experience for fans. This necessitates the adoption of a more balanced approach – one that focuses on both fanbase growth and fanbase monetization – such that fan value remains as the key focus. For example, sponsorship today is no longer based on just brand visibility for a broader reach; it’s based on targeted engagement for specific fan segments as well. As sponsors are increasingly seeking such targeted engagement, the ability to track fan engagement metrics and quantify the potential value of a specific fan segment helps organizations secure more lucrative sponsorship fees. 

• Proliferation of Data & the Increased Emphasis on Data-Driven Decision Making: Sports organizations are increasingly focusing on gathering first-, second- and third-party fan data to develop a better understanding of fans. The availability of such large volumes of data – gathered from diverse platforms and sources – generates an untapped opportunity for sports organizations to maximize fan engagement. More organizations are turning to data analytics to leverage their massive fan database for deepening fan engagement, developing targeted pricing strategies and unlocking new revenue streams for increased profitability in the long run.

Understanding Fan Lifetime Value 

Fan LTV is the estimate of a fan’s value to a sports organization based on their current engagement and revenue from all transactional and non-transactional touchpoints as well as on their probable future journey (see Image 1). It aims to quantify and predict the potential lifetime revenue/value generated by a fan which helps organizations create more personalized experiences for them to drive long-term fan engagement. Leveraging fan LTV enables sports organizations to expand their focus from immediate revenue and profitability to fostering long-term fan engagement for a sustainable future. 

Image 1: Use of Transactional and Non-Transactional Data for Fan LTV Calculation

Organizational Benefits of Fan LTV Estimation

By segmenting fans based on their unique value proposition, fan LTV calculation helps organizations not only foster deeper, long-term connections with fans but also provide valuable insights that enable strategic decisions and increase operational efficiency. Here are three key use cases: 

1.Optimize the Fan Lifecyle: Fan LTV estimation goes beyond basic demographics and analyzes fan behavior across different touchpoints, allowing organizations to segment their fanbase using criteria such as engagement levels, interests, and spending habits. This enables them to develop tailored fan engagement strategies for each fan segment, proactively addressing potential fan attrition and developing targeted marketing strategies to attract fans with high potential future value.

2. Enable Strategic Decisions: By revealing a fan’s potential long-term value, fan LTV estimation provides sports organizations with a richer fact-base to implement various strategic decisions. For example, organizations can optimize media rights negotiations, secure lucrative sponsorship deal, tailor merchandise licensing strategies by gaining an accurate understanding of fan value. This helps in driving profitability and sustainable growth. 

3. Increase Operational Efficiency: By understanding which fan segments deliver the highest value, fan LTV estimation enables sports organizations to optimize resource allocation across sales, marketing and customer service, thereby boosting operational efficiency. This includes targeting high-value fans with personalized campaigns, providing tailored merchandise offerings, identifying upselling and cross-selling opportunities and proactively addressing customer service issues to minimize churn and maximize fan engagement. 

Recommendations

• Drive Strategic Marketing & Branding Investments with fan LTV Insights: Analyze data from multiple fan touchpoints – including demographics, purchase history, social media interactions, attendance at live events – to identify high-value segments and tailor marketing campaigns that resonate with their preferences. This data-driven approach enables efficient resource allocation, personalized messaging and optimized brand activations, leading to increased fan engagement and stringer brand loyalty.  

• Leverage fan LTV Insights in Media Rights Negotiations: Maximize media rights revenue by leveraging fan LTV data to showcase the value proposition of the fanbase to broadcasters and streaming platforms. Demonstrate fan loyalty, consumption habits and projected future revenue potential to secure favorable agreements that optimize reach and financial returns. 

• Secure Lucrative Sponsorship Deals with fan LTV Data: Attract and retain high-value sponsors by utilizing fan LTV data to demonstrate tangible partnership benefits. Provide sponsors with comprehensive insights into fan demographics, engagement levels and predicted lifetime value to forge bespoke partnerships that deliver measurable ROI. 

• Optimize Merchandise Licensing Agreements through fan LTV-Driven Valuation: Leverage fan LTV insights to accurately assess the long-term value of potential licensing deals. Analyze fan consumption habits, purchasing power and predicted lifetime value to negotiate favorable agreements, optimize product offerings and maximize revenue generation and fan engagement through merchandise sales.

The Future Is Fan LTV

By embracing fan LTV, sports organizations can derive a wide-range of benefits that allows them to forge deeper relationships with fans in the long-term and identify/ engage high-value fan segments through tailored fan engagement strategies. With rising sports investments, rapid changes in technology and fan behavior, fan LTV can help sports organizations leverage data and analytics to optimize revenue generation and stay ahead of the curve. 

References

[1] PitchBook. (2024, August 14). Every PE connection to Europe’s top football clubs. Retrieved from   https://pitchbook.com/news/articles/private-equity-european-football-dashboard

About EXL: EXL has been partnering with major sports organizations across the globe to navigate issues surrounding data management, viewership, subscriptions and fan engagement to achieve business goals and to strategize for the future. EXL works extensively with these organizations to derive data-driven insights, identify opportunities for growth and deliver end-to-end improvements. To learn more about how EXL can support your organization, please get in touch with us at Sports.Analytics@exlservice.com.

Contributors:

Anuroop Talwar

Vice President II – Sports Analytics

Anuroop.Talwar@exlservice.com

Abhishek Kumar

Engagement Manager – Sports Analytics

Abhishek.Kumar19@exlservice.com

Pulkita Vaish  

Senior Consultant – Sports Analytics Pulkita.Vaish@exlservice.com