In the second part of out longform series on the business of basketball, Emmet Ryan looks at the vital role a secondary competition such as Eurocup plays in the overall growth of basketball in Europe. Part one, on the Euroleague proposal for next season, is here
Football is big and people with money know this really well. They spend lots of it just to get a piece of the market. Sky and BT used it as effectively a proxy war over the insanely valuable British telecoms market (short version, Sky spent more and BT won) and oodles of cash goes into it. That goes from TV rights, to merchandise, corporate partnerships, and ticket sales. There simply isn’t a team sport on the continent, and in terms of total take the planet, that comes remotely close. Taking on football directly is stupid. Smart sports don’t, smart sports look to win money football doesn’t fight for or at least finds too expensive to win. Basketball is not a smart sport but it can be.
Secondary and tertiary markets matter
Primary markets, as in those with the highest populations, tend to be all but owned by football. It is the most influential sport in terms of how money gets spent. For those living in a secondary or tertiary city however it’s not as easy a fight. The huge football clubs are still a draw but the fan stickiness isn’t the same. Yes, everyone will watch Barcelona on telly in football, but the amount of certainty of purchase and stickiness of the consumer decreases. Opportunity arises for other sports to get a significant chunk of the action. In Ireland, that’s Gaelic games and rugby. In the UK it’s rugby and cricket. In parts of continental Europe it’s…also rugby but in far smaller pockets and only in France and Italy. Across the rest of the continent it’s a far more complex battle but unlike the aforementioned British and Irish markets the success at maximising consumer value of handball, ice hockey, and basketball would best be described as meh.
Look at some of the urban markets of 50,000 or greater that have had teams in Eurocup in the past four years that have one major thing in common (population in brackets): Bamberg (71k), Bandirma (122k), Bonn (313k), Dijon (152k), Karsiyaka (315k), Le Mans (148k), Limoges (139k), Ludwigsburg (89k), Oldenburg (158k), Orléans (114k), Reggio Emilia (173k), Sassari (127k), Trento (117k), Varese (81k), Venice (264k), Villeurbanne (146k).
Not one of these cities has a top tier football team in its city, the bulk of them don’t even have teams in the second tier.
Football still has a presence but it’s not what gets the city going as a unified force, even within the more expensive to reach demographics. The bulk of these cities would also be described by any brand as affluent*, that’s really important because a bunch of poor people won’t move the needle for big sponsors.
A couple of these mid-tier cities jump out due to sheer size, primarily Bonn and Karsiyaka. The former de facto capital of West Germany is in a position that should have Euroleague salivating. The football tradition was never great (with the current regenerated outfit in the fifth tier), the club owns its arena, and none of the other second tier leagues in Germany have a notable presence. Telekom Baskets Bonn have an in-built advantage for entertainment cash that few other sports teams in Europe have with a market of this size. Karsiyaka is somewhat different as, economically, it simply doesn’t have the advantages of Bonn but what is has enjoyed for a long-time is a strong identity in its home location with potential to tap into the wider Izmir market. Turkey’s only going to increase in financial importance over the coming years and markets that aren’t called Istanbul represent an attractive opportunity in terms of cost.
*I don’t feel affluent but I assure you that my salary, paltry as it feels, has me squarely in what is described as ABC1 territory. That’s what we are looking at here.
Will it blend?
The proposal Euroleague is putting forward with its new closed/semi-closed format is wholly based around large markets. Istanbul is huge, so is Moscow, Barcelona, Athens, Madrid, Milan, and Tel Aviv are all big. With the possible exception of Tel Aviv, where honestly ever second Israeli I meet seems to have a differing opinion, basketball is at best second to football in these markets. That’s fine to a point and large markets are definitely necessary but they simply won’t work as the sole focus. Large markets obviously have more people and more money to go around but it also means competition is stronger. Winning a fan’s heart wallet over to any degree to basketball is simply more expensive than in a market where competition is smaller. Top tier sponsors also see little to no difference in reaching these fans to reaching football fans meaning that if they do invest in hoops, it’s a much bigger drop on a per capita basis than in a secondary or tertiary market. The bulk of the dosh is going on the big show, that’s why fighting football directly is simply not going to work.
It’s about building your own identity. Large markets bring in the big name cities, secondary and tertiary ones give you hardcore support which is simply harder for sponsors to reach with football, combined you have a unique proposition.
It’s about market stickiness which, sadly for some readers, I need to briefly divert your gaze to another sport.
Let me bore you with rugby
Right now most of Europe is ignoring a really valuable competition, at least in terms of revenue. The Six Nations rugby tournament makes boatloads of money because it attracts the top tier in sponsors and gets oodles of love from broadcasters. Dropping down a level, to club rugby, it does the same. All this in spite of large swathes of the nations involved (and in Italy’s case the vast majority) not giving a hoot about it. The lazy call, as is often cited the local media, is that it’s businesses looking after their own people but no corporation is a charity. Rugby delivers value to high end sponsors, as well as broadcasters, that is tough to replicate. The average rugby fan will tune in for far more than their own team’s games, even outside of major tournaments. Their average income is well above typical national averages. They are affluent and sticky, that means broadcasters can rely on eyeballs and sponsors can rely on brand reinforcement. That’s more than enough to throw wads of cash at a sport that relies heavily on teams from middle to low populated cities to keep the day-in day-out interest alive.
About those middling to low-population cities
Look at the 10 largest cities by population in Europe with the possible exception of Berlin, and even then come on it totally is, football is unquestioned king among sports there. All sports need some kind of large city presence to get by but they simply can’t rely on those markets to carry them. The direct competition with football has and always will be too hard a direct fight. For sports that aren’t football, you need to offer a rather radical alternative to the diet fans are used to in those cities. Londoners expect to battle clubs from Manchester in football, not Bath, Bristol, or…Leicester ok but that really is a new thing. The flavour is part of it but it’s what can and has been done in those cities, and by the financial brains behind these sports, that has aided the growth of rugby as a financial entity. In towns where Jamie Vardy is a once in a century phenomenon, particularly given the increased reliance on wealth in the sport, those smaller metropolitan areas have bought into teams that play a sport which has built a base. Naturally, there is the added advantage of rugby having major roots in its heartlands but getting the crowds it does on a regular basis in these secondary and tertiary cities is relatively recent concept.
Ok the rugby bit is over
As it stands, it’s really not clear what future Eurocup has but the role of second and third tier markets in any redeveloped competition will be vital to the overall growth of the sport in Europe. The natural starting point for the new look Euroleague is to go with large markets and teams with large pockets. That’s conservative and a touch short-sighted but not a terrible place to start from. It’s just awfully important to remember that finding a rich dude isn’t a business plan.
Eurocup is the model for any expansion to that, it can be the test bed and one that is developed a lot better than the current or recent iterations of the competition.
The competition had lots and lots of teams in it, that was great for numbers but it never really seemed to be anything more than a thing that was there so Euroleague had a buffer between it and FIBA competitions. It wasn’t exactly a planned out beast in its own right, to the point that when FIBA raided it for the FIBA Europe Cup it wasn’t exactly difficult for the competition formerly known as Eurochallenge to take a heap of teams.
A new Eurocup has to be more focused and a whole lot stronger. This is where the markets that basketball can win are, the ones that create the unique identity for the sport on the continent. This where the sport can win fans for whom football isn’t going to win them in large cities, essentially tapping into other parts of revenue and giving broadcasters and sponsors alike more reasons to value the product. The list of cities above deliberately excluded those second and third tier markets where making the group stage of the Champions League is deemed somewhere between a good result and a miracle. Those are still rich markets, they cover huge chunks of the Adriatic, Baltic, and Central European regions. Combine these markets, with relatively affluent secondary and tertiary cities, and large markets and you have what European basketball currently actually is. Build an actual plan around them and you have a real opportunity to develop a product that attracts serious dosh…which is where I have to admit that there is one rugby bit left.
The revenue factor
Those rugby teams I was talking about earlier? The average TV revenue of a team in the top tier of the Aviva Premiership in England is over €5 million annually. That’s all before league and team sponsorship, merchandise, and ticket sales come into play. Rugby’s average fan income is higher than basketball’s but it doesn’t offer the same volume of continent or potential reach. Broadcasters have rightly valued basketball’s reach lower because of the sport’s own failings. Focusing on the sticky fans can create a product that increases the sheer number of sticky fans. Those that will watch more than just their own team, while obviously prioritising the club they love, makes the most economic sense. Making more of them is the only way to actually grow the product. Everything else is throwing darts and hoping for the best. It’s slow, deliberate, growth and it focuses on core assets.
Eurocup as it currently stands is an expense for clubs. That’s why it was so easy for FIBA to raid. The current competition starts out way too fat to feel special to fans and they have the promise of staring down a bunch of blow-ins from the bigger competition in the latter stages. Essentially, if you are from one of these secondary or tertiary markets you know at the start of the season that by the time the games that matter happen you will either be blown out of the water by a blow-in or by a richer Russian or Spanish team. That’s not going to excite anyone.
The big buffer didn’t really work for Euroleague because it was too big. No buffer essentially makes growth more expensive. The natural argument is that teams will happily leave the FIBA Champions League for a place in the revamped Euroleague, and they definitely will, and thus Eurocup won’t be needed. Relying on yanking up and comers from a rival organisation isn’t a great business model, not when you have one in your lap. Why manage the European fortunes of 16 clubs when you can do it for 40?
A 24 team Eurocup offers an awful lot more than the existing competition. It immediately reduces the resources required from Euroleague to manage it for starters, and those are finite, while allowing it to focus on the markets that matter most. A clear, and I mean actually defined in real words and no fudging, route to qualify can be established at the start of a season while also enabling licensing. You want teams to want to be in this competition and this is the road to Euroleague. Establish yourself here and either through winning it or proving yourself over several seasons, you earn your place in the big show as it expands. The model can take on a bunch of shapes but the easiest is to largely copy the existing Euroleague 24 team model, mainly because it guarantees quality games, allows for development of rivalries, and gives a clear road to the final.
It also allows for a Final Four that isn’t a disaster. Aggregate scoring has no place in basketball, this sport is about wins and that has always been something fans identify with. The implementation of aggregate scoring was to solve a problem, namely that nobody wanted to trek to a far off land for the Final Four of a competition that wasn’t really all they cared about. Cities like Bamberg, Bonn, Charleroi (home to the last Final Four in the competition), Limoges, and Strasbourg, have arenas that can be targeted for smaller crowds but with a heavy, and I mean heavy, local flavour for the event. If this sounds ambitious, congratulations we are shooting for the moon here because treating Eurocup like it matters is the only way the competition ever will matter. For secondary and tertiary markets, or frankly any team that currently isn’t part of the main party, they need to be given a reason to care. Euroleague can also establish that if teams want to be in it, they need to come through here and not FIBA’s competition, while giving those sides a big reason to not hedge their bets.
Share the wealth
Financially, there’s not a whole lot of teams that are ever going to compete with CSKA Moscow in the long-term. The gulf however can be narrowed while actually making it beneficial to the big market clubs. Euroleague is focusing heavily on those large market clubs because, right now, those are the teams that bring a disproportionate amount of money to the table. The problems with this have been outlined above but getting these sides to be cool with playing teams from smaller markets in the big show has to involve overall revenue growth. That’s why a genuinely unique product needs to be developed out of the jigsaw puzzle of one currently lying around the continent.
Right now it’s not too hard to divide income from sponsorship and broadcast rights on a equitable basis rooted in merit because there isn’t a whole lot of it.
The IMG deal with Euroleague is heavily focused on the 16 big teams and that cash is locked in for a decade. That’s a problem because it’s going to make it tougher for teams from smaller markets to keep up, without a sugar daddy and that isn’t economically sustainable*. Expanding value means, in the short-term, getting the big clubs to be alright with a good-sized chunk of this cash (a quarter to a third) being put into the Eurocup pie. The only way they buy that is if a plan to increase the overall pie to a point where the money on the table in the medium term is far greater than right now even after that slice has been cut.
*’Not economically sustainable’ is polite shorthand for NO THAT IDEA REEKS
The cold reality for large clubs is that by ignoring second and third tier markets, all they have is a smaller but not refined product. It’s not a great sell because the value proposition simply isn’t the same to sponsors. Those smaller markets will naturally benefit way more than the big ones from such a proposal but both sides of the aisle need each other.
Which is a wonderful way to say that while this is sensible and the bones of a sustainable plan, it ignores the elephant in the room that is the FIBA Champions League which we are looking at in the next of these columns. That will be followed by the most downbeat of the lot, why all growth is severely stunted by a lack of cooperation between FIBA and Euroleague and that this leads to the fans missing out the most.