From the editor-in-chief: return of sport an emotional boost, but firms eyeing 50 per cent revenue drops and job cuts

Despite some pretty terrible news on national unemployment, with wave upon wave of job cuts, the return of elite sport this week feels symbolic of a new optimism in Britain.

Friday will mark 14 weeks – almost 100 days – of working from home for me (like many of you, I haven’t taken any holiday since the crisis began). But there’s no doubt that British business, including the PR and marketing sector, now considers itself in the ‘recovery phase’.

PR bosses report that the past few weeks have brought a notable uptick in brand activity and new projects; genuine light coming through the tunnel.

The Premier League kicked off again on Wednesday after its 100-day hiatus; the England cricket team announced its squad for the first test match of the summer on 8 July; and next week Jamie Murray’s new all-British tennis tournament will take place at the National Tennis Centre.

“I think the loss of sport, live music and events over the past three months has reminded people of just how important they are to our lives,” the chief executive of a sports and entertainment business told me this week. “Even governments are taking sport more seriously than they did before, focusing on getting it back, realising the role it plays in the national mood. Marcus Rashford’s campaign is a reminder of that."

The harsh truth, however, is that the ban on sport since mid-March and the subdued nature of the sector for the rest of this year has devastated any business reliant on it.

After travel, it is probably the sector hardest hit by the C-19 crisis. Redundancies are sure to follow, of which more in a moment.

“Our revenues were down by 50 per cent in May, 30 per cent in April," says the boss of a leading sports PR and marketing agency. "We’ve furloughed more than half of our staff."

The chief executive of another established agency confided: “We’re in full-on survival mode. There was a time when client after client was just saying: ‘Sorry, we have to stop everything.’ As a result, 30 per cent of our staff are on furlough and everyone has had their salaries significantly reduced.”

Indeed, not every sports agency will survive the crisis. This week, Promote PR announced it was shutting down. This sad tale suggests only those with deep pockets and/or the ability to effectively reduce costs – in agency terms, usually rent and staff salaries – will succeed.

One of the reasons the sports business has been so badly hit is that, like much music and theatre, there has been a full stop in live activity. Hence the lucrative sponsorship, hospitality and activation element has been diminished.

“Actually, the more traditional PR side of our business has remained very busy with clients managing issues, and we can’t cut our resources in that,” says the boss of a leading sports agency. “But sponsorship has been hit and content production, which was going really well pre-crisis, has just fallen off a cliff.”

Another agency leader reports: “Live revenues has just gone. And content creation is down by 50 per cent. We haven’t lost any clients, and we’ve even won a few new business pitches, but promo activity is subdued overall.”

When one compares the realistic ambitions of sports agencies with those in other sectors, one realises the damage.

PR agencies in general are expecting to be 10-20 per cent down this full year, with some corporate and financial specialists quietly even hoping to end up flat year on year.

But bosses in sports agencies would currently view “a good 2020” as being “just 25 per cent down” overall, wiping out any profit margin.

“Our aim is to break even as a business this year,” admits the chief executive of one leading agency in this area. A more negative scenario would result in 2020 underperforming by 50 per cent on 2019, which would indicate major job cuts.

Like every other business, sports agencies are reaching crunch time in terms of rightsizing their operations for the longer term, with the furlough scheme beginning to taper off at the end of July.

But most seem to holding on to staff as long as they can, particularly with elite sport restarting this week – and a potentially bumper 2021 in the pipeline, including the postponed Olympic Games and European Football Championships. That said, most agencies in this sector accept there will be some redundancies.

“Sport will come back, but the question is whether the marketing around it will be seriously diminished for the time being,” says one agency leader. “The taps may not be turned on like they were before. I think by 2022 there will have been a full recovery, but Q4 this year and Q1 next year could be really gnarly as brands consider their plans for sport in 2021.”

A rival boss agrees: “It will be interesting to see how brands view sport going forward. There will be some big decisions taken in the final quarter of this year. But I do know that our business needs to change regardless; we need to be more digital, more nimble and have a more diverse workforce than before.”

Again, we are reminded of the requirement for the comms industry – probably all of us – to adapt quickly as a result of this crisis.

I have written before here about how the C-19 story will simply accelerate the megatrends that were affecting the industry previously. And sport is a case in point.

With the likely end of printed tickets and event ticketing, customer communications will inevitably become entirely digital, moving mainly to our phones. Equally, livestreaming of events to mobile devices will be accelerated when fans are not allowed in stadiums.

Corporate purpose – or ESG – will also rise further up the boardroom agenda. “Consumers are looking to brands for values,” says one agency boss. “And brands are realising the need to have a social purpose behind their sports sponsorships.”

And there’s little doubt that diversity is now being taken more seriously than it was before.

This is precisely why the communications business is well positioned for this recovery phase of the crisis.

The founder of one generalist PR agency put it nicely this week: “All this has shown us that good PR is actually highly skilled, and that professionals underestimate their value sometimes. For example, can programmatic media or AI decide on the right position for a brand to take on Black Lives Matter? PR professionals are showing themselves to be highly resilient; to be able to pivot quickly in changing situations.”

This, my friends, is what we must take from all this; greater resilience and greater confidence in our own abilities to both survive and thrive.

PRWeek UK is committed to having a more diverse selection of commentators in our articles, and is compiling a list of BME (black, Asian and minority ethnic) PR professionals who are willing to be quoted. To be added to the list, please email john.harrington@haymarket.com and include your specialist areas of expertise, and/or preferred subjects for commentary.

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