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Is Free Exposure Good or Bad For Shamrock Rovers F.C.
Shamrock Rovers F.C., self -described as the most successful football club in Ireland(Shamrock Rovers F.C. Membership 2015) had asked the television broadcaster RTE to refrain from showing the club's remaining matches for the year on television on the opinion that each live broadcast resulted in approximately €10,000 of lost revenue per event.
It is understood that other clubs within the Premier League agree with the club's position and were very sympathetic to their position. The Premier League clubs felt that it would be good practice for them to be financially compensated when their games were televised, providing hours of television entertainment. (McDonnell 2015). This paper will discuss the notion of free exposure including whether it was good or bad for a business as well as examine decision making within a company with the objective of attaining long term goals. The relevance and connection of these concepts to the aforementioned decision by Shamrock Rovers F.C. will also be discussed and analysed.
The Irish football league, founded in 1921 is an important part of Ireland's tradition and history. It consists of 20 clubs as well as the Football Association of Ireland, FAI which is the umbrella body responsible for the promotion, regulation and organisation of activities. The unique nature of the Irish sports environment means that the league faces robust competition for a comparatively small market in comparison to its European peers from the GAA Hurling and Football organisation and Rugby in addition to other growing sports (Conroy Consulting 2015). This is in addition to a good amount of television exposure for non-Irish football including the English Premiership. Revenue generation within the League has been described as challenging especially with the economic conditions of the past number of years (Conroy Consulting 2015). How does free exposure or long term planning impact this competitive landscape?
Studies have shown that when people encounter something repeatedly, the likelihood of having a preference for it or a positive reaction in future is increased. This is known as the mere exposure effect, MEE (Kahneman 2012; Schacter 1987; Zajonc 1968, 2001). Kahneman (2012) explains that repetition results in cognitive ease and a comfortable feeling of familiarity linking this to eventually developing a degree of mild affection for the stimulus in question. The state of cognitive ease denotes relaxation, no threats or need to redirect attention. The main factors contributing to the concept of cognitive ease are illustrated in the figure below:
Figure 1: Causes and Consequences of Cognitive Ease
Source: Kahneman 2012, p.60
Zajonc (1968, 2001) goes further to argue that the mere exposure effect not only transcends conscious experience but that in fact the positive effect of repetition on liking is an extremely important biological fact supported by numerous experiments on humans and animals alike. The MEE effect is very important from marketing and advertising perspective since past experiences plays a significant role in one's future decisions including consumption and consumer purchases (Kahneman 2012). It could be inferred based on this that repeated exposure for the football clubs within the Irish league through the televising of matches by a major broadcaster would be very beneficial in increasing the profile of the league within the Irish market. Moreover, the leading clubs such as Shamrock Rovers F.C who were more frequently featured stood to gain more in the form of higher recognition of their specific brands in comparison to less featured clubs. This imparts a degree of competitive advantage as a result.
The German Bundesliga, considered to be one of the most successful leagues in Europe (Albach and Frick 2013; Blitz 2012) prioritises maximum exposure of its matches to fans as part of its business model. One of the ways this is achieved is by making sure ticket prices are very low and therefore accessible to a wide spectrum of the market across different age groups and social backgrounds. In addition, the Bundesliga restricts the quantity of season tickets in circulation to ensure that they have as many fans as possible able to actually attend their own team matches (Doyle 2014). Live coverage of matches is generally broadcast by German television companies including Pay TV. The Bundesliga and its clubs leverage the resulting popularity of exposure due to wide match attendances, television and media coverage to generate income by balancing match day ticket sales and media rights with sponsorship and merchandising in addition to transfer income. In actual fact, the clubs on the average generate 21% of their total revenue from ticket sales (Chadwick 2010). In examining the English Premier League, described as Europe's' largest football league by value it was found that while the number of live matches broadcast had increased from 60 in 1992/93 to 138 in 2005 accompanied by increase in viewership, attendance of live matches also increased (Ofcom 2005).
The preceding examples lend credence to the assertions of the FAI that more exposure of the game through televised broadcasts was positive for the long term revenue increase for the league and its clubs. Furthermore, it should at the least cause Shamrock Rovers F.C. and the other clubs in the league to re-evaluate their business considerations in coming to the conclusion that free exposure was causing them lost income in match ticket sales and therefore too expensive for business. In the case of Shamrock Rovers F.C. specifically, the question would be whether the club might actually be ceding competitive advantage to others by rejecting the free advertising offered in the form of live match broadcasting. One difference between the Irish league and both Bundesliga and the English Premiership lies in the fact that while clubs in both leagues receive payment for television coverage (Chadwick 2010; Ofcom 2005), the nature of the competitive environment for the Irish league means that the clubs do not get paid for television coverage of matches. This then raises the dilemma of how to balance the tension between maintaining exposure to the market in line with long term goals of increasing league value and short term financial needs. Due to the fact that the clubs are not being paid for exposure, they view this from the perspective of a sunk cost which is about €10,000 per event for Shamrock Rovers F.C. and see no direct relation between this and their immediate profits.
Evidence supports the fact however, that competitive advantages can be created through giving something away for free (Anderson 2009). Examples drawn from the history of companies behind household names like Jell-O, Gillette and Microsoft show that giving something away can be good for business and can be leveraged as a competitive tool. This is particularly useful in a very competitive marketplace where margins are driven down relentlessly (Anderson 2009). In such a situation, it is inferred that an organisation will benefit from recognising the realities of the marketplace in which it operates, undertakes comprehensive analysis of its environment such as carrying out SWOT (Strengths, Weakness, Opportunities and Threats) analysis based on Michael Porter's strategic forces that affect competition (Porter 2013) to strategically create a business framework that will enable it to tap into creative channels for exploiting what it has in its possession including using the concept of 'free' to gain competitive edge, differentiate itself in the eyes of the consumer and convert these advantages to economic benefits for long term sustainability.
Long term decision making
The value of an organisation is based on its long term ability to generate income necessary to support growth that adds to its value. In effect, a firm's value is understood not only by looking at its present financial income but also weighing other factors like its competitive position, the growth potential for its industry, strength of competitors and the management of the organisation (Rappaport 2005). On this basis, the importance of making plans and setting objectives from a long term perspective is obvious. Sometimes the immediate financial reality or financial expectations of stakeholders can make focusing on long term goals difficult. The company's strategy based on long term objectives serves as a guide for defining the framework of how the organisation creates value for its stakeholders. This framework is the business model and it defines what choices, trade-offs, sacrifices or tactics are employed in competing within the marketplace (Porter 2013). Hamel and Prahalad (2005) maintain that defining strategic intent usually including a long term desired goal provides stability to a firm's short term actions and allows for the flexibility to adapt correctly when new opportunities or threats are identified. Commitment to a strategic target requires discipline and effort, often forcing an organisation to be more creative and innovative in using limited resource to attain its goals rather than focusing only on current opportunities or threats and how existing resources match these (Hamel and Prahalad 2005). It can then be surmised that the organisation is challenged, stretched and fitter as a result.
Relating this to the situation with Shamrock Rovers F.C., information on the positive effects of mere exposure and examples of economic advantages possible by giving something away for free; long term decision making could provide the structure and motivation that will guide how it could boost its value and long term sustainability by taking advantage of the benefits of the exposure provided by RTE's television coverage of its matches which in itself can be viewed as advertisement that the club does not have to pay for. Given the size of the market, economic conditions and strong competition from GAA Hurling and Football organisation, Rugby and the English Premiership on Irish television (Conroy Consulting 2015), it is believed that the exposure for the Irish league and its club gained from televised matches provides a net positive. There are a number of creative ways discussed by Anderson (2009) through which the club might monetise its advantages against its competitors as a result of having more exposure as shown below:
Figure 2: Four basic business models of Free
Source: Anderson 2009, p.27
Looking at figure 2, the club could adopt options 1, 2 or 3 or a combination of all or some of the three. In allowing televised matches without being paid for it, Shamrock F.C. could seek to use its exposure advantage to increase income from merchandising and sponsorship. Increased exposure as shown in option 2 could be used to attract advertisers for placement in prominent places within their stadium since the stadium receives good television coverage as a result of match coverage. Option 3 opens up the possibility that increased exposure for Shamrock Rovers F.C. and associated clubs in the Irish league would make it easier for consumers to accept the prospect of paying to watch football on TV thus opening the door to future income from media rights for the clubs within the league. These three business models as illustrated above, contribute in some form or the other to the success of the German Bundesliga and English Premiership (Chadwick 2010; Ofcom 2005). The Bundesliga for example received 33% of its income in 2006/2007 from television, radio and other media, 21% for match day income, 25% from sponsorship while merchandising and transfer fees constitute the rest (Chadwick 2010).
The intent in this brief was to examine whether free exposure was good or bad for an organisation in its quest to compete in the marketplace. Also addressed is the question of whether or not companies should make decisions based on a long term goal. It was found that exposure whether free or paid for is a positive component of marketing to consumers and increasing awareness and likability based on what we know about the mere exposure effect. Football, because of its entertainment value receives what amounts to free advertisement and exposure in Ireland and other countries such as Germany and England as a result of television match coverage. Successful leagues like the Bundesliga and English Premiership have also capitalised on the entertainment value of the matches covered to broadcasters and receive payments some of which go to member clubs but in Ireland, it does not appear that the economic landscape have allowed the Irish league clubs to achieve this.
The reaction to this situation does not point to reducing existing exposure even if it meant giving it away for free to television broadcasters as envisaged by Shamrock Rovers F.C. which in turn could lead to a reduction in brand awareness, brand equity and income (Aaker 1996). In order to counter short term financial impacts of not getting paid for this exposure and its perceived impact on the ticket sales, strategic planning would enable the organisation define objectives and steps it can employ to leverage the exposure it is getting to create value. Long term goal setting and decision making will be important and helpful for the firm to be able to adapt to short term financial short falls that might arise as a result.
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