Digital experiences are unquestionably the future. Not only are they what fans want, they provide the physical world’s version of a cookie that is so valuable in e-commerce.
But 10 years into this annual conversation around bringing seamless digital experience to sports, the growth of the initiatives we are seeing is pushed to the side in favor of further vision conversation.
I have a theory about why: it's not a tech problem, it’s a business problem. Building these world-class digital experiences is an expensive proposition.
The challenge facing digital investment in sport
Panera Bread, Starbucks and Dominos are frequently cited as having most successful digital programs. For some perspective, Panera spent $150 million over four years to bring their digital solution to market. This was possible because Panera’s stores do over $3 billion in annual sales. Digital has now reached 26% of Panera’s revenue. Starbucks' history of digital investment and results is very similar – although over a longer period of time.
When you apply that model to sports venue it breaks. The highest volume sports properties generate $50 million in F&B revenue. If you were to take the 5% of gross sales that Panera invested and apply it to a sports F&B operation – you would spend $2.5 million on the digital program.
That is not going to happen.
Three paths forward
So, knowing that the ROI equation is out-of-whack for sports and entertainment market, is there a way to bring the cost of these digital programs in line with budgets and expectations? Here are couple paths that we see being successful, and they all involve leveraging investment by third parties that can productize a digital offering for sports:
First – Teams and work together within or between leagues to standardize their requirements for digital. There is a committee with almost 50% of MLB engaging on this subject, whether agreement can be reached on workflows and requirements remains to be seen. However, if you could leverage a $2.5-$5 million investment across the league, the cost of the program on a per venue basis, while expensive by today’s standards, generates an ROI.
Second – Concessionaires building their own digital experience with or without 3rd parties is a viable economic model. A large concessionaire in sports generates $1-$2 billion in gross sales, and could justify the investment required to bring a sophisticated digital solution to market. The challenge here – if they build it – is whether clients will accept a solution across their portfolio.
Third (and this is the route Bypass is pursuing for the time being) – Work with digital solutions that are being productized across merchant brands and market segments. Apple and Google are both introducing digital-enabling functionality in their wallets. With Apple specifically, the wallet now accepts a pre-registered loyalty card that can be sent to the phone when the guest makes a digital payment. So you take a huge amount of friction out of registering and participating in the digital program – no card to carry, no sign-up process – really a seamless way to create the physical “cookie”.
We are enabling this technology, working closely with Apple for a $500 million retail restaurant, where the budget makes economic sense. Our goal is to productize it and bring it back into sports at a price point that makes sense for venues. I’m hopeful that will be possible and we’ll certainly know more when we go live in Q4 of this year.