Sports Teams Require AI Policies to Avoid Legal, Financial Liability

Sports Teams Require AI Policies to Avoid Legal, Financial Liability

Artificial intelligence (AI) is reshaping how forward-thinking sports organizations operate on and off the field. The NBA, for example, is leveraging AI-driven fan engagement tools to personalize fan content and interactions (see: NBA CourtOptix), while Premier League clubs use the advanced tech to analyze player performance data and predict injuries.

These applications are delivering measurable results. The rights owners using them have improved fan retention rates, incrementally grown revenues, and altered training methods and workloads to optimize for individual player health.

But sports’ AI revolution comes with a catch–organizations without strict policies and procedures surrounding its use are exposed to significant legal, financial, and ethical liabilities.

It’s easy to envision an eager marketing associate uploading the data associated with 50,000 season ticket holders into ChatGPT in a well-intended effort to create personalized email campaigns. That seemingly innocuous action could trigger repercussions costing the club millions of dollars and irreparably damage its reputation.

Other industries have already seen how uncontrolled AI use in a corporate setting can be damaging. Samsung banned its employees from using generative AI tools, like ChatGPT, in May of 2023 after sensitive corporate code was leaked. 

In sports, where the tech is being used extensively across the business, the prospect of a mishap seems inevitable. Yet, few teams have policies and procedures in place.

Perhaps that is because the consequences of mismanaged AI use do not receive much attention. 

But they can be staggering. Under European Union Data Protection Regulation (or GDPR), organizations mishandling personal information can face fines up to €20 million or 4% of annual global turnover, whichever is higher. 

Samsung incurred a $600,000 fine from South Korea's Personal Information Protection Commission (PIPC) for data breaches back in 2022.

In the U.S., the California Consumer Privacy Act (CCPA) has imposed the most stringent guidelines around corporate AI use. Organizations that fail to adhere to its privacy policies, particularly when involving personal information, can face regulatory fines of up to $7,500 per intentional violation. 

Other states are crafting and rolling out their own regulations (and penalties). 

Sports organizations that proactively develop and implement comprehensive AI policies will be the ones best positioned to capitalize on the tech’s capabilities and mitigate the liabilities cited. 

Specifics will vary based on how each rights owner is using or plans to use AI, and where it is located. But there are several key subjects every policy manual should address:

• Data Governance: Ensuring organizational compliance with state and federal regulations, such as GDPR and CCPA, is critical; especially for global franchises that handle large volumes of personal data. Teams should establish clear protocols for data collection, storage, and usage, especially for when they are dealing with sensitive information.

• Ethical AI Use: Failing to prevent bias in AI applications, whether tied to player evaluation, marketing, or fan engagement, could lead to reputational damage. Teams should have guidelines in place ensuring the algorithms that underpin their AI solutions are fair.

• Transparency and Accountability: Establishing clear responsibility for AI-driven decisions (think: RACI), especially regarding the tech’s role in making strategic business or player-related decisions, is crucial to avoid ambiguity and mitigate risk. Transparency ensures that both AI and human-driven decisions are traceable, so any issues that arise can be quickly identified and addressed.

• Intellectual Property Protection: Addressing ownership of AI-generated insights, whether related to player performance data, proprietary fan insights, or marketing assets, is essential to ensuring that the organization retains control over its most valuable digital assets. Clearly defining IP ownership in contracts and AI policies will safeguard the club’s interests and protect it against future legal challenges.

• Training and Education: Ensuring that the entirety of the staff is trained on AI-related use cases and best practices, including the risks associated with mishandling sensitive data, will empower organizations to use AI effectively and securely. It should also reduce the risk of data breaches, while increasing operational efficiency.

• Risk Assessment and Mitigation: Regularly evaluating and addressing AI-related risks, from potential data breaches to algorithmic bias, will help secure compliance with both internal and external regulatory frameworks.

• Third-Party Vendor Management: Selecting and carefully monitoring AI providers will help to guarantee compliance with organizational standards and legal obligations, particularly those related to data privacy.

Professional sports properties face unique challenges in AI governance due to their international fan bases (think: cross-border regulations) and highly publicized player data. Each must account for these factors when developing AI policies to remain compliant and maintain the public’s trust. 

While many sports organizations are grappling with how to approach AI governance and/or still trying to figure out how to use the technology, some of the more forward-thinking ones have begun making strides. They’ve had to as they work to grow revenues and drive business value.

Manchester City F.C., for example, set out to partner with Google Cloud to enhance its understanding of player performance and fan engagement. Due to European government regulations it first had to have a data protection policy in place.

Naturally, that tie-up includes strict measures that ensure the EPL club remains compliant with GDPR and other laws.

As AI continues to evolve, so too must the organizational policies governing its use. It’s not enough to simply write guidelines and forget about them–emerging technologies and new use cases will emerge. 

Compliance manuals will require continuous updates and vigilance. A static policy can quickly become obsolete putting rights owners at risk.

In sports’ competitive landscape, staying ahead of the curve isn't just an advantage—it's a necessity. And as sports’ economic engine (media rights) faces increasing pressure, the need to drive incremental revenues is only going to grow for most properties.

AI can help. Just don’t use it without having a policy in place first.

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