Sports Industry Revenues in Context and Future Opportunities
Having recently studied the FIFA Master – International Master in Management, Law and Humanities of Sport degree at the International Centre for Sports Studies (CIES), one thing in particular has struck me as fascinating about the sports industry. Despite almost daily media coverage about the massive transfer fees being spent on players (Mourinho claims Pogba was cheap at £89m) or the amount that athletes are earning (Forbes list of the highest paid athletes), the sports industry as a whole is still quite new and tiny compared to other industries given how much coverage it gets in our daily lives.
Sports Industry Revenues:
To paint this picture, consider that the global sports industry revenues are USD $145.3bn in 2015 according to PWC (narrower definition incl. Sponsorship, Gate, Media Rights and Merchandising) or a somewhat lower USD $80bn in 2014 according to AT Kearney with a similar definition (or as much as USD $700b when you add in sporting goods, apparel, equipment and health/fitness spending). Then compare this to Tourism – USD $2,364bn in 2015, Pharmaceuticals – USD $1,145bn in 2014, Packaged foods – USD $2,600bn in 2016, Smartphones – USD $398.1bn in 2015 or even just Apple on its own – USD $233.7bn in 2016.
Needless to say, you quickly begin to grasp just how small the sports industry is in comparison to other global industries.
TV Rights and Globalisation as the Driving Forces of Sports Revenue
I believe that the reason for these figures can be found by looking at particular points in the history of sport. Sport was considered an amateur endeavour in its early days and professionalism only started creeping in during the late 19th century. TV rights and globalisation are probably the main factors that sped up this process, however, it is only in the second half of the twentieth century that this really began to explode. Just consider the NFL, although the first game was aired on TV in 1939, games only began being aired regularly after WWII in 1948, but it was only in the 1960s and the war between the AFL (American Football League) and NFL that TV rights deals became really significant. Or consider that English football was actually in decline in the 1980s due to a string of disasters and hooliganism issues prior to the creation of the English Premier League for the 1992/93 season. If you look at them now, those league revenues are counted in the billions.
The commercialisation of these leagues was really driven by TV rights and more recently globalisation as media rights are now not only sold within their own domestic markets, but they are becoming global with a particular focus in recent times on the massive potential of the hugely populated but still relatively less developed Asian markets.
Polarisation of Revenues
Despite this growth in revenues over the last 50 years, as we can see from the chart above, there is a very clear polarisation of where these revenues are going with 76% attributed to either North America or EMEA. This is also evident in the previous chart when you notice that the majority of the top global leagues come from these two regions. This issue is not exclusive to the sports industry, but it is perhaps a little more troublesome in the sports industry given that a key goal of the Olympic Movement and the majority of International Federations is to develop their sports internationally. Sports are not, nor should they be, the domain of North America and Europe, and so a greater equality of revenues is something that the whole sports industry should be striving towards.
The polarisation is not only regional. As you can see from the chart above, football took in a whopping 43% of the global sports revenue in 2009, and the top 8 sports took 92% of the global revenue. This is understandable as the popularity and marketability of sports will be the key drivers of how much revenue they can generate, but it does make the NCAA student athlete scholarship program ever more commendable for providing other sports with the opportunity to grow and countless additional student athletes with the opportunity to get a subsidised education.
The relatively small size of the sports industry compared to other industries and its polarisation, should not necessarily be seen as an issue but rather as an opportunity. If we look at the above in a positive light we can see two clear opportunities for the growth of the sports industry in the future:
- Huge growth potential in Asia, Africa and South America.
- Growth potential in non-traditional sports – the IOC is constantly toying with the inclusion of new sports at the Olympics.
Add to this another two huge factors in my opinion:
- Global health lifestyle trends that are gathering steam.
- The massive potential in marketing women’s sports – just look at Tennis for an example of how successful women’s sports can be.
The future is bright for the sports industry, but as it grows and larger sums of money become involved, it is important for leaders in the sports industry to remember that sport is not just business, it touches everyone and as such it should be accessible to everyone.
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