MUMBAI: Even as India's sports industry is on a growth path with broadcasters like Star India, Multi Screen Media and others promoting games like kabbadi, football, wrestling et al, the sports industry in North America has been one of the biggest revenue generators as a business. With North America’s sports market revenue crossing $60 billion in 2015, everyone from broadcasters, sports agencies and sponsors want a slice of the pie.
So, what does the future hold for the sports industry in North America? How much more value will sports create? And will demand meet a sufficient supply? Let’s have a look.
According to a PricewaterhouseCooper (PwC) report titled ‘At the Gate and Beyond: An Outlook for sports Market in North America through 2019,’ the sports market in North America will grow at a compound annual rate of four per cent across four segments analysed, from $60.5 billion in 2014 to touch $73.5 billion in 2019.
This year’s edition of report revitalises five-year revenue forecasts through 2019 with four key segment of the North American sports market namely gate revenues, media rights, sponsorship, and merchandising.
Gate revenues are primary market ticket sales for live sports events. The adoption of dynamic pricing for single game tickets has changed. With an increase on media rights revenue over gate revenue, it will make selling broadcast rights more important than selling tickets for the live events and making media rights the biggest contributor to gross sports revenue.
Local TV rights in Major League Baseball (MLB), National Basketball Federation (NBA) and National Hockey League (NHL) will likely contribute to the overall sector growth with more than 35 per cent of current deals set to expire over the next five years, albeit on a smaller scale than the national rights deals entered by the major pro leagues, athletic conferences and other sanctioning bodies that are predominately driving industry-wide growth.
As far as gate revenues are concerned, leagues will have to find ways to bring in the crowds to stadiums. To maintain gate revenues, leagues are coming up with different innovations like rewards, fan (loyalty) rewards program and point systems. And in areas where past generations of rewards programs failed, new innovations will allow clubs to more efficiently track fan activities, understand fan preferences, and disseminate benefits to fans.
There will be many hurdles for sports leagues in terms of media ratings, as the popularity of live sports is in demand. There would be an increase in budgets of various sports cable networks for live programming for the viewers, battle over subscriber fees and bidding wars over desirable content. The rise in the compound rate is derived from subscriber base and as long as it stays strong, there might be an increase in the compound annual rate and vice versa. While media rights are projected to become the industry’s largest segment by 2018, its pace of growth is expected to slow towards the end of the five-year period.
As per the report, even with strong segment fundamentals, such as long term deals, higher renewal rates, and enhanced inventory yields, sponsorship is expected to be surpassed in size by media rights in 2015. The net effect of new inventory will depend on future economic conditions and the industry’s ability to expand sponsor rosters, while maintaining value proposition to existing partners. Approximately 40 per cent of major pro league teams are currently either without a deal or with existing deals set to expire in the next five years.
The report also suggests notable measures, which pro leagues should consider such as to expand retail shops and improve sale results of their representative merchandise, which are in-house operations of the retail business. Another measure would include positioning of official team store locations outside the stadium, arena or ballpark.
PwC also advised, “As consumer and advertisers continue to migrate toward internet-connected devices and second-screen activity, it is more likely the traditional pay-TV model will have transformed (e.g. smaller channel packages, reduced rates) by the next deal cycle of major sports property rights. As a result, the next deal cycle, currently outside the outlook period, is unlikely to realize the same rights-fee premiums as were applied during the current cycle as cable providers sought to secure ports content in support of the overall pay-TV package model.”
The cyclic nature of sports is a reflection of more stadiums being built, more television contracts being signed and advertising taking a major role in globalization of sports. It shows significance growth prospects for the future.
With Indian broadcasters, sports enthusiasts and aspiring entrepreneurs now waking up to the potential of the sports telecast and marketing business, a few lessons could be learnt from the west in order to extract the maximum from the various sports that are played in India.
