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Changing the-game-outlook-for-the-global-sports-market-to-2015

  1. Changing the game Outlook for the global sports market to 2015 December 2011
  2. Our definition of the ‘Sports Market’ For the purposes of this report, the sports market consists of: • Sponsorships, which include payments to have a product associated with a team, league or event and naming rights. • Gate revenues for live sporting events. • Media rights fees paid to show sports on broadcast and cable television networks, television stations, terrestrial radio, satellite radio, the internet and on mobile devices. • Merchandising, which includes the selling of licensed products with team or league logos, player likenesses, or other intellectual property. Food concession revenues are not included. Definitions of key terms Association Football (soccer) is referred to in this report as ‘football’, while American Football − as played in the NFL − is referred to by its full name. ‘Ongoing events’ refers to regular sports events and leagues that occur annually or more often. These are distinct from ‘major events’, which are large international events occurring every few years, such as the winter and summer Olympics, and the FIFA World Cup. A glossary is included in the appendix at the back of this publication to explain acronyms and abbreviations used in the paper. 2 Outlook for the global sports market
  3. Contents Welcome 4 Emerging trends in the global sports market 6 Global revenue outlook by region 10 Gate revenues 14 Sponsorship 18 Media rights 22 Merchandising 26 Appendix 28 Glossary 36 Contacts 40 Outlook for the global sports market 3
  4. Welcome Across the world, we’re seeing Welcome to the second edition of PwC’s1 outlook for the global sports market. In ever closer convergence this edition we provide revenue forecasts between the sport and at a global and regional basis over the five entertainment industries, as years to 2015, and also drill down into both sectors continue to rise to key segments with projections for gate revenues, sponsorship, media rights and the challenges of new digital merchandising. technologies which shape the way we spend our leisure time. The industry outlook At the same time sponsorships In this latest edition − Changing the game − we continue to identify and investigate the and media rights emerge as issues that key players in the wider world of the main engines of growth, sport are facing, providing the context for putting the traditional the revenue forecasts. We go on to consider dominance of gate revenues what the future might hold for the sports market in a world of increasing economic under pressure. There will and political uncertainty and investigate need to be much more focus on where new opportunities might lie and developing sophisticated what challenges to future growth might measurement techniques to emerge. demonstrate the returns on this investment. 1 “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL) 4 Outlook for the global sports market
  5. Where now? Hurdles to overcome… …and pointers to the future Overall, as our projections show, sports revenues globally are on an upward path Despite the recent troubled economic Within this generally positive outlook, So where do sports go from here? Here through to 2015, despite a slight reduction times, sport has continued to thrive, with challenges remain. While stadia, circuits are a few pointers to the future that our in 2011 which reflects the usual post FIFA major events appearing to become more and arenas are full for the big events, industry specialists around the world are World Cup dip. So the cake is growing. The popular than ever. However lower tier spectators face rising ticket prices − and seeing: real competition is around who can deliver events are having to work harder to attract corporate clients and sponsors face wider the most entertaining and compelling • Emerging sports markets in Brazil, support. We are also seeing more focus on economic and regulatory concerns of their offerings that will claim the biggest slices. Russia, India, China and the Middle providing value for money, for example by own. Meanwhile, broadcasters continue East continue to grow apace, offering providing added entertainment through to wrestle with finding the best ways to scope for the development of new offers such as post-event concerts. extract value from new media. As sports commercial opportunities in these search for new ways to keep on growing The popularity of major events is territories for both domestic and their revenues, player costs − the single supported by ongoing improvements international sports and events. largest expense in most sports − continue in broadcasting and technology, which • As sponsors allocate increasing to increase rapidly, putting pressure on the allow higher-quality coverage than ever amounts of money to sport, there will bottom line. before. At the same time, TV companies be intensifying pressure for far more are embracing social media to engage Sports organisations are finding it sophisticated measurement techniques with fans and deliver a greater intensity increasingly difficult to balance the to demonstrate the returns on that of experience. Meanwhile, sponsors needs of all their stakeholders – it used investment. remain eager to contribute to − and be to be all about the fan who would simply associated with − sports events and teams vote with their feet, but now the fan has • Sporting bodies and associations are as part of their marketing mix and are a louder voice via social media. At the increasingly seeking to introduce new using sophisticated data mining to gain same time a corporate world of sponsors regulations in an attempt to control increasing levels of intelligence and insight and broadcasters, can shape the fans’ the cost base and levels of debt in their into their target markets. experience more than ever before. For sports and leave a sustainable business the sponsor, all the benefits which an model for future generations. association with sport can have, can be • All sporting bodies are walking a destroyed by poor behaviour of a player tightrope, as they attempt to balance or sports administrator, or by corruption, increased commercial demands on as in the recent spot fixing scandal by their sports, with the often conflicting Julie Clark Pakistani cricket players. need to maintain the integrity and UK Leader, Sports & Leisure unpredictability that make sporting competitions so exciting and appealing Tel: +44 (0)207 213 4170 to their supporters. Email: Outlook for the global sports market 5
  6. Emerging trends in the global sports market Sport and entertainment converge While the commercial in the history of American television. The entertainment line-up included Keith dynamics of sport and Urban and Maroon 5 during the pre-game, entertainment have always Christina Aguilera singing the national overlapped, the two are now anthem and The Black Eyed Peas at half- closer than ever before. time. Glee was the lead-out programme, attracting nearly 27 million viewers, At root, people buy tickets to sports events almost double its usual audience. Grand and pay-TV services carrying exclusive Prix events also now involve concerts, sports content expecting to be entertained. including Lady Gaga performing at the If they are not, they will vote with their after-party for the first ever Indian Grand feet and their wallets − and will soon be Prix. followed by media partners and sponsors seeking other opportunities. The trend towards blending more entertainment content isn’t always Sports media goes social In many cases, sporting entertainment welcomed by ‘purist’ sports fans, who and commercial success are now seen often feel their sport is being hijacked. The A further area of convergence between This again mirrors trends in as two sides of the same coin. Sport and shift towards entertainment can also cause sport and entertainment is the rising entertainment, where social networking entertainment events are increasingly dilemmas for governing bodies, which use of social media. Social networking is an increasingly closely related and being staged together, as a way to enhance want to encourage excellence in sporting continues to create opportunities and integrated element of the content offering. the overall experience and extend the achievement and do not want their core challenges for traditional broadcasters As people have become used to voting length of events − and therefore the time offer of serious sporting competition to − and also for sportspeople who appear for their favourite acts on television that supporters and viewers stay. With be trivialised by too much ‘froth’. When increasingly prone to overstepping the programmes such as the X-Factor, sports an average US audience of 111 million the Indian Premier League was launched boundaries of what they should say on fans increasingly want to be involved in viewers, the 2011 Super Bowl became the in 2008, almost as much media attention sites such as Twitter. Partly as a result their chosen sports via social media sites. most-watched programme of any kind was focused on the cheerleaders as the of this open personal interaction, social The English lower-league football club sporting contest, to the chagrin of diehard media allows fans to get closer to athletes Stockport County recently gave its fans cricket fans. and sports personalities, and provides the opportunity to vote on its summer sponsors with an opportunity for two- signings, and many owners of sports way communication, thus enabling them media rights look to enhance the value of both to embed their brand, and also to their rights through presences on Twitter understand and manage how fans perceive and Facebook. the brand. 6 Outlook for the global sports market
  7. Commercial challenges Rising player costs As such trends gain momentum, the sports and-a-half year, €171 million shirt In many sports, the focus on providing the The other area of tension is with sporting industry continues to face challenges on sponsorship deal with the not for profit most entertaining and successful product bodies and regulators, who are struggling the financial and commercial front. Many Qatar Foundation. However, this type is driving rapid inflation in player costs. to maintain a reasonably level playing of these relate to the impact of economic of open commercialism does not always This escalating investment in talent is field in financial terms, arguably in order uncertainty and consumer caution, which go down well with paying customers, causing growing tensions on two fronts. to maintain an exciting and competitive are affecting all consumer-facing sectors. and thousands of Barcelona fans signed One is financial, with − for example − sporting landscape. Again in European a petition demanding the agreement many of Europe’s leading football clubs football, the governing body UEFA has However, sport also faces a delicate be dropped. Sport’s status as a ‘healthy’ burdened with massive debts, but only 20 drawn up financial fair play rules that balancing-act, because of the need pursuit also tends to generate significant per cent of them reckoned to be turning a are scheduled to come fully into effect in to maintain value for money in light criticism of sponsorship from companies profit. At the start of the 2011-12 season, the 2013-14 season, and are designed to of increased ticket prices and rising such as alcohol or fast food providers, footballers in Spain’s top division went on ensure that football clubs stop their debt- expectations among the paying public. limiting the benefits on both sides. strike over unpaid wages, claimed to run fuelled overspending and live within their If sports charge more for tickets, then into tens of millions of euros. means over a rolling three-year period. In spectators expect them to provide more the US, the start of the 2011–12 National in return. The same ultimately applies to Basketball Association (NBA) season was the cost of media rights, which can knock delayed by a lockout caused by a standoff on to the pay TV subscriptions funded by between players and NBA owners over subscribers. revenue sharing and the structure of The balance between price and value is the salary cap. There are some sign of further complicated by the deep sense success however: in Formula 1, the teams of ownership that many sports fans feel agreed to instil some financial prudence for their club or sport. Again reflecting in response to declining sponsorship trends in entertainment such as brand and revenues during the downturn in 2009 product placement, sports sponsors want and agreed to the Resource Restriction to be embedded within the product, rather Agreement, which is believed to have than just being a name on a shirt. Naming reduced spend over the past two seasons. rights remain a popular investment for Many football fans in Europe look with envy sponsors, both for new and established at the NFL’s system in American Football, sport and entertainment venues. Examples which involves sharing revenue from the include Barcelona Football Club’s five- national TV deal, enabling smaller teams to compete more effectively with those with bigger, wealthier fan bases. Yet even the NFL experiences problems over collective bargaining and player remuneration, including a four-and-a-half- month lock-out in 2011, following the filing of an antitrust lawsuit against the NFL by a group of players. A new ten-year collective bargaining agreement was signed in August 2011. Outlook for the global sports market 7
  8. Internationalisation A further challenge for governing bodies Since the publication of our last edition is the increasing pressure to grow their of this Outlook, internationalisation to sports in new international markets, while new markets has continued. Most notably, at the same time maintaining the local decisions have been taken to hold the FIFA support base and the integrity of their World Cup in two emerging sports markets competitions. The English Premier League − Russia in 2018 and Qatar in 2022. has been widely criticised by fans and A related issue is the perennial conflict media worldwide for proposing a ‘39th between club and country in sports such game’ in an overseas location. Yet some as football, where players are remunerated fans in other sports and countries are more so highly for success in the club game welcoming of international expansion. that they are often perceived − rightly or wrongly − to be uninterested in their national team. Cricket authorities in countries such as Australia and England have resolved this issue by awarding top players central contracts to play for their When the NFL announced country. However, this results in club, in 2007 that it was going state or county sides effectively losing these players’ services for large parts of the to set up its now well- season. established competitive game in the UK, its website received more than a million applications for tickets. 8 Outlook for the global sports market
  9. Broadcast rights: scheduling and engagement issues While media rights revenues are This issue can in turn affect the sporting continuing on a generally upward path, contest itself. The 2011 Rugby World Cup in the size of the market remains volatile New Zealand resulted in early morning kick- year on year, depending on the presence offs in the lucrative Northern Hemisphere Also, while the traditional broadcast inside it. Alongside the growing use of 3D or absence of major events such as World market. Partly as a result, the major countries’ model is still responsible for generating and HD TV for sport, examples include Cups and Olympics. What is more, the games were scheduled at weekends to allow the most income from media rights, the virtual and computer-generated value of broadcast rights for international them to attract larger European audiences. engagement with fans is increasingly first-down line used in NFL coverage, and tournaments varies depending on local This led to disquiet about the minor nations shifting towards new technology. In an technology that enables broadcasters to screening times in regions around the having their games squeezed closer together, era of 24-hour news and player tweets, freeze the positions of players in a football world. putting them at an even greater disadvantage fans want to know everything and be as match, and then rotate the image digitally to the bigger teams. close to the action as possible, or even in 3D. Going forward: more regulation − more globalisation? In an era of economic uncertainty, what’s That said, as we will highlight in this clear is that the balance of global economic Outlook, sports revenues in North America power is shifting to the east and south. − still the world’s largest market − will This will help to maintain the momentum significantly outpace the growth in Asia of internationalisation, as sports seek new over the next five years. revenues from the growing middle classes in emerging nations. In turn there may be more regulation of media coverage to While the balance of protect national interests and domestic sports. In Asia, there is already concern power is shifting, the that the obsession with overseas football growth opportunities in leagues such as the English Premier the traditional developed League may actually be stunting the development of local clubs and the game markets are far from over. as a whole. Outlook for the global sports market 9
  10. Global revenue outlook by region Over the five years to 2015, a The return of financial services and automobile companies to the sponsorship combination of improved market is contributing to significant economic conditions, stronger growth in sponsorship spending. Major TV advertising, further growth international events − including the in pay TV penetration, and the London Olympic and Paralympic Games in 2012 and the FIFA World Cup football ongoing migration of sports to tournament in Brazil in 2014 − will pay TV will be the leading boost media rights fees and sponsorship drivers of global sports revenues in those years, and gate revenues and merchandising in the regions in which revenues in all regions. they are held. 10 Outlook for the global sports market
  11. Global revenues 2006-2015 We project that global sports market revenues will rise at a compound annual growth rate of 3.7% from US$121.4 billion in 2010 to US$145.3 billion in 2015. Global sports market by region* (US$ Millions) CAGR Component 2006 2007 2008 2009 2010p 2011 2012 2013 2014 2015 2011-15 Global revenues 107,516 111,934 120,760 112,489 121,391 118,690 129,929 130,164 146,469 145,341 % Change 12.1 4.1 7.9 (6.8) 7.9 (2.2) 9.5 0.2 12.5 (0.8) 3.7 * At 2010 average exchange rates p = provisional Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Global sports revenues were valued at given the FIFA World Cup and 2015 being US$121.4 billion in 2010, a strong year a relatively quiet year. EMEA shows the due to the FIFA World Cup in South Africa. most fluctuation over the period, given Global revenues split by region 2010 Over the next five years to 2015, there the 2012 London Olympic and Paralympic Global revenue growth by region 2011-2015 Latin America will be a compound annual growth rate Games and the Football European 5% of 3.7% to achieve global revenues of Championships in Poland and Ukraine 6.0% US$145.3 billion. North America starts and then in 2014, the Winter Olympics 5.0% 4.9% Asia Pacif ic 19% North America 41% the period as the largest region with 41% in Sochi and the Commonwealth Games 4.0% 3.9% of total revenue, and whilst Latin America in Glasgow. If mega events are excluded 4.0% 2.9% will see the highest growth rates, since from the analysis, the global growth rate is 3.0% it starts a relatively small market, it only 4.7% CAGR and although EMEA remains 2.0% gains comparatively limited market share. the slowest growing region, the underlying 1.0% EMEA is the second largest market, but rate is 4.6%, which is much closer to the 0.0% will experience the lowest growth rate global rate of 4.7% and to North America North America EMEA Asia Pacif ic Latin America over the period. This is partly a reflection which is also 4.7%. Latin America remains CAGR 2011 - 2015 EMEA 35% of the timing of major sports events, with highest at 5.6%. 2010 being such a strong year in EMEA Outlook for the global sports market 11
  12. North America EMEA • Largest region with US$49.9 billion or 41% of global • Second largest region with US$42.8 billion or 35.3% of the revenues in 2010. total. • Projected to grow at 4.0% CAGR to 2015. • Projected to be the slowest growing region at 2.9% CAGR to • Gate revenues are the largest sector at 31.4% in 2010. 2015, although if the impact of one-off events is excluded, • Sponsorship is the fastest growing sector to 2015 at the underlying growth rate is 4.6%. 6.1%. • Gate revenues are the largest segment, accounting for 38.6%. • Sponsorship is the fastest growing segment at 5.3%. • Within EMEA, the Middle East North Africa is experiencing the fastest growth of all regions at 6.8% CAGR. Latin America Asia Pacific • Smallest region with US$5.9 billion or 4.9% of total. • Currently the 3rd largest region at US$22.7 billion. • Fastest growing region at 4.9% CAGR to 2015. • It is also expected to have the 3rd fastest growth rate at • Media rights represent the largest sector at 38.3% of the 3.9%. total. • Sponsorship is the largest sector at 43.2% of the total. • Media rights are also the fastest growing sector at 5.6%. • Sponsorship and media rights are jointly the fastest growing sectors at 4.4% CAGR. 12 Outlook for the global sports market
  13. BRIC revenues 2010-2015 We project that BRIC market revenues will rise at a compound annual growth rate of 4.5% from US$8.3 billion in 2010 to US$10.4 billion in 2015. BRIC sports market by country* (US$ Millions) CAGR Component 2006 2007 2008 2009 2010p 2011 2012 2013 2014 2015 2011-15 BRIC revenue 6,167 6,468 7,539 6,976 8,326 7,929 8,337 8,822 12,121 10,388 % Change 9.9 4.4 16.6 (7.5) 19.4 (4.8) 5.1 5.8 37.4 (14.3) 4.5 * At 2010 average exchange rates p = provisional Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Spotlight on the BRICS BRIC revenues split by country 2010 Growth in the sports market in the BRIC Following China’s staging of the Olympics BRIC revenue growth 2011-2015 by country countries − Brazil, Russia, India and China in Beijing in 2008 and India’s hosting of Brazil − strongly outpaced the overall global the Commonwealth Games in 2010, the China 39% market between 2006 and 2010, growing next few years will see the other BRICs 6.0% 5.3% 5.0% 35% at a compound annual rate of 7.7 percent increase their profile as hosts of major 5.0% 4.6% compared with a CAGR of only 3.4 percent events. Brazil will host the 2014 FIFA 4.0% 3.3% for the global market during that period. World Cup, the Copa America in 2015 and 3.0% But during the next five years this gap the 2016 Summer Olympics. Russia has will narrow sharply, with sports revenue the World Summer Universiade 2013 in 2.0% growth in the BRIC countries averaging Kazan, the Olympic and Paralympic Winter 1.0% 4.5 percent compounded annually Games in Sochi in 2014 and the FIFA World 0.0% India Russia compared with 3.7 percent for the global Cup in 2018. Russia will also host its first Brazil Russia India China CAGR 2011- 2015 18% 8% market. Formula 1 Grand Prix in 2014. Outlook for the global sports market 13
  14. Gate revenues Gate revenues 2010-2015 We project that global gate revenues will rise at a compound annual growth rate of 2.5 per cent, from US$39.6 billion in 2010 to US$44.7 billion in 2015. Stripping out the effect of major events, growth in ongoing events will be slightly faster, at 2.7 percent compounded annually. Global sports market by component* (US$ Millions) CAGR Component 2006 2007 2008 2009 2010p 2011 2012 2013 2014 2015 2011-15 Gate revenues 37,056 38,387 39,998 38,873 39,570 39,043 40,613 41,317 43,544 44,746 % Change 8.5 3.6 4.2 (2.8) 1.8 (1.3) 4.0 1.7 5.4 2.8 2.5 * At 2010 average exchange rates p = provisional Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Gate revenue split by region 2010 Global gate revenue growth by region Latin America 2011-2015 4% 4.5% 4.2% Gate revenues account for 32.6% of the just 2.5% CAGR on average. Growth rates 4.0% Asia Pacif ic 14% North America total sports market. They are a key source in EMEA are even lower, if considered as 3.5% 3.0% 40% of income in the sports regions where a compound growth rate, which partly 3.0% 2.6% live events are part of the culture. 82% reflects the fluctuations with major events, 2.5% 2.0% 2.0% of total gate revenues are generated from since there are considerable peaks in 2012 1.5% North America and EMEA. However, and 2014 which reflect the major sporting 1.0% gate revenues represent a mature market events. However, gate revenues remain the 0.5% which will see the lowest growth across all largest single source of revenue at 38.6% 0.0% North America EMEA Asia Pacif ic Latin America segments of the sports market, achieving in EMEA. CAGR 2011 - 2015 EMEA 42% 14 Outlook for the global sports market
  15. …so long as the price−and culture−are right As we’ve already highlighted, The fact that tickets for major events are This concern over the balance between Such experiences also give rise to wider often completely sold out − examples competitive sport and mass-entertainment concerns about sports losing contact with attendances at top live events include the Super Bowl, the ballot for the can reduce consumers’ willingness to their roots at a local level, and their ability remain strong worldwide. London 2012 Olympic and Paralympic pay for the live experience, and raise the to grow the fan base of the future. When Fans retain a strong desire to Games, ‘Ashes’ cricket test matches question of whether prices can continue Argentina’s national football team played be part of the live experience, between England and Australia, and the to rise inexorably at capacity constrained Venezuela in Kolkata in India in 2011, show courts at Wimbledon − underline events. Declining attendances for matches the cheapest tickets were priced at 700 whether the attraction be that gate revenues at the top end are at Indian Premier League (IPL) cricket Rupees (US$16), effectively excluding all sport, entertainment such as constrained by capacity. The fact that matches in 2011 was widely ascribed to but the affluent middle-classes. Despite music, or increasingly both tickets are hard to get may actually consumers’ fatigue over the number of widespread public mania over Lionel increase their attractiveness. However games and the novelty of the IPL’s glitz Messi’s presence in India, the 120,000- together. The growing appeal there is a risk of saturation lower down wearing off. seater stadium was only about two-thirds of the live experience appears the hierarchy of events, with spectators full for the match, although this remains to apply to all high-profile sometimes feeling that the product is being an impressive attendance in a country sporting events, including the oversold, and that competitive quality may dominated by cricket. have been sacrificed to mass-appeal. 2010 FIFA World Cup in Africa, Pricing and the risk of overselling are key and the 2011 Cricket World considerations when trying to expand all sports internationally, especially to Cup in India, Sri Lanka and countries where attending live sporting Bangladesh. events is less of a part of the local culture. Dragon boat racing is hugely popular in As well as being sporting competitions, Singapore, and it is notable how Formula these events are social occasions that 1’s Singapore Grand Prix has emulated people like to be at, experience and the atmosphere of the annual Dragon talk about. The social element can be Boat Festival by running entertainment especially attractive at one-off events offerings over an entire weekend, with with a particularly high-society brand and the 2011 event including Linkin Park and appeal, such as the UK’s Henley rowing Shakira. regatta. These types of occasions, together with smaller events associated with major ones such as Olympic athletics trials, are generating rising attendances. Outlook for the global sports market 15
  16. Seeking new sources of growth The fact that the gate revenue market for The motivations for hosting events Other risks around hosting major events some of the bigger sports appears to be include the fact that they put countries include the recurrent problems around a mature and saturated raises the question on the map − as with the staging of lack of legacy use for the stadia where they of where growth will come from in the international cricket in the Middle East − have been hosted. Stadia that were used future. One unlikely stimulus for growth and demonstrate that their governments for the FIFA World Cup in South Africa is regulation: in European football, UEFA’s can deliver and manage prestigious major remain under used. Russia and Qatar are financial fair play rules are forcing clubs to events, as with the Beijing Olympics. looking to apply innovation to solve this, try and boost their football revenues, and Hosting Formula 1 Grand Prix has proved by dismantling the new stadia after the thereby are providing an extra impetus for especially attractive to countries around FIFA 2018 and 2022 World Cup events to new stadia development, not least among the world, resulting in an ever-expanding reassemble in other areas. Italian clubs. Formula 1 map, with South Korea opening in 2010, India in 2011, and Sochi Russia in Another source of growth in gate revenues is shorter format events. The usual 2014. Regional spotlight: Gate revenues in EMEA aim is to produce a version of the sport That said, there are risks in hosting The economic downturn had an adverse effect on gate revenues in that is faster, less time-consuming and major events. If it is perceived that the more exciting, so helping it to attract preparations have been poor, then they EMEA, with gate revenues for ongoing events falling by 1.8 percent in a new audience − such as the 18-25 can attract adverse publicity and damage 2009 and an additional 1.0 percent in 2010. and female demographics, and/or gain the country’s reputation, as occurred popularity in new territories. Examples with the 2010 Commonwealth Games in With economic conditions remaining uncertain, we do not expect include the growth of rugby sevens in Delhi. There are also risks for the sports. significant growth in the near term. Nevertheless, interest in sports African countries such as Namibia and It is important to work out who will pay to remains high and there are signs that the gate revenue market is turn- Kenya, where there is little in terms of come and watch both from the local and ing around. We expect modest growth averaging less than 2 percent local tradition for the full format game, overseas markets. And questions often but the shorter version is commercially arise about the sustainability of efforts compounded annually during the next two years, with only slightly sustainable. Other sports that have at internationalisation, such as with the faster increases of just over 3 percent annually for ongoing events tried this include cricket with its highly new Indian Grand Prix circuit, which during 2013–15. The gate revenue market is effectively saturated. successful venture into T20, ‘power failed to achieve full capacity. Elsewhere Interest in association football is high and attendance does not show snooker’, and powerplay golf, which is still the evidence is patchy, with Formula 1 dramatic year-to-year variation. Price increases will be the principal in its early days. appearing to be continuing to grow in countries such as Turkey while in others driver of growth. The global attractiveness of major sporting such as South Korea, it appear to have events is underlined by their ongoing and Actual gate revenues will be affected by several international events plateaued. generally successful expansion around the world over the last 20 years. This growth that will be hosted in EMEA. The London Olympic and Paralympic reflects not just the desire of sporting Games in 2012 and the Sochi Winter Olympics in 2014 will boost gate bodies and owners to push their sports revenues in those years as will the Commonwealth Games in Glas- into new markets, but also demand-pull gow in 2014 and Rugby World Cup in England in 2015. Euro 2012 in from governments. Poland and Ukraine will provide an additional lift that year as well. 16 Outlook for the global sports market
  17. Where next Sporting bodies continue to innovate in pursuit of growth in gate revenues. Gate receipts: key messages Clear examples − as we highlighted in the introduction to the Outlook − Gate revenues, while important in certain markets, are growing include combining concerts and sporting less quickly than in the past. events into one event, as frequently now happens with motor sport and horse Value for money is key for all but the very top events − both in racing. In the case of the IPL, the addition terms of pricing and provided added-value entertainment of entertainment-inspired glamour extends to creating theatre and spectacle at matches, and having teams owned by − and closely associated with − top Bollywood movie stars. All such marketing efforts raise the For most sports, there is an important Spectators can become part of the need to strike the right balance between link between the live experience and entertainment as they are encouraged entertainment and sport, and between the experience of the TV viewer, since to display ever more complex messages drawing in crowds and maintaining the the viewing experience is far better and in the stands through the distribution credibility and quality of the sport on more atmospheric if the stadium is full. of coloured cards. More controversially, offer. Cricket bodies, for example, need to Organisers can further improve the the vuvuzelas used at the FIFA World consider the potentially negative impact viewing experience by managing and Cup in South Africa created a distinctive of the growth in the IPL’s T20 format on incentivising the paying attendees. atmosphere; and the crowd can become revenues from the more established Test a platform for the sponsor, as evidenced and 50-over formats. by the sea of orange caps distributed by Vodafone and seen at various Grand Prix events. Outlook for the global sports market 17
  18. Sponsorship Sponsorships 2010-2015 We project that global revenues from sports sponsorships will increase from US$35 billion in 2010 to US$45.3 billion in 2015, a 5.3 percent compound annual increase. Stripping out major events, growth in sponsorships for ongoing events will average 6.4 percent compounded annually. Global sports market by component* (US$ Millions) CAGR Component 2006 2007 2008 2009 2010p 2011 2012 2013 2014 2015 2011-15 Sponsorships 26,749 29,273 32,494 31,467 34,972 35,132 39,173 40,236 45,559 45,281 % Change 14.2 9.4 11.0 (3.2) 11.1 0.5 11.5 2.7 13.2 (0.6) 5.3 * At 2010 average exchange rates p = provisional Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Sponsorship revenue split by region 2010 Sponsorship revenue growth by region 2011-2015 Latin America 4% Accounting for 28.8% of the total sports from the analysis, however, and the market sponsorship will be a key engine underlying growth rate in the market only 7.0% North America 6.1% Asia Pacif ic 34% for growth in total revenues over the is considered, sponsorship falls to the 6.0% 5.3% 28% period, with an average growth rate second fastest growing revenue source, 5.0% 4.4% 4.9% globally of 5.3%. This is relatively equally having been overtaken by media rights. 4.0% shared across the regions, with Asia Sponsorship is a key component of the 3.0% Pacific having the lowest growth rate of total revenue mix in certain regions, with 2.0% 4.4% and North America, the highest 43.2% of all revenue in Asia coming from 1.0% at 6.1%. If major events are excluded sponsorship. 0.0% North America EMEA Asia Pacif ic Latin America CAGR 2011 - 2015 EMEA 34% 18 Outlook for the global sports market
  19. Global match day gate revenues remain flat or even declining − edging downwards by 1.3 per cent in 2011 making sponsorship an increasingly important revenue stream for many sports. The industry’s fastest growing source of money, sponsors have continued to be attracted to sport throughout the downturn, with a modest decline in 2009 followed by a double-digit rebound in 2010. Number of deals 1800 1600 1400 1200 1000 Recent examples of innovative sports United has signed up with a sponsor for Sponsorship is a particularly important 800 sponsorships include English football club its training shirt. Football has a dominant revenue source in certain geographies. 600 Tottenham Hotspurs’ decision to sign up share of sports sponsorship deals by In the BRIC countries, for example, it 400 with different shirt sponsors for different number, with the Olympics, motorsport represents the biggest component of the 200 competitions, with Investec sponsoring and American football also putting in a sports market. The same applies in Asia 0 2006 2007 2008 2009 2010 its shirts for all domestic and European strong showing. Pacific as a whole. In China, sponsorship Source: World Sponsorship Monitor cup competitions, and Autonomy for accounts for some 48 per cent of total Premier League matches. And Manchester sports revenues. Outlook for the global sports market 19
  20. Regional spotlight: Sponsorship in Asia Pacific Sponsorships represent the largest component of the sports market in Asia Pacific. In 2010, sponsorships associated with the FIFA World Cup, the Asian Games and the Commonwealth Games generated an incremental US$916 million, which contributed to the 16.8 per cent increase from 2009. Even without those sponsorships related to major events, the underlying market rose 5.9 per cent. In Australia, the new deal between Toyota and the Australian Football League for A$8 million annually is the largest single sponsorship deal. The People’s Republic of China’s first naming rights deal was signed in 2010, as Mercedes-Benz acquired the naming rights to a new arena in Shanghai. And in India, Nokia replaced Bharti Airtel as the title sponsor of the Champions League Twenty20 tournament, while Nike raised its sponsorship support for the national cricket team to US$65 million for five years, more than 30 per cent higher than the previous deal with Bharti Airtel. Motivations for sponsorship Whilst the rationale for why companies Banks and insurance firms tend to use it to Lifestyle products and services on the An increasingly key element of the decide to invest in sports sponsorships generate global recognition. For example other hand, use sport − along with music, rationale both for advertisers and varies widely, what can be said is that the Standard Chartered sponsors Liverpool cinema, theatre, art and so on − to access sponsors is integration of social media in key motivation is no longer just about Football Club’s shirts, and the UBS Chinese consumers, and to enhance and be part their sports involvement. The domestic maximising brand visibility and awareness, Grand Prix was held in Shanghai in April of the experience. Orange, for example, appliance maker Indesit has launched but is also about gaining deeper and more 2011. Sberbank of Russia’s decision to has signed up with UEFA to sponsor the as the community emotional engagement with fans and become a General Partner of the Sochi Euro 2012 football tournament. More hub for sponsorship of four European staff, and even managing the perception of 2014 Winter Olympics was motivated in generally, telecommunications companies football teams, including AC Milan and the sponsoring company. Fast food chain large part by a desire to innovate and raise are now heavier sponsors of sport than Arsenal. Building on a social networking McDonalds − a sponsor of the Olympics its international profile. a decade ago, including Vodafone’s base, companies can use data mining to since 1976 and FIFA World Cups since sponsorship of the Australian cricket team help them develop content that is relevant 1994 − has signed up Olympic US multiple- and the Russian telecommunications to each platform and each consumer medallist Darra Torres to front its campaign company MegaFon’s active sponsorship segment. in the run-up to the 2012 Olympics, of domestic Russian sports leagues, the promoting exercise and balanced eating. World Universiade in 2013 in Kazan and the Sochi 2014 Winter Olympics and Paralympics. 20 Outlook for the global sports market
  21. Regulatory changes Challenges Changes in restrictions on which industries The market for sports sponsorship deals is are allowed to undertake sponsorships increasingly competitive and globalised, as can have a dramatic effect on the profile more sports vie for companies’ cash. Some of the sports sponsorship community. sports are growing in-house sponsorship For example, the lifting of regulations resources or investing in overseas offices banning beer sponsorship in US, has to pursue deals, while for others it makes led to substantial sponsorship deals for more sense to simply use agents. Whatever the NFL, NHL and MLS, and triggered a approach they take, all sports will need sharp jump in sponsorship spending by to be more sophisticated to offer the level alcohol companies. Aside from regulatory of measurement required. It is no longer effects, the revival in the US automotive enough simply to monitor media hits. industry has had a similar effect on that Instead, reporting must show whether the sector’s spending. Meanwhile in Europe, sponsorship is achieving far more ambitious the proposed legalisation of online business objectives. betting in Germany may open up further opportunities for sports sponsorship. Going forward, football sponsorship in Europe will be further affected by the financial fair play rules, which will require a focus on defining value. To comply with the rules, related parties will only be allowed to sponsor a club if they can demonstrate the fair value of the deal. Manchester City’s estimated £400 million 10-year sponsorship deal with Etihad Airways for both the club’s shirt and stadium is likely to come under scrutiny from UEFA, because of the Abu Dhabi links Sponsorships: key messages of both parties. More generally, the rising Sponsorship is likely to be of increasing importance to most sports importance of establishing value and organisations and major events over the coming years. demonstrating returns from sponsorship for both sides will intensify the demand for As sponsorship becomes more important both for the sponsor and accurate and auditable measurement of results. the sports body, the need for accurate measurement will increase. Outlook for the global sports market 21
  22. Media rights Media rights 2010-2015 We project that global revenues from media rights fees will rise at a 3.8 per cent compound annual rate from US$29.2 billion in 2010 to US$35.2 billion in 2015. Stripping out major events, growth for ongoing events only will be much faster, at 6.6 percent on a compound annual basis. Global sports market by component* (US$ Millions) CAGR Component 2006 2007 2008 2009 2010p 2011 2012 2013 2014 2015 2011-15 Media rights 24,281 23,861 27,005 24,563 29,225 26,945 32,141 30,062 37,801 35,247 % Change 19.9 (1.7) 13.2 (9.0) 19.0 (7.8) 19.3 (6.5) 25.7 (6.8) 3.8 * At 2010 average exchange rates p = provisional Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Media rights revenue split by region 2010 Media rights revenue growth by region 2011-2015 Latin America Media rights generate the third largest end of the period, being relatively quiet. 8% category of revenue and account for EMEA accounts for the largest proportion 24.1% of the total market. However, it of the total global media market, followed 6.0% 5.6% 5.3% Asia Pacif ic North America is the second fastest growing sector at by North America. However, the fastest 5.0% 17% 33% 4.4% 3.8% CAGR if all sport is included and is growth rates are projected to be in Latin 4.0% the fastest growing sector at 6.6% CAGR (5.6%) and North America (5.3%). Media if only ongoing events are included. The rights are the largest single source of 3.0% reason for the difference is the timing of revenue in Latin America at 38.3% of the 2.0% 1.9% major events with 2010, the base year, total. 1.0% being such a strong year, and 2015, the EMEA 0.0% 42% North America EMEA Asia Pacif ic Latin America CAGR 2011 - 2015 22 Outlook for the global sports market
  23. Going multi-platform ITV Live As such statistics underline, broadcasting The new interactive TV portal combines Over the five years to 2015, for the viewer. But more immediately, the still generates the lion’s share of the strengths of online TV streaming with commercial potential of new technology we project relatively healthy for media rights owners was demonstrated income from media rights, but social the popularity of social networks. Users overall growth in global by the broadcasting of the IPL on YouTube. media is increasingly the engine can engage in live chat and discuss their media rights revenues of 3.8 It attracted 20 million cumulative unique driving interaction, hype and interest. favourite shows in real time, using their views, equivalent to 69 per cent of the Engagement through Internet and mobile Facebook credentials. According to ITV, per cent compounded phones can help to bring people to live the application is the perfect dual-screen reach of the overall YouTube audience in annually. However, this India. matches and encourage them to purchase companion to ITV Shows. Launched top-line growth figure masks merchandise. Rights owners can enhance during the 2010 FIFA World Cup, ITV Live large year-on-year swings, and expand the fans’ experience using achieved two million users within four different media platforms and social weeks by providing additional incentives reflecting the traditionally networking in an integrated way, adding such as direct chat with celebrities, dramatic impact of major further value for themselves and the user. factoids, etc. global events held in ‘even’ Historically, entertainment companies This approach matches emerging years, such as the Olympics have led the way in social media, using consumer behaviour. Recent research and FIFA World Cups. different platforms according to the by Digital Clarity indicates that 80 per content offer. So video content might be cent of under-25s use a mobile device As this cyclical pattern continues, one seen on YouTube, while Twitter has been to communicate with friends while they of the most powerful and consistent more used by celebrities. Interestingly, watch TV, and Twitter reports big spikes in forces driving the media rights market is multi-platform approaches for sports traffic during major sports programmes. technology, which continues to advance content have not replaced TV, but This blend of TV and online effectively at a dramatic pace. The mens’ and are complementary to it rather than gives the viewer a virtual living room in ladies’ finals of the 2011 Wimbledon substitutional. which they can watch sport with friends Championships was the first time that the Many TV companies have invested in even when sitting physically alone, BBC broadcast live 3D sports coverage, interactive portals, enabling them to creating a higher intensity of experience. and − also in the UK − Sky Sports combine online TV screening with social routinely broadcasts sports such as football media, and to provide an online social and and rugby in 3D. Meanwhile, Japan’s information environment surrounding ultimately unsuccessful bid to host 2022 their media rights and strengthening its FIFA World Cup involved a plan to project value. 3D holograms of the games live onto football fields worldwide. The quality of the experience and sense of immersion with 3D raise questions over the longer-term impact of these services on live attendance at games. As we’ve already highlighted, full stadia look better on TV and give a more compelling experience Outlook for the global sports market 23
  24. Challenges: reshaping the competitive and technological landscapes As sports rights holders go increasingly online and multi-platform to engage fans, Regional spotlight: media rights in the US they are increasingly competing with other forms of content taking similar approaches, We expect much faster growth in the underlying media rights market in the US beginning in 2011 as well as with other immersive experiences compared with the past three years. The TV advertising market is holding up well despite the slowdown such as cinema and live music. Yet the in economic growth, and mobile rights are becoming significant as tablets penetrate the market. audiences will often vary. Comparing the viewership of the X-Factor with − for The key factors are that sports ratings have been strong, and sports viewing is proving virtually immune example − Champions League football confirms that live events are a bigger draw to time-shifting. In the key 18-49 demographic, live programmes dominate the ratings, and sports through TV, but that there are different are well represented in the top-rated live programmes. A second factor driving rights fees is growing audiences for each, with the X Factor competition as ESPN competes vigorously with the major broadcast networks. Local rights also are having more social media interaction and a lucrative. Time Warner Cable tripled the fees it pays to the Los Angeles Lakers for local rights. The YES higher proportion of women and children. network also doubled the rights fees it will pay for the New Jersey Nets. That said, the post-Super Bowl 2011 edition of Glee benefited hugely from the carry- However, sport is still nowhere near over audience. the entertainment sector in terms of Demographics can also impact the value Twitter profile. Lady Gaga has 15 million and speed of going multi-channel. For followers on Twitter, while the Brazil and sports like golf and cricket, the balance Real Madrid footballer, Kaka, is the top between older and younger generations sportsman at 6.5 million, in 17th place. is likely to be tipped towards older There are only five other sports entities audiences. This means it takes longer for or personalities in the Twitter top 100, all innovations and changes to come through. from the US. This is perhaps just as well However, they still do come through in for clubs, since the challenges of managing time. The BBC has built a thriving global what sports people say on Twitter have online community around its online text been demonstrated time and again. They commentary service for international are the public face of sports and clubs, cricket, reflecting the fact that many users but it is extremely difficult to monitor or are at work and do not want to be seen control them. In early 2011, Liverpool listening or watching, but can click through footballer Ryan Babel was charged with to the site unobserved in a quiet moment. improper conduct by the FA after posting a mocked–up picture of a referee in an opposing team’s shirt on Twitter. 24 Outlook for the global sports market
  25. ‘Free’ content and fragmentation Given the ongoing convergence with and brands. Across all these areas, digital Also, for international sports tournaments, A further challenge for sports bodies entertainment and rising impact of technology will drive a demand for more the value of broadcast rights can vary and regulators alike is the difficulty of technology, sport may increasingly face accurate, transparent and accountable depending on screening times in regions regulating and controlling the same challenges that echo those of other forms measurement as a basis for commercial around the world, owing to its impact content across different platforms of digital content. For example, many decisions. The world football governing on viewership and therefore advertising and geographies, as the device market people now assume that consumption of body FIFA has admitted to greatly revenues. The 2002 FIFA World Cup in fragments and as online and digital music is and should be for free. So will exaggerating TV audiences in the past for Japan and Korea and the 2011 Rugby technologies render national borders they expect to access sport for free in the events such as the World Cup Final. In the World Cup in New Zealand both resulted increasingly irrelevant. In 2011, deciding future on the TV or Internet? On this issue, world of digital rights and delivery, sports in games being shown in the early morning in favour of a pub landlady from the UK, sports right holders seem to be in a fairly bodies or broadcasters simply will not get in the big European markets. the European Court of Justice said that strong position at the moment. Research away with this type of overstatement. broadcasters cannot prevent customers and indeed the experience of pay-TV from buying cheaper foreign satellite TV broadcasters with exclusive sports content services to watch Premier League football. confirm that people are prepared to pay While legal experts said that pubs may for additional value. A rising number of still be prevented from doing this because newspapers have also now started to put of Intellectual Property rules, the case up paywalls around their on-line content, underlined the growing complexity of and are finding that people will pay for the Media Rights: Key Messages policing and selling sports rights in a premium end and specialist content. Ongoing technology innovation and expansion across multiple digital world. Aside from that issue, the proliferation of platforms will continue to be used to maximise engagement and digitised content, web access and social put the viewer ‘inside’ the sport. media will have further impacts on sports rights and related advertising revenues. In an increasingly digital world, a major challenge for rights These developments means companies holders is trying to retain control over how, where and by whom now have the ability to mine and analyse detailed information to which they have sports content is consumed, so that this content can be monetised. never previously had access. Data also plays an increasingly pivotal role in the interface between consumers, content Outlook for the global sports market 25