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PwC: Outlook for the Global Sports Market to 2015

16/12/2011 13:34
Changing the Game

Despite the ongoing troubling economic climate, the sports industry has continued to thrive with many major sporting events proving to be more popular than ever. The popularity of these major events is supported by on-going improvements in broadcasting and technology which is allowing better quality coverage than seen before. At the same time, television companies, sports clubs, governing bodies and even the sports stars themselves, are embracing social media to engage with fans and deliver a greater intensity of experience. Sponsors remain eager and keen to use sponsorship of sports events and teams as part of their marketing mix, and are now using increasingly sophisticated data mining tools to gain greater levels of intelligence and insight into their target markets and help them demonstrate the returns on their investments.

PwC’s second outlook for the global sports market “Changing the game: the Outlook for the Global Sports Market to 2015” provides revenue forecasts at a global and regional level over the five years to 2015. The report also drills down with projections in four key segments: gate revenues, sponsorship, media rights and merchandising.

North America will remain the largest market throughout our forecasts to 2015 followed by Europe Middle East and Africa (EMEA), and then the Asian market. Latin America will remain the smallest market.

What has been clear through this era of economic uncertainty is that the balance of global economic power is shifting to the East and this will help maintain the internationalisation as sports seek new revenues from the growing middle classes in the emerging nations.

Improving economic conditions stimulate growth

Over the next five years to 2015, global sports revenues will grow to US$145.3 billion at an annual compound growth rate (CAGR) of 3.7 per cent due to an improved economy, a rebound in TV advertising, the on-going migration of sports to pay TV and the resurgence of financial services and automobile companies to sponsorship.

The Sports industry by market segments

Gate Revenues: Gate revenues will remain the biggest component of the global sports market accounting for 32.6 per cent of the total sports market (US$44.7 billion in 2015) and are a key source of income in the regions where live sports events are part of the culture. However, this mature market will see the lowest growth across all segments of the sports market at just 2.5 per cent CAGR from 2011-2015. While fans’ appetite for live experiences continues to grow and many major events are often completely sold out, there are concerns over the balance between competitive sport and mass entertainment and there have been challenges around pricing, particularly where the price of tickets effectively excludes all but the affluent middle and upper classes from attending these sporting fixtures.

Sponsorship: Accounting for 28.8 per cent of the total sports markets, sponsorship will see an average growth rate of 5.3 per cent to 2015 generating global revenues of $45.3 billion which are split evenly across all regions. Marketing departments still see sponsorship as a major opportunity to reach their target audiences. We’ve seen the return of sponsors from the financial services sector, and the lifting of regulations in the US has seen substantial sponsorship deals between alcohol companies and sports clubs. But the structure of sponsorship deals has changed. It’s no longer just about brand visibility and awareness but now it’s about gaining deeper and more emotional engagement with fans and staff, something which the new digital technologies are enabling to happen.

Media Rights: Media rights is the third largest category of revenue and accounts for 24.1 per cent of the total market and is the second fastest growing sector at 3.8 per cent CAGR. Revenues from media rights will see fairly healthy growth from $29.2 billion in 2010 to $35.2 billion in 2015. However, these figures mask large year-on-year swings which reflect the traditionally dramatic impact of major global events held in “even” years such as the Olympics and FIFA World Cups.

Merchandising: Merchandising remains the smallest category of revenue accounting for 14.5 per cent of total global revenue.

The global economic downturn has had a dramatic reduction in sports merchandising spend as consumers have tightened their discretionary spending. Sports clubs are also seeing a larger proportion of their merchandise transactions moving online which allows them to engage and interact with fans who can’t attend matches, including those living in other countries. This engagement helps to both monetise sports brands in those regions and markets, while also building demand for media coverage of the clubs involved. Experience has also shown that increased engagement among consumers leads to higher spending on merchandising and, yet again, social media is fuelling this interaction as fans discuss their latest purchases on social networking sites such as Facebook.

Pointing to the future

Looking at what the future might look like for the sports market in world of increasing economic and political uncertainty, we see:

• Growth will come from the emerging sports markets in the BRIC countries and the Middle East who will continue to offer scope for the development of new commercial opportunities both in domestic and international sports events.
• Sponsors will demand more sophisticated measurement techniques to demonstrate the returns on their investment.
• Sports bodies and associations must, and will, introduce new regulations to control the cost base and levels of debt in their sports to leave a sustainable business model for future generations.
• Sports bodies must balance the increased commercial demands of their sports with the need to maintain the integrity and unpredictability that make sporting competitions so exciting and appealing to their supporters.

The “Changing the game: the Outlook for the Global Sports Market to 2015” report is available on the PwC website: