OREANDA-NEWS. February 03, 2012. 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. 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, reported the press-centre of PwC.

Improving economic conditions stimulate growth

Over the next five years to 2015, global sports revenues will grow to USD 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.

Growth in the sports market in the BRIC countries (Brazil, Russia, India and China) strongly outpaced the overall global market during 2006 to 2010, but during the next five years this gap will narrow.

Julie Clark, Head of UK Sports practice, PwC and Editor-in-Chief of the report said:

“North America is still the largest market and growth rates will significantly outpace Asia Pacific and  EMEA. While the balance of power is shifting to some emerging markets which are hosting mega sports events over the next few years, the growth opportunities in the traditional developed markets are far from over.”

Latin America is projected to have the highest growth rate at 4.9 per cent CAGR, partly due to them hosting of the FIFA World Cup in Brazil in 2014, followed closely by North America at 4.0 per cent CAGR. EMEA is projected to have the slowest growth rate at 2.9 per cent, which partly reflects underlying economic conditions, but there are some significant upward swings in 2012 when London will host The Olympics, Ukraine and Poland host the football European Championships and in 2014 when the impact of the Olympics and Paralympic Winter Games in Sochi 2014 and the Commonwealth Games in Glasgow shows through.

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.

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 (USD 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.  

One unlikely area which could stimulate growth is regulation. In European football UEFA’s financial fair play rules, which require a focus on defining value, are forcing clubs to try to boost their football revenues and are providing an extra impetus for new stadia development.

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 USD 45.3 billion which are split evenly across all regions.    Marketing departments still see sponsorship as a major opportunity to reach their target audiences. Banks and insurance firms tend to use it to generate global recognition. For example Standard Chartered sponsors Liverpool.

Football Club’s shirts, and the UBS Chinese Grand Prix was held in Shanghai in April 2011. More generally, telecommunications companies are now heavier sponsors of sport than a decade ago, including Vodafone’s sponsorship of the Australian cricket team and the Russian telecommunications company Megafon’s active sponsorship of domestic Russian sports leagues, the World Universiade in 2013 in Kazan and the Sochi 2014 Winter Olympics and Paralympics.

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.  Advertisers and sponsors are integrating social media into their sports involvement and through social media and smart data mining, they are able to target their messages and content so that it’s relevant to each consumer segment and appropriate for each platform and delivery device.  The challenge is to accurately measure the return on their investment.

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 USD 29.2 billion in 2010 to USD 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.

Broadcasting still generates the majority of income from media rights, but engagement through different media platforms such as the Internet and mobile phones can enhance and expand the fan’s experience.  Smart use of social networking can add further value for both themselves and the user and many TV companies have, themselves, invested in interactive portals.  This enables them to combine online TV screening with social media which complements their offering to the market. 

Merchandising:  Merchandising remains the smallest category of revenue accounting for 14.5 per cent of total global revenue.  However, it accounts for just over a quarter of all revenue in North America.  Growth in merchandising revenue is closely linked with consumer spending patterns and overall growth is similar to gate revenues at 2.6 per cent CAGR generating revenues of USD 20.1 billion in 2015, up from USD 17.6 billion in 2010.

Added Clark:
“Across the world we’re seeing ever closer convergence between the sport and entertainment industries as both sectors rise to the challenges brought by digital technologies which are changing and shaping the way we spend our leisure time.  And this new digital environment is significantly contributing to the globalisation of both the industry and specific sports.”