Is the US still ahead of the rest of the world when it comes to commercialising sport?
The US has led the way in terms of the commercialisation of sport for generations. The traditional four major leagues – American football’s NFL, baseball’s MLB, basketball’s NBA and ice hockey’s NHL – are no longer the only major money-makers in town.
Various college sports conferences, Nascar stock-car racing, the IndyCar motor-racing series and Major League Soccer are among the other properties to be pulling in the big bucks.
In recent years several leagues, most notably the NFL and NBA, have demonstrated serious international ambitions by staging regular-season games on an increasingly regular basis outside North America.Moreover, a new report by professional services firm PwC has indicated that the value of the North American sports market will grow from $63.9bn (€58.2bn) in 2015 to $75.7bn by 2020 as a result of growing media-rights and sponsorship income.
However, is the long-held supremacy of the US in the sports industry under threat? China is emerging as a source of considerable interest in the past two years, with some of sport’s biggest brands and organisations coming under the control of Chinese investors.
Our editorial partner, SportBusiness International, asked four experts to give their opinion on whether a new world order is in the offing in the sports industry.
Rob McQueen is the new president of CSM North America. In April of this year the CSM Sport & Entertainment division of marketing services group Chime Communications entered into a partnership with the Alisports arm of Chinese e-commerce giant Alibaba to develop and operate a range of sports properties and mass-participation events across China.
Karl Sharman is UK & US head of sport and media at Blackbridge Cross Borders, which brokers investment deals from around the world in a variety of sectors, including sport and most notably football’s English Premier League.
Ulrich Harmuth is managing director (digital sport) at Sportradar, which specialises in sports data and digital services across international markets.
Simon Chadwick, a leading academic in the sports industry, is a professor of sports enterprise at Salford University in Manchester.
YES - The North American market has been leading the industry since the dawn of commercialisation and continues to do so.
First and foremost, it remains the largest market with a 41% share and is estimated to be worth $75.7bn by 2020, according to the latest PwC Sports Outlook. This growth is widespread, but mostly generated by the continuing increase in media rights, even though ratings continue to decrease (although not to the extent of other programming). This is partly driven by how consumers now want to consume sports, with leading social networks such as Twitter adding to the rights fee bucket and with added viewing and revenue opportunities through YouTube, Facebook Sports and Twitch among others. Continued innovative partnerships, such as Twitter’s live streaming of 10 Thursday night NFL games, should realise continued commercial growth.
The US also leads the global industry on direct fan engagement, including through new venues, such as the US Bank Stadium, which create a multi-sensory experience for the fan that cannot be matched at home or elsewhere.
Perhaps the biggest reason the US leads the rest of the world is because of its long-standing agency ecosystem. The market has a plethora of high-quality agencies and experienced people that help to drive the US sports industry to a density and scale which allows it to operate and commercialise sport at an unrivalled level. Add to that, growing international sports, such as rugby and cricket, and revenue will continue to grow and prosper.
That said, I certainly think Europe and specifically less mature international markets will continue to grow. Uninhibited by historical ways of working, markets such as Asia are leading the way in innovation. Growth in eSports, which some analysts predict will generate $2bn by 2018, will be led by China and South Korea.
Yes, the US is still ahead. However, in an increasingly inter-connected sports industry, the next innovation may come from almost anywhere.
YES - From my point of view, commercialising sport really revolves around maximising fan engagement and having worked as a European focused on our US operations at Sportradar, I still think no one does it better than the US sports and leagues.
We can point to Formula One and the Olympics, while of course football remains a juggernaut worldwide, with the European leagues and clubs leading the way and finding ways to bring fans from as far away as New Zealand, the Philippines and South Africa closer to the action. However, I cannot help feeling that the majority of lessons are learned from looking to the likes of the NFL, NBA, MLB and NHL for inspiration and initiatives.
Take one example: content. The rights fees that broadcasters pay for major league games are staggering, but I find that it is beyond those broadcast rights that one really sees engagement and commercialisation savvy. Matches are broadcast on social media platforms (the largest of which sprang from the US), OTT content is used to drive traffic to the leagues’ own digital platforms, huge data deals ensure that fans and fantasy sport competitors don’t only get the most data, but the deepest data available, including ball and player tracking data.
Every touchpoint - whether it is online, mobile, in venue or on television, whether it involves audiovisual, data, community relations or merchandise sales, whether it is at home or in new markets - seems to be at its most ambitious and effective in the US.
There are exceptions: Manchester United’s commercial partnership strategy springs to mind. But one of the key reasons Sportradar decided to plant a flag in the US market was to ensure we could be well positioned in the crucible of sports fan engagement and commercialisation innovation. In the last two years we have only become more convinced that our strategic decision was the right one.
YES - Most current numbers indicate that the answer to this question is ‘yes’. Several studies of the global sport industry (notably by the likes of A.T. Kearney and PwC) show the US sports market still accounts for as much as 50% of total world market size.
One characteristic of US sport is the absence of state intervention, which means that sustaining sport has been always driven by the marketplace. Over time we have therefore seen numerous US innovations oriented towards revenue generation, entailing everything from developments in sponsorship and naming rights through to those in broadcasting and digital media.
As such, the US will always be the founding father of modern commercial sport. However, as the 21st century progresses, the US’s position as industry leader will increasingly come under threat.
Over the last decade we have witnessed an eastward shift in economic activity, both generally and specifically in sport. The use of sport as a means through which to achieve economic, political and industrial goals has been employed by Asian countries, such as Qatar and Singapore.
However, the real potential game-changer came in November 2014, when China’s President Xi proclaimed that his country would be seeking to create a domestic sport industry worth $850bn by 2025. Since then China has engaged in an aggressive programme of investments.
While many people’s attention will have been drawn to China’s ostentatious spending in football, its investors have also spent heavily in acquiring ownership of organisations across the global sport industry’s supply chain. Infront Sports and Media, and Inter Milan are examples of this.
It is too early to say whether China will become the globally dominant industrial force in sport that its aspirations imply. Nevertheless, even if the country gets part of the way, it is highly likely that there will be a shift towards Asia.
Underwritten by the state, sustained by the private sector and spurred on by innovation, Asian sport is fast maturing. By mid-century the answer to the question posed here could actually be ‘no’.
YES - I believe the US is still the leader and can’t see the Asian sport industry taking over yet.
In the US, sport and business go hand in hand, which is still missing within most European and Asian sports. The first aspect that they are ahead in is culture. It has become traditional for towns to go and support their local team and colleges in huge attendances. The culture in China is different, as watching foreign sports on television is more popular than watching or playing locally.
The second is sponsorship. Many athletes and clubs in the US are heavily funded through a variety of revenues, including sponsorships. The huge attendances and television figures have created national and global interest in US sports from huge corporations, meaning substantial capital being reinvested in the sports. Comparing this to the Chinese Super League, with low viewing figures compared to the Barclays Premier League, the bigger corporations in Asia, and more importantly China, are heading to sponsor US and Premier League clubs to get a better return on their investment.
The final reason is the opportunity that the US creates for its youth to chase their dream, as with football in Europe. When opportunity is created, youth will chase their idols, meaning that they will go and watch, buy the merchandise and become an advocate for their team. This will result in constant growth and commercialisation of the sport, as it will follow on to their friends and their children in the future. Other than football due to its popularity, the other UK sports are trying to recruit younger potential fans to develop their game on and off the pitch. In China, with the new capital injection, sport, especially football, is back on the rise, but it will take a considerable time to grow, as the current generation has been brought up watching European and US sports.
If China is going to take over the US by commercialising their sports, they must involve the big corporations, impact culture through broadcasting and improve their sports on and off the pitch for the benefit of future generations.
This article was originally published by our editorial partner, SportBusiness International.
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Date published: 23 November 2016