The complexity of the sports industry is well known and this helps to explain the continued growth of academic publications with a special emphasis on this field of study. In this article, I will attempt to draw your attention to some key aspects in one specific area of study - global sport finance - and with a special focus on broadcasting revenues. Given the vast array of sports revenue streams it can often be hard to produce an accurate total annual revenue figure for the whole industry. However, it is widely accepted that today the global sports industry is worth more than €400 billion.
The sources of sports finance can normally be put into the categories of either public and/or private revenue streams.
If we first look to the public revenue streams, it is at the national level where the public source of funds really exists. This is where national public budgets can finance sport with the building of facilities, state aid and public lotteries or in the form of indirect finance such as tax deductions, for example. At the smaller end of the scale, let’s say the local club where you practice a certain sport, the main revenue stream (besides eventual public revenue) is generated by membership fees.
When it comes to global sport governing bodies who manage large international sporting events, the revenue sources are multiple and as a consequence more complex. Indeed, private finance includes various marketing revenue streams such as broadcasting, sponsorship, ticketing and licensing. In addition, the major international sporting bodies are able to run successful marketing strategies and attract large crowds around their events. This generates important additional sums for reinvestment and further long term development of their sport. Here it is interesting to note that the IOC and the vast majority of other high profile international sport governing bodies are entirely privately funded.
International sports events are today considered as premium and exclusive content for broadcasters as they continue to attract large audiences. The International Olympic Committee (IOC) estimated that more than half the world’s population – about 4.8 billion people – watched the London 2012 Olympics and that 3.4 billion people watched the London 2012 Paralympics.
Historically, broadcasting rights were sold for the first time in 1956 for the live coverage of the Olympic Games in Melbourne, Australia. Since then, and especially following the 1984 Los Angeles Games, Olympic broadcasting revenue generation has continued to rise at an impressive rate. While the Olympic Games held in Rome in 1960 generated a “modest” US $1.2 million in terms of broadcasting revenue, the London Games in 2012 totalled USD 2.6 billion. The demand from broadcasters and the viewing public to engage with such high profile mega sporting events continues on an upwards trajectory..
Today it is normal for mega event broadcast revenues to be counted in billions rather than in millions. NBC has recently paid US $7.65 billion to extend its existing broadcasting deal with the IOC by 12 years to 2032, having previously paid $4.38 billion for the rights to the Games in 2014, 2016, 2018 and 2020. Away from the Olympics, The National Football League’s (NFL) agreements with national and international broadcasters for 2013 to 2022 (9 years) are worth a reported US $3.1 billion per annum. If you ask why broadcasters would be willing to pay these tremendous amounts to obtain broadcasting rights the best answer can be given in relation to the recent Super Bowl XLIX. A 30-second commercial/advertisement in the 2015 final cost US $4.5 million. In this multi-channel age, sport is still the only medium to consistently guarantee record breaking audience figures for a broadcaster.
In legal terms, a typical broadcasting agreement contract is mainly structured on the sale of the broadcasting rights by the sports rights holder to the sports broadcaster. However within this contractual framework there can often be a complex number of “parties” with specific interests, ranging from the venue owners, event organisers, governing bodies, sports rights agencies, clubs, teams, national federations, individual sportsmen and women, event sponsors and other commercial partners such as the broadcasters themselves, broadcast sponsors and advertisers. To this list new media companies can also be added. It is easy to imagine, therefore, the potential legal issues that can arise in such a complex structured agreement.
In an increasingly digital world and with an ever present demand for sport content from broadcasters, these complex issues will continue to place demands on sports industry managers.. Specifically, the legal challenges connected to new business models, new marketing products and the continuous proliferation of sport will require the management boards of all industry stakeholders involved in this environment to be well qualified to help better cope with this specific field of development. This is why, in my view, it has become crucial for future business managers interested to work in or in connection with the sports industry to attend academic programmes such as the International Master in Management, Law and Humanities of Sport also known as the “FIFA Master”, and organised by the International Centre for Sport Studies (CIES). These types of postgraduate programmes are carefully designed to help sport management professionals navigate the ever complex world of sport business and approach such high value sport broadcast deals with confidence.
by Vincent Schatzmann, CIES