FROST: The State Of Sports Business

Tim Frost

WILMETTE, Ill. — There is considerable debate concerning the state of sports business.

Unsettled may be the proper mood as attendance, sponsorship levels and car counts are not what they once were.

We are in a period of transition — operating in uncertain conditions while evolving toward a digital future. Growth continues to be driven by media rights because the demand for sports content still sells.  Beyond that there are numerous unknowns.

Questions arise: What will the future of sports media look like, how can return on investment be generated with sponsorship and what is the proper approach to the esports. Disruption is everywhere for media. Many struggle with how to engage the millennial and how to make the commercial aspects of esports relevant.

An annual survey by PwC provided an in-depth look at the business of sports by industry leaders. The consensus was tentative. The results revealed prior operational protocol is not going to cut it going forward and a new skillset is needed along with the mindset that change is required to compete effectively on the field and the digital landscape.
The survey predicted growth will continue but not at the record levels of the recent past. Mature markets will slow with optimism in evolving economies. Sports tech companies will top the charts led by innovation. Broadcasters and media companies, along with event organizers, will be the slowest due to pricing pressure.

Media and sponsorship rights will rise as their business models evolve. Consumers are moving toward digital consumption and those properties that utilize their data will assist sponsors in reaching their target audience.

The movement in consumer behavior is the driving force for many aspects of change in the sports industry. Younger generations are transitioning their entertainment time from traditional television to mobile devices. Understanding their actions is a priority and content and distribution channels will have to be tailored to their preferences.

The contrast between viewership among demographic groups is alarming. Older viewers watch sports on traditional television four times more than younger audiences. Online screen consumption on multiple screens is the standard for the technology savvy.

Sports content still reigns. It is being created and distributed in multiple formats because of the consumer. Highlights and on-demand material along with team-, athlete- and fan-generated content are the most consumed.

The social and often viral content from user-generated content is key to reaching and engaging the desirable audiences. Winners are those who capture attention and activate revenues around it.

Media rights are the largest source of revenue in the sports business. For the last 25 years, they have been rising rapidly. Long-term contracts are set to expire over the next few years. Will the escalation continue? No one really knows.

Non-traditional entrants have started bidding on properties with the goal to distribute on their individual platforms. Leagues are starting to package and structure their media rights for a mix of different channels. This can be a complex undertaking. Adaptation is imperative from an operational and financial perspective.

Live sports are important. Packaging and distributing on different platforms with enhanced features will keep it competitive. Stats, onscreen information and virtual reality are being developed and deployed successfully. Personalized content for engaging the millennial viewer is working.

Esports can no longer be ignored. Traditional sports leagues and teams are devising strategies to become involved. They can create an esports team, acquire a property or extend their brand through sponsorship and activation.

While traditional sports and esports are different, they could learn from each other. Digital streaming is being used to distribute content in a direct-to-consumer model. The operational structure of established entities will provide a road map for the long term.

The goal is to understand and embrace the differences, which is critical to engaging future consumers of sports.