14 Dec 2017
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Sports market in North America to grow at 4% CAGR to $73.5 bn in 2019: PwC

MUMBAI: The sports market in North America is set to grow at a compound annual rate of 4 per cent, from $60.5 billion in 2014 to $73.5 billion in 2019, says a PWC report ‘At the gate and beyond Outlook for the sports market in North America through 2019’.

During the outlook period, media rights are projected to surpass gate revenues as the industry’s largest segment. A first within the Outlook, this change in rank is a key milestone in an industry-wide transformation set in motion nearly a decade ago with the current cycle of rights deal negotiations.

It highlights the complexity of the business of professional and intercollegiate sports in today’s environment and the challenging dichotomy of spectator sports consumption in and outside the live venue; a core challenge to sustaining growth in both the gate revenues and media rights segments beyond the outlook period.

Media Rights: Media rights are projected to increase at a compound annual rate of 7.2 per cent, from an estimated $14.6 billion in 2014 to a projected $20.6 billion in 2019. As first noted in last year’s Outlook, the segment continues to increase in size as the industry works through the current deal cycle and additional sports properties realize the higher valuation of sports content with the runoff of prior generation deals.

Local TV rights in MLB, NBA and NHL will likely contribute to the overall sector growth with more than 35 per cent of current deals set to expire over the next five years, albeit on a smaller scale than the national rights deals entered by the major pro leagues, athletic conferences and other sanctioning bodies that are predominately driving industry-wide growth.

While media rights are projected to become the industry’s largest segment by 2018, its pace of growth is expected to slow towards the end of the five-year period; representative of mid deal cycle conditions absent the one-time effects of several new deals for major properties realised through 2016, the report predicts.

Yet, the segment should continue to recognise higher than indexed growth of existing rights deals through the end of the period as rights owners continue to carve out or reserve in-demand digital assets and further monetise this inventory under new deals or through in-house ventures. Related initiatives involving a la carte and streaming media are allowing consumers to purchase specific content (i.e. media rights for a single game or season package for a specific team), watch games in a condensed format shortly after completion, and watch replays on league platforms before they are available through general media.

Sponsorship: Sponsorship is projected to increase at a compound annual rate of 4.5 per cent, from an estimated $14.7 billion in 2014 to a projected $18.3 billion in 2019. The segment is expected to be surpassed in size by media rights in 2015 despite strong segment fundamentals, including longer term deals, higher renewal rates, and enhanced inventory yields.

Multi-year deals which insulated much of the segment during the recession period have begun to runoff and the inventory is expected to either be renewed or reassigned at terms favourable to the industry which should sustain the segment’s recent year-on-year growth – a result of customised, integrated deal packaging and a deep pool of sponsorship dollars aided by stable economic conditions and the industry’s continued relaxation of prior brand category restrictions.

Future segment growth, projected to be second highest across the four segments, will also likely be supported by further brand category rights segmentation and new sponsorship inventory resulting from digital media platforms, uniform rights, and incremental in-venue signage and naming rights opportunities.

Merchandise: Licensed merchandise sales are projected to increase at a compound annual rate of 1.4 per cent from an estimated $13.5 billion in 2014 to a projected $14.5 billion in 2019.

The segment remains a relatively saturated market in North America with broad coverage of key consumer product categories and deep penetration of traditional buyer segments.

Beyond expanding the female retail market and industry coverage of select other product categories, future segment growth will likely be tied to economic conditions and further innovation within retail sales models and distribution methods.

Gate Revenue: Gate revenues are projected to increase at a compound annual rate of 2.6 per cent, from an estimated $17.7 billion in 2014 to a projected $20.1 billion in 2019. Despite stable macro conditions in most host markets the past few years, gate volume metrics (ticket sales and game attendance) have generally levelled off – post recovery from prior economic recession and CBA renegotiation effects – as competition from the game broadcast and price pressure on certain ticket buying segments have both continued to increase.

Projected segment growth anticipates on-going industry initiatives will successfully mitigate potential volume loss during the outlook period and further enhance revenue yield through price optimization; a result of more informed variable pricing prior to the season as well as more dynamic price change models and customized ticket promotions as the season unfolds and demand factors shift. These initiatives include further innovation of seat concepts, price structures, ticket policies, and amenity packages as market conditions and fan preferences continue to shift.