SBJ/January 23-29, 2012/In Depth
With some metrics leveling off, action sports industry pushes ahead with new strategies
Published January 23, 2012, Page 1
During the holidays in late December, James Leitz jumped online to check his email. The head of IMG’s action sports division scrolled through his inbox and unearthed an email from someone who had visited the division’s website.
“How does action sports connect with the youth market? Thanks”
For years, IMG’s website had boasted that it could deliver the “elusive” youth demographic through action sports. It was something Leitz never questioned and something no one had asked him in the past.
“It struck me,” Leitz said. “It was the first time through that forum that someone had questioned it and said, ‘Really?’”
Leitz thought the email reflected a shift in how action sports are being viewed. After years of recognition as a direct avenue to today’s youth, the sector’s sizzle has softened.
In recent years, average ratings for the X Games and Dew Tour decreased slightly. Attendance across properties leveled off, and some properties like the Maloof Money Cup and the Dew Tour even dropped an event in 2010. Fuel TV, the 24/7 home of action sports from 2003 to 2010, last year broadened its programming slate to include mixed martial arts and motorsports, and canceled its flagship action sports show “The Daily Habit.”
|Staff writer Tripp Mickle talks about what's next for action sports.|
Participation changed, too. The Sporting Goods Manufacturers Association reported a 31 percent decline in skateboarding and a 26 percent decline in BMX participation over the last decade (see chart). Winter sports remain robust with snowboarding participation increasing 40 percent over the same period, and twin-tip skiing surging in sales and popularity at resorts nationwide.
Rich Luker, the founder of Luker on Trends and ESPN Sports Poll, said action sports remain the domain of 12- to 17-year-olds and are more popular than NASCAR, the NHL and Major League Soccer across every demographic of sports fans. But research shows that the number of 12- to 17-year-olds who consider themselves avid fans of action sports has declined every year for the last nine years.
“That has to be a source of concern,” Luker said.
All of those factors form the foundation for an industry in flux.
“The analogy I use with people is adolescence,” said Vans chief marketer Doug Palladini. “We’re not little kids anymore, which is how we used to be perceived. We’re full-grown adolescent. We show maturity in places, but we still show the angst of teens, which is good and healthy. It keeps things interesting.”
Like a group of teenagers trying to determine what they want to be when they grow up, everyone from action sports properties to agencies, and media outlets to sponsors, have paused over the last three years to evaluate their action sports business and develop new strategies for the future. The resulting strategies, ranging from digital development to international expansion, hold the key to the industry’s future.
“The reality is these next couple of years are big,” said Rob Dyrdek, the professional skateboarder and founder of Street League, a street skateboarding competition. “They will be make or break.”
X goes global; Dew forms Alliance
|This year ESPN will expand globally by awarding three cities an X Games that will be similar in size to its events in Aspen, Colo. (below) and Los Angeles.
In 2009, ESPN executives began to question what had become the gold standard in action sports properties, the X Games. The franchise was turning a profit but its domestic events in the summer and winter were struggling to break even. Sponsor churn and the recession hobbled their success. Overcoming that would be key to its future.
ESPN executives considered expanding the number of domestic events beyond two and explored leaving longtime Summer X Games host city Los Angeles for New Orleans. But after a year of evaluation, they settled on international expansion.
ESPN this year will award three cities an X Games that will be similar in size and scope to its events in Los Angeles and Aspen, Colo. The result will be a six-stop property that executives believe will appeal to sponsors and expand the brand’s relevance.
Domestically, the X Games will bolster its events in Los Angeles and Aspen by adding lifestyle elements such as film festivals and concerts. It plans to roll out a new website, xgames.com, and to begin posting videos and stories from its ESPN affiliates in countries such as Brazil.
Scott Guglielmino, ESPN’s senior vice president of programming and global X Games, hopes the new URL will strengthen brand awareness and the international content will drive traffic.
“From our perspective, L.A. and Aspen have set the bar,” Guglielmino said. “That’s what we’re interested in doing when we talk about taking the X Games to different countries. We’re interested in taking the bar up that has to do with scale, the best athletes and [the host city] becoming part of the story.”
|Dew Tour organizers evaluated their business model and created the Alliance of Action Sports, which has acquired stakes in all areas of action sports, including events, apparel and media.
The Dew Tour is taking a completely different approach to its future. Like ESPN, the tour’s organizers began to question and evaluate their business model during the recent recession. They had added a winter series in 2008 but were unsure of how to grow revenue beyond that.
“It was clear that the Dew Tour was just 30 percent of what this fan base cared about,” said Wade Martin, the tour’s general manager at the time. “All you had to do was go to YouTube to see that. These sports aren’t just dedicated to a competitive world.”
Reaching that conclusion led Martin to create the Alliance of Action Sports: an umbrella group that would go by Alli Sports and acquire stakes in all areas of action sports ranging from events to apparel to media. It began managing other properties, bought an online retailer and launched a new website (allisports.com) that covers action sports.
Some of those efforts have borne fruit. Its management of the AMA Motocross Series has helped increase attendance and sponsorship revenue. But others have been slow to pay off. Martin says Web traffic at allisports.com still isn’t where he had envisioned it.
On the whole, Martin is pleased with the results of the strategy. It’s given the group new revenue streams and positioned it for more growth in the future.
“The foundation is now in place,” said Martin, president of Alli Sports. “Now we just have to bring Alli as a brand to life.”
In the wake of the moves by the X Games and Dew Tour, reality TV show star and professional skateboarder Dyrdek saw an opportunity for a new action sports property. Because the other groups had multisport events, he thought there was room for a skate-only competition and developed a street skateboarding property called Street League that debuted in 2010.
The four-stop property saw attendance rise its second year, but its move from live-to-tape broadcasts in 2010 on ESPN to live broadcasts in 2011 cost it 28 percent of its viewers. Dyrdek plans to concentrate on developing shoulder programming that raises the profile of the 24 skaters showcased in Street League and hopes that will deliver more viewers to their live broadcasts.
“The only way to be truly successful is to be live and draw an audience,” Dyrdek said. “That will come with time.”
Agencies shift resources
|Stakeholders in action sports are plotting strategies that will guide the industry in the years to come.
A decade ago, Steve Astephen’s athlete management and corporate consulting agency doubled its revenue year after year. But in recent years, the Wasserman Media Group principal has seen growth slow to a 30 to 40 percent clip.
Astephen, who believes the slowdown reflects increased competition, not the maturation of the business, isn’t complaining. His division’s business is still vibrant, but Astephen has begun looking for ways to push it forward. His primary focus now is on expanding abroad.
Wasserman recently hired two athlete managers in London and is considering opening an event development business in Europe. The agency had tremendous success with Ken Block’s Gymkhana World Tour in Europe. Some 30,000 people turned out in Austria for the event, a huge increase from the 1,200 people who showed up for the same event at Dodger Stadium, Astephen said.
“There’s not a lot of canvas that’s been painted on in Europe,” Astephen said. “There’s no Dew Tour. There’s no X Games. We’re hoping to build authentic great events in Europe to bring action sports to life over there.”
International expansion is a move being played by a host of agencies. Fuse, a corporate consulting agency, recently developed an international subsidiary called Sawabini Smith Carter that is collaborating with agencies in Australia, India and the Middle East; IMG’s action sports group is taking its successful U.S. Open of Surfing to Australia this year; and Octagon recently shifted one of its French sales executives into its action sports group.
Collectively, the moves reflect a belief that international markets offer the best avenue for new revenue. It’s a belief born out of confidence that endemic brands have raised the profile of action sports abroad and the X Games’ expansion will propel it further.
“It diversifies your portfolio at minimum and at best it creates a lot more opportunities across the board because if you’re working with a French athlete with European sponsors, you can place your American athlete in events with opportunities in Europe and your French athlete with opportunities here,” said Peter Carlisle, the head of Octagon’s Olympics and action sports group.
By 2014, Astephen believes Wasserman’s action sports athletes will spend 40 to 50 percent of their time abroad. He added, “Corporate companies are pulling us over there. If an athlete can go over there and make hundreds of thousands at an event and can only make thousands here, of course he’s going to go.”
The other area where agencies are growing their business is the digital sector. Fuse began developing an in-house production and creative team in 2009 that now composes 20 percent of its staff. Wasserman made a similar move, acquiring a production company last year and beginning to pursue social media consulting opportunities more aggressively.
“Before, the world was event activation, but today 80-plus percent of our athlete activation is social media and branded content development,” Fuse principal Issa Sawabini said. “Corporate brands are acting far more like endemic brands with content than ever before.”
TV out of touch?
In 2010, Fuel TV ended a seven-year run of limiting its programming exclusively to surf, skate and snow footage. It has since moved into mixed martial arts, rally cross and other footage it didn’t offer in the past.
The move was driven by a need to expand viewership of the channel. Since making it, the network has gone from 100 percent to 60 percent of its programming being devoted to action sports, and has increased its distribution from 31 million to 36 million homes.
|The Street League plans to develop shoulder programming to draw more viewers to its live broadcasts.
“We’re not abandoning action sports,” said Peter Vesey, Fuel TV’s vice president of advertising sales. “We’re just trying to grow a much bigger audience for our partners.”
The move not only is changing the look, feel and future of Fuel TV’s business. It’s forcing other action sports groups that once developed programming for Fuel to think more critically about their own content distribution.
Palladini, Vans vice president of marketing, believes TV has lost its efficacy as a medium for action sports. The company shifted programming for its Vans Triple Crown of Surfing to the Web and drew 10.4 million viewers over 13 days last year.
Snow sports sales
|Season||Ski sales units||Snowboard sales||All boards and ski sales||All snow sports specialty sales|
Note: Unit sales for boards and skis are sales in all snow sports channels including specialty shops, chain stores and, as of 2006-07, online sales.
Source: SnowSports Industries America
Wasserman, Alli Sports, Red Bull and others are following suit. Each is developing a YouTube channel that they will fill with original action sports programming.
“The major players recognize you need to establish your brand on every possible platform and make it available in a way that the consumer can but doesn’t need to tune in,” said C.J. Olivares, a media consultant and Fuel TV’s former general manager. “It turns [action sports] into a long-tail investment because you’re not aggregating an audience in a single moment in time. It’s your cumulative audience over six or nine months.”
The new media options and changes in consumption are making advertisers and sponsors look more closely at action sports before committing to deals.
Jeremy Carey, the U.S. director of media buying agency Optimum Sports, said the segment still serves as an excellent vehicle to reach the 12- to 24-year-old demographic and the content and on-site integration opportunities it offers are unparalleled, but action sports property’s TV and attendance metrics have leveled off in recent years. For that reason, Optimum advises clients to set aside sufficient money for activation.
Action sports participants (000s)
|Mountain bicycling/non-paved surface||NA||NA||NA||NA||NA||7,040||6,751||6,892||7,592||7,142||7,161|
Source: Snowboard data: National Sporting Goods Association data, provided by SnowSports Industries America. All other data provided by Sporting Goods Manufacturers Association.
“When you tell them all the stuff you have to do to do it right, they might get skittish,” said Carey, who has advised Mountain Dew, JCPenney and State Farm on action sports. “Media budgets don’t necessarily take into account a proper activation.”
But that hasn’t deterred companies from getting into action sports in recent years. For every company like Slim Jim, Taco Bell or Verizon Wireless that has ended a Dew Tour or X Games sponsorship, there are new companies like Jack Link’s, Chipotle and Pantech that have signed new deals.
Perhaps no company underscores action sports’ sustained appeal more than Ford. The company sponsored the Vans Triple Crown in the early 2000s, a time considered to be the heyday of action sports, but abandoned the segment for nearly a decade.
Last year, Ford jumped back in to action sports by signing athletes Ken Block and Brian Deegan, developing an Octane Academy to promote the drivers, and supporting it all with an X Games sponsorship. It was all part of a concerted effort to market to the millennial generation.
“Action sports is right in the target bull’s-eye of this generation,” said Jamie Allison, director of Ford North America motorsports. “That generation thrives and relishes the extreme end of style in sport, and Ford found the right audience in identifying with that platform. It’s working really well.”
The next generation
Leitz was in China two weeks ago as he recalled the email questioning the future of action sports. He was there exploring an opportunity for IMG to expand into Asia. International expansion is the next frontier for IMG’s action sports group.
|Action sports stakeholders see domestic fans becoming more avid and educated, making them more inclined to support brands and consume more content.
Leitz said he found responding to the email immediately difficult. He believes the action sports industry has matured,but that maturation has not undercut the business. The fundamentals of the industry remain strong. Right now, agencies, properties and media companies alike are trying to figure out what they want to do next.
“The question is: When we grow up, who are we going to be?” Leitz said.
It’s a question that industry observers have been asking for the last three years. There’s optimism that the collective efforts to answer that question will begin to pay off in the coming years through international expansion, the development of digital channels on YouTube, and the return of past sponsors like Ford.
Alli Sports’ Martin believes that as those strategic efforts take root, action sports will benefit from a whole new set of fans. Members of Generation X, which was the foundation of these sports’ explosion in the 1990s, have begun having kids of their own, and those kids will likely be the first to have their parents encourage them to skateboard, surf or snowboard.
Tracking fan trends
ESPN Sports Poll tracks the percentage of U.S. sports fans who identify themselves as casual or avid fans of action sports. The survey also shows how action sports ranks among the specific demos among all sports. Here are highlights of the results:
|Casual fans||12+||12-17||Male 12-17||Male 18-34|
|Avid fans||12+||12-17||Male 12-17||Male 18-34|
|Casual fans||12+||12-17||Male 12-17||Male 18-34|
|Avid fans||12+||12-17||Male 12-17||Male 18-34|
Note: The 2010 results covered 23,997 interviews of sports fans ages 12 and older, while the sample size for 2011 was 18,037.
Source: ESPN Sports Poll
Composition of avid action sports fans
(U.S. residents 18+)
Source: Scarborough Research
“I go through that in soccer with my son,” Martin said. “I was a soccer player, but my dad couldn’t stand it. I encouraged my son to play. That’s going to happen with action sports now, and when it does, there’s going to be another big growth.”
Martin doesn’t see that happening for another three to five years. In the meantime, he sees new fans beginning to follow the sports worldwide, opening new opportunities for the industry. He sees the domestic fan base becoming more avid and educated, making it more inclined to support brands more, consume more content and buy more products.
Most avid action sports markets
|Rank||market||% of market that claims to be action sports fan|
|4||Flint/Saginaw/Bay City, Mich.||23.2%|
|9 (tie)||Spokane, Wash.||22.3%|
Source: Scarborough Research
“Yes, it’s a transitional time for these sports, but part of the reason these transitions are happening is because they can,” Martin said. “There still is global opportunity because this thing is the wild west; it was born here, and it can expand out. And there will continue to be a melding and more collaboration between primary stakeholders driving the business, whether they be on the brand side, the media side or the event side. That’s a good thing because it will provide increased opportunity for where we can take this business.”