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Volume 23 No. 8
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Forecast: Big growth ahead

Properties’ revenue to jump 24 percent by 2018, PwC projects

North American sports properties’ biggest revenue streams will combine to total $70.7 billion in 2018, according to a report scheduled to be released this week by PricewaterhouseCoopers. That would be a 24 percent jump from 2013 and 17 percent more than what the company is projecting for 2014, with media rights revenue becoming an increasingly significant contributor to the industry’s overall economy.

The PwC Sports Outlook forecasts growth across the industry in each of the categories tracked for the study: tickets, merchandise, media rights and sponsorships. The report projects that total revenue from those areas, accounting for both professional and college sports, will grow at a compound annual rate of 4.5 percent between this year and 2018. That growth rate would be more than double what was seen between 2009 and 2012.

The biggest area of growth is expected to come from media rights. The category accounted for 16 percent of the total measured revenue in 2008, according to the study, but that share is projected to increase to 27 percent in 2018, just behind the industry’s largest segment in terms of both percentages and dollars: gate revenue.

Gate revenue accounted for 31 percent of revenue in 2008 and is expected to represent 28 percent in 2018.
PwC says the industry’s stable TV ratings and on-demand digital assets “should help mitigate potential future downside risk” in the media rights category. Adam Jones, director of sports advisory services for PwC, said the company is paying close attention to the pay-TV segment of the business and how its penetration could affect the distribution of content.

MLS announced a media deal in May that more than triples what it gets now from partners.
Among the examples of growth in this category, the eight-year, $720 million deal MLS signed this summer with ESPN, Fox and Univision more than triples the average annual total that the league was previously receiving from its media partners. Additionally, the NBA is nearing new deals with ESPN and Turner that would see those league partners pay up to $2.5 billion on average annually for coverage rights, more than double what the league now receives from ESPN and Turner in rights fees.

Also expected to see significant growth, according to the PwC report, will be the sponsorship segment, with a projected annual growth rate of nearly 5 percent through 2018. It’s an ascent that began in 2011 after the category saw declines during the overall U.S. economic recession.

A less adversarial and more cooperative relationship between properties and marketing partners will lead to broader, more integrated activation campaigns, longer-term deals and higher renewal rates, the report projects. Those developments, in turn, will generate higher returns.

The naming-rights market, for example, has been reignited in recent years following a period of relative inactivity during and immediately after the national economic recession. Fifteen deals for big league facilities have been announced in the last 20 months, according to SportsBusiness Journal research, including SunTrust’s 25-year, $250 million commitment last month for the Atlanta Braves’ new ballpark, which is scheduled to open in 2017.

Jones said PwC initially expected the growth rate of the sponsorship category to be even higher as a result of the increase in inventory being offered. However, he said, some companies ultimately ended up transferring dollars from one piece of inventory to another rather than increasing their overall spending.

Revenue from ticket sales will continue to represent the biggest slice of the industry revenue pie, as it has each year since PwC began tracking sports. The gate-revenue sum is projected to increase at a compound annual growth rate of 2.6 percent, growing from $17.3 billion in 2013 to a projected $19.7 billion in 2018.

The study blames work stoppages in the NBA in 2011 and in the NHL in 2012 (both tied to collective-bargaining agreement negotiations), as well as an industrywide freeze or reduction on ticket prices, for what was a relative lack of movement in this category between 2008 and 2012. However, PwC expects gate revenue will increase annually between now and 2018 as team and venue owners continue to upgrade and replace aging facilities as a way to improve the game-day experience for fans.

For the sake of this study, PwC does not count the cost to lease premium seats or licensing fees for personal seat licenses. Its calculations are based on the face value of tickets, though it does note that premium seats account for 15 percent of the total available seat inventory for North American pro sports.

In the smallest of the four measured categories, PwC believes that the sports retail sector is a relatively saturated market in North America and projects an average annual growth rate of just 1.4 percent in this area. The report cites what it calls “imminent change within the structure of intercollegiate athletics” as a reason to be conservative on predictions for the segment’s growth.

Jones said the study is not intended to represent total size of the industry, but, rather, aims to give an in-depth look at what have historically been the industry’s four most valuable segments. PwC works with teams and leagues across the spectrum of pro and college sports, Jones said. It is through those relationships that PwC is able to acquire, aggregate and project the revenue included in the report.

The company has published its Global Entertainment and Media Outlook report for 15 years. It published a global outlook on the sports industry specifically starting in 2011, and it debuted its report looking at the North American sports marketplace last year.

North American sports market outlook

PwC projects that the North America sports market will grow to $70.7 billion in 2018, buoyed by the continued growth of the media rights segment.

North America sports market by segment (in millions)

  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAGR
Gate revenue* $15,778 $16,176 $16,116 $15,757 $17,334 $17,827 $18,262 $18,716 $19,328 $19,737 +2.6%
Media rights $8,809 $9,479 $10,927 $11,812 $12,502 $14,837 $16,592 $17,256 $18,674 $19,349 +9.1%
Sponsorship $11,514 $11,820 $12,615 $13,257 $13,900 $14,619 $15,329 $16,266 $16,861 $17,571 +4.8%
Merchandising** $12,631 $12,571 $12,482 $12,771 $13,144 $13,318 $13,485 $13,668 $13,865 $14,065 +1.4%
TOTAL $48,732 $50,046 $52,140 $53,597 $56,880 $60,601 $63,668 $65,906 $68,728 $70,722 +4.5%

Percentage of change Year to Year

Annual change 2010 2011 2012 2013 2014 2015 2016 2017 2018
Gate revenue* +2.5% -0.4% -2.2% +10.0% +2.8% +2.4% +2.5% +3.3% +2.1%
Media rights +7.6% +15.3% +8.1% +5.8% +18.7% +11.8% +4.0% +8.2% +3.6%
Sponsorship +2.7% +6.7% +5.1% +4.9% +5.2% +4.9% +6.1% +3.7% +4.2%
Merchandising** -0.5% -0.7% +2.3% +2.9% +1.3% +1.3% +1.4% +1.4% +1.4%
TOTAL +2.7% +4.2% +2.8% +6.1% +6.5% +5.1% +3.5% +4.3% +2.9%

CAGR: Compound annual growth rate
* Does not include the cost to lease premium seats or licensing fees for PSLs; includes only the face value of the ticket. ** Food and beverage concession sales are not included.
Notes: Numbers have been rounded. Figures for years 2014 and beyond are projected amounts.
Source: PwC