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Volume 23 No. 8
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Media rights to trump ticket sales by 2018

Report: Industry revenue to reach $73.5 billion in 2019

Media rights are projected to surpass ticket sales in 2018 as the North American sports industry’s largest revenue stream, according to a report scheduled to be released this week by PricewaterhouseCoopers.

The annual PwC Sports Outlook forecasts growth across the industry in each of the categories tracked — tickets, merchandise, media rights and sponsorships — but the report points to the change in segment ranking as “a key milestone in an industry-wide transformation that was set in motion nearly a decade ago with the current cycle of rights-deal negotiations.”

The media rights sector since 2005 has usually been the smallest of the four segments tracked. It moved past merchandise into the No. 3 spot last year and is projected to pass sponsorship this year, before ascending to the top slot in 2018.

North American sports market outlook

PwC projects that the North America sports market will grow to $73.5 billion in 2019, and in 2018, the media-rights segment will become the industry's most lucrative revenue stream.

North American sports market by segment (in millions)

  2005 2006 2007 2008 2009 2010 2011 2012
Gate revenue* $13,284 $14,261 $15,139 $15,984 $15,778 $16,176 $16,116 $15,821
Sponsorship $8,380 $9,003 $10,016 $11,616 $11,514 $11,820 $12,615 $13,257
Media rights $7,041 $7,546 $8,388 $8,540 $8,809 $9,423 $10,858 $11,743
Merchandising^ $13,358 $14,191 $15,255 $15,860 $12,631 $12,571 $12,482 $12,771
Total $42,063 $45,001 $48,798 $52,000 $48,732 $49,990 $52,071 $53,592
  2013 2014 2015 2016 2017 2018 2019
Gate revenue* $17,372 $17,707 $18,251 $18,637 $19,385 $19,717 $20,122
Sponsorship $13,900 $14,689 $15,309 $16,140 $16,822 $17,635 $18,306
Media rights $12,262 $14,595 $16,366 $18,427 $19,150 $19,949 $20,630
Merchandising^ $13,144 $13,493 $13,672 $13,861 $14,042 $14,252 $14,464
Total $56,678 $60,484 $63,598 $67,065 $69,399 $71,553 $73,522

* 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 2015 and beyond are projected amounts. Source: PwC

The report projects that total revenue from the four measured areas, accounting for both professional and college sports in North America, will grow from $60.5 billion last year to $73.5 billion in 2019, a healthy 21 percent jump over that time period.

While PwC notes that it was the national rights deals secured in recent years by major leagues, college conferences and other sanctioning bodies that have driven the media category’s growth, it cites a volume of regional rights deals that will sustain the growth of the media category. The study estimates that more than 35 percent of MLB, NBA and NHL clubs have media rights deals that are set to expire over the next five years. PwC also expects media rights owners to continue to look for ways to further monetize teams’ on-demand digital assets.

As a share of the overall sports industry, media rights will account for 28 percent ($20.6 billion) of the total measured revenue in 2019, according to the study, up from 17 percent ($7.0 billion) in 2005.

The Big Ten is among properties with new media deals to be negotiated in coming years.
Adam Jones, director of sports advisory services for PwC, said the projected change in segment ranking highlights the industry’s “challenging dichotomy.” An improved media experience at home or at a pub, he said, may be more important to fans than seeing the game in person.

On the national media rights front, SportsBusiness Journal research indicates that between now and 2019, new deals will be negotiated for the Big Ten Conference (for rights held by ESPN, CBS and Fox), Conference USA (ESPN, CBS Sports Network and Fox), IndyCar (ESPN) and UEFA (Fox), as well as rights for the NFL’s Thursday night package (CBS). Additionally, about a dozen NFL clubs’ regional preseason agreements will expire.

For now, however, ticket sales remains the industry’s top revenue generator, as it’s been for years. That source accounted for 32 percent ($13.3 billion) of revenue in 2005, according to the PwC report, and is expected to represent 27 percent in 2019 ($20.1 billion). PwC notes that improved dynamic

New venues like U.S. Bank Stadium will sustain gate revenue.
pricing models and flexibility with customized ticket promotions as teams’ respective seasons go on and demand factors shift should help mitigate any potential decline in attendance.

The report does not count the cost to lease premium seats or annual fees for personal seat licenses; its gate-revenue calculations are based on the face value of tickets. It also does not measure in-venue spending. However, it does draw a correlation between enhanced venues and consumers’ willingness to pay for tickets and attend live events. The study credits clubs that have adapted their existing venues to include more gathering areas, saying that “nearly half of major pro league venues currently feature one or more fan zones with a dedicated footprint, to promote fan interaction as well as offer innovative and communal game day experiences.”

Such an adjustment improves the way fans consume sports, Jones said.

Overall, there is nearly $17 billion committed to 135 stadium and arena construction projects across North America, according to SportsBusiness Journal research. Jones said PwC’s internal data shows that, on average, a team can expect an attendance increase of between 5 percent and 15 percent, and a lift in gate revenue of 25 percent to 30 percent, during the first three years after moving into a new venue, compared with the final three seasons in its previous building.

These new and renovated facilities should not only help sustain the gate-revenue category’s growth, but also the growth in the industry’s sponsorship category.

Daytona Rising, for example, is a $400 million project designed to improve the fan experience at Daytona International Speedway. Included in that renovation was the build out of five expanded and redesigned entrances, or “injectors,” and the title sponsorship to each is being sold as new inventory to a corporate partner. Four of the five slots have been filled, through deals with Chevrolet, Florida Hospital, Sunoco and Toyota.

While PwC projects that the sponsorship segment will be surpassed in size by the media rights category this year, the study still projects a nearly 20 percent growth rate for the sponsorship sector between 2015 and 2019. The growth will be buoyed by what PwC sees as an industrywide emphasis on signing longer-term deals, along with higher renewal rates.

The naming-rights market, for example, is strong, as nine deals for big-league facilities with a total value of more than $1 billion have been announced this year alone, according to SportsBusiness Journal research, including U.S. Bank’s 25-year, $220 million commitment for the Minnesota Vikings’ new stadium, which is scheduled to open next year.

Licensed merchandise sales make up the fourth-biggest contributor to the industry’s overall economy, according to the study. Such sales are projected to increase by 6 percent from an estimated $13.7 billion this year to $14.5 billion in 2019. The category peaked in 2008, with $15.9 billion, and remains the only sector to not fully recover from a drop in the late 2000s. However, in-venue team stores are being overhauled and expanded to enhance product displays and increase foot traffic, and the study asserts that approximately 45 percent of major league clubs have one or more satellite locations of its official team store, with that number also growing.

“With improved points of sale, stronger ingress and egress patterns, and improved technology, there is always an uptick in per caps,” Jones said.

PwC has published its Global Entertainment and Media Outlook report for 16 years. It published a global outlook focusing on the sports industry starting in 2011, and in 2013 it debuted its report looking specifically at the North American sports marketplace.