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Volume 21 No. 31

Research and Ratings

Media continues to gain on ticket sales as the industry’s most lucrative revenue stream.
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The North American sports industry’s bull market just keeps charging.

Sports’ most lucrative revenue streams are projected to grow from $69.3 billion this year to a record $78.5 billion in 2021, extending the industry’s recent seller’s market, according to a report scheduled to be released today by PricewaterhouseCoopers.

The PwC Sports Outlook — an annual study that tracks sales of tickets, merchandise, media rights and sponsorships generated by U.S. and Canadian-based professional and college sports properties — forecasts that the four categories will combine to see growth every year from 2017 through 2021, for an overall increase of 13.4 percent.

For the second year in a row, the report suggests that the presence of long-term media rights and labor contracts should separately, but almost concurrently, guarantee revenue stability in the sports industry.

First, the primary rights deals for the NFL, NBA, MLB, NHL, NASCAR, MLS, College Football Playoff and NCAA men’s basketball tournament are each secured for the next several years. And although Facebook, Twitter, Amazon, YouTube and Vice Media recently have increased their investments in the sports media space, their presence is seen as incremental rather than disruptive, at least in the short term.

The media segment is expected to top $20 billion next year and overtake gate revenue as the industry’s largest segment.

A second often volatile area that is expected to be relatively calm for the next couple of years is labor. The MLB, NFL, NHL and NBA collective-bargaining agreements each run through at least the end of their 2021 seasons. MLS has two years remaining on its CBA.

For now, however, ticket sales generate the most revenue for the industry ($19.2 billion in 2017), as they have since at least 2005, the first year that PwC analyzed those specific segments. That niche is expected to grow 9 percent during the measured cycle, spurred by the more than $15.2 billion that is currently committed to building or upgrading 81 stadiums, racetracks and arenas in the U.S. and Canada.

The report does not include the annual cost to lease premium seats or fees for personal seat licenses. Its gate-revenue calculations are based on the face value of tickets.

While the report indicates that sponsorship was surpassed in size by media rights in 2015, the study still projects an industry-high 19 percent growth for the sponsorship sector between this year’s $16.7 billion to $19.9 billion in 2021.

Finally, 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 5 percent by 2021, from an estimated $14.4 billion this year to $15.1 billion.

Minor League Baseball provides a good example of how this niche continues to grow. The property’s 160 clubs combined to wear 1,300 jerseys last summer, a 160 percent increase over the 2013 season, helping to drive both b-to-b and consumer business for the organization’s apparel partners.

Although the study generally focuses on the industry’s primary revenue drivers, this year’s report also included an in-depth analysis of the recent surge in franchise sales prices.

When Guggenheim Baseball Management bought the Los Angeles Dodgers in 2012 for $2.15 billion, for example, the sports world considered the price tag an aberration.

The same word was used two years later when Steve Ballmer, of Microsoft fame, shelled out $2 billion for the nearby Los Angeles Clippers, and again this summer when casino magnate Tilman Fertitta successfully bid $2.2 billion for the Houston Rockets at the same time Derek Jeter and Bruce Sherman were cobbling together $1.2 billion to buy the Miami Marlins.

While the prices may have been eye-popping to sports fans, they represent a new reality for the industry, said Michael Keenan, sports practice leader at PricewaterhouseCoopers.

“For high-net-worth individuals, these are trophy assets,” Keenan said. “Such things don’t come up very often, so combine that scarcity of availability with lower interest rates and stronger cash flows and you have a seller’s market. That’s why bids are coming in higher than what makes sense.”

Keenan, who oversaw this year’s report, has seen the industry from many angles. He was at PwC from 1988 to 1996, then spent a decade on the NFL Management Council and was senior director of labor finance there before joining the Cleveland Browns for four seasons as chief financial officer and then president. He returned to PwC in 2011.

PwC data indicates that from 1990 through 2015, teams generally sold at price levels with multiples ranging between two and five times the prior season’s revenue. Additionally, while the perceived value of a team often spikes after a leaguewide media rights deal is signed, it usually falls “back within the longer-run range, below roughly five times,” according to the study.

The report says, however, that a number of sales dating back to the Dodgers’ transaction have been sold recently “at multiples of six times or higher.”

While Keenan did not provide transaction-specific data, Forbes magazine estimated that Fertitta’s $2.2 billion Rockets purchase, for example, was nine times the team’s $244 million revenue in 2016-17.

The report said that “capital appreciation remains the primary investment objective” when it comes to buying a team, but that more owners are beginning to seek out more private partnerships to exploit the “synergistic opportunities of structuring a sports team within a broader portfolio of real estate, hospitality, and/or entertainment assets.”

Keenan said that increased privately funded ancillary real estate development around venues not only will help teams increase revenue across the ticket, sponsorship and merchandise categories, but will serve as a buffer in a tough-to-predict economy.

“The uncertainty surrounding proposed tax reform in the U.S., such as the elimination of tax-exempt status for public bonds used to fund facilities, and exclusion from preferential income tax rates on business income associated with entertainment and sports, makes it critical for teams to look for more private investment,” he said.

North American sports market outlook

PwC projects that the North American sports market will grow to $78.5 billion in 2021, and that next year the media rights segment will become the industry’s most lucrative revenue stream.

  2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Gate revenue* $13,284 $14,261 $15,139 $15,984 $15,778 $16,176 $16,116 $15,821 $17,142 $17,448 $17,963 $18,649 $19,159 $19,556 $20,006 $20,469 $20,902
Media rights $7,041 $7,546 $8,388 $8,540 $8,809 $9,423 $10,858 $11,619 $12,262 $14,595 $16,305 $18,372 $19,075 $20,135 $20,960 $21,755 $22,667
Sponsorship $8,380 $9,003 $10,016 $11,616 $11,514 $11,820 $12,615 $13,257 $13,900 $14,689 $15,481 $16,301 $16,658 $17,614 $18,391 $19,342 $19,876
Merchandising^ $13,358 $14,191 $15,255 $15,860 $12,631 $12,571 $12,482 $12,771 $13,144 $13,493 $13,806 $13,966 $14,390 $14,554 $14,729 $14,939 $15,087
Total $42,063 $45,001 $48,798 $52,000 $48,732 $49,990 $52,071 $53,468 $56,448 $60,225 $63,555 $67,288 $69,282 $71,859 $74,086 $76,505 $78,532

* Does not include the cost to lease premium seats or licensing fees for PSLs; includes only the face value of the ticket.
Source: PwC
^ Food and beverage concession sales are not included.
Note: Estimates listed for 2005-2016 may have changed from previous versions of the report. As PwC adds teams to its portfolio, the company gains access to more exact, confidential data that it folds into the historic analysis.


In its first year as title sponsor of NASCAR’s premier series, Monster Energy’s deal has already become one of the most recognized partnerships in sports, according to the results of the property’s 11th annual sponsor loyalty survey conducted for SportsBusiness Journal by Turnkey Sports & Entertainment.

Monster signed on with NASCAR to become title sponsor for 2017 and 2018 in a deal worth about $20 million annually — with a two-year option for 2019 and 2020. Monster brought a different vibe from prior title sponsor Sprint, introducing more risque and adrenaline-packed activations such as the ubiquitous Monster Energy Girl models, Bellator MMA fights and motorcycle stunt shows on the midway. Monster also leveraged title sponsorship assets to sign an expanded business-to-business deal with Kroger, introduce a can promo that let fans into Friday’s practice sessions for free, and eventually introduce retail activation at convenience and grocery stores in race markets.

That led to a recognition rate of 50.5 percent in the 2017 survey, good enough to make it the seventh-most-recognized partnership out of all deals studied across sports.

Mitch Covington, Monster’s vice president of sports marketing, has refused media requests in recent months as the company maps out possible renewals with NASCAR, Stewart-Haas Racing and NHRA team John Force Racing. But Brian France, NASCAR’s chairman and CEO, said during a press conference in November that the sanctioning body was pleased with the first year of the partnership, which did come with growing pains.

“We’ve been really pleased with how Monster has come in and engaged with our fans … in all markets it’s been fantastic,” France said. “Their young, edgy demo, they’re motorsports centric and they always have been in their culture. … This is also a complicated sport to make sure that they’re getting all the value, but they’re getting a lot of value, and we’re very pleased with where that relationship is.”

While Monster’s relatively high marks were a major takeaway, Goodyear had the highest recognition rate in any category for the sixth year in a row, though its figures were slightly down among avid fans, from an overall recognition rate of 57 percent last year to 56 percent this year.

In the automaker category, all three brands in the sport — Chevrolet, Ford and Toyota — garnered their highest awareness levels ever in the NASCAR study. Toyota won this year’s Monster Energy NASCAR Cup Series championship, its second in three seasons, and the Japanese brand continued its growth in recognition rate; after hitting an all-time high of about 37 percent last year, Toyota stretched that to 42 percent this year. Meanwhile, Ford and Chevrolet were both up about 7 percentage points from last year.

In its second year as the sport’s official credit card, Credit One Bank came in with an overall 17 percent recognition rate, up solidly from the 13 percent recognition rate among avid and casual fans that the Las Vegas-based company earned in 2016. Still, the company came in behind Visa, which was incorrectly identified as NASCAR’s official credit card by about 28 percent of respondents.


Methodology

For this project, Turnkey Sports & Entertainment, through its Turnkey Intelligence operation, conducted national consumer research surveys among a sample of more than 400 members of the Toluna online panel who were at least 18 years old.

This year’s survey was conducted Nov. 7-25. The 2015 survey was conducted Nov. 18-Dec. 3.

Respondents were screened and analyzed based on general avidity levels. Fans categorized as “avid” were ones who responded “4” or “5” to the question “How big a fan are you of NASCAR?” and then claimed to “look up news, scores and standings several times a week or more often,” “watch/listen/attend at least 21 races per season” and “have a favorite driver.” Fans categorized as “casual” responded “3” to the same initial question, then claimed to “look up news, scores and standings several times a month or more often,” “watch/listen/attend at least five races per season” and “have a favorite driver.”

When asked to identify official sponsors, respondents selected from a field of companies and brands that was provided to them for each business sector. The percentage responses listed have been rounded. The margin of error for each survey is +/- 4.9 percent.

What Brands Do NASCAR Fans Consider Buying?

To read: 82 percent of NASCAR fans said they would be more likely to consider buying NASCAR’s official motor oil if they knew which brand had that designation. The rate decreased to 45 percent when considering only those NASCAR fans who did not know that Mobil 1 is NASCAR’s official motor oil.

CATEGORY (NASCAR SPONSOR) AMONG NASCAR FANS WHO CORRECTLY IDENTIFIED THE SPONSOR AMONG NASCAR FANS WHO DID NOT CORRECTLY IDENTIFY THE SPONSOR DIFFERENCE
Motor oil (Mobil 1) 82% 45% +37 pct. points
Airline (Allegiant) 53% 16% +37 pct. points
Fuel (Sunoco) 55% 24% +31 pct. points
Tire (Goodyear) 84% 54% +30 pct. points
Beer (Coors Light) 64% 34% +30 pct. points
Chocolate (M&M’s) 85% 57% +28 pct. points
Credit card (Credit One) 45% 17% +28 pct. points
Insurance (Nationwide) 59% 34% +25 pct. points
Soft drink (Coca-Cola) 80% 61% +19 pct. points

What Brands Do Fans Think Are NASCAR Sponsors?

To read: 50 percent of NASCAR fans said they think M&M’s should be a NASCAR sponsor, compared with 15 percent who think Cadbury should have a NASCAR deal. Those numbers became 66 percent and 15 percent, respectively, when considering only those NASCAR fans who correctly knew that M&M’s is NASCAR’s official chocolate.

Among all nascar Fans AMONG nascar FANS WHO CORRECTLY IDENTIFIED THE SPONSOR
NASCAR SPONSOR/COMPETITOR RESPONSE RATES DIFFERENCE RESPONSE RATES DIFFERENCE
M&M’s/ Cadbury 50% / 15% +35 pct. points 66% / 15% +51 pct. points
Goodyear / Bridgestone 58% / 33% +25 pct. points 70% / 28% +42 pct. points
Mobil 1 / Castrol Edge 35% / 18% +17 pct. points 51% / 17% +34 pct. points
Coca-Cola / Pepsi 64% / 45% +19 pct. points 74% / 44% +30 pct. points
Nationwide / State Farm 36% / 33% +3 pct. points 55% / 37% +18 pct. points
Allegiant / Frontier 12% / 10% +2 pct. points 25% / 12% +13 pct. points
Sunoco / Shell 23% / 35% -12 pct. points 37% / 32% +5 pct. points
Coors Light / Bud Light 29% / 38% -9 pct. points 38% / 36% +2 pct. points
Credit One / MasterCard 14% / 44% -30 pct. points 18% / 43% -25 pct. points

Notes: Fans could select both the official sponsor and the competitor if they chose to do so. The one specific competing company listed was selected by Turnkey for consideration in the survey file.


Impact on Sampling and Support

Are you more or less likely to consider trying a product/service if that product/service is an official sponsor of NASCAR?

  Avid Casual
  2017 2016 2015 2017 2016 2015
More likely 81% 79% 72% 62% 63% 51%
Unaffected / less likely 19% 21% 28% 39% 37% 49%

Are you more or less likely to consciously support a company by purchasing its products/services if the company is an official sponsor of NASCAR?

  Avid Casual
  2017 2016 2015 2017 2016 2015
More likely 83% 81% 69% 59% 62% 55%
Unaffected / less likely 18% 19% 31% 41% 38% 45%

Are you more or less likely to recommend a product/service to a friend or family member if that product/service is an official sponsor of NASCAR?

  Avid Casual
  2017 2016 2015 2017 2016 2015
More likely 80% 76% 66% 59% 65% 48%
Unaffected / less likely 21% 24% 34% 41% 35% 52%

Which of the following is an official sponsor of NASCAR?

  Avid Casual
TIRE
  2017 2016 2015 2017 2016 2015
Goodyear* 61.0% 62.5% 72.1% 51.0% 51.0% 61.2%
Firestone 11.0% 6.5% 7.5% 11.5% 13.5% 11.9%
Bridgestone 12.0% 12.0% 4.0% 8.5% 6.0% 6.0%
Michelin  4.5% 6.5% 3.5% 12.0% 8.5% 5.0%
I’m not sure 2.0% 7.0% 6.0% 11.0% 15.0% 14.9%
  Avid Casual
Energy Drink
  2017 2016 2015 2017 2016 2015
Monster* 53.0% NA NA 48.0% NA NA
Red Bull 23.5% NA NA 21.5% NA NA
AMP Energy 5.5% NA NA 4.0% NA NA
I’m not sure 4.5% NA NA 15.5% NA NA
  Avid Casual
Soft Drink
  2017 2016 2015 2017 2016 2015
Coca-Cola* 54.0% 59.5% 61.2% 46.5% 50.0% 48.3%
Pepsi 18.5% 10.5% 12.4% 16.0% 7.5% 13.4%
Mountain Dew 11.0% 8.5% 9.0% 9.0% 11.5% 13.4%
I’m not sure 4.0% 10.5% 9.5% 16.0% 15.0% 18.9%
  Avid Casual
Automobile
  2017 2016 2015 2017 2016 2015
Chevrolet* 47.5% 39.0% 43.8% 43.5% 38.5% 29.9%
Toyota* 48.5% 46.5% 41.8% 35.5% 27.0% 20.4%
Ford* 41.5% 32.0% 30.8% 33.0% 28.0% 30.3%
Dodge 17.5% 15.0% 13.4% 12.0% 13.5% 12.9%
I’m not sure 9.5% 15.0% 17.4% 20.5% 22.0% 38.3%
  Avid Casual
Fuel
  2017 2016 2015 2017 2016 2015
Sunoco* 45.0% 44.5% 52.2% 32.5% 32.0% 33.3%
Exxon 11.0% 12.0% 11.4% 16.5% 15.5% 9.5%
Shell 12.5% 10.0% 9.0% 12.5% 13.0% 10.0%
Chevron 11.0% 13.5% 9.0% 13.0% 7.5% 12.9%
I’m not sure 4.5% 10.5% 8.5% 13.0% 19.5% 28.4%
  Avid Casual
Chocolate
  2017 2016 2015 2017 2016 2015
M&M’s* 47.5% 47.5% NA 39.5% 46.0% NA
Snickers 14.5% 15.5% NA 14.5% 12.0% NA
Kit Kat 8.0% 8.0% NA 8.0% 5.5% NA
Reese’s 7.0% 6.0% NA 6.0% 4.5% NA
Cadbury 5.5% 2.5% NA 5.0% 2.0% NA
I’m not sure 13.0% 18.0% NA 22.5% 25.0% NA
  Avid Casual
Motor Oil
  2017 2016 2015 2017 2016 2015
Mobil (Mobil 1)* 37.5% 38.5% 36.8% 33.5% 38.5% 35.3%
Pennzoil (Pennzoil Ultra) 13.0% 15.0% 15.4% 19.0% 14.5% 19.9%
Valvoline 11.5% 10.0% 9.5% 10.0% 9.5% 9.5%
Castrol/Castrol Edge 9.0% 8.0% 7.5% 7.0% 7.5% 4.5%
I’m not sure 10.5% 11.5% 15.9% 13.0% 16.5% 21.9%
  Avid Casual
Insurance
  2017 2016 2015 2017 2016 2015
Nationwide* 38.5% 42.0% 46.3% 29.0% 30.0% 30.3%
Geico 11.5% 9.5% 11.4% 16.0% 9.0% 11.9%
Allstate 13.0% 11.5% 6.0% 8.0% 7.0% 7.0%
State Farm 8.0% 6.5% 6.5% 8.0% 11.0% 4.5%
Progressive 5.0% 5.5% 3.5% 7.0% 4.0% 5.5%
I’m not sure 9.5% 14.0% 15.9% 21.0% 30.0% 34.3%
  Avid Casual
Beer
  2017 2016 2015 2017 2016 2015
Bud Light 33.5% 30.0% 32.8% 27.5% 29.0% 32.3%
Coors Light* 22.5% 29.0% 25.9% 23.5% 30.5% 31.8%
Miller Lite 11.5% 11.5% 10.4% 14.0% 6.5% 9.5%
I’m not sure 11.0% 14.0% 14.9% 15.0% 18.5% 18.9%
  Avid Casual
Credit Card
  2017 2016 2015 2017 2016 2015
Visa 25.5% 24.0% 34.8% 30.0% 29.5% 33.8%
Credit One* 19.5% 15.5% NA 14.0% 10.5% NA
MasterCard 18.0% 19.5% 13.9% 14.5% 17.0% 11.9%
American Express 11.0% 10.0% 10.9% 11.0% 9.0% 7.5%
Discover 10.0% 8.5% 6.0% 6.5% 6.0% 4.0%
I’m not sure 16.0% 22.5% 31.3% 24.0% 28.0% 41.8%
  Avid Casual
Airline
  2017 2016 2015 2017 2016 2015
American 15.0% 17.5% NA 14.5% 13.5% NA
Allegiant* 13.0% 12.0% NA 15.5% 21.0% NA
Southwest 14.5% 13.0% NA 10.5% 10.5% NA
United 12.5% 8.5% NA 7.5% 5.0% NA
I’m not sure 28.5% 34.0% NA 32.5% 38.0% NA

* Official NASCAR sponsor
NA — Not available; this category was not asked about in the annual survey prior to this year.