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Volume 21 No. 30
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Media, gambling, new stadiums to push North American sports market to $80 billion by 2022

Media rights for the first time have overtaken revenue from fans filling empty seats and will top $20 billion in 2018, according to the annual PwC Sports Outlook.
Photo: Getty Images

Media has stormed the gate. Or at least that’s the case when it comes to North American sports revenue.

 

According to a report scheduled to be released today by PricewaterhouseCoopers, the media side of sports in the U.S. and Canada overtook gate revenue in 2017 as the industry’s largest slice of revenue, and this year’s media haul is expected to top $20 billion for the first time.

 

That’s just one takeaway from the PwC Sports Outlook, an annual study that tracks sales of media rights, sponsorship, tickets and merchandise generated by U.S. and Canadian-based professional and college sports properties. The report forecasts that the four categories will combine to see growth every year from 2018 through 2022, topping $70 billion for the first time this year and reaching $80 billion by 2022.

 

If the report’s predictions stand, the industry will have enjoyed 13 consecutive years of growth — thanks in large part to the more than 100 percent increase in the media segment in the last decade.

 

“New players are going to help drive up rights fees,” said Michael Keenan, the sports practice leader at PwC. “Tech companies and properties are going to find ways to partner with existing rights holders because leagues want to provide access to all fans in the way that each individual fan wants to consume it.”

 

The report uses Amazon as an example of what media rights partnerships could look like when the next wave of negotiations begin.

 

The company, which already has formal relationships with several major sports properties, brings a diverse set of products to a media rights conversation: Its artificial intelligence assistant Alexa provides fans with on-demand NFL information; Twitch streams NBA G League and esports events; and Elemental has provided both live and on-demand video streaming for the Olympics. Throw in subsidiary Whole Foods as a potential sponsor/advertiser, plus Amazon’s home delivery capabilities, and its portfolio looks nothing like a legacy rights holder.

 

CBS also offers an add-on subscription option for Amazon Prime members, delivering another way for customers to access live NFL games and giving the two companies an opportunity to generate incremental advertising dollars.

 

Similarly, AT&T’s potential broadcast rights ecosystem includes Turner, DirecTV, Bleacher Report Live and, of course, mobile and internet technology.

 

Finally, regional sports networks will continue to add to the category’s growth. Sixteen team deals across Major League Baseball, the NBA and NHL are set to expire over the next two years, according to the report, and the FCC-mandated sales of 22 RSNs expected to occur next year as a result of Disney’s acquisition of 21st Century Fox could spark a change in RSN business models. Fox Sports Detroit, which has aired Tigers games since 1998 and the Red Wings since 2003, is on the block, and the Ilitch organization, which owns both clubs, announced last month that it’s exploring the creation of an RSN to replace it.

 

Among other segments, ticket sales still generate the second-most revenue for the industry, projected to be $19.3 billion this year. 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.

 

The segment is expected to grow 9.6 percent from 2018 to 2022, buoyed partially by the sustained strength of the sports construction market as $16.2 billion is currently committed to building or upgrading 118 stadiums, racetracks and arenas in the U.S. and Canada, according to Sports Business Journal research. Nicer buildings tend to attract more fans.

 

But Keenan says attendance and in-venue spending, “which have leveled off — and even decreased — as competition from game broadcasts and price pressure on certain ticket buying segments have continued to increase,” could receive a jolt from the U.S. Supreme Court’s recent decision to allow states to legalize sports betting.

 

Venue development, like that of Milwaukee’s Fiserv Forum, will help gate revenue reach a record $19.3 billion this year, according to PwC’s estimates.
Photo: Dylan Buell

As of now, five states — Delaware, Mississippi, New Jersey, New Mexico and West Virginia — have joined Nevada in legalizing sports betting. New York, Pennsylvania and Rhode Island have legalized sports betting but haven’t started taking bets. Those states are home to 22 franchises in the five biggest sports.

 

“Sports wagering has the potential to increase fan engagement, provide benefits to fans who participate and offer additional entertainment to fans on game days and beyond,” according to the report.

 

PwC says a gaming company could partner with a team to design an app that allows any fan to wager on a variety of team and individual outcomes during a game. But to incentivize fans to attend the game and use the app, “a dollar credit to the fan’s individual account could be applied to be used for wagers.” The team also could offer concessions and retail credits for fans to encourage them to arrive early and stay late to wager.

 

The sponsorship category also will benefit from the new inventory related to gambling, via advertising, uniform rights, incremental in-venue signage and naming-rights opportunities. In the past six months, the NHL, NBA, WNBA, Dallas Cowboys, Baltimore Ravens, New York Jets, Philadelphia 76ers and New Jersey Devils have each signed a marketing deal with a casino.

 

The $20.1 billion that the sponsorship category is projected to generate in 2022 would represent an increase of 17 percent from this year and would pull it almost even with the gate revenue sector.

 

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 4.6 percent by 2022, from an estimated $14.6 billion this year to $15.2 billion. One reason for the sustained growth is that properties have become better at analyzing CRM data to adjust the types of items they offer to fans, Keenan said. He also cited nimble behavior such as Fanatics’ ability to ship World Series champions-emblazoned apparel seconds after the Red Sox won the title on Oct. 28 as a reason for the category’s sustained growth.

 

PwC’s data dates back to 2005.