Still growing strong: PwC report projects sports industry revenue to rise 3% this year
Revenue generated in 2019 by the North American sports market will increase by nearly 3% for the third consecutive year to a record $73 billion, according to a report set to be released this week by PricewaterhouseCoopers.
The PwC Sports Outlook is an annual study that tracks sales of media rights, sponsorships, tickets and merchandise generated by U.S. and Canadian-based professional and college sports properties. The report is bullish on the outlook for the sports marketplace, estimating it will top $83 billion in 2023, which would represent 11 consecutive years of growth.
When focused on the past year, the sponsorship category will be the industry’s biggest mover, growing 4.1% year-over-year, thanks largely to the increased presence of the gambling industry.
“At this time last year, gambling had only been approved for a few months, but there was a land-rush of players wanting to get in,” said Michael Keenan, the sports practice leader at PwC.
Overall, more than 120 professional teams and leagues are based in one of the 18 states (plus Washington, D.C.) where sports betting has been approved. Many of those properties have already partnered with MGM Resorts, Caesars and others in the space, providing lucrative new revenue streams for all sides.
Keenan said those early-stage deals could set the stage for founding partnerships and even naming-rights deals by a gambling company. More than half of the existing big league naming-rights deals expire by the end of 2023, according to SBJ research.
But gambling is not the only source of new money.
All 30 NBA teams had a jersey patch sponsorship last season for the first time since the program was rolled out for the 2017-18 season. MLB is expected to follow in the NBA’s footsteps, and Van Wagner Sports & Entertainment this summer estimated to SBJ that the average baseball club should realize $6 million to $8 million per year from the patches, which would represent new sponsorship revenue.
Additionally, technology is driving growth in sponsorship, becoming a very active and lucrative category for teams.
Overall, the future of the sponsorship category looks strong, as PwC projects it to have the study’s biggest annual growth next year (+5.7%) and could eclipse gate revenue to become the second-largest segment by the late 2020s.
Media rights will still make up the biggest slice of pie ($20.9 billion) this year, as they have since becoming the industry’s dominant segment in 2017. Although the primary rights deals for the NFL, NBA, MLB, NHL, NASCAR, MLS, College Football Playoff and NCAA men’s basketball tournament are each secured through the next few years, PwC expects that the monetization of other tiers of rights, such as over-the-top streaming, will continue to increase. The study accounts for rights deals that exist between OTT providers and sports properties.
And, of course, all stakeholders are expecting betting to drive viewership and revenue. Fox Sports, for example, invested more than $200 million to launch two sports-betting platforms — Fox Bet and Fox Sports Super 6 — that prominently feature network personalities. Additionally, Sinclair, which this spring bought 21 regional sports networks from Disney for $10.6 billion, has said that in-game betting on its broadcasts was part of its long-term plan.
The media rights category will be up 3.8% this year and is projected to have the biggest growth during the study’s five-year period (+20.8%), topping $25 billion in 2023.
Closer to the fan level, the report acknowledged that because game attendance “has leveled off and even decreased in some instances,” gate revenue is projected to increase at half the rate of media rights and sponsorships (+1.9%), from an estimated $19.2 billion in 2018 to a projected $19.6 billion this year. However, the segment will likely experience growth as the NFL, MLS and NHL expand into new markets during the five-year forecast period.
“Teams have gotten better in terms of pricing [the game-day experience],” said Keenan. He cited the San Francisco 49ers’ announcement last month that its season-ticket holders next year will get a selection of unlimited food and beverage items at Levi’s Stadium.
The sustained growth in sports industry revenue will continue also thanks to a strong construction market. SBJ research shows that $17.9 billion is currently committed to building or upgrading 144 stadiums, racetracks and arenas in the U.S. and Canada.
Many venue owners are putting an emphasis on developing areas outside of the seating bowl, increasing the opportunities for more co-branded inventory and game-day sales.
And because “access drives consumption,” teams are banking on gambling to help boost attendance.
Betting firm William Hill, for example, already opened its 1,200-square-foot title-sponsored betting area in the New Jersey Devils’ Prudential Center and plans to open a sportsbook inside Capital One Arena, home of the Washington Wizards and Capitals. The goal is to entice fans to arrive at the venue earlier, stay later and fully engage.
“The tightrope for sports will be getting the right mix,” said Keenan. “You don’t want to send the message that if you aren’t gambling, you aren’t a fan.”
Sales of licensed merchandise, the PwC study’s smallest segment, are projected to increase 1% this year, and 4.8% over the next five years, from an estimated $14.7 billion in 2019 to a projected $15.4 billion in 2023. The category remains a relatively saturated market in North America, the study said.