See the complete list of trends that we analyze.
1) Introduction to the Sports Industry.
The sports business means many different things to different people. This is a truly global industry, and sports stir up deep passion within spectators and players alike in countries around the world. To one person, sports are a venue for gambling; to another, they are a mode of personal recreation and fitness, be it skiing, cycling, running or playing tennis. To business people, sports provide a lucrative and continually growing marketplace worthy of immense investments. To athletes, sports may lead to high levels of personal achievement, and to professionals sports can bring fame and fortune. To facilities developers and local governments, sports are a way to build revenue from tourists and local fans. Sports are deeply ingrained in education, from elementary through university levels. Perhaps we can’t state with confidence that sports enrich the lives of all of us, but they certainly entertain a huge swath of the world’s population. In addition to economic impact, the largest single effect that sports create is that of gripping entertainment: hundreds of millions of fans around the globe follow sports daily, whether via radio, television, printed publications, online or in person, as spectators or participants.
Sports are big business. Combined, the “Big 4” leagues in America, the National Football League (NFL), National Basketball Association (NBA), the National Hockey League (NHL) and Major League Baseball (MLB) leagues bring in about $17 billion in annual revenue, but that’s just the tip of the iceberg. U.S. sporting equipment sales at retail sporting goods stores are roughly $41 billion yearly, according to U.S. government figures. A reasonable estimate of the total U.S. sports market would be $400 to $425 billion yearly. However, the sports industry is so complex, including ticket sales, licensed products, sports video games, collectibles, sporting goods, sports-related advertising, endorsement income, stadium naming fees and facilities income; that it’s difficult to put an all-encompassing figure on annual revenue. When researching numbers in the sports industry, be prepared for apparent contradictions. For example, the NFL receives more than eight times as much money each year for TV and cable broadcast rights as MLB, despite the fact that MLB teams play about 10 times more games yearly than NFL teams.
When the astonishing variety of sports-related sectors are considered, a significant portion of the workforce in developed nations such as the U.S., U.K., Australia and Japan rely on the sports industry for their livelihoods. Official U.S. Bureau of Labor Statistics figures as of May 2008 found that there were 13,960 professional American athletes plus 175,720 coaches and scouts, along with 12,970 umpires, referees and officials. Meanwhile, as of 2008, 510,300 Americans work in fitness centers (up from 508,300 a year earlier), 36,900 work in snow skiing facilities (up from 36,500), 76,600 work in bowling centers (down from 77,900) and 351,500 work at country clubs or golf courses (down from 353,000). In total, approximately 1.5 million Americans work directly in amusement, gambling and recreation sectors. Another 50,200 work in wholesale trade of sporting goods, and 244,600 work in retail sporting goods stores.
While it may not seem like it to the casual observer, the sports sector is constantly evolving in terms of personal tastes, popular games and technologies. For example, the decades-old Indy 500 has been eclipsed by NASCAR in many ways. In fact, the personality and popularity of a top athlete can have a tremendous impact on the current popularity of a particular sport—seven-time Tour de France winner Lance Armstrong being a superb example with his extremely positive impact on cycling.
Numbers published in an annual study by the Sporting Goods Manufacturers Association (SGMA) are particularly informative about changes in individual sports, exercise and recreation in America. For example, tennis is making a comeback (up 43% from 2000-2007). The fact that tennis is among the least costly sports in which one can participate, combined with the fact one can usually get to a tennis court without a long, gasoline-guzzling drive in an automobile, could easily push tennis to new popularity in today’s tepid economy and high gas prices.
Which brings up the entire problem of gasoline prices in recreation and sports: clearly, expensive gasoline significantly dampens the popularity of motor boats, RVs and anything else that has a large engine. If gasoline prices rise to $3 or more in the U.S., sales of motorized recreation equipment are going to plummet, except in cases where that equipment is known for high energy efficiency. Sailing anyone?
Meanwhile, the number of people playing golf in America has been dropping. In other categories, SGMA reports that some of the highest increases in participation for 2000-2008 were in the activities of running/jogging, table tennis, lacrosse, spinning, pilates and paintball.
Then there’s the fact that large audiences have been watching high-stakes poker tournaments on television recently. Does that qualify as sports broadcasting? It’s certainly a game. Moreover, thanks to the Internet, fantasy sports teams and online betting on sports events are soaring.
One of the strongest, long-term growth trends in all of the recreation business is in fitness-related activities. In the U.S. alone, health clubs boast 40 million members, and another 25 million Americans use exercise machines in their homes. America’s 78 million baby boomers, with time and money on their hands plus a growing concern about their quality of life, will boost this sector further. Among the fastest growing activities of all, according to SGMA, are exercise categories like spinning classes (advanced stationary bicycles), Pilates, use of treadmills and use of the elliptical motion trainer.
Finally, evolving technologies and fashions have an immense impact on sales of sporting goods within specific sectors. Sporting goods makers are constantly trying to create reasons for consumers to buy new equipment. Golf ball and club makers adopt new technologies with great success. Snow ski and board makers use new technologies as soon as they become available. Additionally, ski gear manufacturers introduce new fashions, new colors and new styles yearly in an effort to get consumers to buy new or buy up, regardless of whether significant new technologies are involved.
Meanwhile, the media used to deliver sports and sports related information is evolving quickly. Sports coverage is one of the most widely viewed categories online. At the same time, digital TV recording devices (DVRs), such as TiVo, are enabling fans to watch events according to their own schedules. Finally, the rapid emergence of sports news and events video delivered via state-of-the-art cell phone screens is having a major impact. Watch for continued rapid change throughout the sports industry, as consumers’ tastes and manufacturers’ product lines evolve.
The global recession had a significant effect on sports and recreation in 2008 and into mid 2009. Professional teams have encountered difficulty selling tickets and revenues for manufacturers of sports and recreation equipment dropped. Gambling revenues plummeted. Consumers are still keenly interested in their favorite sports and recreation, but they are reducing their expenses, and they are cutting back on luxury and discretionary purchases in particular. Since ticket prices for professional sports have become extremely expensive, sales are suffering. Golf courses are suffering revenue declines, and a few have closed while many have delayed refurbishing projects. Travel and tourism related to sports have declined. On the highest end, purchases of the most expensive sports and recreation items like boats and RVs have declined significantly. At least one major sports team fell seriously behind on its debt. Even the NFL laid off 150 employees at the end of 2008. For the mid term, the sports industry will face significant challenges in controlling expenses while pricing products and services in a manner that will maintain their appeal to worried consumers.
The biggest opportunities in the sports industry today lie in providing exciting, high-value opportunities for sports fans, such as high-tech recreational gear at reasonable prices; spectator sports ticket packages that represent better value; high-value family recreation items that can be used at home or near the home; exercise/fitness services and programs that will appeal to aging baby boomers; and equipment and apparel that represents high value and exciting design. Consumers still want to play, but they want to do so at a more reasonable cost.