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 cannot 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) bring in about $23 billion in revenue during a typical year, but that’s just the tip of the iceberg. U.S. sporting equipment sales at retail sporting goods stores are roughly $40 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 vastly more money each year for TV and cable broadcast rights than MLB, despite the fact that MLB teams play about 10 times more games each year 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 2010 found that there were 12,660 professional American athletes plus 184,280 coaches and scouts, along with 15,250 umpires, referees and officials. Meanwhile, the data showed that 484,200 Americans work in fitness centers, 36,600 work in snow skiing facilities, 68,000 work in bowling centers and 340,500 work at country clubs or golf courses. In total, approximately 1.5 million Americans work directly in amusement, gambling and recreation sectors. Another 44,100 work in wholesale trade of sporting goods, and 235,300 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.
Research from the Sporting Goods Manufacturers Association (SGMA) indicates that tastes in individual sports, exercise and recreation are continually evolving in America. Participation in fitness classes like Zumba and yoga is growing. Tennis has enjoyed a strong comeback (up 43% from 2000-09). 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 greater popularity in today’s tepid economy and high gas prices. Partly due to the same reasons, the SGMA reports that running and walking are extremely popular (with the number of runners up by nearly 13% in 2010). Almost 50 million Americans are joggers or serious runners.
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. High gasoline prices and a slow economy can lead to reduced sales of motorized recreation equipment, 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, although audiences for televised golf events remain very large. 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.
Amateur participation in the team sports of lacrosse, volleyball and rugby is extremely high. SGMA reports 33% growth in core participants in lacrosse during 2010.
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 boasted more than 50 million members in 2010, a 10.8% growth over the previous year, according to the International Health, Racquet & Sportsclub Association (IHRSA). America’s 29,890 health clubs enjoyed revenues of $20.3 billion. Members visited their clubs an average of 97.5 days each during 2010.
Another 25 to 30 million Americans use exercise machines in their homes, according to Plunkett Research estimates. America’s 76 million surviving baby boomers, with time and money on their hands plus a growing concern about their quality of life, will boost the health club and home exercise sectors further. (Sports and leisure revenues from the Baby Boomer segment will grow quickly. For example, “pickelball,” a racquet and ball game played on a court about one-quarter the size of a tennis court, is soaring in popularity with senior citizens.)
Internationally, IHRSA research finds there are 44 million health club members in the European market, generating $31 billion in club revenues during 2010. There are approximately 13 million members of 18,000 clubs in the Asia-Pacific region generating $10 billion in revenues.
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. Nanotechnology, with the ability to provide components with tremendous strength at very low weight, is being featured in new equipment to a growing degree, including tennis rackets. Likewise, carbon fibers are increasingly seen in the construction of upper-end equipment, including fine bicycles.
Meanwhile, media used to deliver sports and sports related information are 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. The rapid emergence of sports news and events video delivered via state-of-the-art mobile 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 2009. Professional teams encountered difficulty selling tickets, and revenues for manufacturers of sports and recreation equipment dropped. Gambling revenues plummeted. Consumers in America and Europe are still keenly interested in their favorite sports and recreation, but many 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 have been affected. Some golf courses suffered revenue declines, and a few have closed. At least two major U.S. sports teams fell seriously behind on their debts and took bankruptcy. Even the NFL laid off 150 employees at the end of 2008. For the mid term, the sports industry will face challenges in providing services and products that are appropriate for consumers in advanced economies, while revenues in emerging nations such as Brazil and China will grow rapidly.
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 good value; 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 reasonable cost.