BUSINESS

Sports Industry Expected To Continue Steady Growth Despite Economic Woes: Report

12/09/2011 09:29 am ET

(Greg Stutchbury) - The global economic slowdown is a concern but sports revenues worldwide should grow by about 3.7 percent to $145.3 billion by 2015, according to a research report released on Friday.

The "Changing the Game" report, undertaken by financial services and consultancy firm PriceWaterhouseCoopers, also pointed to sponsorship issues, a growing generation gap between fans, managing media rights and burgeoning player costs as problems facing the industry in the near future.

"The world we live in at the moment is so volatile, you just have to look at what is happening in Europe," Bruce Baillie, PWC New Zealand's markets managing partner, told Reuters in an interview about the report.

"But you also have to take a look at Asia and the BRIC (Brazil, Russia, India, China) economies, which are going to be real growth areas.

"There is a growing middle class in all those countries and they're the people that buy the tickets and watch sports on television ... and that is what will drive greater revenue."

The report, which analyzed four main areas of sports revenue -- ticket sales, media rights, sponsorship and merchandising -- estimated global sports revenues were about $121.4 billion in 2010 and projected them to grow on a cumulative average of 3.7 percent to $145.3 billion by 2015.

Sponsorship would provide the largest growth in revenue, up 5.3 percent to $45.3 billion by 2015, though sports organizations needed to be aware that corporate sponsors were now demanding more from their investment.

"There is pressure from the corporate sponsorship, they want real indication of return and value on their investment," Baillie said.

"The mere fact there is your signage at an event is not enough. Companies are looking for (tangible) measures of who's going to see it and how are they going to engage? How are they going to get emotionally involved?"

VOTE WITH FEET

Baillie also said the report had indicated growth in ticket revenues had slowed dramatically, with attendance at events taking a greater chunk of fans' discretionary income, while ticket prices increased.

As such, organizations had incorporated greater entertainment opportunities like performances from big-name music acts as part of the sporting event to give consumers a feeling of greater value for money.

Fans would also likely "vote with their feet" away from their 'traditional' sports if they remained too expensive, with North American sports and English Premier League matches examples where fans have voiced displeasure at rising ticket costs, he said.

The growing divergence of media platforms, and sale of rights across those platforms such as television, mobile devices and the Internet, would also create issues as consumers grappled with what was 'free' and what was paid content across platforms and geographic regions, the report said.

Burgeoning player salaries had also caused concern, particularly in European soccer where only about 20 percent of clubs were estimated to be in profit each year, though stronger regulation from governing bodies would have an effect.

Baillie added that a generation gap was also emerging in sports which was creating a two-tiered market for fans, with younger fans not attending games but using social media and the Internet to keep engaged, while older fans had the discretionary income to attend, but not engaging in social media.

"There is a divergence of markets. I think there will be for a little while yet, but the future is in one direction," Baillie said.

"The over 40s are getting older and over time will diminish, so there is a generational gap developing (where) you have to satisfy the people who are going to games now as well as entertaining the kids or you will lose them and in 10 years time nobody will be going to the game.

"So (sports organizations) have to straddle both (markets). It's a real balancing act."

(Editing by Peter Rutherford)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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