The sports industry is one which experienced many unprecedented challenges throughout the course of 2020. Learn why 2021 is the perfect time to get into the sports industry in our latest blog here.
If you’re passionate about sports, now is a great time to get into business.
We’ve just seen one of the biggest growth periods in the history of the industry, with growth averaging at 4.3% since 2014. The sports industry reached a value of nearly US$488.5 billion in 2018, is now estimated to be worth over $500 billion.
Of course, these figures alone can’t explain the drivers behind the boom, and (most importantly for those in the business), they can’t tell us where the money is now or if it’s going to keep flowing.
To answer those questions, we need to start by breaking the industry down into its components, and see which key players are kicking the goals.
What is the $500 billion sports industry comprised of, and what are the biggest growth sectors?
The sports industry is incredibly diverse, encompassing any activity that derives income from sports, including anything from TV distribution, fitness, ticketing, betting and advertising to sponsorship or merchandise.
The Business Research Company has just released an extensive research paper, analysing sports industry growth from 2014 to now, and predicting trends for the coming two years.
For their research, they broke the industry down into two main sectors, according to type of engagement:
- Participatory (fitness and recreation centres, community sports, sporting facilities such as local golf clubs, marinas, gyms, personal training, etc.)
- Spectator (clubs and sports teams, event revenue, media rights, sponsorship and merchandising)
Of these, the participatory sector has the biggest share of the sports market at approximately 56%. Of all the different types of businesses within that sector, fitness and recreation centres dominate, owning approximately 40% of the whole participatory sports sector.
The spectator sports sector is expected to be the fastest-growing sector of the two, at a future growth rate of 5.9%. The revenue generated by media rights had the largest share of this sector in 2018 at 23.7%, and the merchandising market is expected to be the fastest growing into the future, at a rate of 7%.
The sports with biggest financial market share:
As we’ve already pointed out, the total worth of the sports industry is estimated to be around US$500 billion. Just under half of this turnover is generated by the spectator sports sector. So, competitive sports and all the business around it, creates roughly US$250 billion in turnover each year.
Every sport discipline has a certain percentage market share of that $250 billion of professional sports turnover. No surprise, association football (soccer) comes in at number one, with a big majority. Anyone who follows giant ‘super clubs’ like Real Madrid will know that football attracts a lot of investment, and huge global audiences.
- Association Football/Soccer (43%)
- American Football (13%)
- Baseball (12%)
- Formula 1 (7%)
- Basketball (6%)
- Hockey (4%)
- Tennis (4%)
- Golf (3%)
The biggest companies driving growth across the whole industry:
Unlike some other industries (such as fossil fuels) that are dominated by only a few mega corporations, the sports industry is made up of a large number of diverse, smaller players across vastly different markets. Some sell sporting goods and apparel, while others are club franchises or media distributors.
Here are the 15 biggest sports brands and their total ‘brand value’ in US dollars, across all four categories (business, events, athletes, teams) ranked in Forbes Magazine’s 2019 ‘Top 40 Most Valuable Sports Brands.’
- Nike, $36,800,000,000
- ESPN, $13,100,000,000
- Adidas, $11,200,000,000
- Gatorade, $6,700,000,000
- Sky Sports, $4,400,000,000
- Puma, $4,000,000,000
- Under Armour, $3,500,000,000
- UFC, $2,400,000,000
- YES, $1,500,000,0001.
- Dallas Cowboys, $1,039,000,000
- New York Yankees, $815,000,000
- Reebok, $800,000,000
- Real Madrid, $725,000,000
- Super Bowl, $780,000,000
- Los Angeles Lakers, $674,000,000
These companies have also been identified as key competitors in the global industry, according to the Sports Global Market Opportunities and Strategies to 2022 report.
Major Competitors are:
- Life Time Fitness, Inc.
- Dallas Cowboys
- Futbol Club Barcelona
- Manchester United Football Club
Other Competitors Include:
- New York Yankees
- International Speedway Corporation
- Los Angeles Dodgers, LLC
- Washington Redskins
- Compagnie des Alpes
- International Speedway Corporation
- The Pittsburgh Steelers
The top 10 most profitable sports teams worldwide:
Sports teams and club franchises bring in the majority of profits (approximately 72%) in the spectator sport market, with money coming in from television rights, guest appearances, sponsorship deals, merchandise and player trading, among other steams.
According to Forbes magazine, these clubs are the top 10 most profitable sports franchises in the world, with each team’s net worth listed in US dollars.
- Dallas Cowboys, $5 billion (NFL)
- New York Yankees, $4.6 billion (MLB)
- Real Madrid, $4.24 billion (Soccer)
- Barcelona, $4.02 billion (Soccer)
- New York Knicks, $4 billion (NBA)
- Manchester United, $3.81 billion (Soccer)
- New England Patriots, $3.8 billion (NFL)
- Los Angeles Lakers, $3.7 billion (NBA)
- Golden State Warriors, $3.5 billion (NBA)
- New York Giants, $3.3 billion (NFL)
The strongest emerging markets in 2020 and beyond.
The emergence of new markets in countries undergoing rapid urbanization and development (such as China) has been instrumental to growth across the industry, and will continue to be so.
According to the Business Research Company, the fast growth of the global sports industry from 2014 to 2018 can be attributed to two main factors: the fast growth of emerging markets, and rapid urbanisation.
Currently, North America is the largest market for the sports industry, accounting for around 30% of the global market. In terms of market share the USA is followed by Western Europe, the Asia-Pacific, and then other regions.
China and India are among two of the biggest emerging national markets, presenting a lot of opportunities for business expansion across the industry.
The Asia-Pacific and the Middle East are expected to be the fastest growing emerging markets in the next few years, with growth estimated at annual rates of 9.04% and 6.2% respectively.
The USA will continue to grow at a rate of 6%, while South America is also expected to experience growth at a rate of 5.3%.
So, aside from emerging markets and urbanisation, what’s driven growth so far?
As you can see from the Forbes list of most valuable sports companies, apparel and TV distribution companies have generated the most brand value over the past few years and now dominate the industry. Close behind are the mega sports club franchises such as the Dallas Cowboys, the Yankees, and Real Madrid.
Here are a few reasons why these companies dominating have surged, driving growth across their sectors and the whole industry.
- Increased demand for sports apparel in emerging economies and increasing participation of women in sport, have contributed to growth in that area.
- The expansion of TV licensing into new digital technologies has added value to companies that are taking advantage of this space. New streaming media and mobile technology has expanded the global audience, and opened up new advertising revenue, while traditional TV distribution contracts continue to be lucrative income sources.
- Sports clubs such as Real Madrid have developed new, successful approaches to branding, and have made moves to expand brand awareness into emerging markets, creating new audiences.
- Fitness is booming, driven by new generations of health-conscious consumers, as well as emerging markets, leading to the growth of participatory sports.
Where to next?
The sports industry is expected to continue to grow, reaching a value of $614.1 billion by 2022. In particular, a few key trends are expected to drive growth forward, and present new opportunities to businesses:
- Development and growth of digital technology, including new streaming services, mobile viewing, virtual reality, etc.
- The expansion of digital betting and gambling, means that the sports betting industry is set to grow.
- European (football) or soccer is growing in popularity in the American market.
- Esports is growing in popularity, and is expected to continue to grow with the development of more sophisticated VR technology.
- Adopting mobile technologies at the supply and demand sides
- Adding elements of entertainment to sports events
- Combining different sports formats to keep customers entertained
- Expanding in emerging economies
- Offering competitive pricing
- Partnering with big brands
- And offering goods and services to women, among others