A Summary of Revenue Projections to 2020

The PwC Sports Outlook identified four key revenues sources shared by sport organizations and evaluated their projected growth and therefore impact on the sports industry, overall.  The four areas included: gate revenue, media rights, sponsorship and merchandise.  All areas are projected to see compounded annual growth by 2020 of a rate of at least one percent with media rights leading the key areas with the largest rate of growth being 5.5 percent.  Interestingly enough, the article describes the exorbitant fees rights holders are receiving as a leveling off event as opposed to oft reported bursting bubble.  Nevertheless, sport revenue of the present and future will require the knowledgeable handling of these four key areas.

Gate revenues have become a dynamic source of income for sports properties.  The variability of ticket programs including season ticket holders (full and partial), incentivizing purchasers with value-added benefits, fan zones and the differentiation between the in-game and broadcast experience are all ways ticket managers ensure ticket sales revenue.  Specifically, with season ticket holders, membership programs have been established to provide a more immersive, exclusive experience to further connect the season ticket member to their sport franchise.  These “members” are rewarded for their involvement in the program with a variety of experiences including behind-the-scenes access and meet and greets with players among other incentives.  From the collegiate to the professional level, creativity and innovation with seating programs greatly enhances a sport organization’s ability to monetize the most plentiful asset, its seats.

Media rights have received an increased amount of publicity in the past few years with ever-rising rights fees being paid out by various media companies.  Specificallu, the Big Ten’s multi-billion-dollar deal with ESPN and FOX.  Earning $440 million annually for the Big Ten deal was to be a litmus test to determine how other rights holders would fare in the new round of TV negotiations.  Because, $2.64 billion contracts don’t seem sustainable, media companies and rights holders are investigating new ways to distribute and monetize their content.  Cord cutting is at an all-time high and alternative forms of distribution are necessary.  Although no one can put a finger on exactly what route the sports entertainment industry is taking, many are certain the road leads through the intelligent, handheld devices that often accompany sporting event spectators.

Similar to gate revenues and media rights deals, sponsorships are in a new era of existence.  No longer are court-side dorna signs an acceptable display of sponsorship graphics and logos (except for in AT&T Arena in San Antonia), sponsor expectations include fan and product immersion and dynamic displays.  Sponsorships that have cracked into the digital and social space have barely scratched the surface of their exposure capabilities.  Currently, projected growth will occur towards the latter years of the four-year period with most companies locked into deals causing a stabilizing of the field.  Awareness will always be the leading driver for a company to enter into a sponsorship but the added benefit of community relations and foundation interaction helps with solidifying a positive company image for those who interact with the brand.

Although having the smallest compounded annual growth rate of 1.4 percent, merchandise has become an important tool in earning revenue.  E-commerce is an obvious advantage to the sale of club specific merchandise especially with fans of sports franchises not being relegated to one city or region.  Representation is as easy as a click of a button for a Dallas Cowboys fan who lives in Montreal.  For fans who are able to represent their favorite teams locally, sports venues have team stores that sell merchandise.  Facility/team owned merchandising versus third party vendors is a question that provides pros and cons that defend either side.  The most important aspect of sales is the integration between team and sales, ensuring team assets are advocating for the purchase of key products as communicated by the merchandise professionals.

Revenue streams are important to the sustainability of the sports industry.  Making intelligent, well-thought out decisions that increase the bottom line can be effectively done with a focus on gate revenues, media rights, sponsorships and the sale of merchandise.

The chart below compares revenue accrued in 2016 versus the revenue projected by 2020 and the compounded annual growth rate over the four-year period.

North American sports market by segment (2016 to 2020 projections and growth rate)
US$ billions 2016 2020 CAGR
       
Gate Revenues 18.7 20.8 2.7%
Media Rights 18.2 21.2 5.5%
Sponsorship 16.3 18.7 3.9%
Merchandise 13.9 14.8 1.4%
CAGR = compound annual growth rate
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