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The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, reviews the fastest growing aspects of the sports business – advertising, licensing, and superstar endorsements – heading into the second half of the baseball season, British Open, NFL camps, and other Summer activities.
According to a recent PricewaterhouseCoopers survey, the overall entertainment and media industry in the United States now exceeds $553 billion, expanding to over $726.2 billion in 2010. Specific sports spending will rise 41 percent during that period, to a staggering $61.6 billion. The United States is the individual leader in overall sports spending – 39.8 percent of the global sports investment. However, much of the other approximately 60 percent comes from Europe, the Middle East, and Africa (38.6 percent) – with the highly successful World Cup, French Open, Wimbledon, and British Open capturing our economic attention as the Summer hits its stride.
As the sports industry continues to expand at an unprecedented rate, interesting trends are emerging in at least three areas: (1) television, Internet, and other advertising; (2) consumer spending and licensing; and (3) sports sponsorship and “superstar endorsements.”
Television, Internet, and Other Advertising
Total advertising in the United States will increase from $177 billion last year to an estimated $230.4 billion in 2010, with Internet and television ads expanding by 15.2 percent and 7.1 percent, respectively.
Not surprisingly, a new Nielsen study reveals that consumers spend over 4 hours and 44 minutes per day watching television, compared to less than four hours per day 15 years ago. However, this television watching is enhanced by other technology that captures our sports passion. Broadband use has increased to nearly 31 hours per week. Internet sports cumulative sessions surpassed 5.7 billion last year. Not to be outdone, U.S. revenue from video games will exceed $8.2 billion in 2008, compared to less than half that in 2000.
The trends are obvious – networks and corporations are diversifying their approaches to the sports marketplace. The major networks wrote nearly $9 billion in primetime advertising this year, two percent less than the year before. However, the difference is being made up by Internet, video game, and other advertising. For example, Disney debuted its ABC series “Lost” and “Desperate Housewives” on streaming video, and over 85 percent of the people who streamed remember the advertiser that was advertising on that program. In fact, Nielsen is planning to modernize the way it compiles television ratings, soon to include iPod viewers, Internet access, cell phones, and other mobile devices. All told, total sports ad spending will exceed $12.4 billion this year, a $2 billion increase from 2004.
For the sports world, the properties and leagues that can diversify their viewing and entertainment offerings in the widest variety of places and platforms will be the ones who have the greatest economic return over the next decade.
Consumer Spending and Licensing
Americans are spending more than ever before on sports. Sports leagues generated licensing revenues of $8.1 billion, up nearly $2 billion from 2004. Consumers are spending 30.3 percent more on tickets – purchasing $15 billion worth for sporting events last year. Compare that to $11 billion for amusement parks, $9 billion for movies, and $790 million for Broadway plays. The trend here is obvious as well. Though sports and Hollywood have always been competitors, more opportunities to cross-promote, jointly brand, and blur the line between sports and entertainment clearly exists. For example, William Morris signed the NHL as a client to help land hockey teams in major motion pictures; more movies with in-brand advertising of key companies continue to exist. NASCAR leads the way combining sports and entertainment, with the Red Hot Chili Peppers touring a number of racing facilities this Summer and Fall. Again, the more integrated the promotion and aggressive marketing, the greater the revenue over the next decade.
Sports Sponsorship and Superstar Endorsements
The sports consumer is more avid than ever before. A recent poll has revealed that nearly 30 percent of us are “avid sports fans” – meaning we will watch more television, buy more products, follow endorsable athlete superstars, and generally spend more money. Not surprisingly, corporate sponsorship spending in the United States increased to over $12 billion last year, with much of that being spent on sports properties.
