2 Sport as an Industry

Sport as an Industry

Overview of Sports as an Industry

• The chapter outlines how sport is not only an entertainment medium but also a significant industry.

• Strategic communicators in sports must understand the operational aspects of business to effectively contribute to organizational goals.

• Effective strategic communication helps in achieving unified goals within sport organizations.

Sources of Revenue for Sport Organizations

• In 2019, global sports revenue reached $500 billion, underscoring the economic scale of the industry.

• Key sources of revenue include:

  • Television broadcasting rights: Significant source of income, creating partnerships with media outlets.

  • Commercial sponsorships and endorsements: Financial support from brands in exchange for visibility and association with teams/athletes.

  • Merchandise sales: Fans express allegiance through the purchase of team-related products.

  • Spectator fees: Income derived from ticket sales and attending events.

  • Tourism: Events generate local economic opportunities.

Ticket Sales

• Ticket sales form a crucial revenue stream, varying by sport and league:

  • NBA: 20% of total revenue from ticket sales.

  • MLS: 60%.

• Offerings include:

  • Single-game tickets.

  • Season tickets: Most profitable, often accompanied by perks.

  • Group rates and promotions.

• Example: Arizona Diamondbacks offered suite packages to enhance attendance.

Merchandise

• Merchandise sales differ from other industries as they involve social fandom aspects.

• Factors influencing purchase intentions include:

  • Overall fan satisfaction.

  • Media exposure and on-field performance.

• Importance of official licensed merchandise for consumers to avoid counterfeit products.

Sponsorships and Endorsements

• Sponsorships provide reputational value to both sponsors and sports entities, representing a large revenue category.

• Distinction between sponsorships (larger scale: leagues or teams) and endorsements (athlete-focused):

• In 2017, global sport sponsorships exceeded $62.7 billion, with an annual growth projection of 4-5%.

• Prominent endorsements:

  • Roger Federer: Highest endorsement income of $100 million in 2019.

  • LeBron James and Tiger Woods: $60 million each.

Broadcasting Rights

• Broadcasting rights allow media to share games with broader audiences, making it a profitable revenue source.

• Media revenue example: NCAA's broadcasting partnership earns ESPN $792.5 million annually.

• Fees vary by league; NFL's broadcasting rights totaled $4 billion in 2017, while NHL's were $220 million.

• Increasing digital media partnerships signify a growing trend in sports broadcasting.

Social Media as an Asset

• Social media enhances fan engagement and creates new communication avenues in sports.

• Second screen usage provides opportunities for fans to interact in real-time during events.

• Example: The Alliance of American Football effectively utilized hashtags for brand-building purposes.

• Strategic communicators must protect brand hashtags to avoid ambush marketing risks.

Revenue Generation through Social Media

• Athletes leverage social media for additional revenue via endorsements and brand partnerships.

• Cristiano Ronaldo example: Generates significant income via Instagram due to high follower engagement.

• Engagement metrics include the interaction level and the ability to convert interests into purchases.

Sport Management

• Involves comprehensive management aspects of a franchise, including finance, personnel, and legal considerations.

• The structure varies across leagues; diversity remains an issue within management positions.

Sport Economics

• Encompasses the broader economic impact from local to global perspectives, influencing budgets and sustainability of sports programs.

Marketing in Sports

• Marketing efforts include understanding audiences and consistent promotional content.

• Events like the Super Bowl are valuable for marketing due to high viewership and sponsorship opportunities.

Advertising in Sport

• Advertising in sports focuses on raising awareness and integrating promotional efforts into the sporting landscape.

• Example: Super Bowl commercials effectively leverage sport's appeal for significant revenue generation.

Legal Aspects in Sport

• Areas of focus include the right of publicity, defamation, and the implications for athletes as public figures.

• Title IX: Protects against sex discrimination in sports, ensuring equal opportunity.

  • Still requires awareness and respect for its provisions to achieve true equity.

Conclusion

• Understanding the complexity of sport management and communication strategies can lead to successful campaigns and revenue generation.

Sport as an Industry

Overview of Sports as an Industry

The chapter outlines how sport functions not only as an entertainment medium but also as a significant industry. Strategic communicators in sports must understand the operational aspects of business to effectively contribute to organizational goals, as effective strategic communication helps in achieving unified goals within sport organizations.

Sources of Revenue for Sport Organizations

In 2019, global sports revenue reached $500 billion, underscoring the economic scale of the industry. Key sources of revenue for sport organizations include television broadcasting rights, which serve as a significant source of income through partnerships with media outlets; commercial sponsorships and endorsements that provide financial support from brands in exchange for visibility and association with teams/athletes; merchandise sales allowing fans to express their allegiance through team-related products; spectator fees from ticket sales and attendance at events; and tourism, which generates local economic opportunities.

Ticket Sales

Ticket sales form a crucial revenue stream that varies by sport and league. For example, the NBA derives 20% of its total revenue from ticket sales, whereas MLS relies on them for 60% of its revenue. Offerings include single-game tickets, season tickets (the most profitable option with various perks), group rates, and promotions. An example includes the Arizona Diamondbacks offering suite packages to enhance attendance.

Merchandise

Merchandise sales differ from other industries as they involve aspects of social fandom. Factors that influence purchase intentions include fan satisfaction, media exposure, and on-field performance. Furthermore, there is a significant importance placed on official licensed merchandise to help consumers avoid counterfeit products.

Sponsorships and Endorsements

Sponsorships provide reputational value to both sponsors and sports entities, representing a large revenue category. There is a distinction between sponsorships, which are larger scale (such as leagues or teams), and endorsements that are athlete-focused. In 2017, global sports sponsorships exceeded $62.7 billion with an annual growth projection of 4-5%. Prominent endorsements include Roger Federer, who earned the highest endorsement income of $100 million in 2019, followed by LeBron James and Tiger Woods, each earning $60 million.

Broadcasting Rights

Broadcasting rights allow media outlets to share games with broader audiences, making it a profitable revenue source. An example from media revenue is the NCAA's broadcasting partnership that earns ESPN $792.5 million annually. Fees associated with broadcasting rights vary by league; for instance, the NFL's broadcasting rights totaled $4 billion in 2017, while the NHL's were about $220 million. There is a noticeable trend of increasing digital media partnerships in sports broadcasting.

Social Media as an Asset

Social media plays a crucial role in enhancing fan engagement and creating new communication avenues in sports. The use of second screens provides opportunities for fans to interact in real-time during events. An example of this is the Alliance of American Football, which effectively utilized hashtags for brand-building purposes. Strategic communicators must also protect brand hashtags to avoid ambush marketing risks.

Revenue Generation through Social Media

Athletes can leverage social media for additional revenue through endorsements and brand partnerships. A notable example is Cristiano Ronaldo, who generates significant income via Instagram due to his high follower engagement. Engagement metrics include the level of interaction and the ability to convert interests into purchases.

Sport Management

Sport management involves a comprehensive approach to managing a franchise, which includes finance, personnel, and legal considerations. The structure varies across leagues, and diversity remains an issue within management positions.

Sport Economics

This area encompasses the broader economic impact from both local and global perspectives, influencing the budgets and sustainability of sports programs.

Marketing in Sports

Marketing efforts in sports require a deep understanding of audiences and consistent promotional content. High-profile events like the Super Bowl offer valuable marketing opportunities due to their high viewership and sponsorship potential.

Advertising in Sport

Advertising in sports focuses on raising awareness and integrating promotional efforts into the sporting landscape. An example includes how Super Bowl commercials effectively leverage the appeal of sports for significant revenue generation.

Legal Aspects in Sport

Legal considerations include the right of publicity, defamation, and the implications for athletes as public figures. Title IX also plays a critical role as it protects against sex discrimination in sports, ensuring equal opportunities for all. However, there is still a need for awareness and respect for its provisions to achieve true equity.

Conclusion

Understanding the complexity of sport management and communication strategies can lead to successful campaigns and revenue generation within the industry.