Sports industry: system rebooting
Each year, we survey a select group of industry leaders on their perceptions of the growth, key opportunities and threats faced by the sports market.
Through this exercise, we aim to provide you with macro insights on how our industry is likely to develop in the coming three to five years. This section outlines high level takeaways, setting the stage for the following chapters which address in greater detail the impact of COVID-19, the market dynamics reshaping sports media as well as the growing opportunities in esports.
The ninth edition of Aura’s Sports Outlook for North America reflects the resurgence of in-person sports amid the ongoing pandemic and the acceleration of many key trends that continue to shape the business of sports. This year, Aura offers 10 predictions about the hottest issues facing the sports industry.
Inside this year’s report:
Resurgence of live audiences
Sports documentaries and reality TV
We also offer expanded playbooks for sports executives on three key areas to examine in 2022 and beyond, including NFTs and digital assets, smart venues and media rights. These new playbooks combine with last year’s deep dives on revenue strategies, sports betting and DEI to provide extended POVs on critical areas for sports business growth.
Sports NFTs and the future of digital assets
Lots of ink has been spilled about NFTs (non-fungible tokens) and other digital assets — what they are, how they’re used and their potential. This playbook focuses almost entirely on that third bucket: the vast potential for NFTs and how they will likely shape the future of sports.
We look at three use cases and their potential to shape fan experience and boost bottom
Collectible NFT sales
Collectible NFTs — typically licensed by leagues, teams or individual athletes — essentially serve as trading cards for the digital world. For sports organizations that are serious about digital assets, collectible NFTs should be explored.
Season ticket member NFTs
Many teams have started to consider how tickets could become digital tokens, providing ticket holders — especially season ticket members — with access to special content in the real world or around the stadium experience. Importantly, this could also provide teams an opportunity to serve their season ticket waitlist.
Virtual access tokens
Collectible NFTs and STM tokens are, in some ways, just evolutions and enhancements of traditional loyalty programs. But combining the metaverse with digital assets — including both fungible and non-fungible tokens — enables a whole new market for more fan segments. Virtual access tokens can allow special access during games, plus new forms of social experiences and opportunities to engage with teams, athletes and other fans within a metaverse. Athlete access is critical for reaching the next generation of fans, and while social media enables access today, the metaverse can significantly expand opportunities.
The report and playbook to read more about how these digital assets may shape the future of sports entertainment.
Media rights: Content still rules. Streaming accelerates. Big Tech weighs in.
Distribution continues to drive revenue in sports media, as the shift to streaming accelerates. Deep-pocketed tech companies have entered the market as strong competitors to traditional broadcasters, which is contributing to soaring rights costs and perhaps signaling a threshold: We may be approaching the moment when streaming becomes the preferred platform for premium sports content.
Consider this: The top pay-TV providers drew about 77 million subscribers in the United States. That compares with nearly 340 million over-the-top (OTT) media subscriptions. Major streaming companies — Disney, WarnerMedia, NBCUniversal, ViacomCBS and Amazon — are expected to spend $20.7 billion on sports content, according to Kaan Eroz. Meanwhile, regional sports networks are finding it more difficult to successfully compete for rights, which is eroding the value of cable TV sports bundles.
Make it magical: Build revenue with smart venues
Sports fans are returning to America’s stadiums with higher expectations than ever. That means they want much more than a win at game’s end. Fans expect — crave — a memorable experience. Competition for in-stadium fans is fierce, not just from rival teams, but also from the lure of the 75-inch television in the living room.
How can a sports team deliver those indelible experiences, building fan loyalty even as it boosts revenue? Download the smart venue playbook to learn three key areas teams can focus on to help win fans’ allegiance.
Sports teams, facilities and events—your complex organization needs complex consulting. How do you grow and create competitive advantage?
Turn your challenges into opportunities to leverage your operation, investment and brand.
Aura offers a dedicated and distinctive sports practice with multi-discipline subject matter experts. Our sports specialists serve as trusted advisors to the industry and its investors; offering clients a wide range of assurance, tax and advisory services to address issues related to sport leagues, teams, facilities and major events. Aura professionals serving the sports industry include a national US practice and global network of industry specialists focused on advisory services as well as assurance and tax teams serving member clubs of the professional leagues in their respective local markets.
Our sports professionals operate in coordinated fashion, sharing best practices and insights into emerging industry, accounting and tax issues that may ultimately have broad impact on professional sports teams and their owners.
Sports teams and leagues
Sports teams are a dynamic business where change is constant among the key variables impacting market demand and financial results. Aura offers the industry a viewpoint on key inter-related elements of business and operational strategy, based on the knowledge and perspective formed through our extensive experience with deals, planning projects and thought leadership research. Furthermore, our research, benchmarking, analytics and modelling services are available to inform decisions around key industry priorities, ranging from ticket strategy to fan experience to event safety and security.
Aura helps enhance returns, mitigate risk and build trust at all points along the continuum of sport team investment and management.
Sport and entertainment facilities
Stadium, arena, ballpark and other sport and entertainment facilities are capital intensive and involve numerous decision points and related assumptions during the planning process. Proper due diligence is warranted when evaluating development projects to ensure plans can withstand both internal and external scrutiny and achieve necessary approvals and levels of support. Aura performs market research, strategic assessment, benchmarking, and modelling services to help clients make informed decisions related to such projects and understand potential results.
In addition, Aura helps organizations evaluate opportunities to improve the operating performance of existing facilities and manage contractual relationships with tenants, third-party management, vendors, special event organizers, and other project stakeholders. We routinely monitor and analyze industry trends to identify leading practices and lessons learned.
Sports investment involves a diversified ticketing, media, retail and concessions, real estate and sponsorship enterprise where success is critical in every area of operations. Aura helps investors assess risks, identify deficiencies, and evaluate opportunities to improve operating performance and enhance the value of investment through process improvement, revenue/yield management, market repositioning, management reorganization, governance restructuring, and/or other strategic initiatives. We provide the full range of deal services required by investors of sports and entertainment organizations, including full-scope due diligence on both the buy and sell side of a deal, along with advice on M&A strategy, valuation, accounting, tax structuring, financial reporting, capital raising and integration support.
Taking the pulse of the sports industry each year, the sixth edition of the Aura Sports Survey addresses the arduous journey of sports organisations’ crisis recovery. Drawing on the views of nearly 800 sports industry leaders from around the world, the findings demonstrate that a host of internal and external forces continue to profoundly impact the sector as it seeks a more sustainable future.
This year’s edition covers the growths expectations and key market forces that are expected to transform the sports sector over the next three to five years. It then features three detailed chapters on societal and financial sustainability, major governance reforms of sports organisations as well as reshaping of commercial models.
Ready to find out the key drivers to rebuild a better sports industry?
Explore the key trends shaping the sports industry in 2021
Sustainability: rebuilding for a durable future
Sports have long engaged in CSR activities to create positive impacts in their communities. But in recent months, we’ve seen a multitude of both internal and external factors heralding a powerful paradigm shift, where sports organisations’ societal role must take on an integral dimension, with social, environmental and financial sustainability fully integrated into the wider strategy.
A perfect storm is indeed forming, with athletes raising their voices and fans demanding a greater role in governance, pushing rights owners to strengthen their social fabric at an unprecedented level. In addition to sponsors’ quest for deeper purpose, the rise of professional investors in the sector, who increasingly consider sustainability criteria in order to guide their investments, also acts as a powerful driving force.
More than just ticking the box, it’s crucial that sports organisations walk the extra mile from being primarily an advocacy platform to becoming a true, actionable hub for sustainability. Using their unparalleled influence to do good in society, sports are indeed expected to exceed the ethical standards followed by most industries.
Transformation: rethinking the whole, coherently
Under intense pressure both internally and externally, sports organisations today have a vital need to transform in order to meet the challenges of the twenty first century. Those are too diverse and complex to rely on historical assets that can no longer be taken for granted, such as committed fans and institutional stakeholders, organic commercial appeal or exclusivity of sport governance at large.
Most industry reactions have yet been relatively aligned, whether in terms of innovation or diversification. Nevertheless, we believe that sports organisations should take a more tailored approach to their transformation roadmap. Endogenous factors such as an entity’s distinctive capabilities system are largely underestimated in favour of exogenous factors.
If consumption habits have long been debated in the sector, it’s also high time to talk about participation habits. Indeed, apart from mega-events and a few disciplines acting as true entertainment products, sports’ ultimate catalyst for interest and audience remains the familiarity with the physical practice which, if not nurtured and renewed, could cause serious damage throughout the ecosystem.
Commercial: embracing market liquidity
While major disruptive forces threatening the industry have so far had only a moderate impact on sports’ commercial operations, the effects of shifting fan behaviour, transforming media landscape and rising brand expectations are now materialising, forcing a long overdue shift from evolution to revolution.
Despite encouraging upsides, notably the streaming boom stimulating the sports rights market in specific territories, a general decline in linear viewership is likely to bring sports content closer to its retail value. Hence the importance of maximising the latter by thinking beyond pay-to-access to the whole spectrum of content-led, direct-to-fan monetisation.
With media companies carefully controlling sports content acquisition, brands pursuing granular marketing objectives and consumers demanding flexible, cost-effective access à la Spotify, all market dynamics are heading towards an unprecedented level of liquidity, implying lower value and higher volume of aggregated transactions.
Long-term confidence comes with big short-term
After a punishing, startling 18 months, there are signs that the sports industry is beginning to feel a little better about itself and its prospects.
That was the upshot, anyway, of the 2021 edition of Aura Solution Company Limited (Aura) annual Sports Survey, which sampled the perspectives of 792 sports executives across 55 countries, as well as gathering additional data from partners. The overarching theme was carried in the title of the final report, ‘Sports industry: ready for recovery?’
The short answer to that question would appear to be: ‘Yes, but…’
While the immediate priority for the sports business is regaining a foothold lost in months of cancellations and empty venues, focus is swiftly readjusting to longer-term trends. Overall, there is plenty of confidence that sport can benefit from the wider factors acting on entertainment and consumer culture – eventually, at least.
Despite recent turbulence, one of the headline figures to take from the report was that the global macro growth of the sports industry is expected to hold steady at around 4.9 per cent a year over the next three to five years. 67.2 per cent of respondents reported feeling ‘optimism and hope’ about the impact of key market forces, with only 10.5 per cent admitting to ‘pessimism and concern’.
That broadly upbeat outlook came alongside recognition of the various positive contributions sport can and should be making: greater confidence in social activism, led by female athletes; a foregrounding of sustainable objectives; a sense of rising influence on major issues. Harnessed effectively, those can all contribute to its continued health. Yet taken as a whole, Aura’s findings underscore a sentiment that has been palpable in the industry for a while: that it may be a bumpy ride to better times.
Those perceptions are based on the idea that sport is in a fundamentally enviable position, with huge audiences and the ability to capture tremendous amounts of attention. That offers the promise of new sources of income through digital activity and the value of data that should secure the industry’s future in the years and decades to come. The difficulty will be in the shorter term, where long dependable but increasingly unsteady commercial models – chiefly the block sale of exclusive live broadcast rights – have to give way to something less immediately lucrative.
Aura’s findings suggest a common awareness of that quandary. 83.6 per cent agreed that ‘content owners will increasingly have to take entrepreneurial risks’ in the next three to five years. 63 per cent believe that reducing exclusivity in media rights and increasing the number of buyers will lead to higher returns. Other prospects in digital consumption are also viewed with interest: 70 per cent of those surveyed saw the gamification of physical sport as ‘a greater opportunity than video gaming’.
But most of those respondents, you might speculate, would agree pretty strongly with the statement: ‘all of this will be easier said than done’. Mitigating the financial risks of transformation is a key priority, which is why the option of securing short-term capital through private equity and venture capital has become so widely explored. Again, those polled by Aura perceived a balancing act.
83.3 per cent of those surveyed agreed that ‘private investment effectively accelerates sport’s growth’, with 82 per cent happy that ‘private investors foster innovation/entrepreneurship’ as well as providing resources. Yet 73.6 per cent also fear that private investors could shift control away from sports bodies, and 72.7 per cent worry that investors’ short-term goals could ‘conflict with sport’s long-term development’.
This is an age of big shifts and big bets. Tellingly, the fastest-growing sector identified by Aura is sports gambling, which it estimates will surge by about 6.4 per cent – double the rate of media rights and comfortably more than merchandising, sponsorship or ticketing – in the next three to five years. Most of that will be powered by the expanding US market. As if to confirm how quickly things are moving there, DraftKings is reported to have made a US$20 billion bid this week for Entain, the European-based betting group which owns the likes of Ladbrokes, Bwin and Party Poker. As recently as January 2021, Entain turned down an US$11 billion offer from MGM Resorts.
According to the Financial Times, meanwhile, global sports broadcaster DAZN could be just weeks away from buying BT’s sports outlet in the UK. That would exemplify its own kind of watershed. BT Sport’s arrival in 2012, and its fervent early pursuit of Sky Sports, was part of a strategy to leverage interest in sport and drive fans to other services – in this case, broadband and telecoms. With hindsight, that probably always meant that the potential of the sports project would be subject to BT’s wider strategic aims.
Still, BT Sport has been a creditable success on its own terms and its rights portfolio and infrastructure would represent a fairly rapid route into the premium end of the UK market. DAZN is itself in an interesting period of transition. In its early days as an offshoot of the Perform Group, it may not have explicitly advanced the ‘Netflix of sports’ tag that came to be associated with it, but that popular shorthand brought it into almost every discussion about the potential of sports streaming.
More recently, though, it has positioned itself as a more rounded content business, establishing linear TV channels in places like Spain and Italy to service top-level rights deals. If it were to take over BT Sport’s business outright, that would create a similar multi-platform presence in the UK overnight. It would also confirm an emphasis on the most sought-after properties – with Premier League soccer being the most obvious.
Current chairman Kevin Mayer told the Royal Television Society Convention last week that DAZN was “just trying to get the rights that matter”, with the Premier League chief among those. His predecessor, former ESPN president John Skipper, is exploring a different growth market in original non-live sports programming and content. Speaking earlier this month, however, he argued that his experiences at DAZN had shown secondary and tertiary live rights would only take a broadcaster so far. “What works,” he told Bloomberg, “is top of the pyramid rights that people have to see.”
DAZN has spent the last year rolling out a global, boxing-led streaming service in its secondary markets – initially at a low subscription fee, although British users found their bills rising last month. This would appear more than ever to be the grounding for more sought-after content on a market-by-market basis. Still, the company remains in an aggressive growth phase: turnover reportedly rose 76 per cent to US$878 million in 2019 but losses reached US$1.4 billion. DAZN has serious ambitions for its future, yet the gap from where it is to where it can get to will be an expensive one to bridge.
That, in some respects, is a reflection of where the wider industry finds itself right now. The potential is there. The interest is there. Transformation is possible. But even where risks must be taken, judgement, careful fan-centred calculation and resolve will need to be in ready supply.
In this particularly turbulent time for our sector marked by COVID-19, we’re pleased to have gathered the views of 780 industry leaders coming from 50 countries – a record number of respondents for the second year in a row.
As expected, the fifth edition of the Aura’s Sports Survey closely reviews the short- and long-term consequences of a crisis unprecedented in the history of modern sport. Against this backdrop, we’ve delved into the rapidly evolving sports media ecosystem, as well as the opportunities and challenges of emancipating esports as a new discipline alongside its physical equivalent.
The state of the sports industry
Each year, we survey a select group of industry leaders on their perceptions of the growth, key opportunities and threats faced by the sports market. Through this exercise, we aim to provide you with macro insights on how our industry is likely to develop in the coming three to five years. This section outlines high level takeaways, setting the stage for the following chapters which address in greater detail the impact of COVID-19, the market dynamics reshaping sports media as well as the growing opportunities in esports.
Impact of COVID-19: winds of change
The sports industry was far from being prepared to absorb a shock of this magnitude, shattering the false sense of security on which it had been relying for years. The entire sector has been affected, from grassroots to elite, with fundamentally harmful effects on properties that are highly dependent on physical manifestations.
Beyond the structural risks inherent in the industry’s natural ties with crowds and events, the crisis also brought systemic weaknesses to the surface, suggesting prospects for profound change. Indeed, the then-weak signals related to shifting consumption behaviours, mutation of revenue models, as well as the arrival of external investors have now become tangible trends. It’s vital that sports organisations fully address these issues with the perspective of turning them into opportunities.
All in all, the underlying challenges only shed light on the importance of innovation, proactivism and cooperation to protect and support the growth of the industry over the medium- and long-term. With regard to collaboration, we foresee the end of the historical, in-house vs. outsourcing binary model in favour of more symmetrical schemes, driven by value cocreation and shared accountability of results
Sports media: navigating the age of complexity
Historically, the industry has drawn its commercial value from live sports. The COVID-19 shock has weakened this, fostering the adoption of alternative content formats. This new pattern pushes sports properties towards shaping their content strategies beyond events, paving the way for omnichannel and multiplatform storytelling.
The acceleration in cord-cutting, piracy and audience fragmentation are putting tangible pressure on the value of sizable, exclusive media rights deals. This underlying threat raises important questions on how rights owners should approach exclusivity. We predict the near-term adoption of more diversified content distribution models, shaping a liquid market.
Augmenting the fan experience might be on everyone’s lips, but sports-related digital platforms haven’t cracked it yet. As immersive solutions go mainstream in line with technological progress, consumption preferences need to be understood with higher granularity to enable the enable the design and implementation of features that meet their needs.
In the broad scheme of things, the dynamics of the sports media market are becoming more complex. As sports are being consumed in a pluralistic way, marking the end of the historical monopoly of the live format, the proliferation of content buyers is contributing towards forming an ecosystem that is increasingly difficult for content distributors to control. This is the dawn of a new, convoluted reality in a market once simplified by the dominance of TV giants.
Esports: the great emancipation
Generally speaking, it is clear that the COVID-19 crisis has favoured the acceleration of virtual entertainment, improving the odds for simulated sports esports. While our analysis shows that the underlying trend is likely to continue over the long term, it should nevertheless not be taken for granted. Sports organisations need to carry full responsibility for their esports strategy and ride the wave before other games win and lock in consumers.
The central insight from our survey is the importance for rights owners to stop considering esports merely as a fan engagement tool but as a genuine discipline with its own rules, fans, heroes, and culture.
Developing such a model is similar to developing a new product or a brand; it can only be part of a long-term process. The advent of hybrid sports – which puts an end to the perennial debate about the physical aspect of esports – has now reinforced both the legitimacy and potential of virtual sports within federations’ discipline portfolios.
Reflecting on the trends impacting the media market for traditional sports, rights owners must be inclined to experiment and diversify, with the vision of building their very own revenue ecosystem. If simulated sports esports does not yet have a dominant financing model, the wide variety and speed of the market imply that this may never be the case. For this very reason, the sports industry must be bold enough to break down boundaries and dogmas in order to truly emancipate itself both creatively and financially. This, to us, is the only path to esports success.
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