Sports: the most disrupted of all industries?
by Callum Murray
The sports industry is set for a slowdown in growth of over 20 per cent in the next three to five years according to PwC’s Sports Survey 2017, ‘Sports: the most disrupted of all industries?’ Author
13th October 2017, 09:32

Broadcasters are the most pessimistic sector in the sports industry in relation to future growth, anticipating that the industry’s growth rate will slow by over 32 per cent, from 8.1 per cent in the last three to five years to 5.5 per cent in the coming three to five years.

The authors of the report published last month by PwC, the professional services firm, comment: “This perhaps reflects the ongoing rise of OTT solutions across a variety of private platforms, in particular social media, and media consumption trending towards mobile, bite-sized and on-demand content.”

The PwC survey of 189 senior sports executives and officials, conducted in May and June this year, finds that leagues and clubs are the most optimistic sector, predicting a fall in growth of just 11 per cent, followed by sports marketing agencies and brands (-16 per cent), international federations (-18 per cent), other organisations/consultancies (-22 per cent), tech companies and investors (-26 per cent) and, finally, broadcasters and media companies (-32 per cent).

The report concludes that, “sports leaders no longer have skyhigh confidence in the industry’s continued growth.”

David Dellea, director, sports business advisory, PwC Switzerland, adds: “What are sports industry leaders telling us? The message is loud and clear: the industry is undergoing more disruption than ever. Linear TV is experiencing decreasing ratings and revenues. Global tech giants are slowly but surely entering the rights market. The globalisation of media is perpetuating the dominance of a handful of elite sports. Brands now have more channels through which to engage consumers, diminishing their dependence on sponsorship. The increasing costs of staging major sporting events are diminishing the interest among host cities. And these are just a few of the challenges and disruptive forces that are prevalent today.”

The relatively pessimistic growth views of both tech companies and investors, on the one hand (albeit expected growth here remains the highest of the sectors at 9.1 per cent), and broadcasters and media companies, on the other, appears somewhat paradoxical, given that many observers expect the former to benefit from technological development and changing viewing habits, at the expense of the latter.


Experts have repeatedly warned that the rights valuation of various properties have reached a tipping point, and broadcasters have seen certain ratings decline despite bold predictions

The report comments: “Live TV consumption seems increasingly at odds with the lifestyles of millennials and post-millennials, experts have repeatedly warned that the rights valuation of various properties have reached a tipping point, and broadcasters have seen certain ratings decline despite bold predictions.

“Compounding these trends is the consolidation of online ad revenues among the tech heavyweights of Facebook, Google and Amazon, as well as the increased ease with which brands are able to engage consumers without needing to invest big bucks in headline sponsorship deals.” 

Yet, the prospects for the two sectors are not necessarily binary, according to Steve Nuttall, the sports media guru who told Sportcal in an exclusive interview last week: “I don’t want to give the impression that everything will switch to online. TV is very resilient and smart and as long as it continues to innovate, it has an amazing future. [Digital] is not necessarily out to eat TV. It could partner with TV. There’s a better opportunity than ever before to delight the customer.” Click here to read the entire interview.

Broadcasters pessimistic on growth
 

Conversely, broadcasting remains the sector with the highest expected average revenue growth among the respondents, 8 per cent, compared with sponsorship (7.1 per cent), participation fees (6.6 per cent), ticketing and hospitality (6.1 per cent) and licensing and merchandising (5.9 per cent).

Leagues and clubs are “the most bullish” over the growth prospects of broadcasting, foreseeing annual growth of 9.9 per cent and 8.9 per cent, respectively. However, the report’s authors admit, “This comes as no surprise, considering that the vast majority of respondents are in football. Propelled by the globalisation of the media industry, top-flight football clubs, leagues and their stars are unrivalled winners in the race for new market shares in Asia, a big growth market.”

The report adds: “International federations came out as the least optimistic on sponsorship growth (5.9%), which reflects the challenges a number of them are facing in terms of securing new commercial partners and host cities for their events. Ironically, the broadcasters surveyed were the least optimistic on projected growth of their own market segment at 5.6%.”

The report also identifies the following top three ‘sports rights media market disruptors’:

1. ‘Proliferation of new platforms (OTT, digital media, apps, etc.) to deliver content to fans

2. ‘Expansion of mobile internet and ubiquitous access to sports content through mobile devices

3. ‘Rights holders changing distribution strategy to establish direct relationships with fans (‘proprietary’ TV channel, social media following, etc.)’.

The report comments that, “the global ubiquity of alternative on-demand content means that (live) sports is now competing with various other entertainment formats far more than it used to. OTT solutions such as Netflix or HBO Now are investing more than ever in the content they produce (or acquire the rights for), attracting subscribers with a multitude of engaging series, films, shows and documentaries to choose from. Indeed, respondents identified the proliferation of new platforms to deliver content to fans, such as OTT solutions, as the number one development disrupting the sports rights media market.”

Timo Lumme, the International Olympic Committee’s managing director, television and marketing services, is quoted as saying: “Disintermediation will have the greatest impact on the way in which sports media rights are exploited and consumed. A direct relationship with fans is increasingly important in terms of media value.”

Broadcasting tops expected annual growth rate by sector table

The future of traditional TV is viewed sceptically by the report’s authors, albeit they have come under some criticism for failing to take full account of the compensatory rise of digital delivery mechanisms. The report claims: “It is no longer disputed that live TV is in decline, as evidenced by dropping viewership figures among leading broadcasters such as ESPN in the US (the subscriber base has contracted from 100 million to 88 million in the last six years) and Sky in the UK (average viewing of live Premier League matches declined by 14% over the past season, resulting in the launch of revamped and considerably cheaper channel package offerings).”

The report’s authors also argue that: “The alarm bells have also been ringing for the IOC since NBC reported a 17% decline in ratings for primetime coverage of Rio 2016 compared to London 2012, with a steep decline of 25% among the all-important segment of adults aged 18–49.

“Furthermore, TV viewers are ageing across the board, as highlighted by a recent study on sports TV viewership conducted by Magna Global for SportsBusiness Journal.”

The study shows that the median age of TV viewers for golf’s PGA Tour is 2016 is a worryingly high 64, an increase of five years since 2006, followed by tennis’ ATP Tour (61, +5), Major League Baseball (57, +4), tennis’ WTA (55, -8) and the Olympic Games (53, +3).

Even the apparent TV juggernaut that is English soccer’s Premier League, is relying on audiences with an average age of 43, the study finds.


The declining appeal of live is inherently compounded by the proliferation of digital channels and variety of formats through which sports content can now be consumed  

Under the heading, ‘OTT: friend or foe?’, the report argues: “The declining appeal of live is inherently compounded by the proliferation of digital channels and variety of formats through which sports content can now be consumed.”

However, it continues: “Within this context, players with strong digital platforms are partnering with rights holders and traditional broadcasters. For example, ESPN Media Distribution recently teamed up with the European Broadcasting Union in order to strike a deal with the IAAF for the sale and distribution of a broad package of media rights, whereby both companies will be able to leverage ESPN’s OTT streaming platform.”

In line with Nuttall’s view, the report concludes: “Such developments indicate that it is errant thinking to view OTT as necessarily competing with broadcast. Lewis Wiltshire of Seven League went as far as to state that “the biggest misnomer in the industry is that OTT is killing broadcast. OTT is in fact additive to broadcast – at this stage. Almost all of the deals we’ve seen involve digital platforms adding another syndication stream to rights already being shown on traditional TV. Those digital platforms are bringing additional revenue streams and reaching divergent audiences who would otherwise not consume those rights.”

The full report can be downloaded here.

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