The 10th edition of PwC’s Sports Outlook for North America returns with top trends and predictions on the hottest issues facing the sports industry. This year, through a series of in-depth playbooks, we’ve turned our attention to the evolution of sponsorships, smart venues, team valuations, environmental sustainability, and efforts to expand reach by cultivating fans across international boundaries.
Data innovation can drive sports sponsorship value
Teams leverage data to track and analyze fan engagement in ever more granular detail. And now, using third-party clean rooms and other tools, teams and sponsors can pool consumer data to glean deeper, more valuable insights. Fans can expect more personalized offers, sponsors can better optimize their marketing budgets, and teams can increase the value of their sponsorship inventory.
Smart venues: Reinventing connected experiences
Today’s leading sports organizations are creating more personal — and profitable — entertainment for fans in part by making their venues smarter and more responsive. Sensors, data, machine learning and artificial intelligence are the tools being leveraged today to deepen fan loyalty and keep them coming to the game. Our playbook outlines key areas where your franchise should focus its venue upgrades and development.
Franchises go global
Technology has enabled viewers around the world to tune into foreign games, allowing sports to build global popularity. Franchises and leagues are now setting up shop on other continents to attract and cultivate a new, multicultural fanbase that may be categorically different from the one they’re familiar with back home. Success requires a deep understanding of the new market and an organic connection to those potential new fans.
Sustainability is the future
Environmental sustainability has become an urgent issue for consumers across industries, and sports are no exception. Leagues and teams have an opportunity to take a leadership role in pushing for the adoption of more sustainable business practices — an issue that’s becoming ever more important to fans.
Valuation overtakes cash flow
How much a sports franchise is worth has increasingly little to do with its profitability. That’s in large part thanks to professional sports leagues’ recent embrace of private-equity investment. (The NFL is now alone among major US sports leagues in prohibiting private-equity investment.) Institutional investors care more about a franchise’s long-term marketability — which hinges on assets like athlete star power, team success and cultural capital — as opposed to a short-term focus on ticket sales. That has led them to invest heavily in player salaries. The payoff in market value has been enormous, particularly for the NBA. Given the potential for both domestic and international growth, we expect more owners will begin to consider valuation, rather than cash flow, their most important metric.
Streaming expands (and fragments) further
The most valuable commodity in sports media has long been distribution rights. Sports broadcasting is still dominated by commercial television networks, but such streaming services as Amazon Prime, YouTube TV and Apple TV+ are making significant inroads by cutting deals with leagues worth hundreds of millions of dollars. (Others may join them soon.) That, in turn, has driven up costs for legacy channels. Whether these streaming ventures succeed or fail will depend largely upon which ones advertise the more attractive bundled entertainment packages — a feat that cable, in its early days, performed quite well. Sports fans switching from cable to streaming will look for the enhanced fan experience that vertical integration promises, combined with comparable value to what cable has historically offered. Take a look at last year’s media rights playbook for further analysis.
Vertical integration of sports media continues
Fans have a seemingly insatiable appetite when it comes to engaging with their favorite sports, teams and athletes. Content creators have enjoyed success with a wide range of offerings, from traditional documentaries to reality-TV series. Consider Welcome to Wrexham, an FX series that chronicled the celebrity transformation of a Welsh soccer team. A host of star athletes have also launched production companies, as have several franchises, among them the Golden State Warriors and the Los Angeles Clippers. Leagues, too, are experimenting with new modes of content creation, with Major League Soccer (MLS) selling its matches to Apple while the NFL opts for a direct-to-consumer platform. All of these vertical ventures stand to increase revenue and amplify brand recognition for athletes, teams and leagues as well as their collaborative business partners. Winning in this context demands thinking creatively about how to tell an authentic and compelling story.
Mid-major sports rise in the US
Sports outside the major US professional leagues have moved into the spotlight, as the demand for new sports content explodes and charismatic athletes seize opportunities presented by NIL and social media. Formula 1 has enjoyed skyrocketing viewership in the US, initiated by the popularity of Netflix’s Formula 1 docuseries, Drive to Survive. As grassroots participation in pickleball has grown in recent years (faster than any other sport in the US), so has interest in a nascent pro pickleball tour. And lacrosse saw an impressive 30% growth in viewership of one of its professional leagues. The biggest mover of all was women’s sports, particularly soccer and basketball. The WNBA had its most watched season in nearly two decades. These and other formerly fringe sports offer access to niche fan bases, whose brand loyalty offers a unique investment opportunity.
NIL changes the college sports market
The Supreme Court’s 2021 ruling on NCAA vs. Alston, enabling student-athletes to profit from their name, image and likeness (NIL), continues to upend the collegiate sports landscape and attract new investment. The NIL market is expected to surpass $1 billion by the time it turns two years old, with more than a third of those funds coming from donors eager to keep their favorite teams and schools competitive. Thriving in the NIL ecosystem isn’t as straightforward as scoring points. It demands social media and self-promotion skills. Star quarterbacks can have an estimated NIL value of more than $3 million, according to On3 NIL 2022 valuations, but despite receiving far less media exposure, some women athletes have proven especially adept at attracting loyal audiences to their channels and securing lucrative sponsorships. So, too, have athletes with arguably more media savvy than athletic talent. And though most of the NIL money went to athletes at established Division I schools, smaller Division II and III schools have made a dent as well. The influx of money has influenced conference realignments and fundamentally altered recruitment incentives as players and schools grapple to maintain their athletic and financial edge. Meanwhile, state laws and NCAA rules surrounding NIL are still in flux, which could create unexpected opportunities for athletes, schools and investors.
Emerging technologies help transform the sports experience
Rapidly evolving technologies, from wearables to artificial intelligence, are transforming the sports experience. Perhaps the most visible examples have emerged in the realm of officiating. In tennis, soccer and football, sensor-enabled balls and lines have allowed officials to review and rule quickly and accurately on close calls. Many athletes wear sensors that allow team physicians to track vital signs and monitor other aspects of athletic performance to enhance training and speed recovery from injury. Similar sensors are employed to improve safety equipment and protocols. All of this data can be analyzed with AI and potentially shared with fans. Already, AI has made possible more sophisticated statistics during sports broadcasts. Additionally, virtual reality has made it possible for viewers to have the experience of watching a game courtside without leaving their sofa. While gaming and junior levels of sports are a bit behind the pros, they represent potentially even more lucrative opportunities, given the data inherent to gaming and the demand for more technology to evaluate amateur athletes. According to Grand View Research, the sports technology market is estimated to reach $55 billion by 2030. Those who lead its evolution and expansion will find new ways to make the fan experience more immersive and exciting while making the game better, fairer and potentially safer for players.
Mobile sports betting heats up
It appears that 2022 was the tipping point for US sports betting. All major professional leagues and most teams now have official sportsbook business partners, and the competition between mobile apps has begun. As more states have legalized online sports betting, gleaning a share of gaming revenue is key and hinges on shrewd technological decisions. The sportsbook FanDuel is the current leader in the US betting market, but competitor DraftKings may narrow the gap by inking a rumored deal with ESPN — which has the No. 1 mobile sports app in the world. That would give DraftKings instant access to 116 million monthly users. Other sportsbooks, however, stand to gain a share of this emerging market if they are able to provide innovative enhancements to the mobile-betting experience. One contender is the $27 billion sports conglomerate Fanatics, which launched its sports betting product earlier this year. The industry will be watching to see whether Fanatics will be able to leverage more mature technology as well as an existing loyalty program and purchase behavior database to decrease the cost of customer acquisition — a major drag on the existing players’ balance sheets. In any case, the sports-betting market is already sizable and is expected to balloon in the coming years. The Wall Street Journal has reported that the sports-betting industry may bring in as much as $22 billion in annual revenue by 2026.