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16October2018

Global sports market is huge and expanding with other revenue sources opening up

Global sports industry is estimated to be worth over US$350 billion (N74.4 trillion) in assets in 2009. This includes infrastructure construction, sporting goods, licensed products and live sports events. In revenue terms, the global sports market made up of revenue from sources such as gate revenues, sponsorship, media and marketing rights and merchandising was estimated at US$112 billion in 2009. Price WaterHouse Coopers (PWC), in its recent report on outlook for the global sports market projected that it would reach US$145.34 billion in 2015. The largest proportion of this revenue is expected to come from North America accounting for 41% of the total. Sub-Saharan Africa did not feature in the estimates. While the global sports revenue has been driven by gate takings and sponsorship in the past, media rights over live events are catching up very fast as a result of the advancement in distribution technology.

FIFA enjoyed a great period of success in the four-year cycle between 2007 and 2010, with revenue rising to US$4.19 billion, up significantly from the figure of US$2.63 billion from the previous four-year cycle. For the right owners of FIFA world cup, revenue for the event comes in from the sponsors, who benefit from such brand feasibility, from media houses who seek content for viewers, as well as gate takings.

Stadium naming right is another rising source of revenue for private football clubs in the UK. After 93 years at its cramped Highbury home, Arsenal moved to its gleaming new Emirates Stadium in July 2006, which was built at total cost of £390m. About half of this was financed by bank loans, alongside sponsorship deals which left about £100m debt in the book of the club. By July 2010, the club had sponsorship and naming-rights deals in the US worth more than £700m.

Another huge revenue source for sports rights owners is brand ambassador or sponsorship deals which give associated brand positive attributes and associations from the endorser and transfer same to the brand and its products. Clubs and sport figures as well as federations could be endorsers. Some of the biggest endorsement deal includes the Tiger Wood’s US$105m endorsement with Nike and David Beckham’s US$160m deal with Adidas. Shirt sponsorship and endorsement deals are fast becoming a major income source for European football clubs.

 

Sports value chains revolves round ‘rights’ ownership and management

Rights owners are institutions, including national sports federations, leagues, clubs, teams etc. They define the structure of professional sports around the world. They set the rules, organize the events and take responsibility for generating revenues from matches, media and marketing rights. The value chain is structured around four pillars: The properties, right management, events and content.

Properties in sports value chain are intangible assets that draw fans and revenue. These include events, such as leagues and tournaments; state, regional and national athletic events; teams such as Manchester United FC and star athletes like Lionel Messi, Tiger Wood etc. Properties are owned and managed by rights owners. Right management is the monetisation of the properties based on gate takings, sponsors, merchandising and media rights. A rapidly rising source of revenue in recent times, especially for professional sports is media and marketing rights. Right owners or sports agencies acting on behalf of right owners structure the deal and trade media and marketing rights. Packaging content for the media distribution is a vital part of creating revenue in modern sports. In climes where sports have developed, rights ownerships are fully privatised with minimal government participation and usually restricted to rights protection via an efficient legal system and national team management.

 

Turning the Nigerian Premier League to a cash cow

The case of the Nigerian Premier league, a once virile and potentially great local football league where global football stars have been discovered, highlights the challenges of Nigerian sports.  In the past, most of the major clubs were owned by business people and as such ran as profit-making ventures. Today they have all been taken over by state governments and are run as government agencies. As a platform for harvesting national team members and potential international stars, the bureaucratic process of joining these clubs has robbed many potential great talents the chance to be discovered. What is left of the Premier League today is barely better than street soccer in the minds of many Nigerians that now follow English, Spanish and other European football clubs.

In addition, league matches are believed to be characterised by unwholesome practices such as match rigging and fixing. Consequently, the value of the Nigeria Premier League and the associated club rights are one of the lowest in the world. The league is therefore losing out on such revenue sources as gate fee as fewer Nigerians follow the games. Sponsorship has also become more of philanthropic venture for a number of Telecom operators and manufacturers. Both merchandising and media revenues would be meagre, if any Nigerian club get them. The jerseys of major European clubs can be purchased in almost every clothe shop on Nigerian streets while viewing centre entrepreneurs make at least $200,000 monthly from screening live games. The broadcast right for English Premier League (EPL) in Nigeria for 2010-2014 was sold for $115m to the South African Multichoice, the owner of DSTV Nigeria.

Nigeria has hosted a number of international and regional tournaments in the past decade. Nigeria ‘99 World Youth Championship and Ghana-Nigeria 2000 Nations’ Cup competition are the most recent. No one has accounted for the cost-revenue implications of the ownership of the rights at these tournaments to the nation. And in the process, the opportunities to expand private participation in the sports value chain may have been lost. When South Africa hosted the World Cup in 2010, it was estimated that the country generated total revenue that is near commensurate with the £3.5 billion incurred by the country for building and renovating 10 stadia, improved transport infrastructure, and security in addition to FIFA income of £2.1 billion.

Individual sportsmen brand rights and ambassadorial sponsorship deals are however rife and yielding substantial return, especially to footballers. Peak Milk’s usage of Kanu Nwankwo as a brand ambassador resonates deeply in this regard. Jay-Jay Okocha still commands respect and acclaim for his football skill; hence his commercials for Pepsi Cola. Other games enjoy some patronage but inflows to them are near obscurity in most cases and sponsorship being largely dominated by telecom companies and the international oil companies.

  • Written by The Analyst
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Government dominance in Nigerian sports could be responsible for the stunted performance

Football is perhaps the biggest unifying factor in Nigeria. Nigerians of all divide forget any form of leaning when it comes to taking position behind the national team in an outing. In addition, Nigeria may currently home one of the largest followers of the English Premier League and other European Leagues in the world. For a country of over 170m people, with robust youth demography and improving middle income, the passion for sports suggests a massive market for sports and sport related activities. The infrastructure and institutional arrangement to mine this market however remain suboptimal- usually muddled up in the graft-ridden government domination. The impact on the ranking of local sporting leagues and federations as well as individual actors in the global sports arena has therefore been on the decline with periodic spurs.

The establishment of the National Sports Commission (NSC) in 1963 marks the beginning of structured sports and sporting activities in Nigeria. The most significant achievement of that era was the qualification of Nigeria's Green Eagles for the Olympic Games held in Mexico in 1968. The respect for the nation in the sporting world grew with its record breaking performance at both USA 94 and Atlanta 96. Today, Nigerian sportsmen and women entrenched Nigeria's name firmly on global map as a great sporting nation. Although the country is yet to win a World Cup in football or lead international tourney like the Olympic, it has been known to possess great sportsmen with landmark achievement in leading international events and football leagues.

 

Nigerian sports on a slippery slope

The abysmal performance of the Super Eagles at the 2010 World Cup in South Africa marked a pathetic low in the much loved round leather game. It necessitated the President’s suspension of the participation of the country’s national teams in global football competitions for two years with the aim of using the period to re-focus the sport in Nigeria. Although the suspension was lifted about a week later following advice from FIFA, the step underscored the need to go back to the drawing board. It is comforting to note that some of the steps taken are currently yielding result. This was partly contributory to the emergence of the nation as the African champions at the last edition of African Cup of Nations in South Africa in 2013.

Across other games, Nigeria remained a leader in the African region and internationally until recently. Nigeria was the best country in athletics at 2011 All-African Games in Maputo, Mozambique with 38 medals (17 Golds, 11 Silvers and 10 Bronze medals). And in the previous three All- African Games, among which one was hosted on Nigerian soil, Nigeria maintained a position at the top of the ranking table.

 

Exporting sports revenue

Another issue that calls for worry is the very nascent state of Nigeria’s sports both in terms of development and income generation by federations and actors despite the strong passion for sports exhibited by its citizens. Nigerians currently spend huge amount of money to view international sporting events especially football of advanced economies. In other words, significant portion of the potential sports revenue are channelled towards patronage of sports outside Nigeria as it is with the import dependent nature of the entire economy. The followership that top football competitions like UEFA Champions League, English Premier League (EPL), Spanish La Liga and Italian Serie-A, get from Nigerians has no doubt contributed immensely to the $22 billion (N3.41 trillion) European football.

Despite the international respect and the parade of globally competitive athletes, the country has found it hard to domesticate sports earnings. This lacuna is rubbing off significantly on the fate of games and the sports people in the country. Local football leagues are near obscurity, riddled with fans gangsterism and corruption. Sport advertisements and sponsorship are highly unorganised and the revenue value chains dominated by high public sector involvement. The outcomes include the death of former great athletes due to poverty and low job creation and income potential of the sports sector of the economy. 

 

Giving life to Nigerian sports requires government handing off

Unlike in other countries where government participation is largely reduced to protecting rights, the role of government in Nigerian sporting industry ranges from regulations to participation within the value chain. All sports federations are owned and managed by the government through the National Sports Commission. And in most cases, appointments to the leadership of these federations have become largely political. Similar scenario characterises sports at state governments’ level where sports and related activities have become political tools. Governments own sports events rights, dictate and direct sports’ property values and flow, in addition to appropriating budgetary allocation for same events and properties. Consequently, competitive pricing of sports’ properties and rights becomes impracticable and unmarketable. This therefore may have been responsible for the unwieldy nature of the industry.

The foregoing indicates that not only is sports value chain in Nigeria sub-optimal largely as a result of government dominance, statistics on the activities of the industry is also almost non-existence. However, sports in Nigeria continue to attract passionate and frenetic followership. Sports also encapsulate and bring real life expression to brand attributes such as leadership, passion, energy and winning. Advances in technology and proliferation of media have meant that sports teams, events and major players are able to attract worldwide following. And given the passions of Nigerians for sports supported with the strong youth demography, the potential size of sports market in Nigeria is massive with implications for job creations and economic growth.

Government however need to reduce in its participation in the industry and focus on rights protection. The automatic force of the market is bound to move in if a competitive environment is restored for investors to begin to see the money. The glorious days of Nigerian sports can be restored with the invisible hand of demand and supply.

  • Written by The Analyst
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Nigerian Super Eagles wins AFCON 2013

Nigerian national football team, Super Eagles won the African Nations' Cup 2013 for the third time, having won in 1980 and in 1994. Nigeria won 1-0 against Burkina-Faso who was featuring for the first time in an AFCON final. Sunday Mba scored a magnificent winner as the dominant Super Eagles made the breakthrough just before half-time when Mba clipped the ball over Mohamed Koffi and then volleyed into the far corner. Although the Burkinabes tried to get the game on, they were unable to match the super power of the Super Eagles.

Despise not an humble beginning 

The Nigerians started the competition on a sour note and they were unable to keep their leads in the first group matches against the same Burkina-Faso and Zambia while it took two goals from Victor Moses in the last 10-minutes of the game against Ethiopia for Nigeria to qualify for the quarter final. But they improved their game ever since, displacing the tournament favourite, Ivory Coast in an entertaining game that ended 2-1 in their favour. Sunday Mba also scored the winner, Ivory Coast having canceled the lead through Emmanuel Emenike's strike in the 23rd mins. The match against Mali was the peak of the Super Eagles' performance, beating the third place team 4 goals to 1, a match described by the Malian goalkeeper Mamadou Samassa as a game against the Brazil and not Nigeria. From humble beginning and an underdog, the Nigerian team has taken over African football once again. But like the Head Coach, Stephen Keshi said, this is just the beggining. The team must be able to hold on to the African Championship for some time.

 

  • Written by The Analyst
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