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Cpanel

24May2018

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.

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