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Sports Industry OVERVIEW

The sports business means many different things to different people.
     This is a truly global industry, and sports stir up deep passion within spectators and players alike in countries around the world.
     To one person, sports are a venue for gambling; to another, they are a mode of personal recreation and fitness, be it skiing, cycling, running or playing tennis.
     To business people, sports provide a lucrative and continually growing marketplace worthy of immense investment.
     To athletes, sports may lead to high levels of personal achievement, and to professionals, sports can bring fame and fortune.
     To facilities developers and local governments, sports are a way to build revenue from tourists and local fans.
     Sports are deeply ingrained in education, from elementary through university levels.
     Perhaps we cannot state with confidence that sports enrich the lives of all of us, but they certainly entertain a huge swath of the world's population.
     In addition to economic impact, the largest single effect that sports create is that of gripping entertainment: hundreds of millions of fans around the globe follow sports daily, whether via radio, television, printed publications, online or in person, as spectators or participants. Sports are big business.
     Combined, the “Big 4” leagues in America, the National Football League (NFL), National Basketball Association (NBA), the National Hockey League

¹ Video Tip

For our brief video introduction to the Sports industry, see www.plunkettresearch.com/video/sports.

The sports business means many different things to different people. This is a truly global industry, and sports stir up deep passion within spectators and players alike in countries around the world. To one person, sports are a venue for gambling; to another, they are a mode of personal recreation and fitness, be it skiing, cycling, running or playing tennis. To business people, sports provide a lucrative and continually growing marketplace worthy of immense investment. To athletes, sports may lead to high levels of personal achievement, and to professionals, sports can bring fame and fortune. To facilities developers and local governments, sports are a way to build revenue from tourists and local fans. Sports are deeply ingrained in education, from elementary through university levels. Perhaps we cannot state with confidence that sports enrich the lives of all of us, but they certainly entertain a huge swath of the world’s population. In addition to economic impact, the largest single effect that sports create is that of gripping entertainment: hundreds of millions of fans around the globe follow sports daily, whether via radio, television, printed publications, online or in person, as spectators or participants.

Sports are big business. Combined, the “Big 4” leagues in America, the National Football League (NFL), National Basketball Association (NBA), the National Hockey League (NHL) and Major League Baseball (MLB), bring in about $39 billion in revenue during a typical year, but that’s just the tip of the iceberg. On a very broad basis, including related services, a reasonable estimate of the total U.S. sports and recreation market would be $552.8 billion yearly (and $1.5 trillion for the entire world).

Also, the sports industry is so complex, including ticket sales, licensed products, sports video games, collectibles, sporting goods, sports-related advertising, endorsement income, stadium naming fees and facilities income, that it’s difficult to put an all-encompassing figure on annual revenue.

When researching numbers in the sports industry, be prepared for apparent contradictions. For example, the NFL receives vastly more money each year for TV and cable broadcast rights than MLB, despite the fact that MLB teams play about 10 times more games each year than NFL teams.

When the astonishing variety of sports-related sectors is considered, a significant portion of the workforce in developed nations such as the U.S., UK, Australia and Japan rely on the sports industry for their livelihoods. Official U.S. Bureau of Labor Statistics figures as of 2021 found that 479,900 Americans work in fitness centers, 28,700 in snow skiing facilities, 52,300 in bowling centers and 329,900 at country clubs or golf courses. In total, approximately 1.2 million Americans work directly in amusement, sports and recreation sectors. Another 61,300 work in the wholesale trade of sporting goods, and 271,900 in retail sporting goods stores. Sports, recreation and related supplies and services have been among the greatest new job engines over the past several years.

While it may not seem like it to the casual observer, the sports sector is constantly evolving in terms of personal tastes, popular games and technologies. In fact, the personality and popularity of a top athlete can have a tremendous impact on the current popularity of a particular sport—NBA basketball megastar LeBron James, who was recruited for the league directly out of high school, being a superb example with his extremely positive impact on basketball both at home and abroad. Lance Armstrong, at the peak of his popularity as a Tour de France winner, had an immense impact on the sport of cycling.

Physical fitness activities have been showing substantial growth in popularity in recent years. There has been significant growth in elliptical motion trainers, running/jogging, and stationary cycling done in groups (“spinning”). Participation in fitness classes like Zumba, boot camps and yoga also has been growing.

The Physical Activity Council is a consortium of sports industry groups. Its 2021-edition report tracked participation in hundreds of activities during the past year. The group’s extensive survey showed that only 75.6% of Americans aged 6+ participate in physical activities, ranging from golf and walking to fitness clubs and organized team sports.

Meanwhile, many enigmas remain obvious in sports and recreation. For example, the number of people playing golf in America has been dropping over the long term, although audiences for televised golf events remain very large, and golf participation increased during the worst of COVID. Then there’s the fact that big audiences have been watching high-stakes poker tournaments on television recently. Does that qualify as sports broadcasting? It’s certainly a game. Moreover, thanks to the internet, fantasy sports teams and online betting on sports events are soaring. Meanwhile, electronic games have become one of the world’s fastest-growing industries, generating tens of billions of dollars in annual, global revenues including software, game consoles, mobile games and game subscriptions. In the minds of many people, competing against other electronic games players is a sporting activity, so much so that live electronic game competition now draws large crowds willing to buy tickets to watch top pros compete in person. This type of organized electronic game play is now referred to as eSports. Related leagues, tournaments and sponsors are growing quickly. Earnings can be very substantial for top players. On an amateur level, eSports are beginning to be recognized as legitimate sports activities at some schools. Dedicated eSports stadiums can be found in Germany, China and the U.S.

One of the strongest, long-term growth trends in the recreation business has been in fitness-related activities. In the U.S. alone, 40,000 health clubs enjoyed 64.2 million members, prior to the pandemic of 2020. Members visited their clubs an average of about 100 days each year. However, the Coronavirus of 2020 caused 6,800 gyms to close permanently, and some of the largest gym companies, including 24 Hour Fitness, took bankruptcy.

Another 42 million Americans use exercise machines in their homes, according to Plunkett Research estimates. America’s roughly 70 million surviving baby boomers, with time and money on their hands plus a growing concern about their quality of life, will boost the health club and home exercise sectors further. (Sports and leisure revenues from the Baby Boomer segment will grow quickly. For example, “pickleball,” a racquet and ball game played on a court about one-quarter the size of a tennis court, is soaring in popularity with senior citizens.)

Globally, IHRSA estimated that 210,000 health clubs served 183 million members as of 2018. It also reported that Brazil, a very body-conscious nation and home of Rio de Janeiro’s famous beach culture, is second only to the U.S. in the total number of health clubs. IHRSA stated that India and China are expansion markets with very high potential.

Evolving technologies and fashions have an immense impact on sales of sporting goods within specific sectors. Sporting goods makers are constantly trying to create reasons for consumers to buy new equipment. Golf club makers adopt new technologies with great success. Snow ski and board makers use new technologies as soon as they become available. Additionally, ski gear manufacturers introduce new fashions, new colors and new styles yearly in an effort to get consumers to buy new or buy up, regardless of whether significant new technologies are involved. Nanotechnology, with the ability to provide components with tremendous strength at very low weight, is being featured in new equipment to a growing degree, including tennis rackets. Likewise, carbon fibers are increasingly seen in the construction of upper-end equipment, including fine bicycles.

The types of electronic technology applied to sporting apparel and sporting goods is becoming much more advanced, as sensors are being embedded that wirelessly gather information through sophisticated accelerometers. Nike’s Nike+ brand is a major success in this arena, enabling users to set goals, see real-time exercise results and upload exercise histories to www.nikeplus.com from their smartphones and other devices. Eventually, the sports industry will see widespread use of remote wireless sensors in virtually all types of sporting equipment, from tennis rackets to bicycles to golf clubs and even apparel such as swimsuits. Sports participants are going to want to be as totally connected to personal electronics during their recreational activities are they are in all other aspects of their lives.

Meanwhile, the media used to deliver sports and sports related information is evolving quickly. Sports coverage is one of the most widely viewed categories online. At the same time, digital TV recording devices, such as TiVo, are enabling fans to watch events according to their own schedules.

Some of the biggest opportunities in the sports industry today lie in providing exciting, high-value opportunities for sports fans, such as high-tech recreational gear at reasonable prices; eSports, spectator sports ticket packages that represent good value; exercise/fitness services that appeal to aging baby boomers; subscriptions that enable online and mobile viewing of events as well as online home exercise classes; and equipment and apparel that provide high value and exciting design. Globally, over the long term, the industry has tremendous upside potential in rapidly developing consumer markets such as China, India and Mexico.