The business of sport: How to use digital assets to maximize revenue in the sports industry
The sports industry faces significant changes, which makes it vital to ensure maximum value can be realized from digital assets. But how?
The global sports industry is in the midst of a considerable transformation. The effects of the Covid-19 pandemic, combined with a market that comprises an increasing proportion of tech-savvy millennials, is changing the way sport is consumed.
For this reason, increased attention is turning to the digital world for solutions. For example, a 2021 survey from PwC found that 70% of sports leaders felt connected tech is the greatest opportunity for physical sport.
In this article, we explore the challenges faced by the industry’s most lucrative revenue streams and discuss how the digital world – specifically digital assets – can not only help maximize existing income, but also create entirely new sources of revenue.
Traditional sports industry revenue streams
The sports industry has traditionally relied on a few main sources of income, and while these revenue streams are unlikely to stop, there are certainly challenges ahead.
Ticket sales
Income from ticket sales has historically provided a significant proportion of overall revenue for the sports industry. The global pandemic, however, dealt a huge blow.
With many events canceled, and those that did go ahead taking place in empty or partially filled stadiums, income generated from ticket sales simply disappeared.
A report from the Union of European Football Associations (UEFA) reveals that 88% of gate receipt revenues across its European soccer club members were wiped out in 2021 and consequently made up just 2% of overall revenue.
On a global scale, figures show that online ticket sales revenue for sporting events was down 60.6% at the height of the pandemic, dropping from $20.95bn in 2019 to $8.95bn in 2020.
While the same figures project that online ticket sales revenue will bounce back to $27.62bn in 2022, and resume steady growth in subsequent years, the fallout from the war in Ukraine could have further detrimental effects.
Broadcasting rights
The cancellation of events and tournaments also affected one of the largest revenue streams for the sports industry – broadcasting rights. One report shows that the global value of sports media rights fell to $44.6bn in 2020, a drop of more than 12% on 2019’s total.
However, while the pandemic certainly had a big impact on revenues in the short term, the long-term driver of overall change is the increasing move towards streamed content. For example, US streaming subscribers doubled from 2019 to 2020 to reach 275 million.
Such a rise was, in part, fueled by imposed lockdowns. Once relative normalcy resumes, however, a continued increase is expected, with the global streaming market projected to grow at a CAGR of 21.3% to 2030.
This trend has prompted major sports leagues to invest more in streamed content. Notably, the NFL added Amazon to its list of broadcast partners – the first time a streaming service has been included. Furthermore, the league is reportedly launching its very own in-house streaming service called NFL Plus.
Research suggests the same is also true on the other side of the Atlantic, with streaming predicted to generate 20% of major European sports rights revenue in 2022.
Sponsorship
It’s no secret that sponsorship deals are big business in the sports industry, generating a large proportion of overall revenue. In fact, the global sports sponsorship market is expected to grow to nearly $90bn by 2027.
While this revenue is here to stay, many believe that the increasingly digital nature of the sports business, coupled with the transparency of modern marketing, will lead sponsors to demand more transparency and measurable ROI.
This demand will place a large focus on data – the more the sports industry can generate, the better. With the arrival of GDPR and the demise of the third-party cookie depriving many of a treasure trove of information, clubs and leagues the world over will be looking for new ways to gain this valuable insight.
Merchandise
Whether it’s team kits, footwear, or toys and games, the sports merchandise market is another significant revenue stream for the industry.
The global market for licensed sports merchandise is reportedly growing at a CAGR of 3.4%, and is expected to reach a value of $27.2bn in 2026.
With the market enjoying such steady growth, it’s important to ensure merchandise is marketed as widely and accurately as possible.
Future sports industry revenue streams
There’s no doubt the sports industry has learned valuable lessons from the unprecedented events of the past few years and, with an eye on the future, it is laying the foundations for new revenue streams that will provide greater financial stability in an increasingly digitized world.
Below are some of the most notable opportunities being explored by some of the industry’s biggest players.
NFTs
There are many ways in which non-fungible tokens (NFTs) are expected to play a part in the future of the sports industry. For example, NFT tickets could provide holders with exclusive in-stadium access, become digital keepsakes, and even offer a whole new fan experience in the metaverse.
However, the most commonplace and profitable current example is the collectibles market.
Through the authentication of video clips and images, NFTs are turning digital assets into modern-day trading cards. Their unique nature makes them desirable to collectors and this is fueling a thriving online marketplace.
Marketplaces such as OpenSea, NBA Top Shot, and NFL All Day along with startups like Autograph are contributing to an industry that was worth $7.29bn in 2021 and is enjoying significant growth.
Documentaries
Another area that has gained momentum in the sports business is documentary filmmaking. There have been a number of success stories in recent years, with Netflix’s Formula 1: Drive to Survive contributing to a surge in the popularity of the sport in the US, as reported here.
The Last Dance also enjoyed huge viewing figures, while Ryan Reynolds and Rob McElhenney have made no secret about documenting their first two seasons as owners of Welsh soccer club Wrexham AFC.
While broadcasting rights from such productions can certainly generate additional revenue, arguably the most valuable aspect is the unique ability to expand fanbases by using storytelling to win the hearts and loyalty of previously disinterested audiences.
Sports betting
The global sports betting market was valued at $66.98bn in 2020 and is expected to rise to $140.26bn by 2028, with the majority coming from the online segment.
While Europe has always claimed the lion’s share of the market and is enjoying steady growth, all eyes are currently on the US, which is experiencing something of a frenzy.
Sports betting is now legal in a growing number of US states, so in anticipation of this legalization spreading nationwide, sports betting companies are jostling to establish themselves as household names.
This has led to a raft of mergers and acquisitions and newly formed partnerships across the industry, along with huge advertising budgets to ensure betting brands gain the exposure they need.
Image streaming
Digital images are one of the most important aspects of sports marketing. From news reports to marketing materials, the power photography has to inspire is immeasurable.
As such, sports clubs, leagues, and associations have amassed enormous libraries of images that document everything from tournament-winning touchdowns and injury-time goals to player profiles and stadium facilities.
These images are viewed and shared countless times online, but with so many digital images published in so many places – and the ability for users to copy and share freely – it is impossible to tell how many times these images have been viewed and where.
Image streaming can not only change all that, but it also offers the ability to monetize every single one.
The technology offers a new way to display images online that is more secure, engaging, and measurable than current formats like JPEG and PNG. It works in a similar way to a YouTube video in that one high-resolution image is uploaded to a central server, which can then be streamed to unlimited websites using an embed code.
There are some significant benefits to streaming images:
- Because images are streamed from a high-resolution original, it is possible for users to zoom in to the fine details and even go full-screen without affecting webpage loading times. Experience it for yourself with the images included in the body of this article.
- To provide protection against theft and unauthorized use, streamed images are obscured by a deterrent message when users attempt right-clicks or screenshots. Instead of being copied and republished, images can be embedded for free using an optional built-in share button.
- It is possible to track every URL to which an image is streamed. This means image owners gain valuable analytics data and can control distribution by blocking domains as they wish.
- Image owners have the option to monetize entire collections by serving contextual advertising into streamed-image frames. This generates money every time an image is viewed, wherever it is online, tapping into a potentially huge new revenue stream.
In addition to generating advertising revenue, image streaming can perfectly complement all the existing revenue streams mentioned above, forming an essential part of the overall sports business model.
In-image advertising can provide a highly targeted way to market tickets, merchandise, and even upcoming documentaries – all to an engaged audience without the use of cookies. It also offers an ideal place for sportsbooks to spend their ever-growing digital advertising budgets.
What’s more, this brand-safe advertising can form part of sponsorship deals, while image analytics can provide valuable impressions and engagement data as proof of ROI.
Image-streaming technology can even complement the use of NFTs by encouraging the sharing of assets without making additional copies in the process. This maximizes exposure and exclusivity at the same time.
Final thoughts
The PwC Annual Sports Survey 2021 mentioned at the beginning of this article found that 56.1% of industry leaders thought sports organizations should focus primarily on increasing revenue, while 43.9% believed the focus should be on controlling costs.
Considering the state of the current industry, it is easy to see the argument from both sides. On one hand, it should be about licking the financial wounds inflicted by the global pandemic and the potential effects of the events in Ukraine. On the other hand, it should be about chasing down potentially enormous opportunities in the industry’s ever-evolving future digital landscape.
With such strong arguments either way, it could be prudent to take a balanced approach.
Creating the digital infrastructure to realize the full potential of NFTs will take significant investment with no guarantee of return. However, by leveraging technologies such as image streaming, it is possible to enhance the current sports business model and prevent value leakage from existing image assets, while at the same time tapping into a well-established global digital advertising market projected to be worth $646bn by 2024.
Whatever the answer, one thing for certain is that the landscape of the sports industry will look very different in the next few years, so sports organizations need to take action now to ensure they are well-positioned to capitalize on new opportunities.