Kearney predicts global sports market to hit $600 billion in 5 years
As the ownership models of global sporting brands shift, so has the emphasis on revenue increases over on-pitch success, according to a Kearney report. This corporatised approach to sport is set to drive the global sports market to a size of $600 billion by 2030, with the growth powered by pushing back on traditional taboos such as gambling.
According to Kearney, an influx of value-driven investors into sports, such as private equity and state investment funds, is reshaping the sports landscape. Perhaps most famously, in 2008, Abu Dhabi’s sovereign fund acquired Manchester City, using the football club as a basis to build one of the world’s most successful multi-club franchises – but just as influentially was the 2006 acquisition of Formula 1 by CVC – a private equity firm which realised a 450% return when it exited a decade later.
While the sovereign wealth fund behind Manchester City has goals which include building an improved reputation in the West, similar deals also come as Middle Eastern economies are working to diversify their economies – and the lucrative world of professional sport can provide a profitable platform to encourage private sector investment there. Meanwhile, private equity firms are facing a difficult moment, where – amid rising interest rates, trade wars and political uncertainty – investors are looking for the few remaining sure-fire acquisitions; and with the adoration of global fanbases driving massive broadcasting deals and merchandise sales, sport is as close to that as is still available.
With this shift in ownership has come a change in priorities for many top organisations. With fewer owners backing organisations out of local pride or childhood passion, and more due to the possible returns, sporting organisations are increasingly motivated by returns in the board room, and less motivated by on-field glory.
Christophe Firth, partner at Kearney, explained, “Sport is no longer a passion project for investors. It holds promise as a high-growth, high-return investment class. New technology, format innovation and revenue diversification has created new opportunities, not least the influx of private capital and strategic investors. These new entrants to the market have also raised the bar, driving increased expectations and the need for strategic thinking and professionalised operations. Clarity of ambition and strength in execution are the watchwords as the sector moves from passion to profit, creating value while also shaping the next era of global sports.”
New revenue priorities
Kearney’s research ‘From passion to profit: unlocking value in sports’ notes that this is already driving sporting revenues to new heights. According to the estimates of the strategy consultancy, the global sports market is expected to exceed revenues of $600 billion by 2030 – from a present level of $417 billion.
Breaking the market down, Kearney believes that the shift in ownership is already impacting where sports-related organisations rake in the revenue from. While broadcasting revenues still provide a sizeable core of income – including $86 billion directly from broadcasting, streaming and pay-per-view subscriptions, and $154 billion from sponsors looking to use that global coverage for advertising – there is now a sizeable alternative chunk provided by ‘gaming’. Kearney defines that segment as a $17 billion portion from sports video games – which usually involve rights deals for athletes and organisations – as well as $27 billion related to fantasy sports apps. But the majority of it comes in the form of $133 billion from betting.
The researchers note that a primary driver behind this is the liberalisation of the sports betting market in the United States, as well as a growing appetite for it in Asia, most notably China and India. And while it might raise the eyebrows of campaigners who have determinedly tried to draw attention to the human cost of this revenue stream, it looks likely that sports owners will press ahead with it in the next five years.
By 2030, Kearney anticipates that 46% of sporting revenue will come from ‘gaming’, up more than 12% from its 2020 revenue share. While rapid growth is also expected in IP commercialisation, in particular sponsorship and tier 1 media rights, this is likely to mean that gambling partnerships will continue to climb up the priorities of the owners of sporting institutions.
