Business of Speed

The Money Behind the Motorsports Industry

By: Tim Frost

Date: November 1, 2018

There is considerable debate over the state of sports business.

Unsettled may be the proper mood – attendance, sponsorship levels and cars counts are not what they once were.

We are in a period of transition – operating in uncertain conditions while evolving towards a digital future. Growth continues to be driven by media rights because the demand for sports content still sells. Beyond that there are unknowns.

Questions arise: what the future of sports media will be, how can return on investment be generated with sponsorship, and what is the proper approach to the esports. Disruption is everywhere for media, many struggles with how to engage the millennial, and commercial aspects of esports relevant.

The annual survey by PWC provided an in-depth look at the sports business by industry leaders. The consensus was tentative. Prior operational protocol was not going to cut it going forward and a new skillset is needed along with the mindset that change was required to compete effectively on the field and digital landscape.

The survey predicted growth would continue but not the record levels of the recent past. Mature markets will slow down with optimism in evolving economies. Sports tech companies would top the charts lead by innovation. Broadcasters and media companies, along with event organizers will be the slowest due to pricing pressures.

Media and sponsorship rights will rise as their business models evolve. Consumers are moving towards digital consumption and those properties that utilize their data will assist sponsors reach their target audience.

The movement in consumer behavior is the driving force for many aspects of change in the sports industry. Younger generations are transitioning their entertainment time from traditional television to mobile devices. Understanding their actions is a priority, and content and distribution channels will have to be tailored to their preferences.

The contrast between viewership among demographic groups is alarming. Older viewers watch sports on traditional television four times more then younger. Online screen consumption on multiple screen is the standard for the technology savvy.

Sports content still reigns. It is being created and distributed in multiple formats because of the consumer. Highlights and on-demand material along with team-, athlete-, and fan-generated content are the most consumed.

The social and often viral content from user generated content is key to reaching, engaging the desirable audiences. Winners are those who capture attention and activate revenues around it.

Media rights are the largest source of revenue in the sports business. For the last 25 years, they have been rising rapidly. Long term contracts are set to expire over the next few years. Will the escalation continue? No one really knows.

Non-traditional entrants have started bidding on properties with the goal to distribute on their individual platforms. Leagues are starting to package and structure their media rights for a mix of different channels. This can be a complex undertaking. Adaptation is imperative from an operational and financial perspective.

Live sports are important. Packaging and distributing on different platforms with enhanced features will keep it competitive. Stats, onscreen information, virtual reality are being developed and deployed successfully. Personalized content for engaging the the millennial viewer is working.

Esports can no longer be ignored. Traditional sports leagues and teams are devising strategies to become involved. They can create an esports team, acquire an property, extend their brand thru sponsorship or activation.

While traditional sports and esports are different, they could learn from each other. Digital streaming is being used to distribute content in a direct to consumer model. The operational structure of established entities will provide a road map for the long term.

The goal is to understand and embrace the differences which is critical to engaging future consumers of sports.