RESEARCH
The ability of the industry to adapt to the changes that the digital revolution brings will be critical to achieving future growth
ticket prices risks reducing attendance and creating a lack of atmosphere for TV viewers, undermining the value of broadcast media rights. For example, 15,000 (16.7 per cent) of the 90,000 capacity at Wembley Stadium are premium seats that have been sold on a 10 year licence. Although these sales have been important in helping to fund the facility, there has been criticism when the seat holders do not attend lower profile games – leaving visible gaps in the stadium.
Broadcast media rights in a multi-platform world Spending on media rights for ongoing events is forecast to be healthy, partly reflecting the fact that they are less suscep- tible to near-term economic developments, because many rights are locked in to long-term contracts. The wide array of issues impacting media rights – including economic factors, com- petition regulation and changes in delivery technologies and platforms – makes it an especially complex marketplace. Currently, the overarching challenge for all parties in the
media rights market is how to protect and monetise rights in a multi-platform world of pervasive (and often freely-available) digital content, echoing the problems encountered by music and, to a lesser extent, movies. The negative impact of the economic downturn on advertising spending, and the resulting shift towards subscription models, has seen pay TV companies become the main driver of rights deals. However, while exclusive rights deals may be more lucrative for sports bodies, they risk driving up the costs of players’ salaries (as seen in the Premier League), and can attract attention from competition and media regulators. Sky TV is currently appealing to the Competition Appeal
Tribunal against a ruling made by media regulator Ofcom in March 2010 that forces it to cut the price at which it sells its sports channels to rivals. Sky TV, backed by a number of sporting bodies, argues that this move could reduce Sky TV’s investment in sport at grassroots level. Sky TV and Ofcom sub- sequently agreed an interim deal at the end of April that means Virgin Media, BT and Top-up TV are able to offer Sky Sports 1 and 2 at a reduced price – but with the difference in cost put into an escrow account pending the appeal. If Sky TV wins its appeal, the escrow money will be awarded to the satellite broadcaster and if it loses, the rivals will get it. It is thought that the appeal could take more than a year to be resolved.
Merchandising towards consumer confidence The global merchandising market is heavily dominated by North America, which will continue to account for around three quarters of total global spending throughout the forecast peri- od. This underlines the impact of local cultural and behavioural factors, such as the tendency for North American consumers to buy apparel at games. Merchandising will continue to be the smallest of the four components of the sports market. This component is more exposed than the other categories to
economic conditions, owing to its heavy reliance on consumers’ disposable income. Major events also play a significant role, lim- iting growth in odd numbered years (non Olympic and non FIFA
28 Read Sports Management online
sportsmanagement.co.uk/digital
World Cup). The challenges faced by the industry include the risk of losing revenues through counterfeiting – a threat that is especially apparent in emerging markets such as Asia.
Where next? As the global sports market gradually recovers from the eco- nomic slowdown, stripping out the effects of major one-off events, an underlying trend of steadily rising spending is emerg- ing. Long-term contracts will to some degree, insulate media rights from the downturn and as a result media is the only cat- egory where spending for ongoing events increased in 2009. The ability of the industry to adapt to the changes that the
digital revolution brings will be critical to achieving future growth along with its ability to answer questions such as: how will accountability, measurability and transparency of their return be given to sponsors? How will price sensitivity be man- aged to achieve the largest attendances in respect of numbers and yields? How is conflict between media rights regulators and sports bodies resolved and managed? And how can consumer appetite for merchandising outside of the US be enhanced? In conclusion, in order to win in sport it is vital to think
globally and act locally. ● Julie Clark is UK sport and leisure sector leader at PwC. The full Back on T
rack? report can be found at
www.pwc.co.uk Issue 4 2010 © cybertrek 2010
Minnesota Timberwolves and the LA Lakers at the O2 Arena during their pre-season tour
PIC: EMPICS SPORT
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