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E-sports explosion will further grow a booming industry

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The sports industry is filled with passion and feelings that range from euphoria to big disappointments.

And the sports industry also is a business – one of the largest businesses anywhere.

There are various estimates of the size of the sports industry worldwide. It is commonly considered to be more than $500 billion and up to $1.3 trillion. Now that is big business.

America’s annual sports industry revenue is estimated at $60 billion.

The sports industry connects many different activities and businesses. They range from concession and food sales at sports events to multimillion-dollar transactions involving sports teams acquiring and/or signing superstars.

The sports business also features numerous players. They include owners, teams, leagues, players, agents, sponsors, investors, broadcasters and others competing for a larger piece of the playing field as the sports industry continues to grow.

MEDIA RIGHTS

One major source of revenue in the sports market is the dollars derived from media rights deals, which are becoming larger than gate revenues.

More than 35 percent of local television rights deals with the National Basketball Association, National Hockey League and Major League Baseball are set to expire by 2019, which will contribute to the overall growth in the sector based on assumed lucrative new deals.

But national television rights deals truly drive the growth in this area.

BATTLE FOR EYEBALLS

The competition at these sporting events is not limited to the field or court of play.

There is fierce competition between stadiums and television screens for the spectator’s attention – with projections that media rights soon will surpass gate revenues.

Stadiums are attempting to bring in new technology, features and seating styles in an effort to win back the fan that increasingly may choose to stay home instead of going to the stadium.

SPONSORSHIP RIGHTS

The revenue categories of sponsorship and licensed merchandise also are expected to grow, with sponsorship having the most room for growth.

Naming rights are a large portion of sponsorship revenue, and additional sponsorship revenue comes from inventory created by way of digital media rights, uniform rights and other in-venue signage opportunities.

Licensed merchandise sees a boost in revenue from an expansion in the retail market, technology-driven retail enhancements and the improvement in economic conditions.

Another boost comes from the markets where champions are crowned, such as the Philadelphia Eagles winning their first Super Bowl – spurring millions of dollars in merchandise sales.

IMPACT OF E-SPORTS

What lies ahead could be a major game changer in the business of sports – e-sports, or video games.

Newzoo, the global leader in e-sports, games and mobile intelligence, predicts the e-sports economy will grow to $696 million. Brands are expected to spend $517 million on advertising, sponsorship and media rights.

Peter Warman, CEO of Newzoo, said e-sports are growing exponentially as a business and industry and are capitalizing on one of the favorite pastimes of digital natives and millennials.

The global e-sports audience will reach 385 million in 2017, made up of 191 million e-sports enthusiasts and another 194 million occasional viewers. The number of e-sports enthusiasts is expected to grow by another 50 percent toward 2020, totaling 286 million.

REVENUE PER FAN

In traditional sports, total revenue per fan is a key indicator of how well a sport is monetized. It encompasses all revenue streams, including media rights, sponsorships and consumer spending.

Based on audience and revenue expectations, the average revenue per fan this year will amount to $3.64.

As the e-sports industry matures and incorporates an increasing number of local events, leagues and media rights deals, the average revenue per fan is anticipated to grow to $5.20 by 2020.

There will be much to watch in the sports business in 2018, particularly what happens with the fast and high-impact players in the e-sports market.

Glenn Ebersole, Professional Engineer, is business development manager at CVMNEXT Construction in King of Prussia. He can be reached at gebersole@cvmnext.com or 610-964-2800, ext 155.

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