Global sport sector to recover, says PwC

AFTER A year of falling attendances, sponsorship wobbles and club balance sheets in more disarray than the French football team, the global sports market is expected to get back on track, according to PricewaterhouseCoopers (PwC).

A new report by the accountancy giant suggests that the business of sport over the next few years will be marked by expanding gate revenues at live events and robust returns from massive sponsorship deals.

Sports organisations may start to set different prices for tickets in the same way as airlines and hotels in order to maximise gate receipts, its report, Back on Track, forecasts.

Global sports spending will rise from $114 billion (€92.5 billion) in 2009 to $133 billion by 2013, representing an annual growth rate of almost 4 per cent, PwC said. Sports revenues will grow across all territories, it predicts.

Three major sporting events – the World Cup taking place in South Africa, the Vancouver 2010 Winter Olympics and the London 2012 Olympics – will provide a major impetus to spending in the market.

But even once these one-off events are stripped out, the sports market is set to rebound from a weak year in 2009, according to Julie Clark, head of sport at PwC.

Gate revenues, sponsorship money and merchandising turnover for ongoing events all fell in 2009, with only cash from media rights going in the right direction for sports clubs.

The long-term nature of media rights contracts insulated this area of the market from recession, Ms Clark said.

However, the contract renewals that did take place suggest that media money may not be a guaranteed source of revenue growth for sports clubs in the future.

An “overarching challenge” for all sports bodies selling media rights is how to protect their revenue streams in a multiplatform digital era, where content is often freely available, PwC notes.

Gate revenues will remain the biggest component of the sports market, followed by sponsorship deals, the report forecasts.

However, sports clubs should be wary that tickets do not become so unaffordable that attendances fall, compromising support from their local base and damaging the club’s total revenues, said Feargal O’Rourke, a tax partner at PwC in Dublin.

“In the US, a number of sports teams are using dynamic ticket pricing, similar to the yield management models used by airlines and hotels,” Mr O’Rourke said.

“It does mean that people might be sitting next to someone who paid less for their ticket and that may be a psychological barrier for people to overcome.”

Meanwhile, heavily indebted football clubs will have to concentrate on “living within their means” in the years ahead.

Michel Platini, president of European football’s governing body Uefa, has outlined plans to ban teams from the organisation’s competitions if they spend more than they earn.

“I think sports bodies themselves are rediscovering that unfettered spending is not healthy and that they need to put their houses in order,” said Mr O’Rourke.

Scores And Misses From Top Draws To The Tiger Factor For Sports Revenues

Back of the net

Aviva stadium

The attention paid to naming rights and branding at the redeveloped Lansdowne Road venue shows that “the days of Ireland being a backwater in sports business terms are gone”, says PwC’s Feargal O’Rourke.

London 2012

There is a “flight to quality” on sponsorship, which enhances the appeal of events like the Olympics. Visa has renewed its deal with the International Olympic Committee and it has been suggested it will only be possible to purchase tickets for 2012 on Visa’s platform.

Financial sponsors

RBS has cut back its sponsorship budget, but elsewhere financial companies are back in the game. Next season will see Aon take

over from AIG as Manchester United shirt sponsor, while Standard Chartered will sponsor Liverpool.

Yellow card

Star sponsorship

Revelations about Tiger Woods’s private life, as well as a spate of scandals in Australian rugby league, mean sponsors are re-examining the reputational risks of aligning themselves with individual sports stars.

High ticket prices

The average attendance in German Bundesliga football in the 2009-2010 season was 42,000, compared to an average of 34,000 in the English Premiership. PwC says German supporters’ ability to buy tickets for clubs like Borussia Dortmund for €15 is the reason for higher German levels of support.

Media rights renewals

The flight to digital, competition regulation – such as Ofcom’s order that Sky must reduce wholesale prices – and government moves to put more sports events on free-to-air lists makes it difficult to forecast revenues.