Spectator sports industry

Industry Snapshot

GENERAL INDUSTRY: Sports

CAREER CLUSTER: Business, Management, and Administration

SUBCATEGORY INDUSTRIES: Independent Athletes; Racetracks; Sports Agents; Sports Promoters; Sports Teams and Clubs

RELATED INDUSTRIES:Apparel and Fashion Industry; Broadcast Industry; Motion Picture and Television Industry; Sports Equipment Industry

ANNUAL GLOBAL REVENUES:US$171.06 billion (Business Research Company, 2023)

NAICS NUMBER: 7112-7114

Summary

The spectator sports industry comprises professional, semiprofessional, amateur, and tournament sports that are conducted live before a paying audience. It includes high-profile sports leagues such as the National Football League (NFL) and Major League Baseball (MLB), as well as horse, dog, and car racing. Participants in the industry include owners, athletes, trainers, managers, coaches, promoters, referees, and administrators, as well as groundskeepers and facility managers.

History of the Industry

The history of sports and games dates back to ancient times. Artifacts of an ancient Egyptian board game called enet have been extracted from pyramids, and the game’s origin has been traced back to 3000 B.C.E. Likewise, Egyptians were fond of sporting competitions that involved running, jumping, and fighting. Egyptian wall paintings from around 1850 B.C.E. depict a wrestling competition that involves techniques still used by wrestlers today.

The ancient Greeks epitomized a culture obsessed with the human form and the pursuit of physical perfection. Competitive sport was a feature of many Greek religious and social ceremonies, and the Greeks constructed sporting arenas that were designed for spectator viewing. They also inaugurated the first sporting competition at Olympia in 776 B.C.E., founding a tradition that continued to be observed every four years for more than a millennium. The Olympic Games’ schedule would eventually be expanded from a singular running race to include sports such as javelin, discus, chariot racing, wrestling, boxing, and the pentathlon (featuring five events). The Olympics were outlawed in 393 C.E. by the Romans, but after a fifteen-hundred-year hiatus the modern Olympic Games were founded in 1896, continuing the tradition of sporting competition among the world’s elite athletes.

Horse racing also dates back to ancient times, when people held chariot races, jousted, and played a team game that was a predecessor of polo. The modern concept of horse racing, however, can be traced to England in the 1600s, when it found favor with King Charles II and the English aristocracy. The sport popularized gambling and formalized the concept of pedigree in animal breeding. In fact, some scholars contend that the fascination with genealogy in horse racing has roots in English aristocrats’ obsession with their own lineage.

Modern sport, with standardized rules and regulations, began evolving in the 1800s in Europe as schools increasingly mandated sports in their curricula. At the same time, advances in transportation technology facilitated sporting competitions between villages and towns, and an increasing proportion of the population moved to large cities, where it became easier to form sporting leagues. Over time, standardized rules and faster, cheaper travel made it possible to conduct national and international sporting competitions.

The development of spectator sports as an industry has been accelerated by communication technologies that make sports accessible to increasingly large audiences. Today, revenue generated from ticket sales and concession spending is dwarfed by the revenue generated from broadcasting rights, merchandising, advertising, and sponsorships. Consequently, sport in the United States and around the world has become big business. In fact, since the 1920s, when expenditures in the spectator sports industry were first tracked in the United States, the industry has seen rapid growth. From 1920 to 1930 alone, spending on spectator sports more than doubled, from $30 to $65 million. In the 1990s, spending was estimated at more than $11 billion.

The Industry Today

Sport cuts across national boundaries and demographics and is no less woven into the contemporary cultural fabric than it was woven into that of the ancient Greeks. Moreover, as a form of entertainment and recreation, sport is incredibly multifaceted. It accommodates players and managers from amateur to professional levels, and it offers a wide variety of allied pursuits, not least of which are gambling and spectating.

The 2004 Summer Olympics in Athens, Greece, made history when television broadcasts of the competition were viewed by 3.9 billion people worldwide. They generated over thirty-five thousand hours of broadcast viewing spread across thousands of stations. In the United States, 203 million people—nearly 70 percent of the population—watched at least some part of the games. The 2008 Summer Olympics in Beijing, China, comprised more than 302 events involving around ten thousand competitors, and they were covered by 24,500 media representatives from fifty-nine countries. Audience demand for the Olympics has grown strongly, if the increase in supply is any indication. Measured by the number of broadcast hours dedicated to Olympic events, there was a 27 percent increase in the supply of Olympic coverage between 1992 and 2004. The 2016 Summer Olympics in Rio de Janeiro, Brazil, was watched by an estimated 5 billion people worldwide and was comprised of 306 events involving more than 11,300 athletes. More than 3 billion people watched coverage of the 2020 Olympic Winter Games held in Tokyo. The event was the most watched Olympics on digital platforms.

In the United States, the spectator sports industry employed 13.5 thousand professional athletes and sports competitors in 2018, with thousands more individuals in support and related occupations. The other leading occupations in the industry include office and administrative support; service and guest attendance (ticket takers, ushers, and so on); food preparation and service; maintenance and repair; security services; transportation and freight; general and operations management; coaching and training; and business support (human resources, convention planning, accounting, auditing, and so on). Data USA put the total 2019 workforce at 151,000 and projected 9.3 percent growth over ten years. However, the global COVID-19 pandemic dramatically affected spectator sports, closing venues for a time and later, when competition resumed, many athletes were playing to empty arenas.

In 2022, the combined Big Four leagues—the NFL, the National Basketball Association (NBA), the National Hockey League (NHL), and MLB—accounted for an estimated annual revenue of $57 billion, according to Statista. Other significant spectator sporting leagues in the United States include the National Association for Stock Car Auto Racing (NASCAR), Indy Car, the Professional Golfers Association (PGA), the National Collegiate Athletic Association (NCAA), and Major League Soccer (MLS). Growing professional sports subsectors include previously marginal sports such as motocross, skateboarding, monster trucks, aerobatics, and poker. Amateur and semiprofessional sports also create strong spectator demand. Some of these include cycling, poker, bowling, bodybuilding, beach volleyball, rodeo riding, figure skating, and rally-car racing.

Today, the majority of spectator sports revenue is generated from the sale of broadcasting and sponsorship rights. If a league engages in a profit-sharing business model, it distributes league-generated revenues among its franchisees. Coupled with salary caps that limit the earning potential of players, this arrangement can make franchise ownership incredibly profitable. However, statistics belie the vast scope of the disparity between the richest and the poorest sectors of the industry. In competitive leagues that do not engage in profit sharing, teams and individuals must privately fund their enterprises, and they must do so in an economy where consumer, sponsor, and investment spending can contract in response to economic downturns. As highlighted by the 2007-2009 global financial crisis and its economic impact on consumer spending, contracting spending in professional sports is a relatively new paradigm in an industry that has enjoyed decades of skyrocketing growth. The COVID-19 pandemic likewise saw major economic changes from suspended seasons, social distancing requirements, canceled broadcasts, and related economic impacts such as loss of revenue for businesses such as hotels and restaurants located near sports venues.

The spectator sports industry is undergoing a transformation in the early twenty-first century, as teams and their governing bodies diversify their business interests. Likewise, the industry is coming to terms with new technologies and how these may change the way in which spectators view and interact with sports and sporting events. Some examples include online fantasy leagues, video gaming, digital television, and Internet video streaming. The domestic spectator sports industry is also challenged by questions of how best to market its products to potential international and foreign audiences.

The sports agency field is dominated by large companies that manage professional athletes, coaches, celebrities, and events. Demonstrating the high value placed on sports managers and promoters in the industry, the career tournament earnings of Tiger Woods (the world’s highest-paid athlete in the early twenty-first century) were overshadowed by the $500 million he earned from endorsements and other activities. Some leading sports agencies include IMG, Octagon Worldwide, BDA Sports Management, and the William Morris Agency.

Industry Outlook

Overview

The outlook for the spectator sports industry shows it to be stable. Between 1998 and 2005, revenue in the spectator sports sector skyrocketed by 32 percent, and that of the agency and promotion sector increased by 36 percent. This meteoric rise was slowed somewhat by the global economic recession of 2007–9, with the valuations of the major US sports leagues remaining relatively stable, but long-term media broadcast deals and sponsorships helped offset other declines. By 2011 the industry had begun to grow yet again. In 2015, the valuation and revenues of the NFL, MLB, NBA, and NHL all reached record highs. After the lean seasons of the pandemic, and rising inflation in early 2022, the spectator sports segment saw growth; the market reached $171.06 billion in 2023 and was predicted to reach $274 billion by 2026.

While overall the industry is still expected to grow, some observers expect to witness corrections in overvalued salaries and company stocks. These pricing corrections follow decades of unfettered growth that resulted in ticket, merchandise, salary, and company values that may not be sustainable. In keeping with general employment trends, spectator sports organizations are working toward smaller, leaner workforces. While wage and salaried jobs in the arts, entertainment, and recreation industry are expected to grow generally, job competition in the spectator sports sector will tighten and intensify. This trend is likely to result in keener competition in the amateur and semiprofessional sectors as well.

These economic factors are forcing sports businesses to look beyond their traditional markets and means of distribution. Foreign markets, especially in Asia, are proving particularly attractive. The key to opening these foreign markets, however, is to develop awareness and appreciation for new sports within them. Such initiatives demand long-term investment. The NFL, for example, has established a youth flag-football league in China. The NFL has played regular season games at Wembley Stadium in England, in an attempt to generate European interest in American football. NASCAR, meanwhile, is attempting to broaden its audience demographic by broadcasting in Spanish.

Sporting organizations are also competing in the new media space, as consumer demand for instant and interactive services increases. The rising demand for Web-based services challenges traditional marketing paradigms, as the industry grapples with expanding its audience and cementing viewer loyalties beyond traditional broadcast technologies. The challenges of leveraging new communication technologies and media methods cannot be understated, given increased competition among various sports in a saturated domestic market.

Revenue in the spectator sports industry is expected to grow generally, but many businesses (especially those competing in nonfranchise leagues) will experience lower profit margins resulting from increased competition. While revenue from consumer sales is likely to plateau, income from the sale of long-term broadcasting and sponsorship agreements assures financial security for most high-profile leagues. Business survival will be more cutthroat in sports whose officiating bodies do not share profits from broadcasting or event sponsorship with teams or athletes. NASCAR, a privately owned, family-operated business, is a good case in point: Sponsorship and broadcasting revenues earned by NASCAR remain solely with NASCAR. This situation can lead to tension when competing teams accuse NASCAR of stealing their sponsors and of pocketing huge broadcasting revenues that leverage the teams’ participation without providing any reimbursement. Meanwhile, many teams are reducing their workforces, cutting salaries, and scrabbling for sponsorship dollars.

Employment Advantages

Opportunities will continue to exist for talented, motivated, and qualified individuals. Practical experience is highly regarded in this industry, so candidates are encouraged to seek relevant experience through volunteering, community involvement at local schools and clubs, amateur leagues, and hobby activities. Candidates who combine relevant practical experience with high levels of academic achievement or athletic talent will be best positioned for opportunities, as will those who can apply their skills in new and high-demand areas. Although employment entry may be difficult, competition keen, and the work demanding, those who do become successful are likely to be remunerated generously.

Annual Earnings

The total sports industry in the United States was valued at $552 billion in 2020 according to Plunkett Research; This figure includes the spectator sports, sporting equipment and apparel, health, fitness and recreation, and promotions industries. In 2023, the NFL was the most valuable league, with other major contributors as follows:

•NFL: $25 billion

•MLB: $14 billion

•NBA: $12 billion

•NHL: $6 billion

•Other sporting leagues: $7.7 billion

The NFL is one of the world’s most profitable sporting leagues, with the average team valued at $5.11 billion in 2023. Second place goes to MLB, with an average value of $2.3 billion per franchise. The NFL’s value can be attributed mainly to broadcasting rights and a player-salary cap that ensures that franchise teams realize strong profits. The top teams also own or control their own stadiums, which garner strong income from ticket and concession sales, as well as multimillion-dollar naming deals. The NFL has also identified unique business opportunities by entering into preferred supplier arrangements with relatively small, burgeoning organizations in return for stock options in these companies. This tactic has paid large dividends, as these partnerships drive up sales and company stock values. The NFL also owns its own broadcasting network.

These domestic statistics are dwarfed by the potential revenues offered by burgeoning sports markets overseas. In China, for example, increasing professionalism in sports, coupled with wider media coverage, is resulting in massive growth in the sports industry. In 2022, China's sports and fitness industry was $461.3 billion and was predicted to reach $800 billion by 2025.

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