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Friday, September 10, 2004
Business of Sports Is Changing
Over the past decade there has been a decline in consumer interest in major sports when compared to other forms of entertainment according to a recent article in the McKinsey Quarterly. In Europe between 1996 and 2001, the number of TV viewers of sports fell by 15%. In the US, NFL Monday Night Football has lost 17% of its viewers since 1999.
In the US, the number of people participating at the amateur level in sports that are major revenue producers on the pro level is also on the decline. For example, from 1991 to 2001 the number of participants in baseball fell by 10%. It is thought that a drop in participation in a sport ultimately translates to a smaller audience for that sport.
In 2002 US networks lost an estimated $4 billion on sports programming. The rate of revenue growth from global corporate sponsorships has fallen 6% annually since 1996. Sports increasingly are competing among themselves for a tighter pool of funds.
McKinsey identifies six challenges facing every professional sport that must be addressed if that sport is to be a successful business. The historically major sports face a watershed with these six challenges:
- Players' salaries
- Changes in technology
- Illegal activities by athletes
Are we seeing the end of professional sports as a lucrative business that drives other economic activities? I think not. But professional sports are undergoing an upheaval. Alternatives such as extreme sports are coming on line and the population of sports enthusiasts is aging and changing. Think of the baby boomers and what they no longer play. Think of the teen and preteen girls who follow women's soccer in the US. The picture of professional sports as a business is likely to be a mosaic in the future. That will probably mean less money for the longtime leaders in sports revenues, but more income overall as more sports draw their share of the audience.