Pwc's Sports Survey 2018

www.pwc.ch/sports

Sports industry: lost in transition? PwC’s Sports Survey 2018

September 2018 View from The state of the Sports media: Sports Esports: serious References and the top sports industry out with the old, sponsorship: business contacts How to call the shots Market growth stable, in with the new? driving ROI in the Living up to the hype Notes and sources in transition? with most optimism in Sports content retains digital age Asia, least in Europe throne and goes digital Sponsors behind the curve Is esports an Olympic Our service offerings in earnest in understanding shift in sport? Sports tech firms consumer behaviour Our Sports Business optimistic, broadcasters No consensus on rights Fan engagement kings Advisory team and leagues less so values going forward How to engage the millennial consumer Esports can no longer be 06 Media and sponsorship OTT entrants a key ignored, but how to rights to keep growing as growth driver of rights Personalised content proceed? models evolve value is king

Esports overtakes football Tech firms no longer on 38 It is all about the fans in growth potential the sidelines, but which players will dominate No consensus on Threats abound from tomorrow? tomorrow’s sponsorship shifts in consumer 32 values, but more stable behaviour than media rights 08 18 26

This survey was conducted by our representation across regions and The analysis in this report is primarily Respondent profile by organisation Respondent profile by geographical sports market they know best Percentage of respondents, up to 3 choices possible Sports Business Advisory team industry segments. PwC’s global based on the collective opinion of 14.1% 19.8% between the months of May and network further supported us the respondents. It is complemented Other / Consultancy Sports June 2018 through an online to ensure greater participation, by data provided to us by Intelligent & suppliers federation European 61.1% questionnaire that was distributed particularly in Asia. In total, we Research in Sponsoring GmbH, a 5.1% Asian Academia /Public 17.9% 27.8% to sports industry leaders across received 470 responses to our leading independent international Sports team/ sector the world. Sharing our vision questionnaire across 42 counties. As sports marketing research agency in Club North American 27.6% of establishing an independent participants did not always provide Germany, as well as desktop research. 7.2% perspective on the state of the responses to all questions, we have Brand/ Sponsor 10.5% Middle Eastern 9.8% Broadcaster/ industry, a number of high-profile included the precise number of 7.2% Media South American sports executives supported us by responses received for the questions Sports technology company 6% company sharing the questionnaire with their that are graphically represented South Pacific 5.3% peers. This helped us ensure broader within this report. 8.7% 9.4% (Sports) marketing League/ Event agency organiser African 4.9%

2 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 3 Dear Madam or Sir,

We are pleased to present you with the 2018 edition of our annual sports survey. This year, we more than doubled our respondent base of sports industry leaders. This has provided us with a highly diverse set of viewpoints to analyse and derive insights that are of particular relevance to the industry.

Overall, sports leaders foresee uncertain conditions as we continue to evolve towards digital media consumption, leading us to question whether the industry may be somewhat lost in this transition. Despite the accelerating change in the business models behind the exploitation of sports rights, however, respondents expect stable market growth driven by strong underlying demand for sports content. Simply put: sport still sells.

Beyond an overall assessment of industry growth and threats, this report features three areas that we singled out for deeper analysis: (i) what the future of the sports media landscape will look like, (ii) how to drive ROI through sports sponsorship going forward, and (iii) how to approach the fast-growing space of esports. In broad terms, we hear that the transition towards the digital consumption of sports content is intensifying, causing more disruption than ever in the media space, that sponsors are behind the curve in understanding how to engage the millennial consumer, and that esports has become too commercially relevant to be ignored by traditional sports.

As we continue to expand our respondent base, we are obtaining a more representative perspective across geographies, stakeholder groups and industry segments. As such, I am convinced that our study is well on its way to achieving our vision of providing an independent, globally representative and authoritative snapshot of the state of our industry.

Yours sincerely,

David Dellea Head of Sports Business Advisory

4 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 5 View from the top How to call the shots in transition?

Future vs. past growth Top ten sports by growth Growth rate by Potential to grow revenues globally Top five Over the past and next 3-5 years market segment Over the next 3-5 years industry threats By percentage of respondents 1 Esports 6 Rugby Traditional TV rights Shift in consumer behaviour of younger generations

Digital media 1 71.8% Football/ American Ticketing & 3.2% rights 2 soccer 7 football hospitality Access to alternative entertainment formats (other than sports) 7.7% 3.8% 11.5% 2 54.2% Decreased willingness to pay for sports content average 3 Basketball 8 Cycling past 7.0% 3 32.5% Participation 4.4% Lack of trust in sports governing bodies growth future Mass fees 4 participation 9 Tennis 4 31.4% growth sports 4.8% 5.5% Piracy/illegal streaming Boxing/ Cricket 5 25.5% 5 martial arts 10 Licensing & Sponsorship & merchandising advertising

Top content and channels Time to enter esports? 70.5% believe so, but how should they go about it? Consumption in the next 3-5 years Personalised content is king Do sponsors “get it”? By percentage of respondents Areas sponsors should focus on to drive ROI (by % of respondents) By percentage of respondents Create an esports team Create multiple teams to 1. Tech firms playing its “simulated” play across video games 1. Highlights/on-demand video 73% 64% 36% (e.g. Facebook, Amazon, Google) sport (e.g. FIFA 18 for (e.g. League of Legends, football/soccer) Dota 2, Counter-Strike) 1 Acquire or partner 2. Pure OTT offerings Start up esports 2. Live video content with an existing 74% 26% (e.g. DAZN, Netflix) 46.7% 46.7% 56.3% esports team operations from scratch 2 Personalised fan/ 2 of industry leaders believe that senior Extend own brand Create a new, standalone 3. Team/athlete-generated content 3. Rights holders’ OTT offerings customer targeting to esports 84% 16% esports brand (through improved management at global sponsors are CRM data) behind the curve Target traditional 4. Fan-generated content 4. Broadcasters’ OTT offerings Branded content for Branded content for Target a completely proprietary digital rights holders’ digital new fan base 83% 17% fan base channels channels

6 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 7 The state of the sports industry The state of the Sports leaders across the board expect Market growth outlook by stakeholder industry growth rates to decrease from 7.7 Percentage annual growth estimates per cent in the past 3-5 years to 7 per cent sports industry in the next 3-5 years, which represents a 6.1% slowdown of 10.2 per cent. In the 2017 5.7% -8.3% edition of our survey, sports leaders were 8.0 significantly more doubtful, with growth 7.6 7.3 7.4 rates expected to decrease from 8 to 6.4 6.9 6.8 Market growth stable, with most optimism in Asia, per cent over the same timeframe (a 20.7 per cent slowdown). We read this as a least in Europe suggestion that market conditions across the industry are stabilising as we progress Market growth outlook by respondents’ region in the transition from traditional to digital Percentage annual growth estimates over a 3-5 year period media consumption, with sports leaders continuing to predict healthy growth in absolute terms.

5.3% Sports technology Academia/public Sports federation -10.2% Considering growth expectations through company sector to 2022, the most optimistic respondents 7.7 7.9 -15.9% 7.4 are based in Asia, expecting a growth of -9.5% 7.0 7.9 per cent (compared to 7.4 per cent in -20.6% -13.9% 8.2 the past 3-5 years). Respondents based 7.9 By David Dellea 7.1 in Europe came in second, predicting 9.7 7.7 growth of 7.1 per cent, albeit expecting 7.1 a 15.9 per cent slowdown compared 7.7 6.6 Each year, we ask a select to 8.2 per cent growth for the past 3-5 group of industry leaders what years. Respondents based in the Middle East and Africa predict that growth rates their perceptions are in terms will rise from 5.8 per cent in the past 3-5 of overall industry growth, years to 6.4 per cent in the next 3-5 years, by revenue stream and by Overall Asia Europe which represents an acceleration of 9.4 per cent. As for respondents based in the individual sport, as well as Americas region, growth is expected to League/event Sports team/club Other/consultancy decrease from 6.5 per cent to 6 per cent, the key threats the industry is -9.0% 9.4% organiser & suppliers equating to a 9 per cent slowdown which facing. We do this in order to -12.4% may signal the industry’s concern with provide you with macro insights 6.5 6.4 growing saturation in North America in 6.0 5.8 5.8 -4.1% -32.2% on how our industry is likely particular. Last but not least, respondents -1.7% to develop in the coming three 5.1 in the Pacific region predict growth to 7.6 7.3 9.2 decrease from 5.8 to 5.1 per cent (a 12.4 7.0 6.9 to five years. In this report, we per cent slowdown). will dive into the key takeaways and what they potentially mean Sports tech firms optimistic, 6.3 for the key stakeholders in the broadcasters and leagues less so Americas Middle East & Pacific sports industry. Overall, sports Africa When considering the perceptions of leaders foresee stable market past and future growth by stakeholder growth driven by persistent Past 3-5 years Next 3-5 years type, the leading optimists are sports technology companies (from 7.6 to 8 media and sponsorship revenues Brand/sponsor (Sports) marketing Broadcaster/media per cent, or a 6.1 per cent acceleration agency company as the business models behind Source: PwC Analysis, N = 406, 414 in growth), reflecting the wealth of them continue to shift towards opportunities provided by technological Past 3-5 years Next 3-5 years innovation. digital. Source: PwC analysis, N = 406, 414

8 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 9 The state of the sports industry

On the other hand, broadcaster/media the next 3-5 years, more than 3.5 times Expected annual growth rate by revenue stream over the next 3-5 years companies were the least optimistic that expected for the traditional TV As we transition towards greater Percentage average annual growth rate estimates Arrows indicate range of respondents’ answers within statistical confidence stakeholder type (from 9.2 to 6.3 per rights segment (3.2 per cent). These digital consumption, sports cent, or a 32.2 per cent deceleration in numbers come as no surprise given growth). League/event organisers also the ongoing shift from traditional to properties that are able to stand out with a significant deceleration, digital consumption. Although some leverage their cross-platform albeit still predicting growth of 7.7 per respondents predict the value of data effectively will be well- cent, which is second only to sports traditional TV rights to decline going Sponsorship & Licensing & Participation Ticketing & technology companies. In our view, forward (as represented by the lower placed to help sponsors reach Digital media rights Traditional TV rights advertising merchandising fees corporate hospitality this mirrors a combination of factors range of -2.7 per cent), the majority their target audience at a more that are prevalent in the market today. of our respondents still project them granular level. 16.6% One of the more significant factors is to grow at an average of 3.2 per cent, that the industry is experiencing more underlining the importance of not price pressure than ever before. This is neglecting this channel during this Sponsorship and advertising came primarily due to greater competition transition. It is key not to lose sight of in second with a healthy 5.5 per cent from other entertainment formats and the fact that many people still want growth, reflecting the exponential the resulting reduced willingness to pay to watch live sports on TV, especially growth of activation opportunities among consumers. Also contributing among the older generations. The PGA available to sponsors through digital. to this expected deceleration is the fact Championship was a good example of As we transition towards greater digital 11.5% that certain top leagues are experiencing this type of oversight, where viewership consumption, sports properties that are 10.1% stagnation in their media rights values figures increased by 73 per cent relative able to leverage their cross-platform due to increasingly saturated markets, to last year’s event. As Tiger Woods data effectively will be well-placed 9.2% 8.8% 8.5% particularly on the domestic front. mounted a serious challenge for the title, to help sponsors reach their target the failure to secure a linear broadcast audience at a more granular level. For 7.8% Media and sponsorship rights to deal in the UK left fans scrambling to sports properties with a global audience, keep growing as models evolve subscribe to digital streaming platform this is of particular relevance as the Eleven Sports. This is a stark reminder development and adoption of virtual 6.3% Looking at how sports leaders perceive 5.5% that sports properties need to focus advertising technology proceeds. In 4.8% future growth by revenue stream, digital on understanding all of their audience sum, there will be no shortage of growth 4.4% sports media rights was identified as 3.8% segments, catering to their consumption opportunities as the model for sports 3.2% the most promising segment, with an channel preferences. sponsorship continues to evolve. 11.5 annual percentage growth rate in

0% 0.9% 0.9% 0.3% -0.1%

-2.7%

Source: PwC analysis, N = 377-414

10 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 11 The state of the sports industry Esports overtakes football Ranking of top 10 sports by potential to grow revenues globally in growth potential Rank based on weighted scoring system Flat out Perennial Breakaway group Front of the peloton sprinting powerhouses

100

When asked which sports have the and stage competitive matches in the highest potential to grow revenues United States or Canada is an important globally, sports leaders overwhelmingly milestone in the beautiful game’s picked esports, replacing football, which ongoing growth. 81.7 80.1 was top in 2017, as the one that will 74.9 grow the most. As explored in more As the other global team sport, basketball depth in the esports section, this was to retained third place in our top 10 68.6 be expected, with the esports economy rankings, and can expect a significant forecast to double in size by 2022. boost from the FIBA Basketball World 64.4 Cup in China next year, where public 61.3 Considered as the only truly global sport, investments in infrastructure have the 59.2 58.6 58.1 football’s sustained growth prospects country poised to build on the 300 can be explained by its continued million participants it already boasts. efforts to grow in less mature football markets. Furthermore, the doubling Significantly, mass participation in size of the World Cup as of 2026, sports ranked fourth, with over half of which will provide an additional 16 respondents attributing “active lifestyle countries with the possibility to qualify, trends” as having the greatest impact is likely to make a strong contribution to on increasing sports participation. football development globally. A similar Indeed, based on our analysis, marathon effect can be expected from recent registration grew by a 5.6 per cent developments in Europe, for example, compound annual growth rate (CAGR) where the transnational nature of the from 2013 to 2017 and can be expected UEFA Euro 2020 and inauguration of the to continue at a similar pace up to UEFA Nations League will create more 2022. Albeit at a lower rate, triathlon incentive for investment in the game registrations also grew from 2013 to 2017 across the continent. Following in the (1.5 per cent CAGR) and we forecast footsteps of the NFL and the NBA, La them to grow by 2.5 per cent CAGR up to Liga’s recent decision to cross the pond 2022.

Mass Football/ Boxing/ American Esports Basketball participation Rugby Cycling Tennis Cricket soccer martial arts football sports

Source: PwC analysis, N = 353-419

12 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 13 The state of the sports industry

Threats abound from shifts Daily device usage among 14-34 year olds Percentage of respondents using the device on a daily basis in consumer behaviour Smartphone 96% Laptop 84%

Television 81% As in 2017, the number one threat faced Top threats of greatest concern to the sports industry by the industry is the shift in consumer Percentage of respondents, up to three choices possible behaviour of younger generations, with Radio 71% over two thirds of sports leaders choosing Shift in consumer behaviour of younger generations it among the top threats the sports PC 53% industry should be concerned about 71.8% (up from 56.6 per cent last year). This DVD/Blu-ray player comes as no surprise, as recent studies Access to alternative entertainment formats (other than sports) 50% have shown that younger generations are 54.2% transitioning their entertainment time Tablet 45% away from traditional TV in favour of Decreased willingness to pay for sports content mobile devices. 32.5% Gaming console 44%

Lack of trust in sports governing bodies Given that this cohort is one whose Streaming devices 22% purchasing power will only increase 31.4% going forward, it is logical that E-book reader understanding their behaviour is a top Piracy/illegal streaming 18% priority for the industry, and sports 25.5% content and distribution channels will Mobile without internet 11% increasingly need to be tailored to their Impact of match-fixing preferences. 14.7% Smartwatch 10%

Poor anti-doping compliance With the likes of Netflix investing VR glasses 3% 9.7% USD 8 billion in 2018 in original Source: IRIS Intelligence | Market Research - 02/2018 - CAWI - Survey N = 301 content and the rise of esports Response panel: representative for 25 global markets Source: PwC analysis, N = 443 and gaming, competition in the entertainment space is fierce. Daily device usage to consume videos on TV and online screens Average number of minutes of daily usage for TV and online screens for different types of viewer Access to alternative formats gained of a young person is a rival for a share of with only 31.4 per cent of respondents one position from third to second place their wallet, given the limited amount of identifying it as a top threat (down from in our top five table, with over half of money they have to spend. 47.1 per cent in 2017). Match-fixing (fell respondents choosing it as a top threat out of the top five at 14.7 per cent, down (up from 28.6 per cent in 2017). With the Coming in third was consumers’ from 21.7 per cent in 2017) and poor likes of Netflix investing USD 8 billion decreased willingness to pay for sports anti-doping compliance (9.7 per cent, 67’ in 2018 in original content and the rise content (32.5 per cent), which is strongly down from 13.8 per cent in 2017) are not 86’ 84’ of esports and gaming, competition in linked to the fifth most prevalent perceived as big threats either. One could 91’ 116’ 135’ the entertainment space is fierce and threat of piracy/illegal streaming argue that the ethical nature of such we predict that this threat will remain (25.5 per cent), with the high-profile issues results in more of a spotlight being a top threat for the foreseeable future. case of BeoutQ in Saudi Arabia likely placed on them in the press and among Primary and seconday Trainees/university Young professionals school students students To draw a link with the number one heightening respondents’ sensitivity to sports governing bodies, rather than threat and as recently contended by this matter. Significantly, the lack of trust actually being a big concern for industry Adidas’ global creative director, arguably leaders at large. in sports governing bodies has dropped Source: TV | Online | IRIS Intelligence | Ratings analysis, representative for Europe anybody who competes for the attention two places from second to fourth, Online screens = mobile, laptop, desktop and tablet

14 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 15 The state of the sports industry Myth or reality: should sports leaders be so concerned about the shift in consumer behaviour of 2018 survey of VoD users on likelihood that traditional TV services will be completely replaced by VoD offers younger generations? Percentage of responses of current VoD users Data provided by IRIS | Intelligent Research in Sponsoring 39% 35% Respondents 16-65 years of age

Football viewership during 2016-2017 season for top five leagues in Europe 29% Respondents 14-34 years of age Percentage of viewership for traditional TV and online screens, split by age bracket (sum = 100%) 25%

20% 3% 6 - 19 years of age 7% 15% 12% 12% 14% 9% 20 - 34 years age 38% TV Online screens 4%

22% Most likely More likely Rather unlikely Very unlikely I cannot judge 35 - 49 years age 27% Source: IRIS Intelligence | Market Research - 02/2018 - CAWI - Survey N = 1’024 for 16-65 year olds, N = 301 for 14-34 year olds 61% Response panel: representative for 15 global markets 50+ years of age 28%

Source: TV | Online | IRIS Intelligence | Ratings analysis Pointing in the same direction, recent This cements the intimate relationship Online screens = mobile, laptop, desktop and tablet Myth or reality: should sports Top five leagues = top divisions in England, France, Germany, Italy and Spain video on-demand (VoD) user surveys between online screens and on-demand that are representative for 15 markets consumption, celebrating today’s media leaders be so concerned about (see figure 2 above) paint an even clearer industry mantra: content whenever, the shift in consumer behaviour picture of this generational divide: 64 wherever and however you want it. of younger generations? per cent of respondents between the Au revoir traditional TV, and bonjour Looking at recent TV and online divide: while younger generations are ages of 14 and 34 think that traditional online screens. The jury is now out on viewership figures for European football consuming the same content as older TV services will be completely replaced understanding what the implications will (see graph above), only 17 per cent of TV ones, they are doing so through different by VoD offers, while only 34 per cent be for rights holders, media partners and viewers are under the age of 35, whereas channels, preferring digital consumption between the broader segment of 16 and brands with regard to content strategy. the equivalent figure for online viewers via smartphone, tablet and other 65 year olds share the same opinion. is 45 per cent. It is clear that we are methods of OTT distribution. currently in the midst of a generational

16 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 17 Sports media: out with the old, in with the new? Sports media: out with the old, In terms of channel growth, tech firms in the market in recent times (see below from whether or not the disruption (in the broad sense) came out on top. for a more in-depth look at the latest caused by new digital entrants is Although their business models differ, developments). transitory. They are clearly here to stay, in with the new? as a collective they are perceived as with the debate shifting to whether and having the greatest growth potential in Of the eight options we provided to how traditional and digital players can the coming 3-5 years, narrowly ahead respondents, the top six in terms of co-exist in the mid- to long-term. of pure OTT offerings. This is likely due prospective growth are digital, and the to the noise that the likes of Facebook, bottom two are linear. This is a reflection Sports content retains throne and goes digital in earnest Amazon and DAZN have been making of the conversation having moved on

In the next 3-5 years, sports leaders came in second. This is particularly the Top sports content type to be consumed over the next 3-5 years Top consumption channels over the next 3-5 years predict that the consumption of all types case with regard to premium sports Ranked based on a weighted scoring system Ranked based on a weighted scoring system of sports content will grow. Consumption properties. growth is also expected across all media 1. Tech firms (e.g. Facebook, channels with the exception of free-to- Beyond live and highlight video, the rise 1. Highlights/on-demand video air broadcasters, which are forecast to of user-generated content in sports is well Amazon, Google) experience a slight decline. This reflects reflected in the responses we received, 2. Pure OTT offerings (e.g. DAZN, the industry’s confidence in the sustained with confident growth estimates Netflix) high demand for sports content across across team, athlete and fan-generated 2. Live video content multiple platforms. content. The native, social and often viral nature of user-generated content is By Lefteris Coroyannakis In terms of sports content types expected a strong recipe for reaching, engaging 3. Team/athlete-generated content 3. Rights holders’ OTT offerings to grow the most, highlights/on-demand and monetising young audiences video came out on top, a format which and achieving commercially-relevant 4. Fan-generated content In the media space, we asked is well-suited to the way in which our levels of engagement with them. With sports leaders what types of consumption habits are evolving to be an abundance of such content, the 4. Broadcasters’ OTT offerings content, which channels and increasingly mobile, online and short- sports industry is in a great position to which new players will dominate form. It is more important than ever capitalise on the well-documented shift to cater to fans with appealing content of our attention from traditional to social 5. Results/news/data/statistics the sports media rights landscape before and after, as opposed to just media platforms., 5. Digital channels with native/ during, sporting events. That said, the scraped content (e.g. COPA90) going forward. We also comment 6. Sponsor-generated/branded unique appeal of live sports allows it on expectations of how the The native, social and often viral content to retain its “must have” status among 6. Unofficial live streams value of sports media rights buyers, as demonstrated by respondents’ nature of user-generated content 7. Original content/documentaries will evolve, as well as what continued bullishness on the continued is a strong recipe for reaching, growth of live video content, which respondents believe to be the engaging and monetising young key growth drivers behind this audiences. value. Our findings underline 8. Digital audio content the intensifying pace with which 7. Pay TV broadcasters sports media consumption is transitioning to digital The currency of social media is attention platforms, how tech firms are and the winners, from clubs and leagues 8. Free-to-air broadcasters playing an increasingly central to brands and advertisers, will be those role and that the demand for sports content remains sky high. that can capture that attention and activate revenues around it.

Source: PwC analysis, N = 408-425 Source: PwC analysis, N = 345-417

18 | PwC’s Sports Survey 2018 Simon Meehan, COO and PwC’s Sports Survey 2018 | 19 Co-founder, Footbolé Sports media: out with the old, in with the new? No consensus on rights values OTT entrants a key growth going forward driver of rights value

Despite sports content remaining king Projected trajectory of global sports media rights values According to our respondents, the Completing the podium was the market and the proliferation of platforms Percentage of respondents, only one choice possible number one development driving up the entry of telecommunication companies, through which it can be consumed, value of sports media rights is the market the deep pockets of which have tended there seems to be no consensus on the entry of non-traditional Pay TV entrants. to push up rights values. In the case of evolution of the global sports media Don’t know/abstain This perception was likely bolstered by BT, which entered the fray for domestic rights market going forward. The more Will stabilise at some recent deal-making among OTT players English Premier League rights for the likely scenarios predicted by respondents point and stay flat 10% for premium football rights in a number 2016-2019 cycle, its bidding war with are (i) that it will continue to grow of territories. It is also well-aligned Sky drove the overall value of TV rights indefinitely (34.2 per cent), (ii) that it 21.4% with the lofty 11.5 per cent annual above GBP 5 billion. In the face of rising will peak in either 2022, 2026 or 2030 growth forecast for digital sports media competition from Netflix and Amazon, followed by a decline (collectively 24.4 rights in the coming 3-5 years that our it left with few options other than to per cent), or (iii) that it will stabilise at respondents predict. content share with Sky in order to fill some point and stay flat (21.4 per cent). Will peak by 2030, the non-sport entertainment gap in its then decrease 4.7% 34.2% Will continue offering. to grow The number one development indefinitely Despite sports content remaining 8.1% driving up the value of sports Will peak by 2026, king and the proliferation of then decrease media rights is the market entry platforms through which it can 11.6% of non-traditional Pay TV be consumed, there seems to be 10% entrants. no consensus on the evolution Will peak by 2022, then decrease Will decrease for an interim of the global sports media rights period and then grow again The second most important development market going forward. here is the increasing ability of rights It is now a top priority 24.4% holders to sell direct-to-consumer, which adds another revenue stream for all rights holders With competition from pure OTT that contributes to the monetisation Source: PwC analysis, N = 430 platforms intensifying and ad revenues of media content. Recent high-profile to develop a direct being diverted from traditional TV to examples of this are Formula 1’s launch digital platforms, the refinancing of of F1 TV in May of this year, Juventus’ relationship with their rights fees is becoming increasingly unveiling of Juventus TV, coinciding with challenging for both pay and free- the arrival of Cristiano Ronaldo, and consumers. to-air broadcasters. However, given Borussia Dortmund’s relaunch of BVB- how essential sport content is to their As the market continues to transition resulting ability to value rights with more TV in association with Sportradar. The business models, traditional players are from linear to digital, new market precision, this is unlikely to lead to the former even contains live race content left with little alternative than throwing entrants with business models that may speculation and ensuing rights bidding in countries where the digital rights are everything but the kitchen sink at rights well allow for greater monetisation wars that have characterised traditional held by F1 owner Liberty Media, and Chris Guinness, Head of holders to access their content. All the than traditional players could offer TV rights auctions in the past. In is targeted at the most engaged of F1 Asia Pacific, IMG while, they are pressured to innovate significant growth perspectives for addition, where the business models of fans; so-called “petrolheads” of a mostly with their own content and channel rights in markets that seemed to be bidders differ, rights holders must have a younger demographic who are already strategies in order to attract viewers and broadly saturated. Given digital players’ firm grasp of what drives value for them consuming the sport digitally. generate (new) revenue streams. data-driven business models and their in order to steer negotiations effectively.

20 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 21 Sports media: out with the old, in with the new? Tech firms no longer on the sidelines, As was widely reported, Amazon broke As for Facebook, ground in early June of this year by whose sports becoming the first non-traditional content drive but which players will broadcaster to acquire one of the is now being The packaging and structuring English Premier League’s domestic spearheaded by of media rights to suit a mix of rights packages. The package consists former Eurosport dominate tomorrow? of 20 matches over two match days CEO Peter Hutton, different channels, including per season for the 2019-2022 rights recent deals cycle, including the popular Boxing Day (and subsequent in a same territory, is going to fixture list. The price tag has not been or expected announced but observers suspect that sublicensing deals) increase in complexity. Rights When respondents were asked which came out on top (chosen by 66.5 per third. While their respective strategies the package, which was one of the two in the Indian holders must adapt to this new technology companies they expect to cent of respondents), with Google/ are underpinned by different business that had been left on the table following subcontinent, dominate the global digital sports media YouTube in second place (47.1 per models, a number of tech firms have the auction process earlier in the year, Southeast Asia and reality from an operational as rights market going forward, Amazon cent) and Facebook (40.2 per cent) in earned their seat at the negotiating table. was snapped up at a heavily discounted Latin America for a rate. Regardless, it has already proven series of premium well as financial standpoint. Top 5 dominant players in digital sports media rights market going forward to be a great strategic move for Amazon football rights have Percentage of respondents, up to three choices possible to establish its brand as a serious player successfully placed Bumpy road ahead. in the sports broadcasting market. More the social media substantially, it will provide them with giant on the sports ample opportunity to experiment with media rights map. various monetisation models until the Thanks to its 2 Vincent Gaillard, CEO, next Premier League rights auction billion plus active scheduled for 2021 by doing what it users globally and European Professional does best: capturing and analysing the abundance Club Rugby relevant data in order to increase Prime of user data subscriptions, better target its customers this generates, 66.5% and boost sales. Facebook is uniquely placed to monetise said, it remains to be seen whether a pure through ad revenues. In this sense, its sports OTT play can reach the critical In February of this year, YouTube made scale allows it to apply the traditional mass to substantiate its business model. big strides in its cord-cutting venture free-to-air economic model in a digital into live TV by announcing the addition context, especially in the big markets In theory, all of this should be good of a broad array of sports content to its (from a user base perspective) such as news for consumers, with more choice, 47.1% YouTube TV streaming service, which those where it has acquired rights. convenient access and, at least in the is currently only available in the US for short term, better prices. It also spells a 40.2% USD 40 per month. It now boasts an DAZN has also been making noise new era of competition for sports rights, attractive sports portfolio that ranges through a number of recent rights which could drive their overall value up from the NBA and MLB to the UEFA acquisitions, most notably in boxing further depending on how effective the Champions League and English Premier and Italian football. Through its recent various players’ monetisation models, 28.4% 26.3% League, to College Basketball and launches in Italy and the US, the sixth and ability to distribute at scale, will marquee PGA events. As the sports fan and seventh countries in which it now be. Either way, as long as sports content becomes increasingly accustomed to offers its streaming service, and it’s the remains premium, properties will need to consuming content via digital platforms, naming of Cristiano Ronaldo as its global cater to consumers on both old and new YouTube TV’s offering is undeniably ambassador, momentum is growing for channels in order to maximise returns. compelling for US consumers. the posterchild sports OTT outfit. That

Amazon Google/ Facebook DAZN Alibaba YouTube

‘Source: PwC analysis, N = 433

NB results could be skewed as Amazon acquired its English Premier League domestic rights package one day before we launched the survey, while Facebook and DAZN had yet to make their latest deals until after the questionnaire was closed

22 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 23 Sports media: out with the old, in with the new?

2017 survey on the most desired future features of live sports streaming Myth or reality: is “live” dying a Percentage of respondents

Gain insights into player stats and 54 slow death? information 36 Data provided by IRIS | Intelligent Research in Sponsoring Stream more than one game on different 48 devices 36 As mentioned in our previous “Myth or must now ask ourselves is whether live Are we also experiencing a shift away Ability to watch in virtual reality (VR) to view 45 reality” section, it is clear that younger content will be consumed online to the from live content, or is the shift only the game from different angles 30 generations are shifting from traditional same extent that it has been through related to the channel of consumption? 36 TV to online screens. The question we traditional TV. How is live holding up? There are no straight answers. See updates from the locker room/sidelines 22 29 Have an insider view into press conferences 21 Sports viewership through online screens, age split for live vs non-live consumption Talk to/interact with players and coaches in Percentage of respondents consuming live or non-live for different age brackets 34 real-time 21 40 Live sports Non-live sports Engage with other viewers 17 16 - 20 years old 90% 95% 29 Access to excusive social media “stories” 16 21 - 25 years old 87% 92% 21 Participate in score/play predictions 15 26 - 35 years old 80% 87%

36 - 50 years old 72% 36% 18 - 35 year olds 18 - 65 year olds 51 - 65 years old 64% 24% Source: IRIS Intelligence | Market Research - 12/2017 - CAWI - Survey N = 1’024 for 18-65 year olds, N = 322 for 18-35 year olds Response panel: representative for 25 global markets Source: IRIS Intelligence | Market Research - 02/2018 - CAWI - Survey N= 1’024 - 16-65 year olds Response panel: representative for 15 global markets Online Screens= Mobile, Laptop, Desktop, Tablet Sports may well be the last man standing markets asking about a series of features the pitch, integrating the variety and in terms of content that can motivate desired when streaming live sports: 18 personalisation of on-demand within a viewers to switch on a traditional TV, to 35-year olds are far more demanding context of live consumption, all while Looking at the data above, 64 per cent relief as more than 8o per cent of up to smartphones as their second screen, and or any digital device for that matter, in their expectations than the broader ensuring a seamless transition into the of people above the age of 50 watch 35-year olds say they consume live sports 74 per cent of the second screen content at a specific time. However, as viewers segment of 18 to 65-year olds (see graph conversations taking place on social live sports through online screens, through online screens, demonstrating they consume is unrelated to what they adapt to a world in which on-demand is above). media. demonstrating that the older generation just how relevant live remains. However, are watching on TV. Viewers under 35 the new norm, the level of quality and is adapting to new ways of consuming the good news comes with a twist: an years old watch live in a more distracted engagement required to motivate people What is the key takeaway here? live. As for non-live content, however, even greater proportion of the same manner, and for shorter durations than to tune in and consume content at a Going forward, the winners in the less than a quarter of those above 50 cohort claims to be consuming non-live those over 35, or only tune in for the specific time increases significantly. This race for live spectators will be the consume it online. This seems to suggest content as well. This hints at a completely most premium, socially engaging, must- is confirmed by a recent survey across 25 ones innovating the most on and off that the majority of older people are different consumption pattern across see content. somehow “satiated” by live, and do generations. not feel the need to consume once the event is over. This would support the Our hypothesis is that although viewers Sports may well be the last man Myth or reality: is “live” dying a hypothesis that older people consume under 35 years old still tune in to watch standing in terms of content that live sports on digital in a similar way live events, they don’t seem to be doing slow death? to how they used to consume it on so with the same degree of intensity can motivate viewers to switch on traditional TV, tuning in and taking as those over 35 years of age. Take TV a traditional TV, or any digital the time to watch a full broadcast. For viewers in the US, for example: in recent device for that matter, at a specific the younger generations, this picture figures published by eMarketer, over ...as long as it keeps fans on the time. is very different. First and foremost, 70 per cent use a second screen while edge of their seats the sports industry can let out a sigh of watching TV. Over 91 per cent are using

24 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 25 Sports sponsorship: driving return on investment in the digital age

Sports sponsorship: driving return Do sponsors “get it”?

Generally, does senior management of sponsors fully appreciate the shift in consumer behaviour with regard to sports media? on investment in the digital age Percentage of respondents, only one choice possible

Don’t Fully, it’s a top priority know/ Sponsors behind the curve in understanding shift in abstain 1.2% consumer behaviour Yes, they appreciate it Not at all, there is a 8.3% and start acting long way to go Over half (56.3 per cent) of industry a collective leap of faith in the initial 16.5% 35.4%... leaders believe that senior management implementation phase. As millennials 10.6% at global sponsors either do not, or only rarely find themselves in the boardrooms, Yes they do partially appreciate the shift in consumer sponsorship managers will need to behaviour with regard to sports media. build strong cases to convince senior Our sense is that sponsors are generally management of the need to implement 17.7% Yes, but do not know confident in their ability to interact with such innovative ideas. Not yet, but there are 17.4% in what direction(s) those consuming the events they sponsor. encouraging signs However, the million-dollar question A good example is how the various shoe remains unanswered: how to engage brands (Nike, Adidas, Under Armour, By Stefanie Vogel with the myriad of fans who are talking and the disruptive Big Baller Brand) about these events online? How can a are activating through the video game 28.3% sponsor be relevant in the context of that franchise of NBA 2K. It is no longer just 56.3%... We surveyed sports leaders conversation? In our view, the solution about players wearing branded shoes Not really Only partially, but on the extent to which they lies in the convergence of sponsorship in the game; users can now create moving slowly believe senior management and media, whereby sponsors’ content their own player and have them sign creativity is what will set them apart. an endorsement deal with one of the at global sponsors appreciate companies. This is a unique way of the ongoing shift in consumer creating a sense of customer loyalty, Source: PwC analysis, N = 407 behaviour with regard to sports The times when sponsors could not because their favourite NBA player solely rely on the approach of a wears a certain shoe brand on the court, media, where sponsors should but rather due to their created player be focussing their energies to “turnkey” sponsorship package wearing that brand in their favourite drive ROI in the next three are clearly over. video game. to five years, and how they The times when sponsors could solely To implement such strategies effectively, foresee the value of global rely on the approach of a “turnkey” brands are going to have to break down sponsorship rights evolving sponsorship package, submit artwork any remaining organisational silos going forward. What are sports for billboards and passively watch it between marketing and sponsorship, generate returns are clearly over. Going fostering collaboration and optimal leaders telling us? We hear forward, it is crucial for them to develop use of resources. In light of increasing that sponsors are behind the digital content strategies that generate pressure to deliver ROI from their curve in engaging millennials value from, and for, specific sports association with sports properties, it is properties. More so than before, such only through integrated strategies and and that personalisation of strategies should include ideas that are activations that they will get the most content and knowing your fans off the beaten path and may require bang for their sponsorship buck. are key elements to succeed in tomorrow’s sponsorship landscape.

26 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 27 Sports sponsorship: driving return on investment in the digital age How to engage the Personalised millennial consumer content is king

With the rise of digital media of engagement. Fan, team and athlete- traditional TV is giving way to online, In this changing environment, what Top 3 areas sponsors should be focused on in next 3-5 years to drive ROI consumption, sponsors’ priorities are generated content is growing at a rapid which is reinforced by the proliferation of should sponsors’ strategies be focused Percentage of respondents, up to 3 choices possible changing. Millennials are interacting pace and has led to companies such as the types of media that can be consumed on in order to maximise ROI? With with brands differently, with authenticity Bleacher Report becoming legitimate on demand (e.g. highlights, data/ nearly three quarters of respondents’ and identity being at the top of their sports content channels, aided by their statistics, behind the scenes content, votes, personalised fan/customer agenda. While exposure through mass acquisition of viral user-generated personal posts of athletes and fans). This 73% targeting (through improved CRM media continues to be important, brands content/social media accounts. This is both a challenge and an opportunity: data) was by far the priority focus area. now have to consider a number of creates a two-way street around while consumers are presented with This is understandable given that the 1 additional factors to ensure that their content, which is key to the successful numerous content options that make modern day “secret sauce” in the sports sponsorship decisions result in effective engagement of the modern sports fan. it harder for brands to stand out, sponsorship world is to know who your engagement across multiple dimensions. these brands now have a multitude of fans are, what their customer preferences opportunities to drive their messages Media consumption is also changing, are, and find effective ways to monetise 46.7% 46.7% The good news is that millennials are with growing fragmentation across home. that knowledge. Personalised fan/ active consumers seeking high levels channels and devices. Consumption of 2 customer targeting 2 Of particular interest in this context is (through improved the development of virtual advertising, CRM data) which has been implemented this season by the German football league for international feeds after Supponor’s Branded content for Branded content for technology passed its quality check proprietary digital rights holders’ digital in March of this year. As live sports channels channels consumption is moving online, rights holders are increasingly empowered to deliver the degree of customer targeting that is now expected by brands. The end game is to integrate data from multiple touchpoints (social media usage, ticketing, merchandising, etc.) in order to build fan profiles which will facilitate Source: PwC analysis, N = 407 real-time targeting.

How is this possibly going to affect the brands specifically interested in gaining sponsorship strategy of rights holders? As visibility in specific territories or certain the value of personalised content rises, audience profiles, offering them the type we envisage sponsorship relationships of targeted reach that they are currently to become more sophisticated, with only able to achieve through other media rights holders offering bespoke packages channels. Under such a perspective, the to an ever more select group of brands “sponsors” of the future will likely mutate looking to buy access and engage fans into true “partners” of rights holders, in unique ways. At the same time, featuring a strategic agenda around the rights holders may look to attract more sport.

28 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 29 Sports sponsorship: driving return on investment in the digital age It is all about No consensus on tomorrow’s Working closely with players to the fans facilitate access and optimise sponsorship values, but more activations is essential to driving stable than media rights Branded content, be it on sponsors’ the global engagement that digital channels or on those of rights holders, is the other area respondents sponsors are now demanding. believe sponsors should be focussing on to drive ROI. This reinforces our belief that all stakeholders need to be in the Broadly speaking, the respondents’ on media rights, and the inherent link Sports leaders have a similar viewpoint content game, where those with the most predictions on the evolution of global between these two revenue streams will on sponsorship values’ potential for engaging and authentic content win. sponsorship rights are similar to those likely see them develop in tandem. indefinite growth (30.7 per cent) relative to media rights (34.2 per cent), with a Jérôme de Chaunac, smaller proportion envisaging a mid- to A final point worth mentioning is that Managing Director, Paris Saint- Projected trajectory of global sports sponsorship rights values long-term decrease (cumulatively 16.5 All stakeholders need to be in the Percentage of respondents, only one choice possible content game, where those with only 23.4 per cent of respondents believe Germain, Americas per cent responding that sponsorship that sponsors should be focussing on rights will peak by 2022, 2026 or 2030 the most engaging and authentic conversion through e-commerce. In a Don’t know/abstain and then decrease, compared to 24.4 per content win. retail world dominated by e-commerce, cent for media rights). we would expect this to be higher up on Will stabilise at some point and stay flat 13.5% In this new reality, sports properties the priority list. Indeed, a key feature If we also consider that 27.5 per cent are making wholesale changes to their of any sponsorship package should be a 27.5% of respondents believe the sponsorship approach to content management. call to action that makes it more likely rights market will stabilise at some point Simply producing linear content is no for viewers to part with their cash for and stay flat compared to 21.4 per cent longer sufficient to generate added value products or services being offered by for the media rights market, it could be for sponsors. By engaging with sports, sponsors. Heineken’s highly acclaimed argued that these results collectively brands aim to build strong, coherent UEFA Champions League campaign 30.7% Will continue indicate that sponsorship values may be and authentic brand identities that “Share the Drama” gave fans the to grow slightly more stable than media rights speak to their target audiences. This will opportunity to enter competitions by, for Will peak by 2030, 2.9% indefinitely going forward. increasingly mean gaining control and example, proving they had bought a six then decrease 5.7% access of the core assets of the sport: pack of the company’s beer and sharing Regardless of how rights values will teams and athletes, their stories and their details with them via WhatsApp. Will peak by 2026, evolve, a fundamental shift is occurring values, and, most importantly, their fans. A scenario where Amazon is delivering then decrease 7.9% 11.8% in how sponsors perceive value. This is that six pack of beer by drone may Will peak by 2022, changing what they want out of their This trend may favour platforms that soon be less far-fetched than we think, Will decrease for an interim sponsorship relationships, and it is now then decrease period and then grow again are focussed on aggregating fan-centric, as evidenced by its recent decision to up to rights holders to step up to the plate shoulder-programming content, offering become the title sponsor of the 2018 and give them what they need. the much-needed platforms for sponsors IRONMAN World Championship and, 16.5% to engage on a more diverse and more significantly, the event’s official continuous basis (e.g. COPA90, Dugout). sports nutrition retailer. Source: PwC Analysis, N = 407

30 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 31 Esports: serious business Esports: Global esports economy in 2018 (US dollar millions) serious business Consumer ticket sales Consumer 55 contribution 129 Streaming advertising Living up to the hype 163

The excitement surrounding Looking forward, our latest Global esports gained momentum in 2018, Entertainment and Outlook data as the industry showed signs of forecasts a growth of global esports 181 Media rights further maturation. Over the past revenues to USD 1.58 million by 2022, year, publishers (such as Blizzard representing a healthy 18.4 per cent Entertainment and Riot Games) have compound annual growth rate (CAGR) introduced franchise leagues, traditional from 2018. The drivers of this growth sports (such as the NBA and F1) have are sponsorship (USD 500 million, 31.7 277 launched esports competitions and per cent of overall revenues), followed mainstream broadcasters (such as ESPN closely by media rights (USD 449 Sponsorship and Sky Sports) have started airing million, 28.4 per cent of overall revenues, By Clive Reeves esports content. These developments thereby significantly closing the gap on substantiate the promise held by the sponsorship) and streaming advertising Sources: PwC, Informa Telecoms & Media, Ovum esports economy, which we estimate (USD 316 million, 20 per cent of overall In terms of the data points we to reach USD 804.9 million in 2018 revenues). Of the five revenue streams sought from our respondents on (a 29.8 per cent year-on-year jump measured in the Outlook, the slowest- esports, we asked them what tra- from 2017). This jump is driven by a growing one – consumer contribution, Global esports economy (US dollar millions) significant growth in direct (sponsorship which encompasses consumer spend Figures in US dollar millions ditional sports can learn from and streaming advertising) and on compendiums for esports events esports, if they believe it should and battle passes for virtually attending be included in the Olympics and esports events – will still increase by 12.7 Media rights are forecasted as per cent CAGR from 2017 to 2022. 1580 what traditional sports teams the revenue stream that will 18.4% should do to take advantage of have experienced the biggest the opportunities presented by year-on-year jump in 2018, up it. We also asked their view on 49.6 per cent from 2017. the main reasons behind traditional sports’ hesitance to enter indirect (media rights) investment by 805 the esports market. The results endemic and increasingly non-endemic brands. Media rights are forecasted demonstrate that esports can as the revenue stream that will have no longer be ignored and that experienced the biggest year-on-year traditional sports organisations jump in 2018, up 49.6 per cent from 2017. Sponsorship, which is already would be wise to devise concrete the leading revenue stream in terms of strategies on how to approach volume, will also grow by 24.8 per cent. 2018 2022 this fast-growing space. Consumer contribution Sponsorship Consumer ticket sales Media rights Streaming advertising

Sources: PwC, Informa Telecoms & Media, Ovum

32 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 33 Esports: serious business Is esports an Kings of

Olympic sport? fan engagement An executive point of view from Peter Warman, CEO, Newzoo

Following the 6th Olympic Summit in As far as our respondent base is Top 5 things traditional sports can learn from esports Traditional sports and gaming share late October 2017, the International concerned, an overwhelming majority of Percentage of respondents, up to three choices possible just as many similarities as differences, Olympic Committee (IOC) recognised 83.7 per cent believe esports should not which is exactly why both worlds can esports as a “sporting activity” and was (yet) be included as part of the Olympic learn so much from each other. asked “to explore this area further and Games. The reasoning behind this view Fan and community engagement come back to the Olympic Movement is split between those who think esports 73.8% Already, the sports industry is stakeholders in due course”. This has should develop independently (29 per increasingly embracing digital intensified the debate surrounding cent), those who do not see esports as a Innovative game formats streaming. Not only is it experimenting the potential inclusion of esports as an sport (28 per cent) and those who think 45.5% with new forms of engagement and Olympic sport, an idea that has been esports needs a governing body before it direct-to-consumer business models, floated very publicly by the Organising can aspire to be an Olympic sport (26.7 Producing exciting content but sports companies are now looking Committee for Paris 2024, and that led per cent). These three themes came out to the games industry as a whole for to the organisation of an Esports Forum strongly at the aforementioned Esports 39.9% inspiration. Traditional sports can by the IOC and the Global Association of Forum, along with a lengthy debate on especially learn plenty of valuable International Sports Federations (GAISF) the compatibility of esports that contain Reaching a global audience lessons from esports—a sector with on 21 July of this year. violent content with Olympic values. 38.4% which it shares a striking number of similarities. Building a team brand As a result, I expect to see more Should esports be included in the Olympic Games? 12.6% income, it has clearly excelled in keeping innovation in the development, Percentage of respondents, only one choice possible this fan base highly engaged. With an distribution, and monetisation of sports Source: PwC Analysis, N = 404 ageing viewership across most traditional content. This will be driven by today’s Don’t know/abstain sports, they would be wise to take note. young consumers, who—when it comes Yes, esports should be to every form of entertainment—have part of the Olympics as These findings indicate that for the time For example, as the NBA 2K League, a vastly different expectations compared 5.9% No, because esports soon as possible being, esports shall remain distinct from partnership between the NBA and video to previous generations. should develop traditional sports. While esports is in 10.4% independently game company Take-Two Interactive, 29% many ways a competing entertainment gets ready to enter its second season, At the same time, esports can learn format, particularly among the younger Commissioner Adam Silver has many a lesson from traditional sports, generations, it can certainly co-exist repeatedly acknowledged that the NBA especially in terms of how the industry healthily. Indeed, respondents were itself should seek out ways to adapt to operates. Until now, monetising viewers of the view that there is a lot that the esports broadcasting style. These has rarely been a concern for gaming traditional sport can learn from the include using different audio and companies. This is where firms will 26.7% staggering growth in esports, particularly video feeds, fan interaction such as look to traditional sports companies with regard to fan and community commenting, real-time statistical analysis for guidance. Going forward, we expect Not yet, esports first engagement (73.8 per cent). needs a recognised and two-screen experiences. While it that the trade of content rights will be governing body has yet to be determined which of these esports’ fastest-growing revenue stream. 28% Traditional sports also believe there is techniques will be implemented, we can something to learn from esports within expect to see a number of them tested I foresee a bright future ahead No, because esports does the areas of innovation in game formats in the international markets where for esports and traditional sports not qualify as “sport” (45.5 per cent), producing exciting rights are currently less restricted (US companies that understand and content (39.9 per cent) and reaching a digital rights are contracted through to embrace their differences, particularly Source: PwC Analysis, N = 404 global audience (38.4 per cent), all of the 2024-2025 season) and there is a those that learn from each industry’s which facilitate fan engagement and growing interest in the game. Given the triumphs and missteps. community building. While the nature of NBA’s track record of adapting to new esports has allowed it to attract young, trends, it will be worthwhile following digitally native fans with high disposable these developments closely.

34 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 35 Esports: serious business Esports can no longer be ignored, but Top 3 reasons traditional sports are hesitant to enter esports If such a large proportion believe that Percentage of respondents, up to three choices possible esports cannot be ignored, why do they continue to hesitate entering the market? how to proceed? According to our respondents, the top Lack of understanding of the business model reasons are a lack of understanding of 66.6% the business model (66.6 per cent), a lack of understanding of the audience Lack of understanding of the audience and culture and culture (61.8 per cent) and the 61.8% immaturity of the ecosystem (37.7 per cent). Immaturity of the ecosystem 37.7%

Source: PwC Analysis, N = 374 When asked whether they should What a traditional sports team should do regarding esports Percentage of respondents, only one choice possible enter esports or not, 70.5 per cent of respondents said they would develop a Too premature: strategy to enter esports, 17.9 per cent wait and see believe it is too early to decide and only Don’t know/abstain Going one step further, we asked markets, such as North America and credible position on esports. This will 4.5 per cent advise against entering. respondents which of the below strategic Asia, this overall picture supports our provide a platform for the development Do not enter esports at all 7.2% 17.9% trade-offs bear the most potential for view that European sports teams have of a strategy that best fits with each 4.5% traditional sports entering the esports approached esports in a conservative entity’s respective business context market. The picture that emerges is manner so far. and overall commercial strategy. As one of a cautious approach, whereby esports continues to mature and grow, respondents are of the view that The continued growth of esports raises it is becoming abundantly clear that traditional sports should enter esports in a strategic conundrum for traditional overlooking it is no longer an option and a low-risk manner. sports organisations, with many now is the time to consider how to get executives debating what to do next. For involved. While we are observing aggressive those in such a position, it is important approaches in more mature esports to be well informed in order to take a

Strategic trade-offs for a traditional team to enter esports 70.5% Percentage of respondents, trade-off among two options

Develop a strategy Source: PwC Analysis, N = 403 to enter esports Create an esports team playing its Create multiple teams to play across “simulated” sport (e.g. FIFA 18 for 64% 36% video games (e.g. League of Legends, football/soccer) Dota 2, Counter-Strike)

Acquire or partner with an Start up esports operations from existing esports team 74% 26% scratch

Create a new, standalone Extend own brand to esports 84% 16% esports brand

Target a completely Target traditional fan base new fan base 83% 17%

Source: PwC Analysis, N = 220-267

36 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 37 References and contacts

Notes and sources Our service offerings

The state of the sports industry • David, M., 22 August 2018, La Liga players ‘outraged’ over deal to play match in the United States, BBC Sport Independent • Carlisle, J., 16 August 2018, La Liga set to play first game in United States in new marketing deal, ESPN business review Governance and • Friend, N., 15 August 2018, Tiger Woods resurgence propels PGA Championship TV ratings, SportsPro Business planning and due diligence compliance • Murray, E., 13 August 2018, Brooks Koepka’s nerveless display denies Tiger Woods farytale victory, The Guardian Corporate strategy • Vena, D., 23 December 2017, Adidas considers Netflix as competition, Business Insider UK

Sports media: out with the old, in with the new? Organisational Mega-event Market analysis • Booton, J., 22 August 2018, DAZN signs Ronaldo as brand ambassador amid complaints about tech, SportTechie design feasibility and impact • Jellis, R., 21 August 2018, Facebook sublicenses La Liga to Sony in Indian subcontinent, TV Sports Markets (SportBusiness and benchmarking Group) assessments • Pakman, D., 10 August 2018, May I have your attention, please?, Medium • Tyers, A., 31 July 2018, The changing landscape of football on TV: our guide to the new channels now hosting La Liga, Seria A and the Championship, The Telegraph • Beall, C., 20 July 2018, What is a reasonable price for Amazon’s Premier League rights? About UK£80m, SportsPro (guest contribution) • Carp, S., 11 June 2018, Prime time: What does the Premier League’s deal with Amazon really mean?, SportsPro • Moskvitch, K., 8 June 2018, Amazon’s Premier League deal has riled fans, but that’s not a good thing, Wired • Sweney, M., 7 June 2018, Amazon breaks premier league hold of Sky and BT with streaming deal, The Guardian • Pennington, A., 11 May 2018, The brakes are off: F1 to launch ‘fan-focused’ OTT service, IBC365 • Roberts, D., 21 February 2018, YouTube and Amazon are fighting for sports streaming supremacy, Yahoo Finance • Fildes, N., 15 December 2017, BT and Sky agree content sharing deal, The Financial Times • Kirkpatrick, D., 8 November 2017, EMarketer: 70% of US adults ‘second-screen’ while watching TV, Marketing Dive (an Industry Dive brand) Clients

Sports sponsorship: how to drive ROI in the digital age • Roethenbaugh, G., 11 September 2018, Amazon opens online nutrition store as title sponsor of 2018 IRONMAN World Host Championship, endurancebusiness.com cities • Connolly, E., 15 August 2018, View from the Dugout: how soccer clubs are changing their perspective on digital video content, Event SportsPro organisers Sports governing Esports: serious business bodies Investors • 28 October 2017, Communique of the Olympic Summit, International Olympic Committee Brands • 21 July 2018, Olympic movement, esports and gaming communities meet at the Esports Forum, International Olympic Committee • Morris, C., 28 June 2018, The IOC is another step closer to including video games in the Olympics, Fortune • Chakraborty, A., 19 April 2018, Esports with violent content contrary to Olympic values – Bach, Reuters Sports • 5 June 2018, Global Entertainment & Media Outlook 2018-2022, PwC Media Sports ministries companies marketing Sports tech A special thank you goes to Brent Piattelli for content input, editing and all around awesome ideas, Paul Kelly for funky design and Leagues & agencies firms ability to stay chirpy in the face of competing tasks, Nadia Mouzo and Florian Brugger for bringing his report to the world, and last teams but not least, Gustav Baldinger and Reto Brunner for their undying support.

38 | PwC’s Sports Survey 2018 PwC’s Sports Survey 2018 | 39 Our Sports Business Advisory team

PwC’s Sports Business Advisory team was their operations to meet their business annually, checking the pulse of the sports launched by PwC Switzerland in 2012 goals. Working closely with PwC firms industry on growth expectations and a and has evolved into a sport business hub in various territories throughout our wide range of other strategic topics and for Europe, the Middle East and Asia. network, we have delivered projects for commercial levers. We hope you have The team helps sports industry players a variety of organisations across Europe, found the third edition of this publication design effective strategies, identify new the Middle East and Asia. Since 2016, insightful. growth opportunities and optimise we have published PwC’s Sports Survey

David Dellea Lefteris Coroyannakis (editor) Head of PwC Sports Business Advisory Focus areas: strategy, media and Focus areas: strategy, governance and sustainability sponsorship [email protected] [email protected] linkedin.com/in/lefterry linkedin.com/in/daviddellea

Clive Reeves Stefanie Vogel Focus areas: strategy, sporting Focus areas: transactions, mass operations and esports participation sports and sponsorship

[email protected] [email protected] linkedin.com/in/clive-reeves linkedin.com/in/stefanievogel

Alexander Stolz Ioannis Meletiadis Focus areas: media and digital Focus areas: strategy, technology and activation ticketing

[email protected] [email protected] linkedin.com/in/alexander-stolz linkedin.com/in/ioannismeletiadis

© 2018 PwC. All rights reserved. ‘PwC’ refers to PricewaterhouseCoopers AG, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.