Just Exactly What is Sports Marketing?
Rarely a week goes by that I don’t receive a phone call from someone asking me if I can help them get in to the sports marketing business. When I ask the callers what their qualifications are, they usually reply, “I have been a sports fan all my life.” When I ask them what additional qualifications they have, there is little substance as it relates to the industry.
So just exactly what is sports marketing? Why is there such interest in entering this field? By definition, marketing is “creating an environment within which a sale can be made.” By adding the word “sport” to that equation, it becomes the environment for application of marketing techniques. And the business of sport is BIG business. Industry estimates range from $25-50 billion dollars depending on how you calculate the size of the industry.
The business of sports (or sports marketing) is made up of distinct segments. The major elements are as follows:
- Rights Holders
- Event Management/Operations
A brief review of these segments reveals the unique interaction and, to a large extent, interdependence of these diverse groups of people, events and buildings.
Rights Holders include entities such as; the International Olympic Committee, NFL, NCAA, Major League Baseball, National Basketball Association, United States Olympic Committee and others. These organizations own and control events (competitions), which have value to television broadcasters. Television broadcasters in turn, bid for the right to telecast these events and many times bid against each other for the programming rights, thus driving up the revenues (rights fees) to the Rights Holders.
Broadcasters then package and promote the events to a television audience and they count on advertisers to pay fees for commercial time when the broadcast is aired. Profit on these broadcasts is usually substantial, thus justifying the fees paid by the networks.
Facilities/Venues are required to stage the events and the host team or facility also needs to make a profit. This model is particularly evident in professional sports where the local team sells in stadium advertising and tickets and, on occasion, local broadcast rights, thus providing additional revenue to the host team or facility or owner.
Promoters frequently create their own events. Don King has been the consummate sports promoter by packaging professional boxing events in large venues and negotiating television rights and signing the athletes to fight for a large prize purse.
Buyers/sponsors pay enormous amounts of money to advertise their messages on the air, in stadiums/venues, on radio and in hospitality at the various events. The Olympics and NASCAR have been particularly successful as corporate entertainment venues. Of course, one should not ignore the Super Bowl, Wimbledon, the Kentucky Derby and other single day events, as corporate entertainment opportunities.
And, in almost all cases, there are athletes that perform their artful craft in return for large salaries. Of course, these enormous salaries would not be possible if not for the tremendous amounts of money paid by the television networks. Virtually all of the professional athletes are represented by agents, many of them attorneys, who negotiate salaries, bonuses, deferred compensation packages, endorsements and other fees in return for a percentage of the total fees. Many of the agents who represent a large number of athletes have considerable leverage and experience in this field and try to negotiate maximum fees while their athletes (clients) are healthy and in their prime.
Finally, none of the events can be staged without facilities. Management and operations of the sports venues is a business in itself. The sale of tickets, licensed merchandise, food and beverage and other operational tasks, generate revenue and create a sense of excitement around the events. In the case of the Olympics, these local organizing committees are created for a short duration during which they create their own infrastructure, rent facilities, organize competitions, sell tickets, stage events and then effectively go out of business, all in the span of approximately six to seven years.
All of these areas collectively and individually make up the sports marketing industry. And within these areas are additional elements, such as shoe, equipment and apparel manufacturers, licensing companies, food and beverage vendors, advertising agencies (who create unique commercial messages in association with sponsorship and television broadcasts), public relations companies (who try to position their clients/sponsors as good corporate citizens and many other supporting players.
It is easy to see how the industry has grown over the years. All one has to do is analyze how much sports programming is offered on over the air (network) and cable television broadcasts. Since the incredible financial and aesthetic success of the 1984 Olympics in Los Angeles, there has been a proliferation of sports programming, sponsorships and events.
Rights fees continue to rise and sponsors continue to pay higher and higher fees for the right to associate themselves with these big events and the athletes who compete in them. It does not necessarily follow, however, that this growth will continue unabated. There are signs that this trend has, at the very least leveled off and may be in a slight decline. Television ratings for all professional sports has been down in recent years and many professional franchises are struggling financially.
However, the sports marketing industry remains an important and viable part of the national economy and consciousness in this country and, indeed, worldwide. World Cup Soccer, the Winter and Summer Olympics, Alpine Skiing, Formula One Auto Racing and other events are highly viewed by global audiences. That is why large multinational companies like Coca-Cola, VISA, Kodak, XEROX and others continue to sponsor these events.
With a large industry such as the sports marketing industry, the real question is “where do you fit in?” We’ll address that topic in future articles. Until then, maybe you can decide where the best opportunities are within this multi-billion dollar industry. Good luck!