2022 was a significant year for the business of sports. As we ring in the new year, we would like to highlight our key predictions on how the sports industry will evolve in 2023:
- The changing capital structure of leagues & teams
- Accelerating adoption of ESG in sports
- NIL (Name, Image, Likeness) to go global
- More regulation on athlete and fan data monetization
- Middle East emerging as a regional sporting powerhouse
- Web3 & fan loyalty integration accelerates
- Faster adoption of AI for content creation, broadcast & sports tech
- Asia powers global mobile esports trends
These trends will potentially make for another historic year so let’s dive into how AST anticipates sports being played, consumed, and monetized around the world in 2023.
The changing capital structure of leagues & teams
The large inflow of capital and new sources of investment into the sports industry were significant developments in 2022. We witnessed some elite teams sold at record-breaking valuations: Chelsea FC (Premier League) at US$5.4 Billion, the Denver Broncos (NFL) at US$4.65 Billion and the Phoenix Suns (NBA) at US$4 Billion. However, records are set to be broken in 2023 with the sales of Manchester United FC and Liverpool (Premier League), the Washington Commanders (NFL), the Washington Nationals and Los Angeles Angels (MLB), and the Ottawa Senators (NHL).
Recently, the NBA launched an in-house private equity division to help formalize a more proactive approach to identifying and making appropriate investments creating a new and lucrative revenue stream for the league given the growth and monetization potential for sports tech startups. We will begin to see how the NBA invests its money and whether other leagues will follow suit similar to how the NBA became the first US league to allow private equity funds to invest in teams in 2021 and the NHL, the MLB, and the MLS followed.
The NBA is also entering an “Institutional Investor Era”, as teams are now allowed to receive investment from pension funds, university endowments, and sovereign wealth funds. With the NBA making such a significant move, we may start seeing North American leagues receiving more investments not only from the Middle East and other international markets. With more complex investment structures, there will be new practices and regulations required around how teams manage their investments and report results.
There will also be significant changes in Europe with UEFA enacting new financial sustainability regulations to replace FFP (Financial Fair Play). With the new spending cap, there will be a shift in the financial strategies of teams and leagues, from salaries to transfers and agency fees. In Asia, we will see more investment going into established Asian IPs like IPL (Indian Premier League) and emerging ones like EASL (East Asia Super League). The Mumbai Indians, the most valuable IPL team, is now valued at US$83 Million, while the league itself is worth US$8.4 Billion (Brand Finance). We believe this is just the tip of the iceberg as IPL team valuations will continue to soar in the coming years.
Accelerating adoption of ESG in sports
In the last two years, we have seen a rapid increase in the awareness of ESG issues in sports and this will greatly accelerate in 2023. Leading and progressive sports IPs and brands have leveraged sports to showcase their ESG-related initiatives and impact strategies. However, recent global sporting events such as the Beijing Olympics and the Qatar World Cup have highlighted the importance of growing awareness and focus on ESG issues. This will transform how federations, leagues, teams, and brands create and execute ESG and purpose-related strategies and policies.
AST asked Fabien Paget, Founder & CEO of 17 Sport, the world’s first integrated sports impact company operating at the intersection of sport, business, and purpose to share his thoughts with us: “Sports is a very powerful tool and it enables brands to open new doors, especially sports fans these days who care deeply about purpose. Purpose in sports is an emerging sub-sector that is overflowing with opportunities and there are many ways to get involved – sponsorships, partnerships, and events. Brands can leverage the power and exposure that sports has to offer to create a true global impact. ”
As we mentioned in our article: How has the sports industry evolved in 2022? We witnessed increasing viewership and sponsorship for women’s sports and the rise of women’s sports media. In 2023 women’s sports will continue to emerge and become a key growth driver of the overall sports industry with events like the 2023 Women’s World Cup.
Regarding environmental impact, we will see more practical solutions to cope with carbon emissions in sports: from events to stadium construction to more efficient supply chains, and cutting-edge materials in sporting goods and equipment. International sports federations will examine their governance to take even more steps to better integrate ESG and purpose-driven strategies and policies into their operations as they transform their organizations and take into account the changing priorities, interests and demands of sports fans.
The sports industry overall has done better this year at emphasizing its commitments towards human rights, diversity, and sustainability. We will see continued efforts in 2023 driven by empowered athletes, vocal fan bases, forward-thinking corporates/sponsors, and changes to sports governing bodies and strong political interests.
Regulations on athlete and fan data monetization
The sports analytics market is growing exceptionally across all continents with Asia narrowly registering the highest growth rate. The massive adoption of technology has led to the increased use of data in all areas of sports including health and performance tracking, broadcasting, sports betting, fantasy sports, and in-stadium experiences to name a few. Data also enables leagues and teams to monetize the direct-to-consumer model by targeting fans more accurately. Moreover, the proliferation of data analytics in youth sports will lead to the democratization of access to elite methodologies and unlock new business models in training, scouting and performance.
Yet, it raises data protection concerns such as how sports organizations can use the data, who owns the data, and the eligibility to share the data. These privacy concerns are not only limited to professional athletes but also amateur-level and casual athletes. Of course, controversy over the use of data equally applies to esports as well.
As the use of data and analytics in sports and esports matures, the industry will have to address issues through legislation on data rights management, privacy, regulations, and monetization. Certain stakeholders have a direct relationship with athletes such as leagues, teams, and agencies, while others like sports betting companies, media, and broadcasters might not. There will need to be significant development and clarification on consent, purpose, and how athletes are going to be compensated as different parties commercialize this data in new and ever-expanding ways.
NIL learning to go global
“NIL” – Name, Image, and Likeness was legitimized in 2021, paving the way for US college (NCAA) athletes to receive compensation for working with brands. Athletes are now allowed to sell their rights to brands leveraging their name, image, and likeness in marketing and promotional activities. NIL is still in its infancy but it has already been a windfall for athletes themselves and the sports business in general. According to Opendorse, the NIL market value could grow to US$1.14 Billion in its second year. Although the trend is currently focusing on the US college level, in 2023 we will see great opportunities to leverage both pro and amateur athlete brands to build brand awareness and make a profit in Europe and Asia as well. It’s still in its early stage but NIL deals in these regions are expected to see exponential growth in the coming years.
Middle East emerging as a regional sporting powerhouse
The much-talked-about Qatar World Cup 2022 achieved some breathtaking numbers across the board and is creating a lasting legacy for Qatar and the Middle East that will continue in 2023. The World Cup had a huge economic impact on Qatar, generating over US$34 Billion for its economy since it won the bid in 2010. FIFA also earned an unprecedented US$7.5 Billion in revenue – US$1 billion more than from the 2018 FIFA World Cup in Russia.
The Middle-East is now a force to reckon with in terms of international hub sporting events. There are already a whopping four Formula 1 races in the Gulf scheduled annually! Qatar has announced the 2025 World Table Tennis championships, and the 2030 Asian Games already, while also aiming to host the 2036 Olympics. Saudi Arabia has taken up the 2034 Asian Games, along with the surprising announcement to host the 2029 Asian Winter Games. After investments into Newcastle United & LIV Golf, 2023 began with the news that Cristiano Ronaldo will now play for Saudi Pro League team, Al-Nassr. We believe that the Middle East’s sports market will continue to accelerate and the great momentum will drive more investment in and exposure for the region.
Three other trends to watch
Besides the 5 key predictions mentioned above, several more trends are worth paying attention to.
Web3 & fan loyalty integration accelerates:
Web3-integrated fan loyalty programs will continue to emerge in 2023. More integrated ‘phygital’ and VR sports experiences will grow as tech giants will leverage their synergies with technology and content to integrate the Web3 sports space and tap into new monetization opportunities.
Faster adoption of AI for content creation, broadcast & sports tech:
We have started to see the emergence of more and more sports technologies that rely on AI and this will accelerate in 2023. We are seeing increased investment in these companies, especially ones where AI enhances performance, analytics, and fan engagement. Automated content production is also changing the way sports journalism and media content are created and consumed.
Asia powers global mobile esports trends:
Esports in Asia continue to grow and determine new trends. Another core focus of AST is esports and we asked Sean Zhang, CEO and Co-founder of Talon Esports to share his insights: “We are seeing huge increases in mobile esports globally driven by developments in Asia. And even more of Asia’s young populations are engaging in esports in The Philippines, Indonesia while esports in India and Japan are taking off. Asian fans are engaging at unprecedented levels and willing to pay a premium to attend live esports events such as the recent DOTA 2 event in Singapore as a great example. There will be more fan engagement as more live events leads to greater monetization from fans and teams will also look for more ways to monetize the opportunities. Of course, the integration between Web3, blockchain, and esports will continue to increase driven from Asia.”
The sports industry has so much to look forward to in 2023, especially when there are so many opportunities that are yet to be tapped and monetized. If you would like to explore how to leverage these opportunities to grow your business, reach out to us to learn more.