Where is the value?

If you scan sports industry headlines in any given week, there are numerous deals that might catch your attention. The latest cryptocurrency deal between the Italian Football Federation (FIGC) with Chiliz to launch a fan token ‘$ITA’ via the Socios.com app. Or perhaps the decision by DP World to invest $400 million in European Tour golf over the next 10 years. Or live coverage of the World Padel Championship in Belgium shown by pay-television broadcaster Eleven. All interesting developments contributing to the recovery and future growth of the sports industry.

But in terms of investment the biggest deal that caught my attention was not in the sports industry but the automotive industry. Electric vehicle maker Rivian that has yet to record any meaningful revenue surged on its Nasdaq debut with an opening market value of more than $100 billion. In the process the company will raise $11.9 billion which is the biggest IPO result for a US company since Facebook’s flotation in 2012. Even rival carmaker Ford has a stake as does Amazon who placed an order for 100,000 commercial delivery vehicles to be delivered in 2025. How can one company that has yet to produce a single product be worth so much? It is hard to comprehend.

Perhaps comparing sport and entertainment with the need to replace one billion cars on the planet with electric vehicles over the next 10 to 15 years is not a fair comparison. Quite often sport is promoted as an essential part of our daily needs including physical and mental wellbeing, social exchange, economic and infrastructure investment and so on. When we have urgent and complex issues such as equality, diversity and inclusion, sport is also viewed as part of the solution. But when you consider the levels of investment in sport to fulfil these ambitions, whether at grassroots level or professional sport, they are a fraction of what is invested to drive growth in other industries.

When consumers see professional athletes and teams earning millions of dollars in salary, rights fees or shareholdings, sport is challenged to justify itself. So, as an industry we take on more responsibilities and embrace the latest trends such as ‘brand purpose or community projects’. Recent research in the US shows US consumers are ten times more likely to rate value and quality as a brands most important attribute compared with its impact in the community. Whilst consumers expect brands and organisations to be active in purpose driven campaigns, it does not translate into a change in attitude towards spending behaviour. Forrester research confirmed that only 18% of consumers are ‘values motivated consumers’ who take hard actions based on their convictions.

In ‘Signals of Change’, a report from Accenture, six signals were identified from a wide range of perspectives to stimulate innovation and new thinking for the future success of organizations. The first signal is ‘Learning from the Future’ that focuses on the use of data analytics and artificial intelligence (AI) to make decisions and define strategies that anticipate the future as opposed to focusing on past insights. It reminded me this is often the way the sports industry operates. Based on past performance new targets such as viewers, subscriptions or sponsorship revenue is predicted to set future targets. Collectively the distribution and sales of multiple broadcast rights, sponsorship, and ticket sales for an event like the 2022 FIFA World Cup might generate $4 or $5 billion revenue. A lot of time and effort for a relatively small amount when more than 1 billon people are engaged in this sports event from qualification matches to the final tournament.

By the end of 2021 Spotify is expected to achieve 400 million monthly active users. As of Q3 about 220 million are using the ad-supported version and about 161 million are ad-free users. This generated $323 million of advertising revenue in Q3 alone. OK, there is only one Spotify and fewer competitors than in the sports industry, but the revenue and growth exceed most franchises in sport.

Perhaps it is time to ask the question, how could a sport or sports related product secure a valuation of $100 billion for products and activities that have not been fully created yet and only need to be delivered in 2025? Surely there is more value in the sports industry than is currently being created.