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Discover the potential of sport: a £20 billion industry

Much like the athletes themselves, businesses in the world of sport are striving to deliver world-class results and performance. Andrew Cave launches a major new series by tracing the history of
 a winning relationship

Over the past five years, the business of sport has become a £20bn-a-year industry in the UK, supporting some 450,000 jobs. But it has not always been that way.

Only 30 years ago, business and sport were rarely mentioned in the same breath. Football was beset by crowd trouble, old stadiums and a lack of external funding. The Olympic Games had suffered major boycotts, in 1980 and 1984, and potential bidding cities were deterred by the vast losses and legacy issues of previous hosts.

Fortunately for sport, business came to the rescue, identifying opportunities, creating markets and sparking unprecedented investment in the games that Britain and the world has traditionally loved to play.

Now, sport in Britain is riding high, boosted by the success of the 2012 London Olympics and by events such as last year’s Grand Départ of the Tour de France, the Commonwealth Games in Glasgow and The Ryder Cup at Gleneagles.

According to consultancy Oxford Economics, the London Olympics will have contributed £16.5bn to Britain’s gross domestic product by 2017. Cycling now brings in £3bn annually to the UK economy, while the amounts paid to televise English Premier League football have again broken records. Progress will continue this year, with the Rugby World Cup expected by accountants EY to deliver nearly £1bn of benefits to the UK economy.

This phenomenal growth, and the subsequent diversification of the sports industry, is a remarkable success story.

To chart this development, the Telegraph is partnering with Standard Life Investments to produce The Business of Sport Series. Over the next 12 months, the series aims to get under the skin of how business potential can be delivered through sport, examining the five key areas of investment,technology, sponsorship, participation and fanbase, and legacy.

At the outset, it is worth considering how business and sport arrived at the current situation. How did the business of sport get to today’s heights from the dark days of the Eighties? Many factors came together but without the contribution of a select band of entrepreneurs – three, to be precise – the revolution may never have happened in the first place.
Rupert Murdoch made a very large bet indeed on the power of football to drive a particular business proposition and proved spectacularly successful

Rupert Murdoch and his Sky satellite television colleagues had the foresight and courage to plough ever-increasing sums into English football, based on their conviction that the sport is so popular with domestic audiences.

More recently, Team Sky has also played a key role in the rejuvenation of British cycling.

In motor racing, Bernie Ecclestone had the vision to understand how globalisation, the enduring appeal of fast cars and the distributive power of broadcasting could create enormous value for Formula One.

And in golf and tennis, Mark McCormack, the late founder of sports marketing agency IMG, was the first to recognise that athletes and sports stars had value well beyond their performances. By identifying athletes as sporting brands in their own right, he unlocked hitherto unexploited intellectual property, which has gone on to help create some of the most powerful brands in the world.

More recently, Lord Coe and his leadership team at the London Organising Committee of the Olympic Games were able to win over businesses to the employee and customer engagement benefits brought by corporate associations with a people-centred Games. The bodies set up to manage the event’s legacy also look to have put in place a structure capable of delivering long-lasting benefits.

“They’re all visionaries in their own way,” says Rob Mason, managing director of IMG Consulting, IMG’s advisory and brand strategy and activation division. “They’re all entrepreneurs by nature. They all made some big bets and took visionary views on the potential for their sports, events or talent over the long-term.

“Rupert Murdoch made a very large bet indeed on the power of football to drive a particular business proposition and proved spectacularly successful. Bernie Ecclestone has transformed what was to a degree a cottage industry into a global powerhouse in terms of financial performance and cutting-edge technology. And Mark McCormack was one of the first to understand the individual potential of sports people to earn much more money than they had done before and to take control of their own intellectual property rights.”
Bernie Ecclestone has transformed a cottage industry into a global powerhouse in terms of financial performance

Lord March, the owner of the Goodwood Estate in West Sussex, whose Festival of Speed and Goodwood Revival claim to be the world’s single biggest motor sports events after Formula One, goes even further, arguing that Mr Ecclestone’s achievements paved the way for all major sports to succeed as businesses.

He says: “Bernie Ecclestone has had an unbelievable impact. He had a great vision of what motor racing was capable of achieving and understood the great public interest in it and enormous broadcasting potential.

“He’s had a massive impact on so much sport, not just motor sport, because he opened everybody’s eyes to what could be done. He had the vision and audacity to take the sport around the world. Nobody else thought it was possible.”

Another change over he past 30 years has been a recognition by business that sports can play a key role in winning hearts and minds and transform how companies are perceived.

Mr Mason had a close view of this as co-owner of sports agency SBI Group before its acquisition by IMG in 2007, since when corporate clients have ranged from banking group HSBC to British Airways, IBM, Visa, O2 and Heineken.

He believes that sports sponsorships and partnerships are conferring benefits such as deeper engagement with customers and motivation of staff, beyond the traditional avenues of brand awareness and hospitality.
Mark McCormack was one of the first to understand the potential of sports people to earn more money than they had done before

The actions that sports have taken to professionalise themselves in business strategy and administration, meanwhile, have vastly reduced any reputational risk previously associated with sports endorsements. “The way that sports businesses are run nowadays is necessarily more transparent and professional, and more focused on the customer – the fan. Sport is entertainment and there is plenty of competition,” says Mr Mason.

“The Olympic movement, for example, reformed after some issues in the past and demonstrably enjoys the trust of its many business partners.

“Television revenues have been the primary commercial driver, but increasingly an organisation’s professionalism and values are in the spotlight when the corporate world makes its decisions.

“Social media and the instant scrutiny that can provide means these trends should continue. Most sports, whether for profit or not-for-profit, are run as businesses, and either way there is an imperative to keep moving forward.

“To do that, you have to keep improving your product, your customer service and being creative to keep your share of voice. It’s a self-perpetuating cycle.

“The power of sport is clear, and TV is still the major power broker. But one of the next big challenges is to harness the potential of digital, social media and mobile and understand its real value.

It’s still relatively early days in terms of sport learning how to monetise that but it is certainly on the agenda of anyone in the game.”

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