What Makes Sports a Unique Business?
In 2014 over 73 million people attended Major League Baseball games in the United States and Canada. The numbers for National. Basketball Association (NBA), National Hockey League (NHL), National Football League (NFL), and Major League Soccer (MLS) contests in the United States and Canada were 22 million, 17 million, 21.4 million and 6.1 mil- lion, respectively. Another 82 million attended college football and basketball games. Such numbers define sports as a premier entertainment business. Evolving over the last century from a mom-and-pop-style enter- prise into a dynamic
economic of high revenues, lucrative compensation and high visibility, professional and amateur sports are not only watched, but financed, broadcast and streamed domestically and around the world. For anyone seeking to study sports, its business structure is just as salient as the runs, touchdowns, baskets and goals. The sports business displays similarities to the entertainment industry. At first glance one may wince at this characterization, but sports possess
characteristics akin to film, theater and music. They all provide a form of leisure a diversion from the daily stresses of life, albeit a passionate one. People pay to attend sports exhibitions by choice, not by governmental fiat or financial necessity. Professional athletes (and more and more collegiate athletes) engage in personal services. Star athletes, like star actors and musicians, command tremendous public recognition often covered by media thirsty for every angle of their professional and personal lives. Athletes are frequently public figures, which means that the media have a defacto license to report on their athletic and nonathletic Sport has changed dramatically in the past decade as a result of techno- logical innovations. The internet and the resulting mobile commerce revolution changed the way sport is viewed,
purchased and played . This has led to some interesting ethical debates about how technology has changed performance outcomes in sport. The need for techno- logical change in sport has been the result of not only more competition among different sports for fans but also an increased usage of technology in people’s everyday lives.
What Makes Sports a Unique Industry?
United States and Canada-A Cartel Structure
In a market-driven economy, the goal of a typical business is to achieve success by direct competition with others. Whether the business is auto- mobiles or appliances, most consumers consider buying a product from a number of firms that manufacture or sell that item, and their decision to purchase is based on factors such asneeds, quality, brand reputation and/or price. The same can be said for choosing service professionals. One may choose a physician or a lawyer from a number of practitioners based on references, training, professional manner and insurance coverage. This traditional competitive structure is not found in professional sports leagues in the United States and Canada.First and foremost, the competition is limited not by circumstance, but by intention. Almost every American-based sports organization’s structure restricts competition. In the professional sphere, the leagues limit the number of competitors by awarding exclusive franchises in different markets, so consumer choice is inherently limited. With a few exceptions, one team occupies that particular market. In doing so, leagues create a limited market and operate as a cartel. In certain respects, this is analogous to the market control demonstrated by the Organization of the Petroleum Exporting Countries (OPEC) in the 1970s and 1980s. In both cases, membership is limited and the product is controlled. OPEC countries may have controlled the production, distribution and sale of oil in an attempt to dominate the market. Similarly, sports leagues regulate which teams may compete, where they can compete, the number of players on a team and the sharing of certain revenues. But by no means does this discourage athletic competition. In fact, there is direct, and often intense, competition among the teams in a given league, even resulting in rancor between the owners. The desired goal of the franchise (and the hope of fans) is to win a championship. If a team has the resources and the will, its owner will sometimes acquire expensive free-agent players to increase its chances of success. In the past, a strong rivalry developed between teams that had significant financial resources, such as the Boston Red Sox and the New York Yankees, and both teams have spent lavishly on players not only to win championships, but to outperform their rivals. Yet, on another level, these teams cooperate in very important matters, such as labor negotiations, broadcasting, merchandising and revenue sharing. The result is a hybrid identity. The team sells itself as both a local franchise and a representative of the league. As shown later, differences exist among the major leagues regarding the sharing of revenues and salary controls, but the basic organizational plan remains the same. This competition versus cooperation dichotomy is explained in more detail in Chapter 1. Many of the controversies that have bedeviled sports leagues involve the balance of power between the respective leagues’ central offices and the individual team owners. Centralized league control of independent franchises has existed in its present form for almost a century. Major League Baseball created the position of commissioner to run the league’s affairs, which has since been adopted by other professional and amateur sports leagues. The commissioner is a de facto chief executive officer of the respective sport, empowered to regulate league policy, setting disciplinary standards for players and other employees and, in more recent years, often spearheading labor negotiations with the league’s players association.Today, sport is no longer pure competition of athletes, but an entire industry in which millions of people work and earn their money. The global sports industry comprises about one percent of the global GDP and is estimated to be worth around 600-700 billion USD when sports infrastructure, sports events, sports hospitality, training, and manufacturing and retail of sports goods are included (KPMG 2016). Beyond money, sport helps businesses to generate emotions. Every year, billions of euros are invested worldwide to positively charge companies’ brands, improve brand image, and emotionalize even functional products with the help of sport. The increasing number of new and growing sporting mega events worldwide, for example, led to global sports sponsoring volume of EUR 42 billion in 2019 (Two Circles 2019). With all the excitement for sports, however, we cannot neglect that, from a business perspective, sport is one of the most conservative industries on the planet. In a way, sport is designed for long-term stability to preserve competitive balance and avoid winner-take-all and natural monopoly dynamics. Every athlete must have a chance to win. The worst scenario in sports is when one athlete or team wins all the time. This is even true for commercial leagues like the NBA, the NFL, the English Premier League, and the German Bundesliga. Integrating fast-moving tech ventures into sports can create tension due to the vastly different underlying competitive dynamics of these two domains and disrupt, albeit temporarily, the competitive balance so important in sport. Nevertheless, the sports industry is experiencing rapid growth due to new opportunities presented through new technologies and data, which is increasingly becoming the new currency in sports (Ratten 2019). With the rise of data analytics, sports act as proving ground or “laboratory” for new technologies (Michelman 2019). Because of this, a growing sports tech landscape is observable with unicorns such as FanDuel, DraftKings, Dream11, Hupu, and Peloton. According to industry experts, 2019 saw more than 2.5 billion USD in investments in global sports technology ventures especially in fitness, esports, and sports content (Penkert and Malhotra 2019).
The Growing Business of Sports
Today, sport is no longer pure competition of athletes, but an entire industry in which millions of people work and earn their money. The global sports industry comprises about one percent of the global GDP and is estimated to be worth around 600-700 billion USD when sports infrastructure, sports events, sports hospitality, training, and manufacturing and retail of sports goods are included (KPMG 2016). Beyond money, sport helps businesses to generate emotions. Every year, billions of euros are invested worldwide to positively charge companies’ brands, improve brand image, and emotionalize even functional products with the help of sport. The increasing number of new and growing sporting mega events worldwide, for example, led to global sports sponsoring volume of EUR 42 billion in 2019 (Two Circles 2019). With all the excitement for sports, however, we cannot neglect that, from a business perspective, sport is one of the most conservative industries on the planet. In a way, sport is designed for long-term stability to preserve competitive balance and avoid winner-take-all and natural monopoly dynamics. Every athlete must have a chance to win. The worst scenario in sports is when one athlete or team wins all the time. This is even true for commercial leagues like the NBA, the NFL, the English Premier League, and the German Bundesliga. Integrating fast-moving tech ventures into sports can
create tension due to the vastly different underlying competitive dynamics of these two domains and disrupt, albeit temporarily, the competitive balance so important in sport. Nevertheless, the sports industry is experiencing rapid growth due to new opportunities presented through new technologies and data, which is increasingly becoming the new currency in sports (Ratten 2019). With the rise of data analytics, sports act as proving ground or “laboratory” for new technologies (Michelman 2019). Because of this, a growing sports tech landscape is observable with unicorns such as FanDuel, DraftKings, Dream11, Hupu, and Peloton. According to industry experts, 2019 saw more than 2.5 billion USD in
investments in global sports technology ventures especially in fitness, esports, and sports content (Penkert and Malhotra 2019).
The Dynamic Sports-Technology Relationship
The pace of on-field and off-field innovation has accelerated withadvances in hardware, software, and data analytics. Technology andsports have a dynamic relationship. Sport is a proving ground for new technologies and technologies are, at the same time, a major source of disruption in sports. The ways that sport is played by athletes, viewed by consumers, monetized and regulated by management, are all being revolutionized by the deployment of technological innovations.” Technology Improves Athlete Performance In the past, training and competition preparation were driven by intuitive practices one followed the tried path without knowing exactly why. Nowadays, athletes,’For a view of sports through the lenses of athletes, consumers, and managers, see the Sports Tech framework by Penkert and Malhotra (2019)
Administration
Artificial Intelligence is making ripples in sports. From football/soccer to Formula 1, Artificial intelligence is being used in Sports to strategize, train, advertise and do much more. In short, AI is significantly impacting the way one view and consumes sports content.AI is making a smarter world for sportsmen, advertisers, broadcasters, with real-time statistics. Roland Garros 2019, had IT giant Infosys create a worldwide C-suite audience giving real-time statistics with the impact of increasing engagement by 16%.AI is going to change the ways of doing business, and while its influence has been prominent in several industries already, the Sports sector is a new member and a very welcoming one as well. Operations and Logistics AI solutions can help identify exactly which steps in a supply chain can be improved in order to improve profits, manage carrier contracts, and even negotiate shipping and procurement rates. AI operations and optimization involves the application of Artificial Intelligence (AI) technologies, such as machine learning and advanced analytics. This is done to automate problem-solving and processes in network and IT operations, and to enhance network design and optimization capabilities. Using AI-based solutions in supply chain and logistics refers to the process where smart machines can perform problem-solving tasks. This automated process of smart industry manufacturing run by IIoT (Industrial Internet of Things), can drive the entire supply chain without any manual participation.
Sales and Marketing
The global artificial intelligence in sports market was valued at $1.4 billion in 2020, and is projected to reach $19.2 billion by 2030, growing at a CAGR of 30.3% from 2021 to 2030. Artificial intelligence in sports is emerging all over the industry, covering post-game analysis, in-game activity, and the fan experience. AI is further being used to enhance the performance of players. Apps such as HomeCourt, ESPN Player, and MaxOne (M1) AI SmartCoach make use of computer vision and machine learning to assess basketball players’ skills, giving them a good medium to improve. In addition, the recording of these performance metrics of athletes helps players to understand the areas where they have maximum potential to excel and the areas that still need improvement. Increase in demand for monitoring and tracking data of players and surge in demand of chatbots and virtual assistants to interact with followers boost the growth of the global artificial intelligence in sports market. In addition, increase in demand for real-time data analytics positively impacts the growth of the market. However, lack of trained & skilled professionals and high implementation and maintenance cost hamper the market growth. On the contrary, increasing demand of AI for making future predictions is expected to offer remunerative opportunities for expansion of the market during the forecast period.
Governanace
AI can be used to assist members of the public to interact with government and access government services, for example by: Answering questions using virtual assistants or chatbots . AI technology can be used in several ways to improve governance in sports:
Referee Assistance: AI can be used to assist referees in making accurate and objective decisions, particularly in fast-paced sports such as football and basketball. The technology can analyze multiple camera angles and provide real-time information to referees, helping them make informed decisions.
Anti-doping control: AI can be used to analyze athlete’s blood and urine samples to detect any performance-enhancing substances. The technology can quickly process large amounts of data and identify any suspicious patterns or anomalies.
Player tracking: AI can be used to track player performance and behavior, both on and off the field. This information can be used to identify potential rule violations, improve player safety, and optimize game strategies. Injury Prevention: AI can be used to monitor player movements and identify any potential risk factors for injury. This information can be used to implement preventive measures, reducing the risk of injury for players. Sports analytics Artificial Intelligence (AI) has been increasingly used in the sports industry to analyze large amounts of data and help teams, coaches, and players make informed decisions. Here are some of the ways AI is being used in sports analytics: Player performance analysis: AI algorithms can process huge amounts of player data, including statistics, physical attributes, and on-field behavior, to generate in-depth insights into each player’s performance and strengths. This information can be used by coaches to optimize game strategies and make informed roster decisions. Injury prediction and prevention: AI algorithms can be trained to analyze player data and predict the likelihood of injury. This information can be used by teams to implement preventive
measures and reduce the number of injuries sustained by players. Tactical analysis: AI can be used to analyze data from games andtraining sessions to identify patterns and trends in a team’s performance. This information can be used by coaches to make tactical adjustments and optimize their team’s performance. Media and communications Artificial intelligence (AI) is transforming the media and communication landscape in sports in several ways: Sports Analytics: AI algorithms are used to analyze vast amounts of sports data and provide insights into player performance, tactical analysis, and opponent predictions. This data can be used to make more informed decisions, such as choosing the best lineup or game strategy. Player Tracking and Injury Prevention: AI is used to track player movements and monitor their performance to prevent injury and optimize training. This allows teams to make more informed decisions about player fitness, helping to reduce the risk of injury. Sports Broadcasting: AI is used in sports broadcasting to improve the viewing experience for fans. For example, AI algorithms can be used to automate camera shots and provide real-time player tracking, improving the overall viewing experience. Sports Journalism: AI can be used to analyze news articles and social media posts to generate insights and trending topics in real-time. This helps journalists to quickly and effectively produce high-quality content, making the process of covering sports events more efficient. Fan Engagement: AI is used to enhance the overall fan experience, for example, by providing personalized content recommendations based on a user’s interests, history and behavior. Additionally, AI- powered chatbots can be used to provide instant answers to fan queries, helping to increase fan engagement and satisfaction.