The Importance Of The Sports Industry Tourism Essay
The sports business means many different things to different people. This is a truly global industry, and sports stir up deep passion within spectators and players alike in countries around the world. To one person, sports are a venue for gambling; to another, they are a mode of personal recreation and fitness, be it skiing, cycling, running or playing tennis. To business people, sports provide a lucrative and continually growing marketplace worthy of immense investments. To athletes, sports may lead to high levels of personal achievement, and to professionals sports can bring fame and fortune. To facilities developers and local governments, sports are a way to build revenue from tourists and local fans. Sports are deeply ingrained in education, from elementary through university levels. Perhaps we can state with confidence that sports enrich the lives of all of us, but they certainly entertain a huge swath of the world population. In addition to economic impact, the largest single effect that sports create is that of gripping entertainment: hundreds of millions of fans around the globe follow sports daily, whether via radio, television, printed publications, online or in person, as spectators or participants.
Sport industry is the manufacturing of sport related goods, services, and ideas through the combination of sport activities with business, mass media, and politics. Unlike sport, which emphasizes participation of both players and spectators, sport industry aims at maximizing its economic profits and social effects. To achieve these goals, business, media, and politics cooperate on the basis of interdependence.
Media representation acts as a bridge linking business and politics in sport industry. On the one hand, as Neil Blain (2002) claims, media representation of sport produces the marketing initiatives that facilitate consumption of sport related commodities. On the other hand, sport is a friendly agent of liberal capitalism. Star athletes and sport events actually divert people’s attention from social problems and shape personal identities according to political interests (Marquee 1999; Rivenburgh 2002). In this context, business, mass media, and politics have developed an intimate relationship in the arena of sport industry.
Due to its wide involvement in society, sport industry, therefore, is of great significance on both macro and micro levels. Specifically, sport industry is the catalyst in economy and an active ingredient in personal identity formation.
Global Sports Industry
The sports industry is now estimated to be worth $500 billion worldwide, but the bulk of recent growth and the most exciting prospects for the future are coming from the high growth economies of the Middle East, Central Asia, Eastern Europe, the Far East and Africa.
Sports are big business. Combined, the leagues in America, the National Football League (NFL), National Basketball Association (NBA), the National Hockey League (NHL) and Major League Baseball (MLB) leagues bring in about $17 billion in annual revenue, but that just the tip of the iceberg. U.S. sporting equipment sales at retail sporting goods stores are roughly $41 billion yearly, according to U.S. government figures. A reasonable estimate of the total U.S. sports market would be $400 to $425 billion yearly. However, the sports industry is so complex, including ticket sales, licensed products, sports video games, collectibles, sporting goods, sports-related advertising, endorsement income, stadium naming fees and facilities income; that it difficult to put an all-encompassing figure on annual revenue. When researching numbers in the sports industry, be prepared for apparent contradictions. For example, the NFL receives more than eight times as much money each year for TV and cable broadcast rights as MLB, despite the fact that MLB teams play about 10 times more games yearly than NFL teams.
When the astonishing variety of sports-related sectors are considered, a significant portion of the workforce in developed nations such as the U.S., U.K., Australia and Japan rely on the sports industry for their livelihoods. Official U.S. Bureau of Labor Statistics figures as of May 2008 found that there were 13,960 professional American athletes plus 175,720 coaches and scouts, along with 12,970 umpires, referees and officials. Meanwhile, as of 2008, 510,300 Americans work in fitness centers (up from 508,300 a year earlier), 36,900 work in snow skiing facilities (up from 36,500), 76,600 work in bowling centers (down from 77,900) and 351,500 work at country clubs or golf courses (down from 353,000). In total, approximately 1.5 million Americans work directly in amusement, gambling and recreation sectors. Another 50,200 work in wholesale trade of sporting goods, and 244,600 work in retail sporting goods stores.
Careers in Sports Industry
Mapping out a career in the sports industry has been described by some as a full time job in itself. Since many of the jobs in this field are rarely found within traditional job postings or newspapers, it is necessary for interested students to become familiar with some of the sectors that make up this diverse and interdisciplinary area.
Typically, when one thinks of a career in the sports industry, one may think of the select few who are employed as professional athletes or comprise a select number of individuals that assume high profile positions within the management of professional teams. While these jobs do exist, openings in these roles are few and remain highly competitive, requiring many years of related experience within a particular field. However, there are many other opportunities that can be found within both the public and private sector that can offer the sports enthusiast a place in this dynamic industry.
The Sports Industry is very interdisciplinary and can be divided into many segments, some of which include:
Sports Media
Marketing, Broadcasting, Sport Writing, Public Relations
Sports Team Administration
Coach, Instructor, Referee, Athletic Director, etc. in high schools, colleges, universities and for professional teams.
Sports Related – Engineering
Stadium and Sports Facilities Operations, Sporting Goods and Equipment, Electronic Games and Computer-assisted training devices (Product Development and Design)
Sports Medicine
Sports Rehabilitation & Orthopedics, Athletic Training, Sports Nutrition, Sports Psychologist
Sports – Other
Sports Management & Finance, Sports Law, Sports Statistics, Retail & Wholesale Operations, Sports Writing
The Economic Impact of the Olympic Games
The Olympic Games is an event of such magnitude that it can potentially have a significant economic impact on the host city and, for the smaller countries, on the host nation as a whole. While the actual event may last for only a few weeks, preparations commence up to a decade beforehand and may entail considerable investment expenditures that can have longer term economic significance.
Benefits
Costs
Pre-Games Phase
Tourism
Construction activity
Investment expenditure
Preparatory operational
costs (including bid costs)
Lost benefits from displaced projects
Games phase
Tourism
Stadium & infrastructure
Olympic jobs
Revenues from Games (tickets, TV rights, sponsorship, etc.)
Operational expenditure associated with Games
Congestion
Lost benefits from displaced projects
Post-Games phase
Tourism
Stadiums & infrastructure
Human capital
Urban regeneration
International Reputation
Maintenance of stadiums and infrastructure
Lost benefits from displaced projects
Table 1 – Key economic benefits and costs of the Games
The full economic impact of the Olympic Games on a host city is spread over time, and can broadly be split into three phases:
Pre-Games impact
Impacts first start to occur soon after the city has decided to bid for the Games, up to a decade prior to the actual event, but become more significant after the Games is awarded. The impacts here relate mainly to the investment and other preparatory activities required staging the Games, but tourism could also start to pick up in advance in some cases due to the higher profile of the host city.
Games impact
The impact of the Games and the associated events immediately surrounding them.
Post-Games impact
The longer-term impact often referred to as the “Olympic legacy”, can last for at least a decade after the Games. This mainly relates to post-Olympic tourism and infrastructure effects.
Cost benefit analysis
Since the Los Angeles Olympics of 1984, a number of cost-benefit analyses have been conducted into the economic impact of hosting the Games (see Table 2 for some examples). In order to quantify the various impacts of hosting such an event, it is necessary to build a model of the economy in question. This necessarily involves making a number of simplifying assumptions in order to make the model tractable. Unfortunately, these assumptions may not always be suitable for the region or country in question and will thus limit the validity of the analysis. For instance, most studies to date have been based upon the classic input-output (I-O) modeling approach, which assumes that linear relationships hold between major economic variables even in the presence of a major shock such as hosting the Games. Such analyses fail to take account of features such as supply-side constraints or the existence of economies of scale.
Summer Olympics
Reference
Total economic impact
Impact as % of GDP
Tourists
New Jobs
Period
Modelling Approach
Sydney 2000
Andersen, 1999
A$ 6.5 bn (1996 prices)
2.78
n/a
90,000 (Australia)
1994-2006
CGE
Atlanta 1996
Humphreys & Plummer, 1995
US$ 5.1 bn (1994 prices)
2.41
1.1m
77,026 (Georgia)
1991-1997
I-O
Barcelona 1992
Brunet, 1995
US$ 0.03 bn
0.03
0.4m
296,640 (Spain)
1987-1992
None
Seoul 1988
Kim et. al., 1989
WON 1846 bn
1.40
n/a
336,000 (S. Korea)
1982-1988
None
Los Angeles 1984
Economics Research Associates 1984
US$ 2.3 bn (1984 prices)
0.47
0.6m
73,375 (South California)
1984
I-O
Table 2 – Economic impact studies of past Games
Sports Industry in Malaysia
The Malaysian sport industry is considered as a young industry comprising of small and medium-sized businesses. The Malaysian sports industry comprises of companies engaging in a diversity of activities, from the manufacturing of sport goods, sport tourism, media, to the construction of sport facilities. Most companies, which are involved with, sport products, do not consider themselves as part of a broader sport industry. These companies tend to identify with sectors such as manufacturing, construction or tourism.
About 10 years ago, sports contributed about RM10 millions for the country but today, nobody knows about the exact figure of the young industry. Some might say the sports industry today is worth millions of Ringgit but no government agency has statistics of the import, export or other business data related to the industry. That’s the finding of Malaysia Sports Industry Convention 2009 (KISMAS’ 09) which was held at Berjaya Times Square Convention Centre. The 500 participants of the two-day convention were told that Malaysia as the favorite destination for international sports events has yet to set up a designated department or unit in related government agencies to monitor the cash flow of our Ringgit or foreign currencies.
Prime Minister Datuk Seri Najib Tun Razak, when officiating the convention, admitted that Malaysia had yet to set up its own data base to collect all information related to the sports industry. “We’re still gathering all the facts. Only then will we know the contribution of the sports industry to our economy,” he said. One of the speakers at the convention, Universal Fitness Leisure Sdn. Bhd. (UFL) managing director Datuk Radha Krishnan, was quite vocal when questioning the fact that there was no agency to monitor the cash flow of the sports industry.
He cited Sukan Malaysia (SUKMA) which was held every two years, in that RM30 to RM40 millions was allocated per chapter, but how much money generated from the event was not documented. He said the sports industry should not be limited to just sporting apparel or equipment but must also include a diversity of activities such as wholesale, retailing, sports tourism, construction and certain aspect of manufacturing. “However, the problem with Malaysia is that our local producers do not see their role as the global manufacturer,” he said in his paper, ‘Business Strategies in Sports Industry’.
A major threat to the Malaysian sports industry is competition from foreign brands. Local companies risk losing control of the domestic market and at the same time they are having problems penetrating foreign markets. Small companies do not have the benefits and advantages of economy of scale to lower cost of production. For small businesses, innovation and research and development are a problem because they do not have the means to employ specialists to conduct research and development. Other problems includes lack of opportunity for networking and developing business alliances, difficulty in responding to challenges posed by globalization and creating new opportunities in foreign markets, and problems in taking advantage of relationship with mega sporting events, athletes and government sport agencies.
Meeting the threat posed by globalization requires a strategic and coordinated approach to maximize domestic market opportunities and developing new export markets. To compete in the global market place, the sport industry must be committed to produce innovative products to customers and meet the needs of investors and sponsors who often demand the highest value, quality and service. It is also important for sport businesses to see themselves as part of a broader sport industry for the following reasons: (1) it will be easier to respond to globalization challenges and create new business opportunities and (2) to take advantage of relationship with mega sporting events, athletes and government sport agencies. Networking with government sport agencies is important because the industry needs an effective grass root programs to stimulate demand for sport products and services. For example, if there are no tennis players, a tennis equipment manufacturer cannot sell tennis rackets and equipments. Malaysian companies need to establish business networks that can better access domestic market opportunities through vertical or horizontal business alliances and building linkages with suppliers and customers. Companies must also explore the benefits of e-commerce as a mean to lower transaction costs or the cost of doing business and to help companies extend their reach and speeds to markets.
The Strategies for Malaysian Sports Industry
Globalization is an opportunity for Malaysian companies to penetrate new markets in other parts of the world. One strategy is by establishing an agency for the sole purpose of promoting local sport products and services overseas. Malaysia’s success in hosting international sporting events has attracted interest around the world. The industry needs to capitalize on Malaysia’s reputation as successful hosts to several world-class sporting events and use this opportunity to explore new markets in areas such as exporting expertise in the venues construction and event management. Sport construction businesses should export their expertise in constructing sporting venues such as stadiums or golf courses. As mentioned earlier, Malaysian sport industry is made up mainly of small and medium sized businesses and these companies do not have the capacity to bid for major international projects. The formation of business networks can help overcome this difficulty and enable sport businesses to meet the requirements of major international projects.
Another strategy to capture new markets is through branding and endorsement of goods. Companies need to build an internationally recognizable brand image, which is important in gaining market share globally. However, building such an image can be a problem for small businesses. One strategy that can be used is by establishing an agency in which the agency’s name and logo can be used to endorse Malaysian sport products. The agency’s name and logo can be used as a marketing tool to promote Malaysian sport products overseas but it is important that the agency branded or endorsed product meets international quality standards. An example where this is being done successfully is in Australia where the Australian Institute of Sports (AIS) currently endorses sports products in Australia. Companies also need to take advantage of Government export assistance programs. Many small businesses in Malaysia are not export oriented and are facing problems selling products in foreign markets. However, there are many government programs and agencies such as MITI (Ministry of International Trade and Industry) and Matrade that provide export assistance and the industry needs to take full advantage of it.
Another challenge facing the Malaysian Sports Industry is the lack of research and development. To compete in the global market requires the industry to upgrade the quality of sport products and services. This requires R&D activities, which are seriously lacking. Observation suggests that R&D in the sport industry lags behind those of the other sectors. Research and development is critical if the industry wants to be competitive internationally and to meet the changing needs of the market. Industry needs to make full use of technology in coming up with innovative products. However, it is unfortunate that in Malaysia, businesses are fearful of the term ‘research’. To reduce this fear of research and to increase R&D activities, it is suggested that the following be undertaken. Firstly, Government needs to undertake measures designed to encourage research and development. This includes awareness campaigns and government assistance and incentives for businesses that conduct R&D. Awards can be given to companies for innovation and creative products and services.
The government must also address the issue of protection of intellectual rights. As in the case of other industries, the protection of intellectual property generated by sport businesses is extremely important. The government can organize awareness campaign to inform businesses about the role and importance of intellectual property protection and the various options available for protection. Another strategy to stimulate R&D is by providing opportunities for cooperative research between universities and sport businesses. Presently, Malaysian sports industry is not able to fully exploit the expertise or ideas developed in universities because of lack of research collaboration between universities and businesses. One way collaborative research can be encouraged between businesses and universities is by setting up a Sports Industry Research Center. This center will bring together industry and research institution. Industries can help fund and then commercialize products from the research projects undertaken by this center and local universities.
A strong workforce skill is also essential to improve the quality of products and the success and performance of sport businesses to compete in the global market. Globalization requires sport managers to possess a depth of knowledge and a broad range of specific competencies in business and in sport to be able to deal successfully with ever-changing challenges and problems with the business of sport. This is best achieved through formal and informal education combined with meaningful practical experience in sport management. Among the strategies that can be implemented to improve the skills of the workforce is through developing a sport and leisure education package and certification specifically catered to the needs of the sport industry. It is important that sport industry training programs to be more than a bunch of physical education courses clumped together with other courses from other department (business, economics, and communications) in a so-called “package.” What are needed are actual courses and classes that are devoted to appropriate and specific content areas within the sport business management discipline and reflects the need of the industry. There is also a need for sport management training programs to train executives and managers. In this regard, public universities and other centers of higher education need to be encouraged to offer relevant education and training programs. Another possibility is by having twinning programs with foreign institutes of higher education and exploring opportunities for distance education or online education programs.
The industry needs reliable data to compete in the globalize market. In Malaysia, no data is available on the sports industry. The quality and availability of information on economic data, industry performance, long-term trends in participation, consumer profile, job and employment creation, value of exports, annual growth, facilities usage and patterns of behavior is poor. The lack of data weakens the industry’s ability to develop evidence-based marketing strategies. One strategy to overcome the lack of statistics relevant to industry needs is by establishing a Sport Industry Statistical Group. This statistical group can be given the task of collecting data relevant to the sport industry. The group can also function as an information center where statistics relevant to industry needs are made available. The types of data that are seriously needed are economic data, industry performance, sport participation data, consumer profile, facilities usage and others.
Successful implementation of the strategies mentioned requires the formulation of a national strategic policy for sports industry. The purpose of this policy is to serve as a common vision for the sports industry in Malaysia to meet the challenges of globalization as well as providing documentation on the broad aims and objectives for the industry. It will also serve as a guideline for sport businesses in Malaysia to plan business activities. In addition it would outline the roles of the various government agency and private sector in meeting the aims and objectives of the industry. The strategic plan should focus on meeting the challenges of globalization through specific strategies such as producing quality sporting goods and services, innovation in product design, ability to anticipate changes in the market, branding and product presence, and use and development of technology to achieve a competitive edge. The Ministry of International Trade and Industry (MITI) should take the responsibility for implementing the strategic plan. This will require the ministry to work closely with other state and federal government agencies including the various sports agencies such as the Ministry of Youth and Sports and the National Sports Council. In terms of evaluation, there should be an annual report measuring the progress and impact of the policy on the performance of local businesses. The report should also identify implementation problems and suggest areas where changes might be needed.
Is sport in recession?
The global economic recession has spared no one, not even one of the most consistently profitable industries in the world: sports. The US unemployment rate stands in double digits, its second highest since 1983. Credit is tight, making paying for housing, food and healthcare very difficult. The impact of the downturn on sport has certainly started, it definitely is not yet finished, and so we find ourselves somewhere in the middle of what is rapidly becoming the most unprecedented situation facing the new world of commercialized, globalized sport.
Events, sponsors, clubs and players have already been affected by an economic reality that some in sport have never encountered before. Yet it was the demise of the Honda Formula One team late last year that arguably sharpened people’s sense that sport faces a major problem in coping with the downturn. Many were left asking, if a sport like Formula One, characterized by its heady mix of money, global appeal and glamour could fall victim to the world’s financial paralysis, then nobody would be safe. Such was the impact of Honda’s pullout, that Formula One witnessed a game of Chinese whispers in which rumors of further pullouts, involving teams ranging from Benetton to Toyota, were being pedaled. During nervous times, people inevitably become twitchy, a sense of self-fulfilling prophecy hanging thick in the air. For the time being at least, the world’s premier motor-racing series appears to have stabilized itself, in part due to a recent cost-saving agreement amongst the participating teams. However, as with all good dramas, there may yet be several twists and turns in the story.
One of the interesting aspects of the Honda case is that it dispelled the myth that the downturn is a distinctly Anglo-Saxon phenomenon: we are actually all in this together. This leads one to recall the old adage that when America sneezes, others catch a cold. In this case, the United States is not just sneezing; it is coughing, spluttering and running a fever, something we should all be fearful of. In sport, there is a great deal of poignancy to this; the US is home to some of the biggest, most commercial and richest sports in the world. Moreover, although it is the world’s biggest free-market economy, the US runs its sports like communists through a range of centralist measures designed to ensure the health and efficiency of national institutions like basketball, baseball and American football. However, in spite of the central controls, the recession has already taken hold of US sport. For instance, the National Football League has announced that it will be shedding around 10% of its workforce, and the Indianapolis Motor Speedway (home to the Indy 500 motor racing event) has indicated that it too will be making serious job cuts. Elsewhere, the world’ richest sportsman, Tiger Woods, has had his five-year, $8 million annual contract with Buick terminated early.
Outside the US, the picture is no less worrying, there being further evidence that sport is encountering difficult times. The World Rally Championship teams Subaru and Suzuki have followed Honda out of top-level motorsport; Vodafone has withdrawn its sponsorships of both the England cricket team and the Epsom Derby horse race; and the 2009 Indian Golf Masters has been cancelled. Consider also the case of English Premier League football club West Ham United: firstly it lost its shirt sponsor when XL Airlines went into administration. The deal, worth an estimated ?7.5 million over three years, has since been replaced by a new deal with online gambling company SBOBET, a deal thought to be worth considerably less than the XL deal at ?2 million for an 18 month deal. In the meantime, the Icelandic owner of West Ham has suffered severely as a result of the world’s financial crisis.
Yet there remains conflicting evidence about just how serious the downturn actually is, and about whom it is most affecting. Even during these supposedly difficult times, a number of Middle Eastern emirates continue to jockey for position as one of the world’s leading sports-hubs, alongside other Asian competitors such as Singapore. The economic power of these emirates is such that we have seen the recent acquisition of Manchester City for ?200+, overnight making them the world’s richest football clubs, followed by City’s immediate purchase of Brazilian player Robinho for ?32 million. Moreover, in the face of impending economic gloom, last year’s Singapore F1 Grand Prix was the self-proclaimed antidote to global economic woes. Then factor in the Beijing Olympics; there were no real signs of any economic downturn in China when the country spent upwards of $40 billion to stage the Games, and the positive economic ripple of this mega-event was even felt in Great Britain at a time when recessionary fervor was just beginning to hit. In the six weeks after the Beijing Olympics, it was being reported that in Britain that sales of bicycles had increased by upwards of 20%; sales of sports bras had increased by 27%; sales of energy bars and sports drinks had increased by 155%; and sales of swimming equipment increased by upwards of 36%. Moreover, in the aftermath of the summer Olympics, much was being made of the loss of two major International Olympic Committee sponsors (it was conveniently ignored that the loss of these sponsors was for reasons unrelated to the downturn). Significantly less was made however of their immediate replacement by two other multinational corporations as Olympic sponsors.
Conclusions
Given the conflicting body of evidence, it would therefore appear that these are not necessarily difficult times for sport; they are more like confusing times. Is sport essentially doomed, struggling at the forefront of the downturn? Will sport be fundamentally undermined, with a multitude of teams and organizations disappearing? Or, is the apocalypse still some way away, with sports simply facing the need to change their management and operational practices in order to cope with difficult trading conditions? Despite these turbulent times, there are grounds in sport for optimism; sport as a product offers something to fans, customers, commercial partners, broadcasters and others that other products do not. Indeed, in recessionary times, sport is effectively a safe port amidst the eye of a storm. The essence of this is what economists refer to as the ‘uncertainty of outcome’: not knowing which of the competitors in a sporting contest is going to emerge victorious. In a world where products are increasingly standardized and homogenized, sport is something different, something unpredictable. This engenders in people a multitude of emotions, ranging from excitement and euphoria through to nostalgia and pride, and finally to extremes such as unquestioning devotion, and even violence. Sport therefore stands alone in offering a unique core product and an associated set of benefits. As such, one should expect sport to exhibit recession-resistant features that one would not associate with other products and industries. For instance, during times of trouble, sport provides people with an escape from the hardships they might be suffering, while providing them with an unrivalled collective consumption experience. Moreover, sport not only has an intrinsic aesthetic beauty, it also enables people to BIRG (Bask in Reflected Glory), a psychological phenomenon that could help to sustain them if they are suffering the consequences of economic adversity. There is evidence also to suggest that the economic appeal of sport can prevail during hard times; the experience of previous recessions indicates that levels of gambling activity can increase, with many people believing that a successful sporting bet may help them alleviate their fiscal constraints.
Like all good dramas therefore, the story of sport and the recession has indeed twisted and turned. Some organizations are using
