News & Views

The changing nature of revenue in the business of sport

Whether it’s the sight of Mo Salah taking a selfie on a Google Pixel mobile with the Anfield crowd behind him, or Welcome to Wrexham on Netflix opening up commercial partnerships with international brands like TikTok, sports businesses and clubs are continually seeking ways to grow their brand value.

Traditional revenue streams, like ticket sales and broadcasting rights, are in decline. Failure to innovate and build more robust revenue streams will expose sports businesses and clubs to increasing commercial pressures, making it more difficult to achieve success stories on and off the pitch.

So, what are the key pathways for diversification?

1.  Collaborations & joint ventures

It is common for rights holders (i.e. those who own and control the legal rights of a specific asset) to partner with third parties who have specific skills and business interests that the rights holders don’t have, or cannot afford to invest in.

A good example of this is Athletic Ventures, a recently announced joint venture between UK Athletics, the Great Run Company (the rights holder of the Great North Run), and London Marathon events.

By creating a centralised, commercially minded entity, the partnership brings together three of the most influential organisations in British athletics, combining their expertise in elite sport, mass events, broadcasting, and commercial delivery. The aim is to create a more sustainable, self-sufficient operational model for British athletics, which is not solely underwritten by the public sector.

Joint venture arrangements are commercially complex, with issues such as minimum guarantees, capital contributions, rights, responsibilities, and control, making it essential to have clear and unambiguous joint venture agreements in place.

2.  Commercial partnerships for capital projects

Revenue growth can also come from commercial ventures that are focused on capital projects, such as building or redeveloping a stadium. The adoption of this strategy not only enables the generation of the funds for big capital projects but can also increase the value of the club’s assets.

An example of this is the strategic partnership between Real Madrid, Sixth Street (an investment firm) and Legends (a premium experiences company for sports and live venue organisation), with the objective of elevating the Bernabéu Stadium as a unique venue and a worldwide benchmark for leisure and entertainment.

As part of the long-term partnership, Real Madrid will receive approximately €360m investment, Sixth Street acquires the right to participate in the operation of certain new businesses of the Santiago Bernabéu Stadium for twenty years, and Legends will contribute its experience in the operation of large stadiums, attractions and event spaces.

Again, the devil will be in the legal detail to ensure not only the capital project is properly funded and delivered on time, but also to ensure each partner to the arrangement achieves their ultimate commercial objective.

3.  Digital content & fan engagement

The digital realm offers a vast arena for revenue generation. As an example, the NBA, has leveraged VR and AR to offer immersive viewing experiences and interactive content, and NASCAR has aggressively embraced digital content as a key driver of revenue, moving far beyond traditional broadcast deals.

Closer to home, the Premier League has decided to dissolve a 20 year+ joint venture agreement with IMG which had created Premier League Productions to create a new company (Premier League Studios) to own and operate its own broadcast operations, distribution, and media rights.

This strategy gives the Premier League latitude to create its own direct to consumer streaming service, promote the Premier League to an even wider audience increasing fan engagement and create further revenue.

4.  Technology & sport

Sport technology companies, which are reinventing sports businesses through innovative technology solutions, are flourishing. These companies go beyond traditional technology sponsorship arrangements and seek to combine the expertise of two established businesses by creating a specific vehicle or investing into an existing vehicle to drive revenue.

An example of this is LaLiga Tech which was initially created by LaLiga to consolidate and commercialise the technological solutions LaLiga had been developing. In 2022, Globant acquired a majority shareholding in LaLiga Tech, bringing together LaLiga’s expertise in sports and entertainment with Globant’s technological capabilities and global reach. This has now morphed, through a rebrand, into Sportian, with an expanded vision and broader scope, aiming to serve the wider sports and entertainment industry, not just football.

From a legal perspective, the retention and ownership of intellectual property rights in any combined enterprise is a key consideration which needs to be carefully considered by the parties involved.

The path to financial stability

The pressures of running a business in the sport sector are balanced by the opportunities. Leveraging technology and data analytics through strategic partnerships between rights holders and technology companies is increasingly where the action is.

The shift towards diversifying revenue streams is not merely about increasing profits, but also about fostering financial stability, enhancing brand value, and deepening fan connections.

However you choose to diversify, getting the right advice on your commercial agreements will be key to achieving your long-term aims and minimising risks.

For further information, please email Phil Bowers or call 0151 906 1000.