Waiving a Cautionary Yellow Flag on the Expansion of Sport

Nov 18, 2022

By Gil Fried, Professor/Chair, University of West Florida, Editor-In Chief of Sports Facilities and the Law

I hate to be the harbinger of doom, but I have seen this script before.  An industry sees lots of potential and tries to monetize the opportunity while it is hot, and in the process hurts the entire industry.  I lived this back in the 1980s with the Women’s Professional Basketball League, which was launched before the WNBA and crashed and burned shortly thereafter.  Things have not improved much since them.  There appears to be a lot of stupid money out there trying to hunt for the next big hit without regard to the possible carnage that might be left behind.

Sport is a very sensitive ecosystem.  While we often focus on our silos, we are all part of the same system. And if we look bad, the impact and implications can hurt us for years to come.

Currently, there is a mad rush to invest in sports. Everyone is hyping so much money and so many opportunities.  Does that sound like the Dot Com bubble?  Recent stories have highlighted how big-name sport stars are buying into professional pickleball teams.  A recent headline spoke to how League One Volleyball is launching a professional indoor women’s league after the 2024 Paris Olympics and recently raised $16.75 million in Series A funding.  It seems like a gold rush.  But similar to past gold rushes, some people made it and others lost their shirts.

Sport executives are stewards to a legacy and tradition as well as a hopeful supporter of the future.  However, when we put revenue and growth ahead of basic business principles, we risk destroying what might make something exciting.  Recent sports such as pickleball and disc golf had taken off during the pandemic.  Will they become fads and come back down to earth from their phenomenal growth?  Are we searching for the next major revenue source at the expense associated with existing sports, which might see declines?  Is that part of a natural cycle or can this lead to major shifts in our sport consumption habits?  For example, with declining youth football participation numbers what will that impact future football consumption patterns?  

Technology has often impacted how we move forward as an industry. Ticketless entry, scanning technology, RFID sensors in jerseys, performance tracking, etc. … all could be great techniques to harness data or make life easier for those in our space.  The other side is that we can push away participants and future fans.  Wearable technology was the next big thing and how many people bought motion tracking technology that sits gathering dust in a drawer.  A major tennis racket company invested significantly on tracking associated with rackets to find out that they could not sell the racket well because players did not want numbers. Instead, they wanted coaching to tell them what to do better.  It is the personal touch a coach could provide.  Technology has its benefits, but it cannot solve all problems, nor will it always generate a great return.

I constantly hear about monetizing sport, but this does not take into account that we are talking about people.  I do not want to be monetized.   I am not alone.  I don’t want my data dissected into millions of ways.  I want to make a buy decision based on what I hear from my fellow sports people.  I will not buy sport equipment based on a Facebook advertisement.  No social media post or search history tracking algorithm will change my behavior.  I do not follow any influencers.  I follow friends who play sports similar to me and they listen to me as I listen to them.  If they say a pickleball paddle is great I might try it.  I am not influenced by the pickleball magazine that seems to be 80% advertising and 20% content.  I have actually stopped reading the pickleball magazine as I want to improve my game, not buy any new equipment.  If a customer feels like they are being treated as a commodity they can walk with they feet and that is my concern.

If we can partner with people and treat them as equals, then they will stick around when the times are tough.  If customers start feeling they are being taken to the cleaners – well they will fight back.  There is such an emphasis to squeeze every last dollar out of people whether it is through licensed goods, tickets, concession sales, subscriptions, NFTs, SPAC deals, streaming deals, sport wagering, etc. When times get tough, such as now, we can face a major backlash. 

Most of the world has socialized sport-based systems where the government has primarily funded youth and community sport.  Remember the good ‘ole days where we had physical education for one hour a day, five days a week.  Now we are lucky if we get 50 minutes a week.  While Title IX has helped grow interest in women’s sports, social media and societal pressures have decreased the number of young women who participate in organized sports, especially during the high school years.  We have allowed the capitalist system to thrive and in the past it did very well.  However, with all the NIL deals, push for professionalism, increase in team valuations, Crypto hyping by athletes, SPAC deals backed by athletes, as a start- maybe we have gone too far.  Our industry is not recession proof.  We have had a gravy train for over 14 years (since the 2008 decline) with a little blip from Covid.  If this turns into a long inflationary and recessionary period many in the sport space might head towards the direction of dinosaurs.

Another self-inflicted wound can be traced to the increase in cheating and unethical conduct for the sake of a victory.  College athletics is replete with examples.  A World Series will forever be challenged based on stealing signals.  High school and youth sports are now the scenes of all too frequent fights and even shootings.  Then there are cheating scandals that have been raised just in the last couple months in poker, fishing, chess, and cornhole, just as examples.

I have students who believe that baseball cards can only go up in value.  They do not see the downside or think that prices can ever go down.  Some of these same students think they can win at sport gambling or they can always make money investing in stocks – until they cannot.  These students are often the demographic targeted by sport organizations.  

All this is raised to wave the cautionary yellow flag.  There are thousands of tech employees who have or will be laid off in the next couple weeks.  Many people thought that tech companies would be recession proof and constantly continue to grow.  There is a limited amount of revenue out there and we can only divide it so much. Now is the time for innovative ideas based on solid business practices with a dose of caution. 

I hope I am wrong. But I have predicted the last several major economic downturns and feel we might be facing a major correction in the sport space. Like I said, I hope I am wrong.