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Professional teams face four major challenges in the future

This is an excerpt from Contemporary Sport Management 5th Edition eBook With Web Study Guide by Paul M. Pedersen & Lucie Thibault.

Future Challenges Facing Professional Sport

As teams in professional sport move to the future, they face a variety of challenges (and opportunities), many of which are discussed in this chapter. Although the challenges are too many to enumerate in this section, we have isolated four major challenges that professional teams face in the future: maintaining reasonable labor - management relations, developing new revenue streams, managing new technology, and dealing with globalization.

  • Maintaining labor - management harmony. First, given the history of acrimony between the players (labor) and the owners (management), and the history of work stoppages (i.e., strikes or lockouts), a continual challenge for professional sport will be ensuring that the games go on. As evidenced by the NHL lockout that cancelled the entire 2004 - 05 season and subsequent NHL work stoppage in 2012, accomplishing this goal is not always easy. Although typically a variety of issues create tension between labor and management, the most visible conflict is associated with the owners’ desire to manage costs, mostly tied to players’ salaries. At the same time, the players are seeking their fair share of the ever-increasing revenues generated by teams and their owners. For this reason, labor disputes are likely to keep occurring.

  • Developing new revenue streams. The increased salaries of professional athletes affected the business of sport. To fund continued increases, team owners are looking for new revenue streams or ways to enhance existing revenue streams. Technological advances, such as the virtual signage and satellite television opportunities examined earlier, have already provided significant new revenues to leagues and teams. Such quests for revenue enhancement are likely to continue in the future, and technology will probably be involved. Think for a minute about how our world is shrinking because of technology. Professional sport crosses international barriers with increasing regularity.

    In fact, globalization, along with branding of a sponsor name on team uniforms, is the largest revenue frontier yet to be crossed by sport teams and leagues based in the United States (with the notable exception of Canada, which serves as a permanent host to teams in all of the major U.S.-based team sports with the exception of the NFL). By globalization, we currently mean any or all of the following activities:

    • Sales and distribution of broadcast and other media rights outside of their country of origin
    • Merchandise sales occurring outside of the country of the respective team identified on the merchandise
    • Corporate partnerships that can be activated outside of the country of origin of the corporate entity
    • Exhibition contests, regular season games, and tours played outside of the continental United States and Canada by U.S. - based professional leagues and teams and also by college conferences and their respective teams
    • Extending social media content outside the national boundaries of the country of origin producing the content

    Most of the activities described in the preceding list, as well as those in the following, are already occurring throughout Europe and other continents primarily in the sport of football (or, as we refer to it in the United States, soccer). Globalization by professional teams in the United States over the next 10 years or so is projected to mean all of the activities previously listed, plus some or all of the following:

    • Sanctioned competitions involving U.S. teams and non - North American professional teams competing in a meaningful league contest that involves standings and records
    • A championship event in which the winner is truly acknowledged and accepted as the World Champion

  • Meeting technology challenges. The same technologies that have helped spread the popularity of professional sport and increase revenues have also created the most competitive entertainment and leisure landscape ever. Twenty-five years ago, people could access four or five TV channels. Today, they can access hundreds of channels and choose from a wide variety of entertainment without leaving their homes. Further, think about all the other leisure options that compete with the consumption of sporting events. Video games, movies, numerous outdoor activities, e-mail, texting, social media, and other activities occupy people’s time as never before. Couple this with the fact that new sports and sporting genres such as action sports appear to be here to stay, and you can clearly see how fiercely professional teams have to compete for consumers’ attention and money. This competition is likely to continue in the future. Technology will also present challenges to the traditional business models employed by professional sport. For example, digital video recorders (DVRs) such as TiVo allow people to consume sporting events and shows at their leisure and view them more quickly because they can skip through commercials. This practice may significantly affect the broadcast advertising models that are currently in place. Similarly, the streaming of video content to handheld devices such as cell phones creates a new way for athletes, teams, and leagues to deliver broadcasts. While this potentially creates a new opportunity for revenue generation, the challenge is to determine what consumers want and how to provide it. Further, at the league level, the emergence of such new sources of revenue will challenge traditional league revenue-sharing concepts.

  • Dealing with globalization. New technologies are also helping spread professional sport across international boundaries. Thanks to this, Japanese fans can watch Yu Darvish play for MLB’s Texas Rangers and Spanish fans can watch Ricky Rubio play for the NBA’s Minnesota Timberwolves. Similarly, new means to facilitate the spread of sport across international boundaries are emerging every day. The NFL has played exhibition and regular season games in Mexico City, London, Toronto, Tokyo, and Berlin. In 2013, two regular season games were played abroad in Wembley Stadium. Similarly, MLB has held season-opening games in other countries, as has the NBA. MLB has been an integral part of the World Baseball Classic, which was played in 2006, 2009, and 2013. The NBA sent the Orlando Magic and the Cleveland Cavaliers to China in 2007 to participate in the China Games, and the 2013 - 14 NBA preseason included eight games in Brazil, the Philippines, Spain, England, Turkey, and China. These efforts have been geared toward increasing the global popularity of the sports as a way to generate more revenue. One obvious decision facing the leagues is whether to put a professional team outside North America. This issue raises several challenges, such as how to deal with cultural differences and account for exchange rates. At a league-specific level, NFL Europe, the NFL’s former development league that played games in the spring and summer, was never profitable, and its long-term viability was always in question. These issues are just a few of the challenges facing professional sport in the future.

Learn more about Contemporary Sport Management, Fifth Edition.