How Sports Leagues Are Reacting to Innovation & Disruption

May 29, 2019 5:45:33 PM / by Pivot Factory

The global sports market is worth well over a half-trillion dollars, making it one of the richest industries on the planet. It’s so massive and so influential that to properly account for its tremendous power, the industry must be judged on everything that encompasses it: sponsorships and ticket sales, television rights, media outfits, and much, much more—all driven by an obsessive, and seemingly insatiable global fan base.

Underscoring the industry’s extraordinary wealth: One study notes that the sports sector is “growing much faster than national gross domestic product (GDP) rates around the world.”

Currently, the 10 most valuable sports franchises in the world all are worth more than $3 billion—with the NFL’s Dallas Cowboys alone earning $840 million in revenue, according to a Forbes analysis.

Yet, in one way or another, industries of all types are vulnerable to disruption. Sports is no exception, but it sure doesn't feel that way. Professional leagues have thus far deftly incorporated new innovations into their businesses as a way to improve their on-field (or pitch, ice, hardwood, whichever playing surface you prefer) product. At the same time, sports leagues have made a concerted effort to encourage fans to pay handsomely for live events, while also investing heavily in improving the at-home fan experience.

Indeed, not only are sports teams competing with rivals on the field, but now they find themselves fending off challengers from beyond the sidelines, in the form of new technologies, and perhaps most disrupting, legalized sports betting in the United States, which may fundamentally change how fans watch sports.

After decades of eschewing gambling—which for a long time was the so-called "Third-Rail" of sports—leagues are embracing this once-fringe element as momentum grows to take sports betting out of the shadows (and Las Vegas casinos) and into the mainstream, literally placing it within our fingertips.

With that, let’s take a look at innovations impacting the sports industry and how some leagues are responding to disruption.

Legalized Gambling

After years of repudiating sports betting amid fears that athletes, coaches or game officials would be ensnared in integrity-damaging, and perhaps even league-killing controversies, professional leagues are, pardon the pun, betting on partnerships that once seemed implausible.

How did this happen?

The U.S. Supreme Court in 2018 effectively made it legal for individual states to adopt gambling. Since then, eight states have legalized it, while others are considering the merits—including the financial benefits—of such an endeavor. Among the early adopters is New Jersey, which also permits online betting via computer or smartphone app, such as DraftKings. 

The NBA—which just years ago was confronted with a high-profile betting scandal involving one of its referees—became the first American sports league to announce a betting partnership, inking a deal with MGM. MLB and NHL quickly followed suit.

The NFL, the most popular U.S. sports league, agreed to a partnership with Caesars Entertainment, making the gaming corporation its first-ever casino sponsor. However, unlike the three other major sports leagues, the NFL-Caesars deal only includes casino gaming.

Wearable Health Devices

Professional athletes are making more money than ever, which is why franchises place clauses in a player’s contract to protect their investment if the athlete chooses, for instance, to perform a non-approved activity and gets injured as a result. This is an important point, because teams increasingly want to ensure their financial commitment to a player pays off—meaning having them play at optimal performance and remaining relatively healthy throughout the course of their contract.

Meanwhile, advances in science and technology have given us elaborate wearable devices capable of tracking everything from health metrics to how well an athlete accelerates, or even the force of a collision.

Let’s use baseball as an example. MLB executives are hypersensitive to injuries involving starting pitchers, considering how much an elite hurler earns and their significance to the roster. In 2016, the league approved two devices, one that analyzes stress on an elbow and another that monitors breathing rate. In response, union officials expressed concerns over potential privacy implications.

Big Data and Transforming Operations

That time when head coaches or managers relied on their “gut” to make a decision has almost entirely been put out to pasture.

Team executives want to know everything about their players—and we mean everything. Analytics is the new game in town, with leagues across the world using data to judge a potential roster addition or to capitalize on something a player does particularly well.  

For decades, teams would rely on experts in the front office and shoe-leather scouts to find players best suited for their programs. That concept has been entirely turned on its head. Teams are investing a ton in analytics departments—basically paying people to crunch numbers to better understand certain players and develop strategies to help the team win on the field, a responsibility that once fell primarily on a coach or manager. Now, front office personnel and the coaching staff work in tandem to develop short- and long-term plans to develop winning programs.

That time when head coaches or managers relied on their “gut” to make a decision has almost entirely been put out to pasture.

Going Forward

As the old adage goes, this is not your grandfather’s sports industry. Agreeing to sports betting partnerships—the most significant way leagues are defending themselves against disruption—and the investment in big data, will only continue, and new innovations may change the fan experience, entirely. Disruption comes for everyone, and thus far, sports leagues have shielded themselves by becoming early adopters. Even so, it's important for franchises to constantly consider new revenue possibilities and how to improve efficiencies. While that may sound old school, it's not something that will ever likely change.

If you’re looking for an innovation consultant to get your company where it needs to go, Pivot Factory is an advisory services firm that focuses on the trends of disruption, and how companies can react through innovation. Contact Pivot Factory today.