2022 was a year that left many of us shell shocked and deeply concerned about our economic future as the world has been destabilized due to the pandemic, problems with supply chain, and the uncertainty wrought by the war in Ukraine. The stock market just closed with its worst year since 2008, down 19%. NEW YORK - OCTOBER 21: A trader takes a break from working on the floor of the New York Stock ... [+] Exchange (NYSE) October 21, 2008 in New York City. The Dow ended the day down over 200 points. (Photo by Spencer Platt/Getty Images)Getty Images It was also a year of rising interest rates, a decline in home sales and a cratering of the crypto market sending prices down more than 60%. And most recently, the collapse of FTX left many worrying about the future of crypto. The digital collectible market imploded with NFT trading volumes down 97% since last year and the once high flying NBA Top shots and its creator, Dapper Labs, saw Top Shots sales and its valuation plummet and forced it to lay off 22% of its work force and Candy Digital, a division of Fanatics, cut 1/3 of its work force.
However, despite the stock market meltdown and the crypto crash, 2022 was a banner year for the sports industry. Let's start with media rights.
It is apparent that Media companies will continue to slow the amount they spend on streaming content. This is a departure from the Netflix NFLX led spending spree on content over the last five years. Most content that is created by entertainment companies is a crap shoot whether it will find an audience. In sports, the risk is reduced since you are almost guaranteed to reach a loyal fan base year after year. That is one reason the spending slowdown will not apply to the Sports Industry. While media rights spent on sports properties were flat in from 2020-21, they increased from $19.8B to $21. 5B in 2022, nearly a 10% increase in the face of a cratering stock market. The price paid for sports media rights in 2022 soared even for sports with historically low ratings. F1 concluded its media rights negotiations raising its take from $5 Million to $90 Million per year. MLS concluded a 10 year deal totaling $8 Billion and the Big 10 Conference wrapped up its media rights package at a cool $8 Billion for 7 years.
BARCELONA, SPAIN - MAY 09: Lewis Hamilton of Great Britain driving the (44) Mercedes AMG Petronas F1 ... [+] Team Mercedes W12 leads Max Verstappen of the Netherlands driving the (33) Red Bull Racing RB16B Honda during the F1 Grand Prix of Spain at Circuit de Barcelona-Catalunya on May 09, 2021 in Barcelona, Spain. (Photo by Bryn Lennon/Getty Images)Getty Images Although women's sports have traditionally experienced depressed media rights, they have been the beneficiary of this upward trend as well with NWSL and WNBA setting attendance and media viewership records and women's broadcast rights growing from 36.9 million in 2021 to $47.7 million in 2022. It is anticipated that the Women's NCAA basketball rights, that ESPN currently pays $34 million per year, will likely fetch well over $100 million year when it expires in 2024.
Also, the franchise value of sports teams exploded and reached record highs in 2022. While European soccer teams as a whole (often pursued by USA billionaires) enjoyed the largest percentage increase in franchise value, USA sports franchises dramatically increased in value with the Tampa Lightning growing by 54%, the Las Vegas Raiders increasing by 49% and the Cleveland Browns up by 48%. But all of this was overshadowed by Robert Sarver's recent record breaking sale of the Phoenix Suns to Mat Ishbia for a whopping $4 Billion.
The reason for the spending frenzy around sports has been fueled by a number of key favorable developments in the sports business. On the media side, new bidders have emerged from the technology world, including giants like Amazon AMZN , Google and Apple AAPL , all with market caps and investment capital far greater than the traditional media companies.SANDY, UT- SEPTEMBER 22: Tomas Gomez #81 of Real Salt Lake makes a diving save on a shot by the ... [+] Atlas FC during their Leagues Cup 2022 Showcase game September 22, 2022 at America First Field in Sandy, Utah. (Photo by Chris Gardner/Getty Images)Getty Images
Also increasing value is the growth of international popularity of sport. European sports like F1 and soccer are becoming more popular in the USA and popular sports in the USA like NFL, and particularly the NBA, have enjoyed meteoric growth globally. It stands to reason that the larger the audience the greater the revenue.
Adam Silver announced this year that the NBA had surpassed $10 Billion in revenue up from around $8 Billion during the 2020/21 pandemic. The NBA and even other sports leagues have identified numerous new growth engines to connect and monetize fans on experiential as well as interactive levels including AR/VR and gaming. They are tapping into new ways of extracting more value from sponsors with new forms of interactive content, social media, and gaming. Sports also looks to DTC and gambling as a huge source of future revenue all of which excite leagues, potential franchise owners, media and tech companies about future possibilities.
Finally, in hard times sports thrives because it is that sweet escape from reality that takes people's minds off the trials and tribulations of the daily grind. It's the same reason that the alcoholic beverage industry has historically been recession proof. The beauty of it all is that sports is the ultimate shared experience whether live, with friends at home, or at a viewing party where you can cheer your team to victory with 10,000 of your closest friends. Sports was the bright spot of 2022 and is positioned to shine even more brightly in the future.