Commodification and Commercialization

Sports are a prime example of an activity that has, at its higher levels, become a highly commercialized commodity. Commodification is the process by which a product or activity that once existed for utility or pleasure becomes something used to make money, to buy or sell, through promotion or utilization. Commercialization is the application of business practices where they were not formerly applied.

Sports have served as a form of public entertainment in many societies throughout history, but the commercialization of sports is more pervasive today than ever before.The prospect of making money has become both a motivation for sport organizers and a promise for athletes. The high monetary stakes associated with sports tend to drive interest and assist in building an audience. Today, money from television broadcast partners often dictates everything from team schedules to the scheduling of time-outs during a competition. Accomplished athletes have become millionaires through their sport earnings and endorsements. In essence, sport, as we know it today, has become corporate sport. It has been said that high-profile sport events could not exist without the support of corporate sponsorship.

Unquestionably, commodification and commercialization have changed sport in recent decades. Athletes can become a part of this phenomenon in two different ways. As professionals, paid to compete, they in essence become commodities. Their likenesses or images are sold to promote products. As amateur sports participants and spectators, they increase the market for sportrelated products and advertising.The commercial success of sports has relied on the ability to generate revenue. Common sources of revenue include gate receipts, sale of broadcast rights, sale of licensed merchandise, and corporate sponsorship support. Successful commercialization occurs most often in or near large cities with many potential spectators who will spend money attending events and buying related products. People in urban areas must have the time, discretionary income, and means to travel to competitions. Commercialization of sport is the product of both urbanization and increasing marketing sophistication.

Commercial Success Factors

Commercial sport requires strong spectator interest. Communities often dictate the success of sport products and events. Spectator interest has appeared to be highest in places where the people value achievement, where a widespread system of youth sports programs exist, and where there is general access to newspapers, radio, and television. Spectator interest has increased worldwide, a phenomenon that has included women as well as men in many industrialized countries. One trend worth noting is that as more women have entered occupations with a strong emphasis on advancement and upward mobility, they have become more interested in following sports and attending games. Often spectators see sport as a model of the way they would like the world to operate. As they watch a sport event, they can see that hard work and the pursuit of excellence still lead to success and prosperity.

In addition to strong spectator interest, five key components have been found to exist where sports have received the most large-scale commercial success.

1. Commercialization of sport succeeds most often in market economies where material rewards are highly valued. 
2. Societies with large, densely populated cities provide the needed concentration of potential spectators that translate to ticket buyers. 
3. Consumers with access to means such as transportation, discretionary time and income, and media outlets are those typically living in societies with higher standards of living and are a key component. 
4. Large amounts of capital must be available to invest in the building and maintaining of sports arenas and stadiums. 
5. Societies with high rates of consumption that emphasize material status symbols, such as clothing with specific team names and colors or brands that contribute to the person’s identity, commonly are found where highly commercialized sport is successful. 

This explains the success of multiple sports leagues and high-profile events in the United States. No other country has hosted separate winter and summer Olympic games within a six-year span of time. Few countries could finance the building of the needed facilities, provide the transportation and media, and guarantee the requisite spectator support.

Commodification of World Sport

Two primary factors have contributed to the globalization of commercialized sport:

• Those who control sports work with those who promote and sponsor sports to find new ways of expanding markets. The return on investment dictates that new means for maximizing revenue are driving the latest initiatives. 
• Many corporations today are transnational in reach. With production and distribution in multiple countries, means are needed to introduce new products or expand services around the world. Sport becomes the vehicle for achieving this goal because of its ability to go beyond language and cultural barriers that may be more difficult to overcome with traditional marketing approaches. 

Take the example of the Olympic games. The 1984 Los Angeles Olympic Organizing Committee (LAOOC) understood the potential that reaching a global audience would have to corporate sponsors. Instead of allowing 628 sponsors to attach themselves to the games, as was done in the 1976 Olympics, the 1984 games had only 32 sponsors that each paid between $4 million and $13 million in cash, goods, and services to be affiliated with this one-of-a-kind global sporting event. The result for the LAOOC was a net profit of $222 million, which had never been done before.The success of the 1984 games spurred corporate interest and increased both the cost as well as the potential for success. Companies such as Coca Cola, IBM, Visa, and Xerox have expanded into new markets, improved revenue, and maximized their transnational reach via the Olympic platform.

Sport organizations with a global interest logically would align sponsors with similar aspirations. Fédération Internationale de Football Association (FIFA), the organization responsible for both men’s and women’s World Cup soccer events, has benefited directly as a sports organization because of the commercial value associated with its global events and subsequent reach. FIFA events are held throughout world, as teams qualify for the World Cup. Cities throughout the world interested in hosting the World Cup of soccer compete for the privilege. Affiliated with hosting are numerous opportunities to gain investment from corporate interests, both locally and globally.Yet, sport properties that are more national have increasingly found ways to invest in expanding their reach; for example, the National Football League (NFL) has expanded beyond North American borders to manage teams and a league in Europe. The NFL Europe has had mixed results, yet, if the product of American football can be developed in European countries, the potential for corporate and media interests can similarly be developed.

Trends in Commercial Sport Development

The global sponsorship market has grown from $17.6 billion in 1997 to $37.8 billion during the summer Olympic year of 2004. By 2005, projections for the global sponsorship market amounted to $42 billion, in a non-Olympic, non-World Cup year. In addition, sport has been attributed to significant amounts of economic impact for cities that host major events. In the United States, the 2002 Indianapolis 500 topped the chart with a reported impact of $336 million.The next highest figure was the $305 million reported for the Super Bowl in New Orleans. Even amateur sporting events can provide economic impact to host cities.The 2001 ESPN Summer X Games reportedly provided between $45 million and $50 million for the city of Philadelphia. Action sports are new to the landscape of commercialized sport, yet ESPN has illustrated the power in commodification with yet another genre. Women’s sport also contributes to host cities.The 2002 National Collegiate Athletic Association (NCAA)Women’s Final Four basketball championship was reported to have generated between $26 million and $32 million for host city San Antonio.The single best economic impact from an amateur event remains the NCAA men’s Final Four basketball championship. In 2002, Atlanta benefited from a $75 million impact, and New Orleans reported a similar figure for 2003. Each of these examples illustrates the five components of commercialization, as well as the economic benefit sought by all parties involved. Sport is big business in the United States and around world.

Television Coverage of Sports

In 1980, NBC paid $87 million in television rights fees for the Olympic games in Moscow that were then boycotted by the United States. In 1984, however, the LAOOC was able to secure $225 million from ABC for domestic TV rights. The Los Angeles organizing committee was the last host-city organizing committee to retain the rights to sell all the sponsorship categories and negotiate the domestic television deal. The deal included a $75 million rebate in case the athlete pool was weakened by political boycott and if the telecasts failed to achieve agreed-upon ratings.The result was a primetime rating of 23.2 (about 17.4 million households in 1984), which surpassed expectations. This unprecedented success paved the way for future television rights deals that now are represented by staggering figures.

In 2004, the NFL led all sports leagues in television rights deals. With a total rights fee of $17.6 billion paid for the contract period of 1998 to 2005, the average annual value for the league was reported to be $2.2 billion. ABC, Fox, CBS, and ESPN all contribute to these astonishing figures.The NFL also delivers some of the highest ratings in sports, which translates to value for the rights-fee holders. NBC has secured television rights for world-class events such as the Olympics and Wimbledon. The four-year deal to secure Wimbledon through 2006 amounted to $52 million.Television networks will, however, only purchase such rights if they have strong indications that they can receive a significant return on their investment. Thus, commercialization of sport has created a new field broadly accepted as sport marketing.

Commercializing Athletes

The opportunity to earn money as an athlete has transcended the sport for many of today’s top celebrity athletes. The most marketable female athletes, such as Serena Williams, Annika Sorenstam, and Mia Hamm have potential to earn more from endorsements than from their sports performances. Michael Jordan, Tiger Woods, and Kobe Bryant were the top three men in 2002. Each of these athletes has earned a following that extends around the globe, which contributes to their high earnings for endorsements. Similarly, the female athletes represent sports that have a strong following beyond U.S. borders and commensurate appeal desired by companies when marketing on a global scale.

The ability that athletes have to cut through television clutter and deliver messages effectively for corporate partners has established them as some of the most effective commodities. For example, Lance Armstrong and his string of Tour de France wins have placed him at the center of a cable channel working to create an audience. The Outdoor Life Network (OLN) orients its programming around the three weeks during which the Tour de France is taking place.With six titles in a row, Armstrong has built a following that is valuable to OLN, as well as to the sponsors of riders, teams, and Armstrong. This world-class event extends company names to countries that may have little other exposure to such brands. This proven strategy was initiated in 1984 in Los Angeles and continues in ever-evolving, innovative platforms.

Armstrong and the Tour de France also provide perfect examples of the future of sport commercialization. New categories of interest will continuously arise as exemplified by OLN’s Tour de France success, while more companies will discover the power of brand building around athletes and sport properties. The past two decades have demonstrated that commodification of sport is limitless as long as creativity and innovation continue to evolve.

Nancy L. Lough

See also Brand Management; Marketing; Ownership; Sponsorship