By the end of 2021, most professional sports leagues and college athletics returned to a relative sense of normalcy with full seasons and live fans, at which time organizations needed to find fresh new revenue streams and ways to deeply connect with fans.

This year, new emerging areas are poised to diversify sports. According to Deloitte, the sports industry continues to see an influx of money from new sources, increased adoption of emerging technologies, shifting power dynamics in college sports and a greater focus on broader societal issues.

With the abundance of options, fragmentation and overload could become more significant near-term challenges but the fundamentals of sports will remain the same, with fan experiences at the center.  

Deloitte’s 2022 sports industry outlook explores how these trends could create new opportunities and challenges for everyone involved: sports organizations, leagues, owners, teams, players and fans.

Among the report’s key takeaways include:

  • The blending of the real and digital worlds accelerate, with growing markets for data capture and analytics, esports, non-fungible tokens (NFTs) and immersive technologies.
  • Blockchain-enabled innovations have a chance to open entirely new markets and options for fans beyond simple collectibles.
  • College athletics will see some of its biggest changes ever as student-athletes exercise more self-determination.
  • Sports betting has entered the mainstream and companies will continue their relentless pursuit of new customers.

The Accelerated Merging Of The Physical And Virtual

As augmented reality (AR) and virtual reality (VR) technologies further develop, sports gaming and betting platforms are trying to imbue the energy, immediacy and excitement of in-person experiences into the digital realm. Deloitte sees this blending accelerate next year as new AR applications for training, simulation and broadcasting increase as well as the deployment of 5G and its low-latency benefits grow.

For example, Deloitte and the USGA collaborated on an AR app to enhance the fan experience, with near-real-time shot tracking and 3D course models. AT&T and the WNBA launched the Game View app to visualize game statistics in AR. And the NHL, together with Verizon and Immersiv.io, is bringing together player- and puck-tracking, along with new ways to consume real-time statistics for a more interactive in-game experience.

Another major trend accelerating the creation of the “phygital” world is the rapid growth of sports-related NFTs. Deloitte Global predicts there will be more than $2 billion in sports-related NFT transactions in 2022. In addition, all the major leagues now have NFT partners—for example, the NBA and WNBA with Dapper Labs and their Top Shot platform. The NFL recently announced a partnership with Dapper Labs (NFL All Day) and the MLB is working with Candy Digital. Deloitte has also seen a rise in the popularity of fantasy sports games—like Sorare—that blend fantasy sports, NFTs and real-world soccer into a new way for fans to engage.

Strategic questions to consider:

  • What’s the long-term sustainability of the sports NFT market? What can be done to drive more demand and engage as many fans as possible?
  • Will AR move beyond simply fun and interesting fan experiences to something more pervasive and essential?
  • How will these technologies shape other notable emerging business areas, such as ticketing and sports betting?
  • What new sports experiences blending the physical and virtual, sport and esport, will emerge?

Moving Beyond NFTs

With the rising use of cryptocurrency and associated exchange platforms, Deloitte predicts a nexus will form around sports collectibles, ticketing, betting and gaming. But it’s important to note that crypto has been playing at the margins of the sports industry for a few years now. Not only have some players been paid in crypto but a few teams in the MLB, NBA and NHL are accepting it for season tickets and other merchandise.

In an effort to drum up greater brand awareness, legitimacy and customer acquisition, crypto players have been betting big on sports sponsorships. The crypto exchange FTX inked a five-year deal with MLB and bought the naming rights to the arena for the NBA’s Miami Heat. Coinbase partnered with the NBA and WNBA in the hopes of educating fans, and the Staples Center was recently renamed Crypto.com Arena.

In the next few years, Deloitte expects to see more experimentation in linking individual and season tickets to blockchains, at first with the bundling of tickets with NFTs to reward fans. In the future, with proper smart contract capabilities, fractional ownership of season tickets and suites and a reinvention of the ticket resale process could be viable. 

This activity could increase the use of dynamic ticket pricing and portions of ticket resales going back to teams or leagues, creating a new revenue source. Before this practice becomes widespread, Deloitte says standards should be established, robust consumer protections should be enacted, fans must be educated and compliance and tax implications should be considered.

Strategic questions to consider:

  • What ultimate role will crypto play in sports betting?
  • Will potential US regulation of the crypto market have a significant impact on its growing connections with sports?
  • Will we eventually see universal wallets that will work across sports so that fans can have a simple and easy user experience?

Shifting Powers In College Athletics

Several events of 2021 foreshadowed the dramatic power shifts set to unfold in college athletics over the next decade. As Deloitte notes, the NCAA expanded the one-time transfer exception to all Division I sports, which means student-athletes in more popular sports don’t have to sit out for a season if they transfer schools.

Next, some states passed legislation allowing college athletes to profit from their name, image and likeness (NIL), which prompted the NCAA to release interim policies so all student-athletes can take advantage of the opportunities that result. 

Finally, several schools announced they’d be changing athletic conferences over the next few years.

With student-athletes free to pursue financial opportunities across social and traditional media, ecosystems of agents, consultants and digital services are quickly being built to capitalize on the opportunity. Some athletes are seeing more than $1 million in opportunities for their NIL efforts. As the power between student-athletes and coaches shifts, Deloitte expects positive and negative consequences: potential recruiting advantages, changes in gender disparity, newfound attention to niche sports and more empowered student-athletes.

Strategic questions to consider:

  • Will federal action take place regarding NIL? Will these changes exacerbate or improve gender disparity issues in college athletics?
  • How will the proposed changes to the NCAA constitution, which gives more power to the divisions, impact these issues?
  • What will be the implications of these issues to smaller schools and the vitality of their sports programs?

A Tipping Point In The Sports Betting Market

Sports betting—which brought in about $1.5 billion in revenue in 2020—is legal and active in 29 states as of November 2021. As the activity continues to grow—it’s anticipated to reach $6 billion by 2023)—three major players are leading the way: DraftKings, BetMGM and FanDuel.

In a frenzy for customer acquisition, they’re shelling out big bucks on advertising and sponsorships to build brand awareness and expand their traditional base. But in doing so, Deloitte says they run the risk of overwhelming the nascent marketing or alienating fans. That’s why the NFL has limits on the number of TV spots they sell to sports betting companies and similarly, the NBA isn’t allowing sportsbooks to advertise on jerseys.

Deloitte sees this tipping point as an accelerant for market consolidation. In developing their infrastructure and portfolios, companies are seeking to acquire strategic technologies to bring in-house and expand their user base. 

They’re also looking to integrate fantasy sports, sports betting and iGaming. Case in point: Caesars Entertainment’s acquisition of William Hill for $4 billion, Bally’s merger with Gamesys Group for $2.7 billion and the failed merger of DraftKings and Entain for $20 billion.

Strategic questions to consider:

  • Will the sports betting spending boom on advertising convert to new customers and will it lead to sustainable growth?
  • How much regulatory and fan pushback will we see, especially with regard to underage gambling?
  • What innovations will we see as sports betting blends into the overall fan experience, including in-venue, broadcasting and streaming?
  • As the market consolidates, what common attributes will the most successful betting operators have?