Globalisation and the disruption of sport business

This article is an excerpt from ‘International Sport Business: Current Issues, Future Directions’,

by Hans Westerbeek and Adam Karg.

It is fair to argue that ‘disruptive technologies’ have become a game-changing driver of change in the world as we know it today. According to the National Intelligence Council (NIC, 2004, p. 11) ‘the greatest benefits of globalisation will accrue to countries and groups that can access and adopt new technologies’. Therefore, not only will countries that invest in research to develop new technology contend for leadership, but also those countries that adopt policies to apply globally available technologies and combine this approach with attracting high-tech brain power developed at top institutions in countries such as the US and the United Kingdom. Unsurprisingly, countries such as China and India positioned themselves well and have become technology leaders. Gerstein (2009) asserts that ‘the expected next revolution in high technology involving the convergence of nano-, bio-, information and materials technology’ (p. 1968) could further bolster China and India’s prospects. We now know that artificial intelligence and communications technologies driven by machine learning increasingly influence and drive news reporting—both fake and real—and also sport business opportunities. Adopting over-the-top streaming solutions, for example, is a growing trend in sport consumption, allowing sport organisations to learn more and communicate deeper and more direct with(in) their existing and emerging marketplaces. Such communication and marketing technologies are fundamental and critical for the (future of) sport business.

So, in that technology-driven perspective and in light of the NIC (2017) predictions, are we facing the end of globalisation as we know it? Since the publication of Sport Business in the Global Marketplace Westerbeek and Smith, 2003) in which the many triumphs of globalisation were heralded, the world in which we live has changed dramatically. Maybe the terrorist attack on the Twin Towers on 11 September 2001 started an international ‘change of heart’ about the benefits of global economic and cultural exchanges and universalism. Maybe the shockwaves of the 2008 Global Financial Crisis exacerbated this sense of cynicism about global connectedness and about global markets driving value creation for more people more rapidly. Most recently, the world has been confronted with what probably is any human’s biggest fear—to die of disease. COVID-19 put the world and its progress on hold and has framed the future of globalisation—how we want to, or can, collaborate and integrate—as no other disruptive force has done before. Fear indeed is the worst advisor, and fear for life and livelihood may well be the Twin Towers of globalisation.

In the past decade—apart from 2020 and 2021, in which most of us have been forced to ‘self-isolate’ or ‘socially distance’ ourselves from others—fear for life has driven mass migration. Migration, in turn, has incited nationalism and political populism, both of which undermine the trust that citizens have in their political leaders, fracture identities and open the door to non-state actors and interest groups generating traction for their splinter ideologies outside the traditional governance structures. Fear for livelihood resulting from immigrants consuming jobs and social resources further destabilises national structures. This situation, in turn, opens the door to politicians and corporate leaders to advocate protectionism, to close borders or even build walls, in order to protect wealth in their developed economies. These economies are facing tough times because they are ageing, their workforces are declining and their disproportional spending on health services will, to a certain extent, debilitate their ability to invest and innovate.

In sport and sport business, this scenario seems to produce a double-edged sword. That is, protectionism and nationalism may offer growth opportunities for indigenous sports, such as Australian Rules Football or American Football. These sports speak to ‘the heart of the nation’, and the latter offers a platform for politicians to ‘make [fill in your country] great again’. Conversely, can sport continue to serve as a means to congregate, integrate and bring (new) communities of people together? In particular, sports that already have a global footprint will continue to seek opportunities to engage with new citizens, be it political, economic or opportunity immigrants. The ‘old’ economies offer further opportunities for sport in regard to health-enhancing physical activity. In the ageing societies, it will be important to be fit in order to work longer, to decrease the national health bill and to continue to live happy and relatively healthy lives at an advanced age. An example of recognising this opportunity was the 2018 release of ‘Sport 2030’, the strategic plan of the Australian Sports Commission, then renamed Sport Australia (SA). In their expanded remit, SA included ‘More people from cradle to grave engaged in sport and physical activity’ as one of four key strategic objectives. The addition of ‘physical activity’ is critical in that it acknowledges the health effects of physical activity and that physical activity is foundational to playing sport. During the COVID-19 lockdown times, engaging in exercise and physical activity was one of only four reasons for which the Australian Government allowed its citizens to leave their house.

The rapid economic growth of developing economies has delivered absurd wealth to relatively few, but also built a massive educated and well-informed middle class. These new members of the middle class will protect their new-found wealth and want to continue on the upwardly mobile track. This aspect will challenge the leaders of nations such as China and India, which have traditionally not had to deal with a vocal, well-informed and opinionated populace.

Here, the opportunities for sport are almost limitless because the consumption of sport—both in regard to participation and spectator products—remains a preferred spend beyond the basic needs of food, water and shelter (spending on sport outpaces spending on consumer goods). In other words, even in times of economic hardship people continue to spend on sport. In the developing and accelerating economies of India and China, the size of the middle class is such that merely increasing domestic consumption will have a massive impact on economic growth, and thus, local and international sport businesses are presented with fertile ground for business success. That these emerging sport economies have largely skipped the phase of developing (physical) community sport structures may turn out to lead to a competitive advantage and growth through digital means. Building digital sport communities and mining information about their (preferred) participation, spectating and engagement behaviours may well lead to a much more efficient production and construction of sport-related infrastructure and product portfolios. However, a trend that can already be observed is that the ownership of sport will increasingly be in the hands of fewer corporations or individual owners, who build sport assets into their conglomerated structures. A lurking danger is that access to sport will increasingly be based on the ‘ability to afford’—both in regard to accessing elite competitions and participating in commercially driven competitive amateur sport.

Growing populations in the developing world, including in parts of Asia, Africa and South America, with a young but poorly educated workforce will lead to instability when opportunities for these young people fail to materialise and the few mega rich collect most of the wealth. Increasingly, intelligent technology will play a big part in this instability, given that automation will take the jobs that traditionally have been the drivers of economic growth—low-skill manufacturing. More often than not, governments in these regions are unstable and institutions fragile, leading to intrastate political violence and possible regional conflict.

Population growth always means that there is a growing market. Any entrepreneur would seek existing markets that are likely to grow (rapidly). The brisk growth of the youth segment in developing economies therefore presents an opportunity for sports that are already popular among younger people in general, and in those nations’ markets in particular. Global sports, such as football and basketball, continue to have a first-mover advantage in that they require little to no explanation about how they are to be played (and watched). Beyond the size of market though, is the precarious socio-economic position in which most of these young people will find themselves. With limited job opportunities and no prospects of access to high-quality education, they are vulnerable to extremism influences. Physically violent sports, such as cage fighting or boxing, will be popular as a means to protect and potentially prepare for violent conflict. The Sport for Peace, and the Sport for Development movements may well find fertile ground for their advancement among these challenged populations.

Increasingly, State ideologies are suffering—in the West, democracy is eroding—and fragmented (religiously inspired) ideologies are thriving. Populists and their foot soldiers, who capitalise on people’s insecurities and fears about an uncertain future, are using advanced communications technologies that allow powerful messaging and almost unlimited reach. Societies are becoming more complex and more difficult to ‘control’ through traditional governance and institutional power and principles, and therefore, social stability is sliding. According to the NIC (2017), although:

liberalism is likely to remain the benchmark model for economies and politics over the coming decades, … it will face stronger competition and demands from publics to address its shortfalls. ... Many developing countries will strive for modernization more or less along Western lines, but the allure of liberalism has taken some strong hits over the years as political polarization, financial volatility, and economic inequality in western countries have stoked populism and caused doubts about the price of political and economic openness… Publics fearful of loss of jobs to immigrants or economic hardship, are likely to be increasingly receptive to more exclusive ideologies and identities. (p. 194)

For sport, this will most likely mean that on the back of anti-immigrant sentiments and xenophobic politics, the national or indigenous sports will continue to maintain a stronghold in their home societies. Ongoing—and in some societies, increasing—racism and xenophobia among spectator crowds are unfortunate but are likely to be challenges that the governing bodies of sport will continue to face. Sport will also continue to be a strong platform of communication regarding political and social issues. The Black Lives Matter movement and gender equality are two of many more issues that have been spotlighted by high-profile teams or athletes on the back of their popularity. Ironically, the only truly borderless sports will be those that broadly are defined as Esports…

As for global economic growth, developed economies are slowing down and the developing economies (in particular, those in South-East Asia) continue to accelerate. The often-avoided elephant in the room (because the issue is too big to handle and control) is the degradation of our natural environment—and it affects us all. The Earth’s surface temperature continues to rise, biodiversity is decreasing and a growing global population continues to put more stress on scarce natural resources, such as water, food and energy. Climate change will cause significant ecological and environmental stresses, including the spread of infectious disease—unfortunately, COVID-19 may only be the start.

As for the natural environment, there will be clear winners and losers in the sport industry. Obviously, those sports that depend highly on (semi)natural sportscapes, such as winter sports and golf, will have to deal with snow-capped mountains disappearing and natural rainfall becoming more erratic and unpredictable. Higher temperatures will pose health and safety challenges to outdoor sports, and for many sports, the cost of playing will increase because of the inability of sport organisations to insure themselves for the risks of participation and also spectatorship. For example, how community and professional sport organisations are going to refinance their businesses following the impact of the COVID-19 pandemic remains a transformational challenge that will take years to achieve. Greening the sports industry has been building momentum since 2013. In Australia, the Sports Environment Alliance was formed to provide a voice for sport in managing and caring for the natural environment. Their mission ‘of leading, educating, and inspiring our sport community members to learn, share and act for a more sustainable and regenerative Australasia’ (Sports Environment Alliance, 2020) is central to the agenda for making change.

It is clear that sport is a global industry, and that sport continues to increase its global reach. However, some of the disruptive challenges that the sport industry faces may well lead to a more fractured and divided industry. In ‘International Sport Business’ we further explore what the future might hold.