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Understanding Sport’s Value Chain In The Middle East

November 16, 2023

In this View From Middle East piece Petra Santini, Partner at Portas Consulting, outlines the importance of understanding sport’s value chain, particularly in the region.

The Middle East’s sport sector is booming. It is currently valued between c.$10-15bn with some estimates of up to $25-30bn by 2030 being cited. Governments are pushing the development of sports, to benefit the country socially and economically, while private investors are increasingly attracted to the sector for financial returns.

How do you ensure that this accelerated investment is holistic and leads to a fully functioning sports sector vs. a series of individual stand-alone initiatives and investments?

There is no set definition of a functioning sport sector however we use this term when a sports ecosystem enables positive outcomes for a country whilst requiring targeted government intervention across value chain. Therefore, whether a policy maker or an investor, an understanding of the sport sector value chain is imperative. This article outlines what the sports value chain is, why it matters, and its importance to sector development in the Middle East.

Sport value chain

The term value chain typically describes a process of activities where value is delivered at each step. While the steps differ slightly across the different sub-sectors of sport, it can broadly be defined across five activities, segmented into three groups:

In a recent study across the sports ecosystem, we identified 16 sport sub-sectors, further broken down into over 80 potential investment areas cutting across the above outlined value chain. These sub-sectors include direct sport activities (e.g. sports facilities and professional sports leagues) and wider supporting activities (e.g. sports medicine and sports media).

Let’s take the sub-sector of sports media as an example:

  • Design
  • Investors will own the media rights for a league, club or event 
  • Develop
  • Production companies will film and develop content for commercial use
  • Deliver
  • Broadcasters will distribute content across networks 
  • News platforms will report on the content either through traditional (e.g., print) or modern platforms (e.g., apps)

There are 7 potential investment areas within sports media alone, all requiring differing businesses and offering varied impact and returns. 

Public sector trends

In countries with a long history in sports, the private sector will often operate across the majority of the sports value chain. Entities have developed sectoral expertise as the sport ecosystem has matured over 100+ years. However, even in such markets, there is a significant role for the public sector to play in enhancing sector development. In the UK for example, local government has sometimes taken over the management of public facilities where the returns have been insufficient for private sector involvement. By so doing, they are ensuring that sports consumption is not limited by income bracket, thereby enabling the sector to function and ecosystem goals, such as physical activity rates, to be achieved. 

The Middle East landscape differs. Public sector entities operate across many parts of the value chain due to the relative immaturity but high ambitions of the sport sector. Governments have observed the value of sport and must fill gaps where the private sector cannot. Major events in Saudi Arabia, Qatar and UAE are examples where the public sector will support across the value chain to bring and deliver leading events to the region. Development of a sports calendar is largely led by the respective entertainment and sport ministries while the event operations are likely supported by similar government entities. Although the private sector is increasingly operating in select areas of the sport event value chain, government support is required due the high cost of attracting events to the region, which in turn, can disincentivise private sector participation. Where any aspect of the value chain is broken in this region it is the current role of the public sector to see that it is fixed in some way.  This is different to other regions.

Policy implications

An understanding of the value chain and where intervention is needed is therefore imperative for a functioning sports ecosystem and enabling a country to benefit economically and socially from sport. For Middle East governments to move towards a fully functioning ecosystem, policy makers must recognise the nuances of the sports value chain and identify potential gaps. They can then set out to attract the private sector to participate in these under resourced areas, for example through grants or tax breaks, reducing long term funding reliance on the public sector. This private sector participation can be through stimulating local investors or through attracting foreign direct investment.

From an investor perspective, ecosystem gaps present opportunities for positive returns given the growth of the sector and possible first mover advantage. Furthermore, many of these new areas of investment can withstand volatile economic conditions and exhibit stable cashflows due to the resilience of sport.

So in summary, especially now for the Middle East, placing greater emphasis on the sports value chain rather than through just a ‘sport’ or ‘thematic’ lens is a more effective way to move towards a functioning whole sports ecosystem.

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