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Introducing “Leveraging Intellectual Property in the Global Sports Economy”
Read the full report here.
A strong global IP system is what any sports fan would call clutch. Strong IP protections have the power to transform a person kicking a ball on a dirt field into a professional athlete kicking a ball under the lights of a multi-million dollar stadium filled with thousands of fans in identical jerseys waving to millions of viewers watching on screens around the world. In short, strong IP protections transform sports into a commercially productive asset.
The global market for sporting events alone in 2014 was valued at $80 billion, with a forecast 7% growth rate. The addition of sporting goods, apparel, equipment, and health and fitness spending brings that value to $700 billion. Building on these numbers and more, our new study, “Leveraging Intellectual Property in the Global Sports Economy,” quantifies sports as an asset worth 1% of global GDP.
The growth in the sports economy shares a strong correlation with the growth in the global IP system. IP rights give innovators the legal confidence to take risks and deliver innovative sports products and services. As more and more sports goods, sportswear, and sports services require lengthy, costly research and development, the importance of IP rights cannot be understated. But, as our study suggests, the benefits of instilling such IP rights are significant.
Our new study focuses on the role of patents, trademarks, copyrights, and trade secrets in the sports sector.
Patents encourage the discovery and dissemination of new and original technologies that help athletes perform better and more safely. There are hundreds of thousands of utility patents related to sports and referring to terms like “athletic” or “athletes,” with golf holding the largest share at 112,256 golf-related patents on file. Searching beyond traditional sport associations, Fitbit, the company behind popular fitness trackers, holds more than 90 patents; Zumba, the dance fitness movement, holds more than 50.
Trademarks create brand recognition and allegiance and fight against consumer confusion in the marketplace. For example, consumers see the logo on the side of a pair of sneakers and can immediately assess the sneakers’ quality based on their experiences with and emotions attached to the brand. In the same vein, consumers interact with team marks, league marks, event marks, and more.
While it’s difficult to quantify the value of intangible assets like goodwill and brand perception, there are some calculations for a team’s brand value: “the portion of a sport’s team’s value attributable to local revenue streams that exceeds what a typical team in the same sport generates.” Our studies show that brand value in the United States can reach as high as $869 million, the brand value share held by the ever-popular Dallas Cowboys.
Unfortunately, criminals try to cash in on brand value by counterfeiting trademarks. Counterfeiting in the sports sector damages brand integrity and consumer confidence, and jeopardizes economic growth and job creation. Our study estimates that the direct economic impact of counterfeiting on the global sports industry is nearly $50 billion a year.
As our study explains, “the promotion and marketing of sporting events, the artistic designs of the logos of sports teams and competitions, the literature contained in game-day programs sold to fans and supporters, the merchandise, and the software of computer and online games are all copyrightable subject matter.”
In most countries, copyright is also attached to broadcasts of sporting events; broadcast and media rights are often a main source of revenue for sports organizations. For instance, the revenues from broadcasting rights attached to the Olympic Games in Rio 2016 totaled nearly 30 billion. Our study shows that copyright infringement, specifically new and emerging piracy trends, is robbing economies of this valuable source of income.
Our estimates suggest that visits to sports piracy sites increased by 20%, from 100 million visits in September 2015 to 120 million visits in September 2016. An estimated 6.5% of North American households subscribed to TV piracy services, resulting in the loss of an estimated $4.2 billion each year in subscription revenues; in the UK, more than 25% of households subscribe to piracy services. In emerging markets such as Vietnam, paid subscriptions to pirated content outnumber subscribers to legal content.
Additionally, in China, despite growing consumer interest and match attendance in the Chinese Football Association Super League, league revenue from paid subscriptions amounts to less than 10% of overall revenue, compared with 50% in markets with mature copyright protection.
Piracy rates continue to rise with the emergence of “plug-and-play” set-top boxes, which require little to no technical expertise and very few resources from sellers and users. These set-top boxes provide unauthorized access to sports broadcast streams sometimes for free, but more often for subscription rates not significantly different from legal alternatives.
Perhaps the scariest thing about pirated set-top boxes is that they mimic legitimate cable interfaces so well that many users are unaware of their copyright-infringing actions. Considering nearly 66% of advertisements on set-top box services promote malware, scams, and online gambling, consumers’ security is at risk. The set-top box trend is just one example: consumers are also falling victim to information theft associated with other types of illicit piracy devices and apps.
Trade secrets function to protect the undisclosed knowledge that help the sports economy remain competitive. Proprietary information like statistical analysis, scouting reports, dietary regimens physiological metrics, and psychological assessment techniques give athletes the “secret sauce” behind success. Sports gear often features secret new compounds and manufacturing processes that boost performance and recovery. Focus group data guides decision-making at multiple levels.
Trade secrets protection is nimble and necessary, but it’s lacking in many jurisdictions. Our study points out that many key U.S. trading partners, including Russia, Indonesia, China, and India, score in the bottom five of the Organisation for Economic Co-operation and Development’s Trade Secrets Protection Index. Additionally, many countries entertain large discrepancies between legal definitions of trade secrets and the provision of legal remedies versus concrete application and enforcement.
Our study makes it clear: the modern sports economy requires a full menu of IP rights and incentives. Absent this enabling environment, sports may still exist, but will be confined to small-scale, primarily non-commercial activities – the proverbial game in the park versus the game in the stadium.
In the words of the UN Secretary General, “Sport has become a world language, a common denominator that breaks down all the walls, all the barriers. It is a worldwide industry whose practices can have a widespread impact. Most of all it is a powerful tool for progress and development.”
The best way to spur sports-driven progress and development is to invest in the global IP system. With strong IP protections, sports can continue to deliver wins across the board.