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Intellectual property (IP) rights stimulate creativity in virtually all aspects of human behavior; they provide the platform to translate good ideas into profitable endeavors. This report analyzes how IP rights enable one seemingly unrelated economy: the world of sports.
By its nature, sports involves multiple layers of economic activity. Properly framed, kicking the ball on a rural dirt field can become instead a stadium filled with tens of thousands of spectators plus millions more glued to their televisions, laptops, or smartphones. Cutting-edge sports gear, alluring sportswear designs, and the excitement surrounding competition make sports a highly enjoyable and popular activity. But each sport and the related sports industries need the protection of some form of IP rights, and an environment that enforces those rights. In an enabling environment of robust IP rights, a chain reaction occurs benefiting multiple sectors of the economy—to the tune of 1% of global GDP.
To build a modern, successful sports economy, countries must provide a broad menu of IP rights.
Innovation is present in every sport. Yet sports cannot become a commercially productive asset without IP rights and incentives. Patent-protected inventions drive improvement in sporting equipment, including sportswear and footwear. Broadcasting rights are the foundation for investment in transmitting tournaments to fans and sports enthusiasts. Trademarks protect the goodwill of events, leagues, teams, and manufacturers of sporting goods. Licensing and merchandising agreements generate the revenues needed to take sports to higher levels of productivity. The sports economy is an instructive case study of how an IP asset becomes a platform for economic activity and related industries.
Traditionally, sports has been associated with two main IP rights: copyright and trademarks. But this report finds that this traditional view is a limited view of how sports industries use IP rights. Copyright and trademarks are still foundational to various subsectors (e.g., broadcasting, apparel, brand value) but the use of other types of IP rights to protect content/creation is significant. For example, the rise of enhanced technologies yields more research-driven innovative sporting products. In turn, these products require strong patent protection. There are literally tens of thousands of utility patents relating to sports. A search of the Google Patents Public Datasets (a patent database aggregated from 17 patent offices around the world) reveals hundreds of thousands of utility patents related to sports and making reference to such terms as “athletic” or “athletes.” Many sporting goods companies are also technology companies with broad patent portfolios. Similarly, the growth of the internet and globalization of sports—with international viewership of domestic leagues growing exponentially—necessitate clear and strong broadcasting rights. Revenues from broadcasting and media rights are becoming the main source of revenue for sports organizations (including leagues and individual teams) to build stadiums, host tournaments and championships, and carry out community outreach to maintain and grow public interest in their sport.
Counterfeit sporting goods and sportswear have a substantial and detrimental impact on economies— depriving leagues and athletes of economic gains, damaging brand integrity and consumer confidence, and resulting in loss of legitimate jobs. Given the rise in online shopping, with rates of e-commerce increasing by double digits annually, levels of counterfeiting are growing exponentially. This study estimates that the direct economic impact of counterfeiting on the global sporting goods and sportswear markets is almost $50 billion each year. When accounting for the indirect effect on related services, the overall impact of counterfeiting is an estimated $84 billion each year.
Unauthorized streaming services and websites for pirated sports broadcasting are operating by the thousands. Ubiquitous and cheap “plug-and-play” set-top boxes are providing free access to sports broadcasts at the click of a mouse. The fast proliferation of broadcast piracy is a major concern, as it is stunting growth of subscription fees and advertising, estimated at dozens of billions of dollars each year. For example, in China online piracy is stifling of its domestic soccer league (Chinese Football Association Super League). Specifically, despite growing consumer interest and match attendance, league revenue from paid subscription amounts to less than 10% of overall revenue; this compared with 50% in mature markets. While in mature markets governments and key stakeholders like Amazon, eBay, and Facebook are taking steps to combat the threat posed by piracy, emerging economies are still struggling to define the scope of their copyright laws and are unable to take swift action to shut down sources of pirated content.