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1. INTRODUCTION

1.1 SPORTS INDUSTRY

Today, sports industry is the largest industry worldwide, in terms of generating

employment and revenue. The global sport sector is estimated to be of USD 480-620
billion. It is seen across the globe that sports is a full-fledged industry which can and may
contribute upto 1-5 percent of a country’s GDP. Sport industry has following components

 Sports tourism
 Sports goods – Manufacturing and retail
 Sports garments
 Sports management
 Sport medicine
 Sports sponsorship

Unlike the old times, when sports was seen as a loss-making affair. Today, Sports industry
has become a multi-billion dollar global industry propelled by enormous consumer
demand. According to a research conducted in Germany, German football league
(Bundesliga) alone, has the highest employment intensity of all other service industries,
which is fairly higher than the national average employment intensity in Germany.

According to another research based in USA, consumers of all ages, based on the
expenditure were found to be opting for experiences, such as amusement parks, hotels and

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meals, movie theaters, foreign travel, food services, live entertainment, with ‘spectator
sports’ sitting on top.

Further, recent trends indicate that sports tourism alone is expected to grow 10-20%
worldwide. Hence, the sports industry can be considered one of the fastest growing
industry and it gives rise to in depth exploration and research related to it.

1.2 PRIVATIZATION

Broadly, process of privatization involves reducing the role of government and transferring
it to the private section as well as following the logic of market in all economic decisions.
Privatization may include a range of scenarios which sometimes prohibit even the limited
role of the government and sometimes create partnerships between the government and the
private section while the government is still playing the lead role. The main idea is that the
competition and the ruling system in the market forces and in the private corporations
happen to have better performance as compared to the public sector. Under these
circumstances, transfer of ownership and management of the company from the public
sector to private sector through privatization process usually lead to enhancement of
performance and productivity of economic corporations. The modern, classical viewpoint
recommends reducing government possessions in order to enhance efficiency. At present,

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selling government owned corporations to the private section and competitive markets are
regarded as the essence of the world’s general policies. Supporting privatization, the
World Bank emphasizes that privatization leads to efficiency if understood and
implemented correctly and encourages investment as well as enhancing financial
conditions of the companies and improving quality of process thus leading to development
and creation of new job opportunities in infrastructures and social plans.

1.3 WORLD, SPORTS AND US

Today, privatization of every industry is receiving attention, sports industry should not be
an exception. Privatization of sports in western countries is quite eminent and has been
investigated deeply. The economic importance of sports and healthy recreation is one of
the most important reasons to this. Having about 50 per cent growth in last decade, the
global sports sector is estimated to be worth between $480-620 billion. However, in our
country, sport is yet to be recognized as an economic sector, due to the fact there has been
little or no comprehensive study done on the industry’s size, potential, and on the available
opportunities that are on offer. There is a direct correlation between the share of sports in
national economy and the amount of investment made in sports section and the proportion
of sports economy to gross national product is 2% in Italy, 1.7% in Britain, and 1.4% in
Germany while it is 0.04% in India. Which shows, Indian sports industry need more
investment in order to grow and a proper system which makes sure the investment is being
activated.

1.4 WHAT’S IN SPORTS FOR PRIVATE COMPANIES? PURE MARKETING

Before digital revolution took place, marketers used to describe to customers about a
product and then if they succeeded, the product would be sold. Whereas today, products
and brands can emerge globally overnight, sometimes even before the customers lay their
hands upon the product. Today with eminent digital marketing practices, what a marketer
wants is to inspire his/her customer to tell the story which builds empathy and kind of an
emotional connect that turns customers into fans. And they need to realize it as a chance to
invest in an industry whose customers already identify themselves as fans i.e. SPORTS.
Sports around the world are a matter of passion and they touch lives in a way which is not
achievable by other activities.

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2.1 LITERATURE REVIEW

India has lowest Olympic medals per capita, previous studies have assessed current
position of India in world as an economy against its overall performances in sports.[21] Its
possible reason could be not enough attention from the government and privatization only
impacting the upper level and middle level, impact of privatization is still very less at
roots.[5] Further the growth of the sports industry can be estimated by how people in USA
are spending the most on experience with spectator sport sitting on top.[3] Hence there is a
strong possibility investment in sports can be the next big thing for India’s economy.[8].

Now from investor’s point of view the question ‘Is sports sponsorship worth it’,
can be answered by looking at positive outcomes of a study which assessed the value
generated from sponsoring the FIFA World Cup 2014.[13] Investing in sports brands can
directly benefit from in-stadium, TV, print and online visibility, coverage around the world
and huge TV audience.[15] Whereas other indirect factors as identified in various studies
are the positively influencing performance indicators based on brand recall and memory
decay.[20] As there is an interaction between event-sponsor fit and sponsorship exposure,
indicating that higher exposure leads to an increased image transfer if the fit between event
and sponsor is high.[17] When equated for total time of exposure, brand recall was higher
for brands exposed through logos than for brands exposed through traditional ads.[19]
Recent surveys find that while managers favored issues of media coverage not more than
ten years ago, now they rate sponsor awareness and image transfer from the sponsored
event to the sponsor as the main reasons for engaging in sport.[18]

Microsoft learned about customer engagement in sports industry that, igniting fan
engagement and applying those learnings across the business can put customers at the
heart of your brand, not just to create loyal customers but passionate fans.[4] Companies
don't just invest in sports to make themselves look good, it makes employees feel good.[9]
Olympic sponsorship support was also found to be positively associated with
organizational pride and CSR perceptions[12] Although in an study, despite the prevailing
logic that companies can enhance the perception of goodwill by sponsoring sport that is
important to their employees, employees’ sport involvement was found to have no effect
on their sponsorship beliefs. In contrast, cause involvement alone explained a large amount
of the variance in those beliefs.[10]

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 In a middle Asian country, where policy of privatization has been at work for more
than a decade in the country’s sports to enhance efficiency and productivity in sports,
unethical and irresponsible implementation led to more negatives than the positives.[14]
Whereas in a developed European country, national football league alone contributes a
significant amount to the nation’s GDP and has highest employment intensity as compared
to all other sectors. [11] In India there is existing privatization, although limited to a
specific sport, the appeal of which lies in its marketing, advertising and packaging, which
are exemplary.[6] But for a broader implementation one choice of privatization form can
be "government to guide, private to operate".[16] In recent studies it appears that the 2020
Olympics Games have not really encouraged companies to devote money to sports in this
fiscal year either.[1] As traditionally most corporates don’t consider sports as a CSR
opportunity and therein lies the biggest challenge.[2]

All of it indicates the lack of proper structure of development of sport personnel in

India. Proportion of sports industry in national GDP is 0.04% which is significantly lower
than most of the developing and developed countries. Also, only 0.69% of total CSR
expenditure was spent on sports development, where a number of talented players are
quitting because of lack of funds. Hence, there is a need of finding the obstructions in
development of sports industry and finding a possible solution to them.

2.2 RESEARCH GAP

Previous studies and findings indicate the potential of growth of sports industry worldwide
and in other studies and articles it was found that Indian sports industry is clearly
underdeveloped and it needs exploration in depth.
In our study we will try to do a comparative as well as explorative study of the
aspects which are restricting the growth of industry and how they can be resolved possibly
through privatization and promoting sports as CSR.

2.3 NEED OF STUDY

India has the lowest Olympic medals per capita ratio, which indicates the lack of proper
structure of development of sport personnel. Proportion of sports industry in national GDP

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is 0.04% which is significantly lower than most of the developing and developed countries.
Also, only 0.69% of total CSR expenditure was spent on sports development, where a
number of talented players are quitting because of lack of funds. Hence, there is a need of
finding the obstructions in development of sports industry and finding a possible solution
to them.

2.4 OBJECTIVES

1. Exploring the current status of Indian Sports industry and private investment attracted
by the industry.
2. To study the possible benefits of investing in sports for private companies.

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3. RESEARCH METHODOLOGY

Research design: Research will be fundamental and Descriptive in nature as it involves

expanding the level of knowledge of the industry as well as it.

Data collection: Data collection will be based upon Secondary Sources.

Data sources: Research articles, blogs, official as well as user developed websites and
journals will be used to collect secondary data.

Period of study:

Four months of Academic year 2017-18 (January, 2018 to April, 2018)

Statistical tools used:

 Ratio
 Percentage
Presentation tools used:

 Pie Charts
 Bar Graphs
 Tables
 Diagrams

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4. DATA ANALYSIS

Objective 1: Exploring the current status of Indian Sports industry and private investment
attracted by the industry.

India happens to have the lowest Olympic medals per capita of all the participant
countries. The global sports sector is estimated to be worth between $480-620 billion.
However, in India, sport is yet to be recognized as an economic sector and industry has
worth of only $74 million.

Sports Industry global worth

Rest of world ($620bn.)

India($0.74bn.)

The sports industry sector may include several different segments such as sports
tourism, sporting goods (in manufacturing and retail), sporting garments, and the available
opportunities in sporting management and sponsorship. It is seen across the globe that
sports as a full-fledged industry can and may contribute about 1 to 5 percent of the
country’s GDP.

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 Contribution of sports industry to
Gross National Product
2.5
2
2 1.7
1.5 1.4

1
0.5
0.04
0
Italy Britain Germany India

Whereas Indian sports industry contributes to only 0.04 percent in GDP.

Three years ago, the government of India, via the Companies Act, 2013, made it
mandatory for companies with a net worth of Rs 500 crore, or revenue of Rs 1,000 crore,
or net profit of Rs 5 crore, to spend 2% of their average profit in the last three years on
social development-related activities.

The Companies Act lists various activities that qualify as corporate social responsibility,
such as health and sanitation, gender equality, education and skill development, rural
development, along with sports development.

Following is the data of how companies chose to spend on CSR activities in financial year
2015-16:

S. Activity CSR Investment in Percentage

No. the activity (in
Crores)
1 Health and sanitation 2777 33.93
2 Education and skill development 2453 29.97

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3 Rural development 937.75 11.46
4 Environment and ecology 520 6.35
5 Gender equality 112.66 1.38
6 PM’s relief fund 80.55 0.98
7 National heritage, art and culture 80 0.977
8 Sports development 57 0.69
Total CSR investment 8185

CSR Investment by all the firms (in crore Rs.)

3000 2777
2453
2500

2000

1500
937.75
1000
520
500 CSR Investment by all the firms
112.66 80.55 80 (in crore Rs.)
57
0

It is quite evident that, sport does not connect with private companies compared
with popular CSR activities such as health, education and rural development. For now it
can be said that companies have hardly explored the depths of what they can do with CSR
in sports. As sports, unlike other areas of CSR, provides companies far greater visibility.

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Objective 2: To study the possible benefits of investing in sports for private
companies.

Monetary return based benefits of being sponsor of sporting events:

i. Image transfer, event-sponsor fit has a positive impact and is the main driver of
the strength of image transfer. Event involvement also positively affects image
transfer, but the magnitude of this effect is lower. Sponsorship exposure does not
have a significant influence. However, there is an interaction between event-
sponsor fit and sponsorship exposure, indicating that higher exposure leads to an
increased image transfer if the fit between event and sponsor is high.
ii. Brand visibility, sports has an instant and emotional connect with society, and it
helps companies with enhanced social reputation in the eyes of the public and the
media. Companies can look at it for achieving wider marketing goals on the
smallest of budgets possible. It also makes them look good in documentation, as it
shows them as angels of sport and human development in annual reports.
iii. Low cost per reach, In-stadium, TV, print and online visibility, with huge number
of viewers and fans involved in spectator sport events cost per reach for a firm is
significantly low as compared to other highly practiced advertisement methods.
iv. High sales/margin per unit currency spent, with sports sponsorship being
provided with right kind of demographics can result into high sales per unit
currency spent. Even though linking sales to sponsorship is typically challenging
but certain approaches might help to quantify it.
v. Long-term brand attributes, sponsorships have the potential to reach beyond
short-term sales to build a brand’s identity. Brand strength contributes 60 to 80
percent to overall sales, making this benefit critical for sustained, long-term sales
growth.
vi. Indirect benefits, sponsorships may stimulate indirect sales—for instance, when
advertisers host executives at sponsored events or when they’re part of a balance-
of-trade commitment. Therefore, any analysis of sponsorships must also account
for these indirect benefits. Companies often either neglect or overestimate these
sources of revenue when calculating ROI. A financial institution, for example, used
its sponsorship of a golf tournament to host clients for its wealth-management
business. Analysis revealed that the impact of the tournament on indirect sales

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 covered the sponsorship costs, making it one of the most effective sponsorships in
its portfolio.

The employee-related benefits of being a sponsor of sporting events:

i. Sports sponsorship is connected very strongly with health and wellbeing,

which means the organisation becomes the beneficiary of positive sentiments
simply by association.
ii. Employees feel as though they're employed by a place of prestige working for a
company with a logo featured prominently at a high-profile event makes employees
feel that way. Their own personal status is consequently elevated.
iii. Employees react in kind when they judge their employer as acting in
alignment with higher-order values In research published by scholars at the
University of Minnesota and the University of Memphis, employees were asked for
their views on their employer's sponsorship arrangements. Two different types of
sponsorship were examined.
 One was based on personal interest, which reflects sponsorship associated
with sports that employees already follow.
 The other was based on a good cause, which reflects sports that employees
may have no interest in whatsoever but that nonetheless are seen as worthy
and vital because they raise funds for a charitable purpose.
 The participants were then asked how favourably they thought of their
organisation. Those who merely had a personal interest in the sponsored
sport didn't feel more fondly towards their employer for sponsoring it. In
contrast, those who saw their employer as sponsoring a sport associated
with a good cause were significantly more inclined to view their
organisation in a positive light.

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5. FINDINGS

 India has lowest medals per capita of all the participating countries.
 The proportion of sports economy to gross national product in India is 0.04%,
which if very low as compared to 2% in Italy, 1.7% in Britain and 1.4% in
Germany.
 There is lack of proper structure for development of sports personnel at grass-root
level.
 Development of sports as an industry, in country, needs more investment.
 Sports industry is not recognized as a profit making affair.
 In Germany, the Professional football system has highest employment intensity,
which is fairly higher than the national average of employment intensity.
 In USA, the consumers are spending the most on ‘Spectator Sports’.
 Private Companies in India, traditionally, do not see investment in sports as a CSR
activity.
 Share of ‘investment in sports’ out of all CSR spending was 0.69%.
 Companies can have Marketing benefits through investing in sports such as:
a) Image transfer
b) Brand visibility
c) Low cost per reach
d) High sales margin per unit currency spent
e) Long term brand attributes and
f) Other indirect benefits
 There can also be Employee related benefits of sponsoring a sports event, such as
high order values in employees or elevation of personal status etc.

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6. CONCLUSION

Sports industry is a growing and profit generating industry all across the globe. But sports
industry in India is definitely an untapped sector, which also accounts for poor
performance of Indian athletes in various sports except a few specific ones. Accountable
reasons found were lack of a proper holistic structure and lack of uniform investment from
private sector. Government can take measures to attract more private investment into
sports such as tax benefits for companies investing in sports or encouraging the private
companies to invest in sports as a CSR activity etc. There are great benefits for companies
which invest in sports hence it should be a no-brainer.

Although, only secondary data was used in analysing the various parameters but on
the basis of availability of data from developed countries, findings are only going to lead
to better things in sports, sports industry and for the nation. Since, India will soon be one
of the developed countries as it is already one of the fastest growing economies at present.

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