Can Anyone Save the Surf Industry?
Worldwide interest in surfing, when measured by the volume of Google searches for the sport, has declined at an alarming rate over the past decade. During this period, some of the surf industry’s biggest players, Quiksilver (Ticker: ZQK) and Billabong (Ticker: BBG), have been sucked into unprofitability with no hope for a turnaround in sight… or is there?
A Tale of Two Surf Industries
Recently, while playing around with Google Trends, I came across Google’s sayonara to the surf industry. The mainstream surf industry, that is.
What do I mean by mainstream surf industry? Well, it can be directly contrasted with the core surf industry in that the former looks to target non-surfers for aggressive growth, while the latter survives off of surfers and the surf community.
The mainstream surf industry is a unique type of animal. It’s aggressive. It wants money, it wants growth. It has to answer to shareholders and bank analysts. It’s pretty much “EPS growth or bust” for this side of the surf industry. They need to get into every department store in town, leaving their surf cred to dissolve in the process (they balance this out by sponsoring good surfers; it’s all part of the game). To put it another way, it exists to reap the rewards from the possibility that one day surfing will “become the next football”. The dream of a near future where surf pools are as common as Starbucks cafes, Slater presents the Oscar for “Best Supporting Actor” every year, and “Monday Night Football” sees its ratings cut in half whenever John John is surfing a heat at Pipe (or at any other spot, for that matter).
We all know this hasn’t happened yet.
At one point in time, however, the idea was actually not that far-fetched. Slater was on Baywatch (and pretty much dating everyone and their hot cousin), Quiksilver and Billabong were punting with the big dogs up in Wall Street, and surfing seemed like it was on the road to gaining worldwide notoriety. How has it played out so far? The following graph, which compares historical worldwide Google searches for “Surfing” vs. those for “National Football League”, may be able to answer that question:
Adjusting for seasonality -pretty roughly-, one could assume that in 2004/05 worldwide searches for these two terms were pretty much on par, a completely different story from the present day reality. The clear divergence shows, amongst other things, the growing worldwide popularity of American Football and that surfing, well, just isn’t considered as cool as it used to be.
But surfing is cool, I swear!
I thought so too, trust me. Having lived in the surf world’s bubble for the past x number of years, I still thought surfing was the hottest thing on the block…. or at least I did until yesterday. The surprise of its consistently deteriorating popularity is what [single-handedly] moved me to write this article. I eat, sleep, and pretty much breathe surfing. I get it force-fed down my throat day-in day-out through my social media feeds, not to mention everyday convos and pretty much just life. For example, I consistently get sold on what’s cool by Whatyouth’s IG account (no wave air shots, lo-fi tracks, being artsy, @ilovetables’ latest grab and/or lifestyle shot…) and I dig it, I just always thought -maybe somewhat gullibly- that so did the rest of the world.
But they do not. (Keep in mind that I’m not necessarily talking about surf fans’ interest in surfing, but in non-surf fans’ interest in our sport)
They actually haven’t for a while now. This graph pretty much shows the world’s interest in surfing from 2004 to 2015 (draw your own conclusions):
In terms of measuring worldwide online interest in surfing, Google searches could serve as very valuable indicators. The chart above shows a -64% decrease in worldwide Google queries for the sport of surfing (from 2004 to late 2014). The trendline after point “A” shows Google’s forecast, which predicts interest will decrease by another -3% by early 2016.
What if this trend continues? What will it mean?
Hmm... I won’t try to predict the future or anything, but there is one thing I sure am hoping for…
I mean, if global interest in surfing keeps declining (again, based only on online queries), it might eventually happen. Surfing epic Swamis with only you and your BFF out could be just around the corner. Well, maybe not juuust around the corner, but you get the point.
Unfortunately, should this doomsday scenario actually occur there will be victims. Surf brands, especially surf clothing companies like Quiksilver (Ticker: ZQK) and Billabong (Ticker: BBG), could continue to feel the negative effects of this decline in worldwide interest. I say “continue” because they’ve already been feeling this impact for years.
The decline in worldwide interest in surfing has been taking its toll on surf brands for almost a decade. For example, let’s look at Quiksilver, the highest correlated Google query in connection with professional surfing. If you go to Google Correlate and look up “Association of Surfing Professionals” (the ASP), the #1 correlated search is “Quiksilver surf”, with a positive correlation of 0.7213. This could be interpreted as “when less people are Googling about surfing, less people are Googling about Quiksilver”.
So what happens when less people are interested in Quiksilver? Well, let’s let Quik’s historical stock price give us an idea…
10-YR Return: -83.72%
Yeah… No bueno ☹
But how about Billabong? Surely the surf gods have allowed them to shred another day… or have they?
10-YR Return: -97.02%
You could pretty much call that a wipeout (but let’s not)
Any good news?
Well, I don’t necessarily know if the news is good, but there certainly is news. As many surf fans already know, the world tour is now being rebranded. It has changed its name from Association of Surfing Professionals (ASP) to World Surf League (WSL).
League? That’s just a coincidence, right?
Nope. Like almost everything else in life, this too has an explanation, although a somewhat speculative one (okay, maybe it’s highly speculative).
As reported by Surfermag.com late last year, “in Oct. 2012 the ASP was acquired by ZoSea, forging a new media deal with the backing of Dirk Ziff, and it fell under the leadership of former NFL exec Paul Speaker”
Kind of like “if you can’t beat them, join them” but there really is no joining going on, rather only human capital acquisition and a revamp of the old dream of surfing one day becoming the next NFL.
A Glimmer Of Hope
(Provided you’re a mainstream surf company, Brazilian, or both)
Don’t go shorting $ZQK or $BBG just yet! Aside from the new ex-NFL exec in the lineup there is one recent occurrence worth mentioning. This occurrence single-handedly brought worldwide online interest in surfing (ASP) to levels unseen in nearly 8 years!
What was the big deal?
Gabriel Medina. The 21 year old Brazilian who many believe will rein the surf world for the decade to come (unless of course JJF has something to say about that).
In December of 2014, Medina was crowned ASP World Tour Champion. He’s now the first ever Brazilian world champ and proudly sits next to Kelly Slater as one of the two youngest title holders in the history of the sport.
This event did not go unseen. In fact, it just might serve as an indicator of the potential that Brazil has to shape the future of the surf industry.
The following graph shows worldwide online interest in the “Association of Surfing Professionals” (ASP) for the past 11 years:
The highest point near the end of the graph shows the December 2014 interest levels, the month when Medina was crowned champ. Not only was the spike reached in late 2014 the highest in about 8 years, but the entire year itself saw interest growing towards the climax of this highly talked about title possibility. Maybe this is what the sport needed, new blood. But not just super good new blood, we’ve had that already (See: Dane Reynolds), I’m talking about champion blood, title blood, SLATER blood. Medina has that. He wants to win again, and again, and again! Who knows, maybe he’ll bring the awareness needed to skyrocket the sport’s reach in Brazil and serve as the foundation for surfing’s 2.0 era…. or maybe he’ll become a soccer player, I’ll go with idk on that one. But what is clear is that Medina’s world title brought more online interest to the ASP World Tour than Slater’s 11th, 10th and 9th world titles (2011, 2010 and 2008, respectively)!
But can he make surfing finally become the next football?
No. He probably can’t. If Slater couldn’t do it, no one can. Besides, surfing in itself will never be able to garner that massive reach on the count of THERE ARE NO TOUCHDOWNS. No touchdowns, no baskets, no goals, no aces (with all due respect to Mr. Buchan), no hole-in-ones. There is none of that. What there is, however, is a [questionable] judging system. A judging system that will forever place surfing in the same category as skateboarding, snowboarding, and other similar sports.
Not everyone feels comfortable being “judged”.
Nowadays, sports are consistently trying to take human error out of the equation. The end goal? You want to make the masses happy. The masses don’t like to feel cheated. Any time you leave a decision up to a judge (a.k.a. a human) you run the risk of a bad call, and bad calls create havoc. For this reason sports have been trying to reduce the protagonism of judges for years. Tennis has implemented the “eagle eye,” the NFL uses more cameras than were used to film The Matrix, and FIFA has started to use soccer balls with chips inside them to assure that the ball did, in fact, go into the goal. How could surfing ever take human protagonism out of the scoring system? I mean, unless you score a ride based on something factual like distance traveled on a wave or number of chop hops, I just don’t see it happening.
This is not bad for everyone, though. To surfers, it’s actually what makes the sport so special and unique. It can go beyond being a mere sport to become a form of expression. It can become therapy. It can become whatever you want it to be (except maybe a Quarter Pounder with Cheese, it definitely can’t be that). However, it will likely never become the next football, keeping companies like Quiksilver and Billabong -who are currently struggling to turn their rapidly decreasing global sales around- caught in the riptide for a while.
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Disclosure: This article is not intended to be used as a trading recommendation. I do not have positions in either ZQK or BBG.