Gen Z’s Impact on the Future of Sports

Get ready for more speed, wider distribution, and clearer brand values

Perhaps the most common question posed to anyone working in digital media for a major professional sports league the last few years has been: “Why don’t we have our own “Formula 1: Drive to Survive?”

Netflix’s hit series married sports (arguably the “OG” form of reality television) with the modern formula for high drama reality TV. The unprecedented, unfiltered access (apologies to NFL’s HBO series “Hard Knocks”) turned F1 drivers into global superstars, and pushed audience, attendance and profits to new heights. By global fan base size, Formula 1 is now tied with the NBA and the English Premier League for the most popular sports league in the world.

The PGA Tour has since responded with its own series “Full Swing” (think ‘Drive to Survive’ for golf) while the NFL also partnered with Netflix on “Quarterback.”

However, F1’s explosive growth masks familiar pitfalls that plague mainstream pro sport leagues such as poor parity, a lack of diversity, profits-over-values, a large carbon footprint and an antiquated live distribution strategy.

Why Gen Z Doesn’t Watch Live Sports

In 2019 we noted in our analysis of sports viewing in the streaming age that more Gen Xers (45%) follow sports closely than Millenials (38%) in the U.S. A recent survey of American Gen Zers, conducted in November 2022, found that 33% do not watch live sporting events, compared with 24% of all adults.

Remember when everyone got their sports news from watching SportsCenter or ESPN.com? American Gen Zers are now three times more likely to get sports news on TikTok. Social media is a powerful top-of-funnel marketing tool, but one that most sports leagues are not reliably capitalizing on.

Why not? Over a quarter of American Gen Zers don’t watch live sports because they can’t, a problem exacerbated by cord cutting and the rise of streaming platforms. Gen Z is the only generation that streams more live sports than it watches on traditional TV globally, while global pay-TV revenue has dropped every year since 2016 and is expected to drop to about 60% of its 2016 peak by 2028. Total pay-TV penetration in the US dropped to 58.5% — its lowest point since 1992. Even pay-TV subscribers can be shut out from watching live sports. For example, YouTube TV subscribers in the New York market can’t watch the Knicks, Rangers, Nets or Yankees.

Perhaps it should be no surprise that two in five American Gen Zers have no favorite team (compared to one in four overall). Globally, Gen Z is also the least likely generation to be loyal to their favorite teams.

It’s not just consumption habits that sports execs are monitoring. A majority of global sports fans consider themselves environmentalists and overall, were more focused on the environment and sustainability than the general population. 68% of sports fans believe sports need to be more inclusive and the same percentage believe salaries of athletes should be based on skill, and not gender. 71% of TikTok users believe inclusivity and representation is important in sports, but only four in ten felt represented by traditional sports media.

Breaking the Broadcasting Rights Fees Addiction

Despite the decline in pay-TV subscribers, established sports leagues, including F1, are finding it difficult to move on from lucrative exclusive live distribution agreements. The deals maximize short-term guaranteed revenue at the expense of bigger audiences, broader interest in the sport, and long-term advertising or sponsorship revenue. This failure to adapt is reminiscent of ESPN’s struggle to wean itself off of lucrative cable carriage fees.

Just how bad is the current live sports landscape for fans? Consider the record breaking broadcast agreement for the English Premier League, likely the most popular league in the world. Having the access to watch the league’s live games depends on where you live, how much you’re willing to pay, and how motivated you are. In the UK, 200 games are shown on TV, split across three broadcasters. (The other 180 games are blacked out for the entire country, in theory, to promote in-game attendance.) In the United States where NBC purchased exclusive rights to every game, you can watch some games on pay TV, while other games can be streamed on NBCSports.com, and the rest can be streamed on Peacock.

It’s not just the Premier League that is hard to follow. Indeed, Yankees fans needed four different services to watch a five game stretch this season. This type of fragmented access to live sports has made the viewing experience unnecessarily confusing and deterring for prospective fans.

In response, we expect more sports leagues in the future to prioritize the widest possible distribution strategy to cultivate the largest fan bases. That strategy will likely entail non-exclusive pay TV agreements, which provides access to older fans who prefer to watch on TV, while also live streaming games on social platforms, where Gen Z currently spends nearly three hours per day globally.

Direct to (Some) Consumers

For decades, fans have watched local teams on regional sports networks (RSNs) through their cable subscription. It’s been a lucrative business for sports franchise owners; in Major League Baseball four teams collect over 30% of their revenue from local media rights. But that model is facing major turmoil due to the economic forces of unbundling.

In response, last year, NESN became the first RSN to launch a DTC streaming service. This March, two more RSN titans, MSG Networks (MSG+) and YES Network (YES app) announced their own DTC offerings with prices ranging from $25-$30 per month.

These products allow for more ways for fans to watch their favorite teams, but friction remains high. At a price point that’s 2–3x higher than other premium streaming platforms, they only appeal to the die-hard fans in the local market. And all leagues still withhold the best games for their national broadcast partners on pay TV, which further contributes to the aforementioned fragmentation of access to live sports.

The MLS’ recent distribution partnership with Apple was praised for eliminating blackouts, but its games are now almost entirely unavailable to anyone who isn’t willing to pay $15/month or does not own an Apple TV. (Fox will broadcast 34 regular season games per season.)

With rumors that ESPN is moving towards its own DTC app of its linear feed, established sports leagues and entities are building a moat around their content that blocks casual and new fans from watching live games.

The Phoenix Suns and Mercury’s new owner, Mat Ishbia, tried to address this problem with an innovative distribution approach that would have made locally broadcast games available over-the-air for free. In the short-term, the plan would have cost the Suns tens of millions annually. Long-term, the plan would have tripled the teams’ potential local audience, increasing advertising and sponsorship opportunities and demand for its merchandise and tickets. Some new fans could have been converted to pay TV subscribers, which, in turn, would make the league’s national broadcast rights more valuable.

Unfortunately, this well-intended experiment will have to wait. A judge blocked the proposed plans in May.

Emerging Leagues: The F1 of the Sky, Sea & Streets

New properties have emerged in recent years that draw on best practices of Formula 1’s popularity, while also paying greater attention to preferences, behaviors, and values, particularly those championed by young people.

The Drone Racing League (DRL) is a fast, tech-heavy emerging property fueled by interest among young “tech setters”. How fast? Pilots take drones from 0–90 MPH in less than one second.

The races, which are held across the globe in a mix of both traditional “IRL” venues with physical drones and immersive virtual simulations, are broadcast in 170 markets by familiar pay TV partners, as well as streaming via the league’s owned and operated social media channels.

Popular sports games such as Madden and FIFA are designed to look and feel real, but DRL’s official video game, available to fans on platforms such as PlayStation and Xbox, is sometimes used for its actual competitions, with physics parity between the virtual and real drones.

The sport presents differently to the public, but behind the scenes it is even more uncommon in a male-dominated industry. Its leadership team is predominantly female, including its President, Rachel Jacobson.

This appealing mix of technology, sports, and entertainment has attracted partners with bespoke activations such as T-Mobile and Google, among others.

Looking for brand safe high-speed crashes? Introducing: SailGP (GP is short for “Grand Prix”), which kicks off its fourth season in Chicago on June 16th.

SailGP developed an international championship that highlights the best athletes from nine nations. Venues span the globe, including 12 cities such as Saint-Tropez, Abu Dhabi, Sydney and New York. Races are distributed live anywhere fans want to watch: it’s available on linear broadcasts in 190+ markets, premium streaming platforms, the SailGP app and on YouTube. Each event consists of three 15 minute races to cater to a younger audience that isn’t used to committing hours to almost anything.

Every aspect of SailGP’s event footprint is measured and reported. SailGP partnered with T-Mobile to enable a remote broadcast that reduces its travel footprint. Last year BBC gave them its Green Sport Award for their leadership in sustainability.

SailGP’s Impact League is a first-ever competition that measures teams’ success based on sustainable and social impact, with the annual winner receiving a monetary prize. Female athletes compete on the F50s for each team, which led to the Women’s Pathway Program that champions gender equity and inclusion. And its Inspire program engages local youth in each race destination.

Earlier this year the National Cycling League (NCL) became the first majority women and minority-owned league, with 15 international riders (out of 32) and mixed gender teams.

Cycling is the second most popular sport in the world after running, with an estimated 1 billion bicycles worldwide. The NCL has taken this proven activity and optimized it for the TikTok era by making it “shorter, faster, and more action-packed,” in the words of co-founder Paris Wallace. In stark difference to the Tour de France, NCL’s laps take about two minutes to complete, and an entire race is usually completed in under an hour. The races have minimal carbon footprints because the race venues are existing city centers, such as Miami Beach.

Cycling is a tech-native sport, as proven by popular services such as Peloton. The possibility of combining biometric data and first person video to enable fans to remotely compete in an NCL race in real time could one day boost the sport to an unprecedented level of audience engagement through hybrid participation.

The focus on speed, gender equity, sustainability and technology, while bringing together a large built in community, makes NCL a natural fit for brands.

Pickleball to the Moon

If you live in the U.S., chances are you have heard of pickleball. According to one study, Pickleball is the third highest sport by participation in America (36.5M). While the “vibes” around the sport may be that it’s an old person’s game, the average age of avid pickleball players has dropped under 35 and the largest age bracket of pickleball players is 18–34. Casual players are 43% female. Proponents tend to argue that its relative ease of play compared to the likes of tennis and badminton made it an ideal novel leisure activity for people to pick up.

Marketers have certainly noticed. In the past 12 months, more than 150 brands have partnered with various pickleball properties. Anheuser-Busch purchased a team in Major League Pickleball (MLP), a co-ed league consisting of 24 teams, and Margaritaville Hotels and Resorts was named its first title sponsor. Celebrities and investors have also noticed. NBA superstars Lebron James and Kevin Durant are among the high-profile MLP team owners.

There are other noteworthy professional pickleball leagues vying for consumer attention, top players, sponsorships, and revenue from exclusive media rights, which are scattered across premium streaming services and linear broadcast channels. Strategic mergers between MLP, The Professional Pickleball Association (PPA) and The Association of Pickleball Professionals (APP) in 2022 hint at cooperation to consolidate the sport and delineate between the leagues, but the professional aspect of the sport remains fragmented.

Brand Takeaways

Gen Z continues to tune in to live sports far less often than older generations, a reminder that relevance is perpetually earned, rather than a divine birthright. Some leagues are reacting to this trend with more urgency than others, particularly emerging leagues, who are not burdened to try and top last year’s P&L with higher guaranteed rights fees that often result in restricting access to key games from a mass audience.

Brands that have historically been priced out of expensive official sports sponsorship deals, or are reluctant to align themselves with the mixed reputations of large leagues, may find a more efficient sweet spot with new sports leagues.

Meanwhile, sports fans are more likely than the general population to think positively about companies that communicate ethical messages and are willing to get involved in social issues. Therefore, brands will likely flock to those sports entities that are most aligned with Gen Z’s values such as DRL, SailGP and NCL.

The shift towards streaming consumption is another potential advantage for brands. As pay TV continues to decline, it’s clear that sports leagues will need to adapt if they want to remain relevant to Gen Z and Gen Alpha. Specifically, that means pivoting to new distribution models to limit friction and capture a higher percentage of its top of funnel marketing efforts on social media.

With the associated drop in rights fees that comes with wider distribution, leagues will be eager to monetize their IP in other ways, particularly through advertising and sponsorship. Again, referencing our 2019 analysis:

Sports moving to online platforms also affords brands opportunities to push products at the point of sale, making ecommerce strategies more seamlessly implementable… sports broadcasts [have] plenty of opportunity during breaks in the action to bring you a word — and product recommendation — from your sponsors.

Brands can deliver a consistent message to their audience before, during, and after live sports events through pre-game shows, live streams, post-match highlights, and behind-the-scenes documentaries. Indeed, Netflix’s sports content has had a significant cultural impact, and allowed the global streamer to be part of cultural conversations around sports despite investing nothing in live sports. This also means brands that may not have the budget for in-game ads or sponsorships can now engage with fans through popular companion series like the aforementioned Quarterback and Full Swing.