The Significance of Establishing Statistics for the Sports Industry

Senior Fellow, RIETI

What is Gross Domestic Sports Product?

Although not a common term, Gross Domestic Sports Product (GDSP) is the total sum of value-added pertaining to the sports product of one country in one year, and is a component of Gross Domestic Product. I will say more on the definition of "sports" later, but I would like to start by considering why we should even attempt to calculate such a statistic in the first place.
First, let us confirm the general meaning and significance of "statistics." There is the way in which things understood through "statistics" are utilized to implement effective "industrial policies." And they may also serve to confirm "what could not be done" because there have never been statistics for the sports industry or because something was lacking in existing statistics. The "New Directions in the Development of Government Statistical Services" compiled at a meeting of the heads of the statistical departments of the Cabinet Office and other government ministries (June 27, 2003) states the significance of statistics as follows.

Statistics accurately grasp the situation of a certain group in relation to such matters as population, society and economy, and provide the basic information on which to plan and draft administrative policies. However, in recent years, statistics have been becoming increasingly important as a way to conduct advance and ex post facto evaluation of policy effects. Furthermore, statistics are becoming increasingly important for individual households and companies enabling them to make accurate decisions amid major changes on the social and economic fronts such as social and economic globalization, progress in deregulation and rapid technological advances, thus statistics should be drawn up in a way that gives sufficient consideration to the dissemination of information so that the general public can utilize them. In addition, since statistics are compiled by virtue of the cooperation of and burden shouldered by the public, efforts need to be made to ensure their swift and continuous provision to the public so they can be widely used as a common asset.

Perhaps the fact that there are no statistics for the sports industry is an indication that "the planning and drafting of administrative policies" and the "advance and ex post facto evaluation of policy effects" in the sports industry are insufficient. It also gives rise to the question of whether there was any such thing as "sports industry policy" in the first place. This is because traditional "sports-related policies" meant "physical education administration," and this is clearly different from "sports industry policy." However, the economic activities of sports in modern society are not just bigger than ever, they have also become socially significant.

Multifaceted evaluation is necessary to accurately grasp the economic value created by the sports industry. This is because it is important to measure not only the output of sports but also its consumption and income (employment). This is all very well. However, when trying to calculate statistics for the sports industry, we come up against the basic yet nonetheless very important question of what constitutes the "sports industry." This is where the second significance of having sports statistics comes into play.

The significance of promoting the sports industry

The sports industry is now clearly earmarked as a component of the economic revitalization strategy in the government's structural reforms. The Council on Economic and Fiscal Policy said in its "Basic Policies for Economic and Fiscal Policy Management and Structural Reform 2002" that, "Markets in areas such as health, sports, fashion, entertainment and music can be expected to grow on a global scale, and their industrialization should be promoted," and so the sports industry is regarded as one part of the action program for the revival of the Japanese economy.
However, what is the "sports industry" in the first place? A clear-cut answer that leaves no room for discussion has yet to be presented by either academic societies associated with sports or those involved in the sports business. Even internationally, sports industry researchers have been unable to share a common view on how to define the sports industry (Ming Li, 2001). Therefore, people are using the phrase based only on their individual understanding of it. The discovery of a new way to define the sports industry is a pressing issue.

But then, regardless of "how" the word sport is defined, in present-day society goods and services are consumed by both "playing" and "watching" sports. Sports gives rise to a certain level of demand, and create a market. In other words, there is an element of "economic activity" in them.
The market created by present-day sports has a tendency to expand due to two reasons.
First, leisure time is increasing as a result of the reduction in working hours. Together with changing lifestyles, the rank of sports in domestic production is becoming increasingly important. Sports often involve organizational activities. The second reason is the development and diversification of the media and the according promotion of "information-oriented media." From the media's point of view, sports make content with maximum value. This in turn has made extended reproduction possible, further fueling the sports industry's growth into a colossus. The industrialization of sports was pushed forward with the inflow of various forms of capital, including advertising.

In 1990, the Service Industries Division of the then Ministry of International Trade and Industry compiled a book titled "Sports Vision 21." In many ways it was a project that was ahead of its time, as it earnestly discussed the "industrialization of sports" from the policymaking perspective for the first time. Most of the issues presented in the book have not lost their luster to this day. In fact, it may be said that the importance of many of the themes, such as the industry's shift to "intangible assets" and "services," or the "relationship between sports culture and wealth" and "sports promotion and regional promotion," has actually increased.

In "Sports Vision 21," sporting equipment manufacturers and equipment distributors were listed as "one area of the sporting industry." Perhaps the "equipment industry" could not be omitted, given the nature of the ministry.
The factors that make up the sports industry are multifaceted, and there are a wide variety of stakeholders. Customers are equally varied and compounded. For example, the media, while "reporting" sports, at the same time, in the case of television media, pay "fees for broadcasting rights." In other words, they are customers from the sports industry's perspective. For sports media such as sports newspapers and magazines, the prosperity of sports and their sales (and circulation numbers) are in a strong positive correlation, and it may be said that they share the same destiny. Fans are the targets of marketing efforts, as they are customers who purchase products, but at the same time, they also have a hand in creating a rousing atmosphere at venues and play sales and promotional roles by spreading information through word of mouth. In other words, they are both a marketing target and marketing resource. In fact, the fans also serve to nurture a team and its players. Therefore, the management of sports in any time and any place cannot help but fall under a stakeholder style of governance.

However, while this is still in the essay stage, I propose that only industries whose products are "sports as an intangible assets" be defined as "sports industries" and exclude industries that deal with physical products such as sporting equipment. First and foremost, this is because the sporting equipment industry is a secondary industry (manufacturing) whose commodity is "sporting equipment," and does not deal in "sports as an intangible," which is a tertiary industry.

From the view of industrial theory, placing both "service providers" and "equipment manufacturers" under one segmentation is quite unreasonable and can invite confusion. Therefore, I believe that sporting equipment industries should be classified as "sports-related industries" and that a line be drawn between them and "sports industries."
"Sporting equipment distributors" and "sports media" also fall into the category of "sports-related industries." For example, on average some 30% to 40% of a sports newspaper is composed of articles on such issues as politics, business and general news that have nothing to do with sports. When it comes to television, on channels that are not exclusively for sports, sports programs account for less than 10% of both exposure and sales. Therefore, we cannot consider them "sports industries" in the narrow sense of the term.
GDSP is "the total sum of value-added produced in connection with sports." Therefore it is possible to see it as the total sum of value-added produced by both "sports industries" and "sports-related industries." While it may be slightly hard to understand, because sports as an intangible industry is very multifaceted, production in connection with sports is wide-ranging, and GDSP should not be limited to "sports industries" in the narrow sense. It encompasses production on both the tangible and intangible fronts. Therefore, sports product is comprised of sporting equipment such as sportswear, shoes and rackets, as well as services such as fitness clubs, professional sports and sports media. Equipment requires aftersales services, while fitness clubs need facilities and equipment and apparatus, and thus these are all called product in GDSP statistics as they signify value-added that is created as a result of sports.
While I earlier made the distinction between "sports industries" and "sports-related industries," the complexity of the sports industry makes such categorization problematic. Because calculation is still ongoing, nothing can be said for certain, but it is likely that the largest stakeholder in "sports industries" is the public sector. The public sector provides "the service called sports" through physical education at schools and public sports facilities, but this is all value added as a result of production by "sports industries." However, there remains the issue as to whether we should include the services provided by such parties as local governments in the category of "sports industries." The multifaceted nature of sports makes it difficult to "calculate" statistical figures and give a "definition" of sports industries.

How the "promotion" of sports industries can contribute to "service industrialization of the entire economy" is a very important and current theme. At the same time, it is also important to define "sports industries" from the "goal," or future model we should strive for. I believe that the establishment of statistics for sports industries (ie GDSP figures) is a matter of urgency, also from the view of planning and drafting policies that are effective in promoting sports industries.

February 10, 2004

The actualities surrounding the measurement of GDSP (Source: Research Institute for Sport Business, Waseda University). The first full-fledged introduction of sports industries into the calculation of the national economy was seen in research studies by European nations ahead of EU integration (Jones, 1989).
As a result of input-output analysis, the ratio of GDSP to GDP as of 1985 was 1.6% in Britain, 1.8% in the Netherlands, 1.4% in Flemish Belgium and 0.9% in Finland.
According to the Henley Centre (1992), Britain's GDSP in 1990 was £8.27 billion, or 1.7% of GDP. Some £9.75 billion were spent on sports-related expenditures, while £4.72 billion in sports-related income was reported.
In 1995, the Leisure Industries Research Centre (Britain) estimated that GDSP came to £9.8 billion, GDSE came to £10.4 billion and GDSI came to 415,000 jobs (LIRC, 1997).
In the United States, Sandomir (1988) estimated that Gross National Sport Product in 1987 came to $50.2 billion, accounting for 1.1% of GNP.
Meek (1997) estimated that GDSP in 1995 was $152 billion, making up 2% of GDP, and that based on U.S. Commerce Department calculation models, the sports industry created 2.32 million jobs and $52.1 billion in direct household income.
Furthermore, Li, Hofacre & Mahony (2001) improved Meek's calculation models and estimated that based on economic statistics released by the Commerce Department (1997), sports-related employment came to 828,231 jobs and that per capita annual income was $40,000, with GDSI totaling $152 billion.

February 10, 2004