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Economic Impact
Research Report
Executive Summary
Extreme Sports represents a new trend that has secured a niche for itself in the booming sports industry. Economic factors that are explored in this paper include the following points.
• The X Games represents an industry model with an unconventional structure, conduct, and performance.
• The financial success of the X Games lies in their ability to gain corporate sponsors who are eager to reach a youth market. ...
• The demand for the Extreme Games is sturdy, and will remain that way because the five determinants of demand are fulfilled by the target market. ...
• A key to the X Games model relies on the idea that consumers might be willing to spend more dollars on the products provided at the events because they do not have to use their discretionary income on tickets. ... The X Games are used as a promotional tactic to attract corporate partners and allow several companies to capitalize on larger marketing opportunities.
• The X Games have been around for nearly eight years and have been growing exponentially each year that they have held their competitions in cities across the nation and have spread rapidly throughout the world. ...
• The profits that are generated during the X Games in the cities that host the event are increasing every year.
• As the X Games continue to grow in popularity, firms that are competing for a piece of the market will also continue to grow.
• The X Games have an estimated $40-$50 million impact on a host city. ...
• ESPN has control over the labor economics of the X Games. ...
Extreme sports, and specifically the Extreme Games (or X Games), represent an industry model that displays an unconventional structure. The X Games are held at various sporting venues, usually in metropolitan areas that can provide a visible marketing platform for the Games. The Games have been held in cities ranging from Philadelphia, San Francisco, and Aspen. The Games are held annually, with the hosting cities contracting the Games for two to three consecutive years. Los Angeles has won the bid to host the Games from 2003 to 2005. The directors of the Games work in alliance with sports commissions from the hosting cities to map out the logistics of the events. The Games are sponsored by a host of corporations looking to expand their product market, by supporting the culture that is extreme sports. ... As an example, McDonald’s has signed on to be one of the major sponsors of the X Games for 2003. ...
The competitors in the X Games represent themselves, often times being sponsored by companies that cater to the demographic of the extreme sports market. ... However, the engine that feeds this corporate involvement is the demographic that typifies the X Games. Also, the success of the X Games is based on the individual success of the competitors, and the marketability of these competitors to suit the target market. This marketability is also necessary to garner corporate sponsorship that funds the Games. ... ESPN and ABC have signed on to air the events of the X Games, and these television entities are a huge driver in the further expansion of extreme sports into the unpenetrated portion of the overall market for sports and entertainment. ...
The overall market of the X Games is the segment of the population that is interested in sports as a form of entertainment, and in the form of participation. ... As a point of note, this target market represents a unique opportunity to the organizers of the X Games. ... As a result, sponsoring corporations and businesses are more inclined to fund the Games, with the intention of capturing a larger percentage of this coveted demographic. ...
Supply and Demand
The demand for the Extreme Games is sturdy, and will remain that way because the five determinants of demand are fulfilled by the target market. As aforementioned, the 14-34 age group’s access to discretionary income acts as impetus for this target market to manifest a continued demand for the X Games. ... The preferences and expectations of the market are fulfilled by the X Games, because the market has created, and perpetuated itself. The Games came about because there was growing interest in alternative sports such as skateboarding, surfing, and biking. The Games is a natural extension of the market by providing a venue to showcase the best talent that participates in these alternative sports. To further enhance the appeal of the X Games, the event organizers charge no fee to attend the events. ... The Games act as an exponentially cheaper alternative to more conventional forms of entertainment and sports
As a result of the free X Games events, the crowd that attends the events experiences a consumer surplus. ... This option is a notion that corporate sponsors bank on to recoup the investment that is put into the Games. ...
Entertainment
The X Games may not have the prestige or drawing power of the NFL or baseball, but in the eyes of ESPN, it may well be its most valuable sports franchise. ... The popularity of the X Games has opened up numerous branding and marketing opportunities not available to them as merely television rights holders for more established, professional-league franchises. ... The key to generating value lies in the X Games utilizing an unconventional revenue model in comparison to other sports, and their ability to build partnerships with other businesses in order to exploit the youth market.
With the X Games, ESPN has created an unusual way of using sports to generate revenue. ... The revenue model for the X Games is different. ... Secondly, the cable TV sports network ESPN developed the X Games and first broadcast them is 1995 (Golub 2002). ... And, according to ESPN, the games are fulfilling the two mandates that prompted ESPN to create them eight years ago: Theyre pulling in more young male viewers to the network, and they are saving the net money in jacked-up rights fees imposed by outside suppliers.
This unconventional revenue model that surrounds ESPN and extreme sports has been successful in maximizing profits and meeting the goals of the X Games. However, this is not the only positive economic impact that the X Games can have. It is important to see how the X Games are used as a promotional tactic to attract partners and allow several companies to capitalize on a larger, more profitable youth market. The X Games may be a small portion of the sports industry, but these events have been used as a gateway to the larger world of entertainment.
There are several economic reasons why the X Games were invented as a good business decision and why other companies are eager to associate with this event. Even though the X Games started in 1995, the trend that created this consumer demand goes back a couple of decades. ... ESPNs X Games capitalized on this emerging fitness and consumer trend and other companies that deal in anything from music and entertainment to soft drinks and video games have used the X Games to tap into this growing market.
The X Games are a relatively new phenomenon and there have not been extensive studies published on how far the economic impact of these games can really go. There are however, several examples of how the X Games have been used to create more economic windfall for companies. These examples can be pieced together to try and get a glimpse what the bigger picture looks like and suggest how far the X Games reach really is. The diversity of sponsors and partners that ESPN has been able to generate shows how far the value of the X Games can be stretched.
Sponsorships are not in short supply at any X Games event. For example, Mountain Dew is an official sponsor of the games and Taco Bell has signed an agreement making it the only company to sponsor four consecutive X Games events, which will extend through the Winter X Games of 2004. ...
The X Games themselves are one big promotion. ... For example, in the 2002 Summer X Games, Comcast used the venue to promote its newer technologies including high-definition television, as well as its new video game-themed diginet, G4.
Approximate Word count = 6836
Approximate Pages = 27.3
(250 words per page double spaced)
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