If you scroll through the pages of any sports newspaper or website, it can appear at first glance that running a sports team is all about positions on the field, defensive strategies, and boosting team morale.
While all of that is no doubt important, there’s a less visible side to running the squad that matters more than anything: managing the money. Professional sports teams have armies of accountants who look after financial matters, and ultimately they often also have wealthy backers who invest their cash so that they can get involved with the club’s direction and management, as well as to make a profit.
In this blog post, we’ll answer your questions about why people get involved financially with clubs, who these people are, and how they can hope to make their money back further down the road.
Who funds clubs and why?
While the most famous figures in major sports teams are the popular players and the often-maligned managers, some of the most important behind-the-scenes figures are actually those who own the clubs.
The people who bankroll sports teams hold a lot of sway over the direction of the club. Struggling teams often need up-front investment to see them through a rough patch or to enable them to pay for the players that they need to get better, and that puts the investor in a position to help and give advice.
Often, the people who fund football clubs will be businesspeople who are looking to diversify their interests and build an income stream into their portfolios other than their main source of money. Vangelis Marinakis, for example, is a Greek shipping magnate who owns Greek football team Olympiacos, located in Piraeus on the outskirts of Athens, as well as English club Nottingham Forest.
The reasons for funding a major sports team can change from person to person. Obviously, as with any investment, the ultimate goal is usually to make a healthy return: when it comes to sports teams, the popularity of a club and the name recognition that it offers can lead to lots of opportunities to monetize, and for a savvy businessperson, the appeal of future financial success is strong.
The emotional side
For others, the motivation may be a little more emotional and personal – because riches and financial reward are definitely not guaranteed. While it might seem from player transfer statistics and so on that there is lots of money to be made in sport, it’s not always the case. For example, in 2010, 22 out of 30 teams in the National Basketball Association (NBA) were in debt, collectively losing $300 million.
If you’re a huge fan of a particular team, taking out a financial stake in that club’s success means that you have a leadership opportunity. You might not make money for a little while, but for many backers, playing a role in a sports team that you have long admired means more than any financial return ever could.
In a few cases, high-profile sports teams are funded not by wealthy individuals but by large groups of people such as fans or supporters. The Green Bay Packers, for example, sell stock directly to anyone who wants to buy it. While there are some perks such as exclusive stadium tours available, there’s usually no opportunity to make a profit from investments like this; it’s for pride purposes only!
How does a sports team make money?
With high name recognition, a fully formed fan base, and huge assets such as stadiums on their side, sports teams have many ways to make money.
A baseline of cash comes in through selling tickets: when fans pay, either per game or per season, the “gate receipts” – as they are known – provide a substantial chunk of income.
However, the real cash is located elsewhere. Stadiums, team shirts, and more all offer exposure that is like liquid gold for advertisers, and this means that sports teams can easily rent out a lot of their blank advertising space for those who want to promote their messages. Everything from placing a company’s logo on the quarterback’s chest to playing video adverts on the scoreboards can be – and is – used to make money.
Many clubs have also started offering out the meeting rooms and dining halls in their stadiums to those who want to hold professional networking events, weddings, and more.
There are many reasons why people might choose to make an investment in the world of sport, ranging from savvy financial aims or even just personal loyalty. With many clubs offering myriad ways to make that investment back through advertising deals and devoted fan bases willing to part with cash to see their team play, there’s no doubting that professional sports teams know what they’re doing when it comes to revenue.