Today, sport is a huge industry with several global brands that generate billions of dollars of revenue every year. Local teams often have international fans, and games are regularly watched by millions of people around the world.
Yet this commercialism is a relatively new phenomenon. Just a few decades ago, following a sporting event meant travelling to watch the game in person, listening on the radio, or reading about it the next day in the newspaper.
Players weren’t paid the large sums they receive today either. In fact, during the early days of organised football in England players were banned from receiving payment for their work. It was thought that having professional players would take away the spirit of competition.
Around the same time, many clubs initially refused to take part in the FA Cup, a knockout tournament that is still played today. These clubs felt that competition between different teams could lead to unhealthy rivalries between teams from neighbouring towns. These concerns were not unfounded as there continue to be isolated cases of this today.
More Reasonable Salaries
Although players did start to receive payment for their time and talents on the pitch, these were not the huge salaries that we see today. In 1957, top players in the English First Division were paid £1,677 ($2,070) per year. Accounting for inflation that equates to around £75,000 ($92,602).
It wasn’t much better in the NFL either. Today, players earn around $2 million a year on average, but in 1969 they were paid $25,000. Even when you adjust for inflation, that’s only around $156,4000.
While these are still fantastic salaries, they’re nowhere near the eye-watering sums players are paid today.
For more context, we can compare the average sports salary to the national average at the time. In 1969, an NFL player earned around four times more than the average US citizen. Today, they make about 50 times more.
Paying the Bills
These growing wage bills have to be paid for somehow, and it’s this huge growth in the business of sport that is behind it. For decades, sports teams made almost all of their money from selling tickets to fans who wanted to watch the game. Successful teams in certain leagues would also receive prize money that would add to this.
However, ticket prices haven’t kept up the pace with salaries so can’t be making up the difference. Although the cost of going to a game is slightly more than twice as expensive today than it was in the mid-20th century, it’s not enough to pay the multi-million dollar salaries.
TV – The Golden Egg
The biggest single factor in turning sport into a multi-billion dollar industry has been television. It has had both a direct and an indirect effect that leagues, teams, and athletes have benefited from.
TV has the power to encourage fans to favour a particular brand over another and buy merchandise to show which team they support. It also makes it possible for fans to watch along at home while they place bets on NFL picks and parlays. This has, in turn, attracted many sportsbook companies to invest heavily in sponsorship of teams and TV ads during games.
Directly, TV broadcasters now pay millions and even billions to buy the rights to show games to their viewers. These are usually multi-year deals that provide guaranteed income to the leagues.
The leagues then distribute most of this money to the teams. How the money is split up varies from league to league, with some dividing it evenly and some giving more to the winner.
For example, in Formula 1 each team is paid a flat fee of $35 million per year. This is supplemented by performance payments that are calculated based on championship position. Some other teams also receive additional payments because of their performance over the last few seasons, while Ferrari gets an additional payment for being the oldest team.
This type of model, which is common among many sports is criticised by some as it creates an unsustainable positive feedback loop. The most successful teams earn more and then can use the additional revenue to hire the best athletes, managers, coaches, and trainers. They can also build the best facilities and promote their brand around the world to build a larger fanbase.
The better talent and facilities then yield better sporting results and, in turn, generate even more revenue based on sporting success. If left unchecked, this could eventually lead to a dwindling interest in the sport as fans get bored of predictable games.
How the Impact of TV Has Indirectly Increased Revenues
Indirectly, the increased audiences that TV broadcasters bring to the sports allows the teams to attract sponsors who want to be associated with their success or want to just to be seen by many people.
The business of shirt sponsorship in sport is widely thought to have begun with a Uruguayan football team in the 1950s, with some European clubs following suit shortly afterwards. In 1967, the English club Kettering Town received a payment from a local tyre company to have its name on its shirts. The English FA threatened to fine the club, and it was quickly removed.
By the 1980s, shirt sponsorships were ubiquitous across the continent. However, it wasn’t until the 21st century that some US sports joined when the Major League Soccer team Real Salt Salt signed a deal with XanGo in 2006.
In 2017, the NBA finally allowed teams to display sponsor’s logos on their jerseys in the form of small patches. It has been estimated that this could generate more than $100 million per year for the teams.
Teams also sell ad space inside their stadiums that can be seen by TV cameras. The stadiums themselves can be named after a sponsor, and most TV broadcasters also sign sponsorship deals for their sports programming.
In Summary
Combined, these factors have all helped to turn almost every popular sport around the world into a major commercial enterprise. As teams have diversified their income streams, they’ve been able to command huge sums of money from other businesses who are attracted to the large audiences that sports attract.
Sports stars are now paid considerably more than they were just a few decades ago. While some dislike that, it cannot be argued that the factors that have driven that growth have turned sports into the commercialised and professional entities that they are today.
