5 Ways on How Pro Sports Teams Generate Revenue

Picture Source: Freepik.com

By Zila Mbekela

Professional sports teams are generally considered to be non-profit organizations, and while to some extent this maybe true, in the modern era, pro sports franchises, teams and organizations are now finding multiple ways of generating income. Let's take a look at five ways of some money making strategies that teams apply in order to boost their bank accounts. (Bare in mind that this list is random and in no particular order):

Ticket Sales

Ticket sales have been the cornerstone of how pro teams make money. Watching the games live has been around way before teams

ever got on television. Selling tickets was as lucrative then, as it is now. Nothing has changed! A packed stadium, full of loud cheering fans with a capacity of over 60,000 is no small feat. The explosive energy at live fixtures is something that is unmatched and that whole experience along with the buzz-is what keeps the fans buying tickets and coming back to the stadiums. Watching one's favorite athlete perform live is something every sports fan aspires to experience, even if it's just once! The only downside to ticket sales is the dependence on good results. The harsh reality for teams is that when they lose on a consistent basis, the ticket sale are almost guaranteed to decline as well. However, regardless of that minor risk, selling tickets will forever be considered an effective revenue generating strategy. According to Investopedia, the National Football League(NFL) teams within the league, are able to generate over $10 million USD from sold-out ticket sales.

Merchandising

Every sports fan loves to own something that strongly affiliates them to their favorite sports team. This could be anything from a playing jersey, to a jacket, socks, scarf or even a mug. Professional teams have been very aggressive in leveraging this kind of popularity. They have made sure to expand and create as much merchandise and products as they possibly can. Branded merchandising's major effect is on brand building and brand enhancement. When walking around at a stadium, on gameday, one can clearly see who supports which team based on the amount of merchandise that people wear- in support of their teams. The home teams' merchandise stores are usually flooded with buying customers who want to make last minute purchases before the game starts. With technology playing its part as well, fans are now able to shop for branded merch on the teams' e-commerce websites from anywhere in the world! Within the world of professional soccer/football, Manchester City is currently at the helm with earnings of $47.5 million USD earned from their merch sales.

Television Rights Revenue

In order for TV broadcasters to display the sports content on their channels, they have to conclude broadcasting rights contracts with the governing league of that sporting code. Once the money is paid to the governing league, the money is then distributed to the teams according to their divisions and competitions, as well as based on how many of their matches will be broadcast on the TV networks. The top division teams are usually the ones who benefit the most because of their public demand, along with the major coverage they receive. UK sports publication- Sports Business reported that the Premiere League of England concluded a broadcasting rights contract worth $8.5 billion USD, with Sky Sports, TNT and the BBC Sports Channel.

Streaming From Online Platforms

This revenue stream is the most recent strategy of how teams could leverage the power of the internet. It has also gained perception as the direct competitor of cable television and broadcasting networks. Steaming has the ability to transcend borders without the need for headache-causing paperwork and time-delaying bureaucracy. Nowadays, passionate sports fans and enthusiasts are able to watch games by using apps on their mobile devices, and getting the games on-demand. Based on ticket sales being disrupted a few years ago, the streaming method had to step up because teams were losing millions of dollars. Streaming was accelerated by the disturbance of Covid-19 with the world uncertain about where things were headed. The ability to reach billions of fans at the mere click of an app button-is what makes streaming such a lucrative income generation method for teams. A few sporting federations saw this streaming wave coming and acted ahead of the curve, which enabled them to seize the opportunity when it came. At the 2022 FIFA World Cup competition in Qatar, FIFA reported that its viewership had reached up to 3.2 billion people. (The viewership number also includes TV broadcasts). The majority of the viewership numbers were dominated by online streams from its platform-FIFA +. The football federation offers the streaming platform at no charge, however, they make money through advertising for brands. As per Statista, FIFA generates around $1.42 billion USD from advertising and marketing.

Sponsorship & Advertising

Being broadcast on television creates commercial opportunities for professional sports teams. These come in the form of brand partnerships, sponsorship agreements with brands and advertising services for corporations. Apparel and equipment brands partner with teams in the hopes of gaining maximum exposure and marketing, by being a supplier. This strategy has proven itself time and again to be more than exceptional. When dedicated fans associate a brand with their favorite sports team, they immediately gravitate towards purchasing it. That is one of the behavioral psychological traits behind marketing. Once again, through TV broadcasting and online digital streaming, corporations pay money to have their advertising banners displayed at the stadiums and on the sidelines in the field of play. According to True Impact Media, USA, an advertising banner at a pro baseball match doesn't cost less than $50,000 USD. This income generating strategy has a proven track record of success for teams around the world. It reiterates the power of brand collaboration!

Sources:

Investopedia

Sports Business

Statista.com

True Impact Media, USA