Professional Sport Is, First and Foremost, a Business

People love professional sport teams. Rooting for them gives fans a sense of belonging and identification in a wider community. It can also provide escape from the daily grind and help people cheer up by bolstering their self-esteem and pride. When fans’ teams succeed, fans experience the victory vicariously, a phenomenon that makes them feel like they’ve won as well.

Since sports are a positive force in people’s lives that is built on ideas of dedication, cooperation, hard work, and sportsmanship, passionate fans sometimes forget that at the heart of professional sport lies a unique business model.

The basic business plan for professional sport is the same as for other popular forms of audience-driven entertainment. Like movie studios, concert venues, dance companies, theatres, and so on, owners of sports teams have one fundamental goal: to fill the arena with spectators who will root for their favorite athlete, player, or team (or a combination of all three). Just like other live events, this requires securing talent, generating advertising contracts, negotiating and obtaining stadium leases, creating merchandising plans, and a number of additional, highly detailed tasks. For this reason, a professional sports team can employ hundreds of people beyond the athletes and their coaches, whose salaries typically make up only one-third to one-half of the total cost it takes to run a team.

Nevertheless, professional sport is a special kind of business because of the way it reaches out to and treats its customers. While it is most definitely a for-profit enterprise, professional sport serves as a unique community resource whose measurable benefits exceeds estimation. This is because sport franchises build ongoing relationships with their fans that cater to what they want and need most, thereby making the fans feel treasured, yearning to come back again and again.

According to Peter Guber, UCLA Anderson distinguished visiting professor, part-owner of the LA Dodgers, and owner of the Golden State Warriors basketball team, “Fans think they own their team. They think they make a difference in the outcome of the game. So when you own a sports franchise, you’re building a relationship, not a transaction, with your audience.” That relationship completely connects with fans when a team renders the “experience to their audiences in memorable and resonant ways,” which helps them feel like participants instead of mere spectators. Not only do feelings of participation inspire repeat viewings from people who are already fans, but creating “these long-lasting experiences […] can turn [fans] into viable advocates […] to move other folks to join the audience.”

Concern for fans sometimes comes into tension with generating the required profits to keep the team going, however. Jeff Moorad, the owner of several Major League Baseball teams, notes that, “The obligation of ownership creates more of a public trust feeling than running any other business. The ownership group has the responsibility for the long-term viability of the franchise. It has to make bottom-line decisions that are best for them. But the last thing the fans care about is a discussion about profitability. They only want to win.”

Moorad advises that because sports can be unpredictable, financial constraints should not stray far from owners’ minds. “When you’re planning [the budget] for the following year, you don’t know how many fans will make it through the turnstiles, or how many corporate sponsors will step up, or how many suite-holders will buy suites. It’s a bit of an art to balance those challenges and to do it on a projecting basis.” This is why Moorad often ran his teams on the idea that it is “not impossible to run a business in baseball on a break-even basis,” which he admits is bizarre when compared to the business models of other industries.

However, the context may not be as bizarre when the business of sport is compared to sport itself. Even though athletes train for hours upon hours a day for most days of the year, their success is not guaranteed. Nevertheless, even if they lose a game or match, they come to the next one with renewed strength and determination. They recognize that some losses are inevitable, but their drive forward propels them to victory more often than not. The same principles apply to the business of sport. Success is not guaranteed, but practice, patience, and hard work helps owners discern the fine line between keeping fans engaged in meaningful ways and making sure the team generates a profit so it can return to the game the following year, even if that occasionally means merely breaking even.