Building an Empire: What it Takes to Start a Professional Organization in American Sports.
It’s week two of my sports business blog, and this week we are talking about what it takes to not only start and own a professional organization, but how some of the best organizations run their businesses from the top, down.
If there is anything that we can take from last week, it is that the entire sports world pretty much revolves around one thing. It’s typically in the form of green paper bills, and commonly known as money. Billions and billions of dollars are spent each year, and if anybody is looking to get started in the professional sports world, that’s pretty much the amount you will need.
Now, since sports have been around forever, it’s difficult to just go out and start your own professional sports team. However, instead of starting your own sports team, the more common occurrence is when a person simply buys an existing sports team. This method of entering the sports world will cost a pretty penny of course.
Let’s start with North America’s professional basketball league, the National Basketball Association (NBA). The average price for an NBA team in today’s market is about 1.1 billion. However, the Los Angeles Clippers were recently bought for a whopping 2 billion by Steve Ballmer in August of 2014, and an article by Business Insider compared what every other franchise in the NBA would be valued at based on this ridiculous figure. They also compared this inflated price to the actual valuation as according to Forbes.com, and the comparison is shocking. As seen by the chart to the left, each franchise is almost three times over its actual Forbes.com valuation when based on the price paid by Ballmer for the Clippers. If price tags continue to skyrocket like this, then who knows what it would take to buy a franchise in the coming years.
As we all know, these outlandish monetary figures aren’t just in the NBA, they are in almost every professional league in North America. Especially the two other major leagues, the NFL (America’s most popular), and the MLB (America’s past-time). Both of these leagues feature some of the most well-known franchises is all of sports, not only on a domestic scale, but on a global scale as well.
Now, lets take a look at the NFL in terms of monetary value per team. Forbes.com keeps a tab on all the North American major sports leagues and keeps track of how much each team is worth. In the NFL, the highest ranked team is the Dallas Cowboys, who are valued at a massive 4 billion. This figure is actually the highest in all of sports. Yes, that includes every team in the entire world, in any sport. With that being said, the average NFL team is worth about 2 billion in today’s market. This average is almost 800 million more than the average of any other league in North America. However, this incredible gap may decrease overtime with many people in America looking to move away from football and toward other sports due to its violent nature.
Now for the last of the major leagues in America, but certainly not the least, baseball. Commonly known as America’s past-time, this sport has offered entertainment to the public for over a century, and there is one team that rules the business world in baseball. The New York Yankees.
The Yankees are valued by Forbes.com at a very lucrative 3.2 billion, and are also considered one of the most popular franchises in all of sports (similar to the Cowboys on a global scale). Although the Yankees are well and beyond the rest of the league in valuation, the MLB does boast a pretty pricey lineup, with an average franchise being worth about 1.2 billion. Out of all the leagues offered in America, the MLB is ranked 2nd in overall worth, in between the NFL and NBA. Now that you understand whats its going to cost just to get involved, let’s take a look at how everything works.
Now, considering we are looking at sports in a business sense, lets throw out the word sports for the time being. All of these franchises and organizations are all businesses. They have established a chain of command amongst their organization to create an effective way to carry out their business.
There are many different ways to go about the chain of command in business and you will see many different examples when looking at the different sports organizations. However, there is always one person at the very top, and that is the owner. Now, the owner clearly oversee’s the entire operation in order to make sure it runs smoothly, but they may also feel that they need to take extra power. For example, Dallas Cowboys owner Jerry Jones is not only the owner but he also acts as General Manager and Head of Football operations, this basically means that he is calling all the shots in the off the field negotiation.
So after you have the owner, you need to have somebody to run the organization to carry out the owner’s wants and needs. This is the position commonly known as General Manager. The general manager is essentially the CEO. They deal with all the off the field problems and negotiations, as well as working above the head coach and players. The General Manager is also normally the head of that given sports operations, which means they deal with trades, contracts, and other sport-related decisions.
After that is where the Head Coach and coaching staff comes in. They do exactly what it sounds like, coach the players and produce an efficient product that will hopefully result to winning games.
Last but not least, the players. The players are the most important part of any sports business because obviously, without players there would be no sport and the entire industry would pretty much be irrelevant. All of these pieces working together in harmony are what make the most successful of sports organizations.
Next week in my sports business blog series we will be taking a look at the process in how these organizations acquire their talent, the players, in an article titled “Buy or Sell.” Stay tuned…