Academic journal article Journal of Sport Behavior

Some Economic Considerations of Professional Team Sports

Academic journal article Journal of Sport Behavior

Some Economic Considerations of Professional Team Sports

Article excerpt

The economics of professional sports is fascinating to both the general public and the sport scientist (Kahn, 1992; Scully, 1989). Although sometimes confusing, arcane, and not completely comprehended, it is generally of interest. Whether one is talking about soaring players' salaries, free agency, teams threatening to leave cities unless more lucrative arrangements are made, the gross national sports product (Sandomir, 1989), salary caps, billion dollar television pacts, multimillion dollar losses reported by anguished owners, arbitration hearings, player strikes, owners' lockouts, and facsimiles, one thing is certain, the economy of sport attracts the public's attention (Sage, 1990; Noll, 1985). The often-quoted aphorism, "sports is too much of a game to be a business and too much of a business to be a game" continues to pique our curiosity and stir our spirits because the nature of corporate sport elicits strong emotions. Furthermore, professional sports do not operate in a social and economic vacuum but are very much affected by the social, political, and economic atmosphere of the larger society.

In this empirical inquiry we focus on the sources of revenues and expenditures using the most recent data for the four major North American professional team sports. The data presented enable the reader to "see" where the money comes from and where it goes to operate a professional sport franchise. Importantly, it enables one to compare and contrast the streams of revenues and expenditures from one major professional team sport to another. Although this is a descriptive study, it is meaningful in compiling the most recent data available and presenting it in an easy to understand manner.

Method

Data published by Financial World (Ozanian, 1995, May 9) were adapted for use in this analysis. The unit of analysis is the team. For all 109 major sports franchises (28 in football, 28 in baseball, 27 in basketball, and 26 in hockey) a data file including the following variables was created for the 1994 [1] season (and playoffs where applicable): (1) franchise, (2) sport, (3) gross gate receipts (excluding sales taxes), (4) media revenues (including television - cable, national, and local - as well as radio), (5) stadium revenues (including concessions, advertising within the venue, parking, suites, and luxury seating), (6) total revenue including categories (3) through (5) as well as licensing and merchandising figures not included in (3) through (5), (7) player costs (including bonuses, insurance, deferred payments, workers' compensation, and pensions), (8) non-player expenses (including travel marketing, administrative, media, and venue expenses, but excluding noncash charges, interest expenses, and payroll taxes), (9) operating expenses combining player and non-player expenses, (10) operating income (total revenues minus operating expenses), and (11) franchise value (based upon the previous two years' average revenues).

Findings

Our descriptive findings are divided into two major headings: (1) the four sports combined, and (2) each sport treated separately. Variables (3) through (11) listed above are systematically examined. Statistical data are reported in millions of dollars unless otherwise indicated. To more fully understand the nature of these variable distributions, summary statistics of central tendency, variability, and form for each univariate distribution are reported. Both the mean and median (shown in parentheses because the data are skewed in virtually all instances) are reported as measures of central tendency and the range (shown in parentheses) and standard deviation as measures of dispersion. For ease of comprehension a generic organization for the presentation of findings is followed: first, the revenue streams; second, the expense sources; third, the "bottom line" or operating income; and fourth, the franchise value.

The Four Sports Combined

Mean (median statistics are in parentheses) gate receipts, media revenues, stadium revenues, and total revenues amounted to $20. …

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