What useful cases can we find in the sports business?
Professional sports is a constantly developing business with billions of dollars in it. People of different professions push forward this huge machine called high-performance sport. Storist has dug into business in sports, how it exists and how people make money off of it.
Brand makes money on brand
Professional athletes are as popular these days, as are musicians or actors. Their names became true brands. It is no wonder that some companies try to benefit from their popularity by offering them endorsement contracts.
According to Forbes, within a year from May 2021 till May 2022, 50 of the highest paid athletes in the world earned $2.97 billion. More than a half from this amount came from endorsement deals.
The top spot in the list of the highest paid athletes in 2022 is held by Lionel Messi. His total annual earnings came up to $130 million, $55 million of them coming from endorsements. In 2017 Messi signed a lifetime deal with Adidas, which gives him $30 million each year.
Apart from that, the soccer superstar has deals with such brands as Huawei Technologies, Mastercard, Pepsi, Lay’s, Gillette. In 2011 Messi signed contracts with AirEuropa airlines, Swiss watch manufacturer Audemars Piguet and Dolce & Gabbana brand.
The second place in Forbes rating is occupied by Lebron James. He made $121 million during a year, only $41 million from which are his on-court earnings. James has a lifetime deal with Nike, which may bring him $1 billion in total. The company issues Lebron’s line of basketball shoes and has sponsored the opening of I Promise school in his hometown Akron. James also stars in movies, which brings him millions of dollars.
Besides, the basketball superstar works with headphones manufacturer Beats by Dre and Blaze Pizza. Moreover, he refused to sign ordinary deals, when a company pays for advertisements and posts on social networks. Instead, Lebron has requested shares in these companies. His initial share in Blaze Pizza was estimated at $1 million. Currently, as the company is called the fastest growing restaurant chain in America, his share is approximately $25 million. Lebron’s share in Beats by Dre is estimated at $30 million.
The third place is taken by Cristiano Ronaldo. He has earned $115 million during a year, $55 million from them coming off-field. His biggest contract is with Nike, which is a lifetime deal that may come up to $1 billion.
Among the companies Ronaldo also has deals with, are Herbalife, Armani, Samsung, Monster, Tag Heuer. He stays at hotels named after himself, flies with Emirates, drives Toyota, uses Castrol oil, eats at KFC, drinks Coca-Cola, plays PES and keeps his money in Portuguese bank Banco Espirito Santo. Cristiano became a partner of Pestana hotel chain and is building four hotels under his brand in New York, Funchal, Madrid and Lisbon.
Masterminds of the large revenues
Soccer and basketball superstars often get such outstanding incomes due to their sports management. Those are people and sometimes the whole companies, which make money off of their famous clients. They negotiate transfers from one club to another, as well as endorsement deals. According to Forbes, the overall value of the current clients’ contracts of the 40 most influential sport agencies is more than $40 billion, which brings them about $2 billion of commission.
These are top three wealthiest people in sports management:
- Scott Boras made over $130 million in baseball. He signed deals for more than $2 billion for his clients. He is a lawyer by training, which helps him in designing good contracts. He is feared and respected by the general managers of all MLB (Major League Baseball) clubs. Scott has 60 players among his clients, whose contracts are worth millions of dollars.
- A soccer player Jorge Mendes retired from playing when he was 30 and discovered a manager’s talent in himself. He has made over $70 million and brought his clients over $700 million. Among the clients of his sports agency are 91 soccer players: Cristiano Ronaldo and James Rodriguez from Real Madrid, Diego Costa from Chelsea FC and other stars.
- The brothers Sam Levinson and Seth Levinson made their careers in baseball. They earned more than $55 million for themselves and around $1 billion for their clients. Business of the Levinsons brothers grew in the last decade on contracts of the baseball players, who had a free agent status. They managed such deals as Jon Lester’s contract with Chicago Cubs for $155 million and David Wright’s contract with New York Mets for $138 million.
Image is more important than victories
However, the list of sports business jobs does not end with athletes and their agents. Even the stars of individual sports, like tennis and golf, have their own teams of managers, lawyers, PR guys, medics and many others. If we consider sports clubs, we have to talk about a separate case of business in sport, which does not always depend on a team’s success.
Club’s financial success is mainly defined by its image and events promotion. Positioning a club in the press as a business enterprise helps appeal to quite a wealthy audience. For instance, the global business elites, whatever teams they might actually support, often gather at the matches of Manchester United, they hold business meetings and even negotiations in VIP boxes of the Old Trafford stadium, which is also known as the Theatre of Dreams. It is not just one of the greatest teams in England, but also a successful business. The club tries to sustain this image, making its huge budget transparent, regularly telling the media about its structure. The club even created its own TV-channel and radio station.
Even if the team is not really successful, games can still bring lots of income – you have to invest in infrastructure and organize a show. The crowd that comes to see games should be interested. The media should give more publicity to the shows. Then the fans will come not only to see the competition, but also for the entertainment. Even those, who are not particularly into sports, will be curious.
A great example is the NBA franchise Minnesota Timberwolves. The “Wolves” didn’t make the playoffs regularly, always being at the bottom of their division standings. However, the arena has often been packed and their merchandise has been selling like hotcakes. Their shows earned a reputation as one of the best in the US, because of frequent TV coverage and enthusiastic reviews in the media.
Sports competitions revenue comes from several sources. Clubs and federations receive income from selling the TV rights, sponsorship deals, distributing tickets and merchandise. The more attention to the event and the higher its status, the bigger money is at stake. The revenue from top events can be up to billions of dollars, which makes sports jobs very lucrative.
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