Like any business, generating income is a constant preoccupation for sport administrators. However, unlike businesses in other industries, the need to generate income is NOT primarily motivated by a desire for profit but rather a greater desire to improve sporting performance. Greater income allows clubs/teams to attract better coaches and players, improve sporting facilities and/or purchase better equipment to improve results.
Sports differ greatly in their ability to generate income despite there being little difference in the level of passion of the consumer for their preferred sport product. The main factors that determine how well a sport can generate income include:
The first of these factors, entertainment value, is the main determinant of income generation. All sports are pursued passionately by their own participants but some sports have a mass appeal and are avidly followed by people who do not participate at all. This gives the sport an extra dimension that attracts the media and results in a level of consumption (as spectators) that is far greater than the actual number of participants.
At different levels within the sport industry there are significant differences in the way that organisations generate income. Indeed, there is also a great disparity in the income generation capacity of different sports.
At the highest level, sports with high entertainment value will generate a high proportion of income from:
At the highest level, sports with lesser entertainment value will tend to generate a high proportion of income from:
High entertainment value sports that are able to generate substantial income at the top level are often able to channel funds downwards to organisations at the grass roots level. This improves the recruitment and development of players and enables grass roots programs to flourish. But sports that have lower entertainment value generally need money to flow from the grass roots upwards to assist in the funding of the national body.
At the grass roots level, sport bodies tend to generate income from:
Typically, the generation of income by grass roots organisations is tied to the 'throughput' of participants. At times when the number of participants is increasing, the organisation will enjoy relative prosperity and improvement in the quality of sport delivery. However, grass roots organisations can suffer a change in local demographics over time that will threaten its existence.
Irrespective of periods of growth or decline, the amount of income generated by grass roots organisations is often insufficient to meet all costs of the desired quality of sports delivery. There are always reasons for management committees of sport organisations to be very reluctant to increase fees and charges for organisation members. As a result, some aspects of good sport delivery management go unfunded such as the maintenance of sport facilities and the training of volunteers and staff.
There are also small businesses in the sport industry to be considered. Such businesses include privately owned sports facilities that employ multiple employees and micro businesses that provide a small income to owner/operators who work on a part-time basis to provide service to the sport industry.
In general, small businesses in the sport industry earn income through:
Sport bodies, at both ends of the spectrum, can and do fall into insolvency and bankruptcy. There are plenty of pitfalls to snare sport owners and administrators particularly when there is a tendency to believe only good things will happen. One of the most typical causes of financial problems occurs when administrators are over optimistic in their assessment of future income. The was the case with Leeds United Football Club in England. In the latter half of the 20th century, the club had three times won the title of English Football League Champions and maintained a top 5 position in many other years. But a series of business decisions, particularly the taking out of large loans hedged against future income from the UEFA Champions League that never eventuated, saw the club go into administration.