Analyzing Financial Trends in the Sports Industry
Sport participation has grown at an impressive and steady rate since the 1980s (Hums & MacLean, 2018). Likewise, big time professional and collegiate athletics continue to sign record-setting broadcast deals and generate more revenue each season. In this paper, I have analyzed economic trends and financial challenges is sports across multiple levels of play, including interscholastic sports, collegiate sports, professional sports, and recreational sports. Topics including market growth, economic trends, and long-term forecasts are discussed. As economic challenges facing sports at each level are presented, proven and potential strategies to confront these challenges are also proposed. I conclude this paper with a brief discussion of strategies I have seen be successful in the various levels of sport participation.
Interscholastic Sports
Interscholastic sports are sports played between scholastic institutions, such as elementary, middle, and high schools. Considered to be more recreational than competitive, scholastic sports were originally designed to combat societal issues such as youth delinquency and poor physical health (Seymour, 1998). According to the Center for Disease Control, 57.4% of all high school-aged students participate in at least one scholastic sport (2021). High school sports are not designed to turn a profit for their respective institutions, but rather provide young people with activities that can positively contribute to their educational experiences. Historically, participation in interscholastic sports has been steadily growing. However, the 2018-2019 schoolyear marked the first year that participation in high school sports declined in 30 years (NFHS, 2019).
Much like other branches of public education, interscholastic sports face many economic issues, as these sports can only generate revenue through ticket sales and concessions. Securing sufficient funding for the continual operation of interscholastic sports teams is the primary issue facing this industry. Funding for interscholastic sports is typically achieved through a combination of booster clubs, participation fees, ticket sales, advertisement agreements, corporate sponsorships, crowdfunding, and private donations (Hums & MacLean, 2018). Other issues include finding and retaining qualified coaches, students specializing in just a single sport, and finding volunteers to help with the teams (Hoffman, 2018).
Collegiate Sports
Originally called the Intercollegiate Athletic Association of the United States, the NCAA was founded in 1906 to regulate the rules of college sports and protect students from serious harm (Hums & MacLean, 2018). According to the NCAA, in the 2020-2021 academic schoolyear, 491.255 student-athletes participated in at least one intercollegiate sport (2021). This number does not include student-athletes who participate in the National Association of Intercollegiate Athletics (NAIA) or junior colleges. The NCAA also reported that participation has grown from 244,039 participants in 1982-1983, the first year included in the report, eventually peaking with an all-time high of student-athletes in 2020-2021, with 510,013 (NCAA, 2021). The drop of 12,368 student-athletes can likely be tied back to concessions made due to the COVID-19 pandemic. Regardless of this drop in participation, college athletics continue to generate revenue at record numbers. In the 2019 financial year, generated $18.9 billion (Richter, 2021). These numbers are expected to increase, as media and licensing rights continue to be sold for higher amounts every year (Hums & MacLean, 2018).
Intercollegiate athletics face a variety of issues, most of which can be fit into one of the following categories: initial eligibility, academic progress maintaining amateur status, gender equity, gambling, domestic violence, substance abuse and performance enhancement, and funding (Hums & MacLean, 2018). Ideally, the NCAA and NAIA bylaws are designed to protect student-athletes and the institutions they attend from most of these issues. In conjunction with campus athletic departments, the governing bodies of intercollegiate sports employ rules and regulations that all member-organizations are required to follow. One issue the NCAA and NAIA cannot offer much assistance with, however, is the growing cost of college athletic operation budgets. In the last 12 years, the average cost to operate a Division I Football Bowl Subdivision (FBS) program has more than doubled (Howard & Crompton, 2014). Nearly every collegiate athletic department, across every level of competition, relies on institution assistance and subsidies to operate (Howard & Crompton, 2014). In response to the growing need for financial assistance, college athletic departments are heavily focused on growing revenues wherever possible. These channels of revenue include revenue generated through ticket sales, donor contributions, conference contributions, and NCAA distributions (Howard & Crompton, 2014).
Professional Sports
Professional sports in North America are largely defined by the histories of major four leagues: Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL). While each of these leagues feature diverse histories, trials, and successes, they have been largely stable and sustainable since the 1980s. Another commonality among these four organizations is the way in which they are governed, as they all have a league commissioner who is appointed by franchise owners, a board of governors composed of franchise owners, a central administrative unit that negotiates all aspects of the league’s collective bargaining agreement (Hums & MacLean, 2018).
Year to year, major sports leagues in North America grow increasingly more profitable (Stewart, 2015). Likewise, individual franchise valuations continue to increase, which more than makes up for franchises whose operation budgets exceed their revenue (Stewart, 2015). Some of the primary issues facing these leagues include criminal activity by the players, player and coach misconduct, player safety, player activism, and engage new fans (Hums & MacLean, 2018). All of these issues become economic concerns as they can, and have, lead to fans and consumers forming a negative perception around the league.
Recreational Sports
Recreational sports leagues are those leagues based in a community or on a college campus that offer participation opportunities for people of all ages and skill levels to engage in sports (Hums & MacLean, 2018). Under this definition, most college intramural leagues would be considered recreational sports, as well. Many leagues offered at the community level are provided as a public service, with just a participation fee required for play. These leagues are often ran by a combination of volunteers and hourly employees (Hums & MacLean, 2018).
Funding for recreational sports leagues is usually provided through the community, in addition to participation fees paid by league members. The primary costs facing recreational leagues are employee wages, facility use and maintenance, new equipment, and promotional materials. Wages, equipment, and promotional materials are paid for through municipal departments, while the cost and maintance of facilities is usually handled by the community (Hums & MacLean, 2018). Financial problems arise when a league isn’t supported by participants and when members of a community do not want to fund athletic activities with public funds.
Conclusion
I am lucky enough to have participated, worked, or volunteered at each level of sport participation discussed in this paper. Interscholastic sports were a major part of my life and taught me many valuable life lessons. I also had the opportunity to cover high school sports as a young journalist at the beginning of my career. I then gained experience working in the professional sports realm, again as a journalist, before briefly working with the NBA’s Phoenix Suns’ G-League affiliate. The majority of my experience in sports has come at the collegiate level, working for the Southern Utah University (SUU) Athletic Department and the Big Sky Conference. I also have routinely participated in recreational community sports leagues and now have the opportunity to serve as a volunteer coach for my children’s various athletic teams. These experiences have undoubtedly led me to the conclusion that sports are both an important and necessary part of our communities that are worthy of private and public financial contribution.
Economic hardships, an apparent lack of interest, and budget cuts in communities and public schools are the cause for most financial issues facing interscholastic and recreational sports. Despite these issues, participation at these levels continue to rise. I believe this is because most communities recognize the physical and psychological benefits of sport participation. The financial commitments required to operate teams and leagues at this level are relatively low. To raise the funds necessary for competition, I would appeal to members of the community that they once had the opportunity and likely participated in sports at this level. As more professionals who played community or high school sports grow up and enter the workforce, more potential donors will be willing to contribute.
I am a firm supporter of the belief that most economic hardships facing college sports are caused by college football. The large number of scholarships to field a team, equipment and facility upkeep, new equipment, and traveling up to 100 student-athletes are just a few of the large expenditures unique to college football. Allowing for partial scholarships in football, rather than every football scholarship being a full ride, would help reduce operating costs, although this change could only be made by the NCAA commissioner and board of directors. If I were an athletic director at a university facing tremendous financial hardships, I would explore cutting varsity football before I cut multiple other sports.
It is difficult to take the financial woes of professional sports seriously. Even franchise owners who lose money each year because of unfilled stadiums and luxury tax bills actually make incredible amounts of money in the selling of a franchise. Howard Schultz was widely criticized for citing his inability to generate a profit when he sold the Seattle Supersonics because he sold the franchise for almost twice what he paid for it just five years earlier (Finkel, 2020). That being said, I believe confronting economic issues facing professional sports should be handled through public relations. Generating appositive image of players and a franchise will solve most of the issues stated earlier in this paper.
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Hayden Coombs 