Where Does Funding in Sports Come From? Stacy Danley Explains

According to Stacy Danley, back in 2018, 106 worldwide sports franchises were valued at least $1 billion. The global sports market’s estimated worth was $388 billion in 2020. However, even if that number seems staggering, to say the least, it was already down from $459 billion in 2019, thanks to COVID-19 and all the lockdowns.

Fortunately for sports organizations and global corporations, people would never stop being sports fans. In fact, the love for sports is so ingrained in everyone that experts predict the market to be worth $600 billion by 2025, then $826 billion in 2030. Now, this begs the question — where does all the money come from?

The Sources of Funding for Sports Organizations

The income of sports franchises is divided into three categories: fan-based revenue, licensing and merchandising, and advertisement.

Fan-based revenue is the money earned by fans who watch and listen to games, whether in-person, on TV, or on the radio. Stacy Danley explains that specific revenue streams include ticket sales, parking fees, concessions, and broadcast or streaming rights. ABC (ESPN), NBC, CBS, FOX, SKY, and other media companies pay millions of dollars to sports clubs for the right to stream events.

As for sporting venues, the average NFL football stadium can seat 70,000 people with tickets that typically sell for around $150 apiece. Team management may opt to organize non-football-related events like concerts in their stadiums to earn extra money. They may also rebuild their stadiums to add additional seats and concessions. Food and drinks may not generate as much money as other revenue sources, but it doesn’t matter — their margins are still very high.

As for merchandising and licensing agreements, all professional sports teams can also generate money by putting their logos, club colors, and player likenesses on items, allowing fans to purchase team clothing, equipment, and other merchandise to express their support for their favorite teams.

Moreover, teams, leagues, and associations license their branding. Stacy Danley notes the 10-year agreement announced by the NFL and Nike with sports store Fanatics in 2018 as an example of license branding. We may not know how much Fanatics paid for this privilege, but it was a sizable amount when you consider that Fanatics now has the exclusive authority to produce and market Nike and NFL adult products.

As for advertising and corporate sponsorship, corporate marketers know very well how important and profitable the sports business is and are always searching for ways to capitalize on it. That is why sports advertising and corporate sponsorships always have high price tags.

Advertisers can collaborate with one of the sports leagues. They may also work with popular athletes to become an endorser and spokesperson for their brand. Corporate sponsors also pay professional sports teams to include their brands in their products and other merchandise. Some even go as far as to rename their main sporting venues, like stadiums and colosseums, after their business.

Stacy Danley graduated from Auburn University, earning his Bachelor of Science in Adult Education and Master of Education in Administration of Higher Education. He is currently the President and CEO of SLD Sports Management Group, a premiere management consulting, sports, and special event marketing and management company. For more related discussions, follow this page.