I suppose the only problem with pursuing sports as a business is the fact that the barriers to entry are quite high, otherwise organised sports definitely makes for one of the best business models in existence. I’ll get back to the addressing the high barriers to entry in a bit, but for now I just want to discuss why exactly it is that sports makes for one of the best business models.
One income stream quickly grows into multiple income streams
I’ll use the sporting code of football to discuss this point of one income stream very quickly growing into multiple income streams in sports. Assuming a certain business in the form of a football club gains entry into an association league, no matter how far down the ranks the team is, the mere fact that it’s part of an associated league means it’s already generating some sort of income in the form of a league grant. That basic income can be very, very low and can in fact even be negligible in relation to the team’s operational costs, but it is an income stream nevertheless.
Now as the team goes along and grows, perhaps even racking up some good results which see it progressing up the ranks, additional sources of income start coming into effect, such as sponsorships and prize monies collected for the team either winning competitions outright or finishing in one of the few available top spots in that competition.
Then there are things like TV rights, image rights, replica kit sales, and home venue ticket sales, etc; it can all add up very quickly and turn that original basic income stream into a few income streams.
Derivative markets form around the main sporting event
Sometimes you can create a hugely profitable business around a specific sporting code or event without getting directly involved in the core business or in the sport itself. I’ll use golf this time to highlight my point of derivative markets forming around the main sporting events, bringing to light something like golf betting at William Hill as the perfect example.
While the bulk of the money flowing into the business of sports and essentially driving it comes from advertising revenue, derivative sports markets like William Hill perhaps see even more money passing through them than the money which actually does the rounds in the official sporting arenas. Not everybody watches golf for example and in fact some people think golf is a total bore, but more people than those who actually watch golf are aware of the fact that they can win some good money at the likes of online betting platforms such as William Hill.
Now, getting back to the high barriers to entry into the business of sports, it’s really becoming somewhat of a billionaires’ playground, isn’t it, with all billionaires snapping up big teams left, right and centre and making huge budgets available for those teams to acquire the best talent available. So you’re perhaps better served to entertain the derivative markets around sports if you want in on the action as opposed to say trying to start your own sports academy, club, etc.