Many assume people own sports teams as a way to make money. That’s true, but not in the usual way.
Most businesses are valued based on how much cash they pump out. But, not sports teams.
Believe it or not, sports teams don’t pump out a lot of cash. Most of the revenue of the sports team goes to the players.
So, how do sports teams make money for the owners?
For their relatively small financial size, they carry a lot of prestige and name recognition. This is great for business, especially the owners’ other businesses, where they make their real money.
It turns out owning a sports team helps owners make more money for their other businesses, indirectly, through the higher profile, and directly as deals are signed in the warm surroundings of the owners box.
It doesn’t hurt that somewhere down the road, if the owner tires of owning the team, there are plenty of other wealthy folks out there willing to pay top dollar for those benefits.
Just remember, that value has little to do with the relative paltry profits from the team and much more to do with how owning the team can be used to grow their other businesses.
Some wealthy folks own teams as a hobby, too. It’s a fun distraction from their boring business lives. It’s like a vacation home or golf club membership. It has multiple purposes. It can be used for leisure and for business.
It’s good to keep this in mind if you find yourself coming to the defense of wealthy team owners by assuming they wouldn’t invest in a sport team in a pro/rel system that could be relegated if the owner doesn’t invest enough in payroll to keep the team competitive.
Trust me, wealthy business owners do not need you defending their interests. They aren’t strangers to taking risks.