Why own a sports team?

Owning a major sports team is like having nearly self-funding, highly effective marketing machine.

The direct economics of the business are terrible. Players hold the cards and get most of the operating profit from the sport. What’s left on the bottom line is relatively paltry compared to the owner’s other holdings.

But, the indirect benefits of owning a team are much more valuable. It can raise an owner’s profile orders of magnitude more than any marketing spend can buy. The owner’s box is a great place to entertain business partners and ink deals.

It also give owners amazing reach within their communities as many of the well connected vie for luxury suites and season tickets for very much the same reason. These folks aren’t looking to resell these tickets for a profit. They are much more valuable of a currency to give favors, repay favors and host folks.

It’s tough discussing sports economics with folks that don’t understand this because they assume that the bottom line profit is what the owner is in it for.

That leads them to such conclusions as:

Therefore, taxpayers must fund stadiums to make the bottom line more attractive for owners.

Or, the salary caps are to help control costs (player pay) to make it more attractive for owners.

Owners don’t mind us believing that. It gives them negotiation power, which is something successful business people aren’t in the habit of giving up. Why show your cards?

It gives them negotiating power over cities, who think hosting a team is good for their economies, so owners can then pit cities against each other to get them to squeeze their taxpayers the harder.

It also gives them negotiating power over players, or really, over their fellow owners to keep them from bidding up player wages to put together the best teams and running the risk that their self-funding marketing machine won’t be self-funding anymore (i.e. they might have to dig into their own pockets to pay players).

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