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$port$ – The Money Behind Sports

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A Comparative Look at Sports Revenue, Salary and Ratings

sportsI’ve mentioned before that I love sports, and I have a big interest in the money behind sports.  The various leagues have vastly different guidelines on how teams spend, and therefore how teams pay their players.  You might think that the popularity of the sport would be in direct relation to the money involved – not necessarily the case.  I’d like to focus in on a particular professional league from various sports.  The numbers I use may not transition to all leagues for the sport of course.  The factors I’m going to tackle are league revenue, league payroll and viewership.

Premier League – Football (European)

Premiere League is the biggest English football league, and is home to some of the most valued franchises in all of sports.  Football is also considered to be the most internationally popular amongst the major sports.  The reason for this is mostly economical; the cost to play football is next to nothing.  You need a couple of nets and a ball.  The nets can be anything from a couple of trees or rocks, to a standard net.

Revenue

The Premier League generates more revenue than any other football league in the world.  The revenue including television rights is over $4billion dollars a year amongst the 20 teams.  The top 2 revenue generating teams are not even part of the Premier League (Real Madrid and Barcelona top the list).  Obviously certain teams are bigger earners than others. In the 2013-14 season Manchester United generated $566 million whereas Cardiff City brought in a “lowly” $108 million.  Membership in the Premier League changes year to year which makes trending numbers tricky on the low end teams.

Payroll

The payroll for the teams varies wildly between franchises.  Chelsea for example had a payroll this past season of $442 million.  Swansea by comparison came in at $63 million.  The Premier League does have some controls on team salaries, but those controls are limited to the amount of TV revenue a team can spend on salaries.  Sponsorship deals, game day revenue and merchandise can add to the payroll causing a huge disparity in what a team is paying back to their squad.  The league’s highest paid player (Wayne Rooney) makes about $17 million a year.

Ratings

In terms of viewership – the Premier League reaches 3 billion viewers in 225 countries.  That is almost half of the planet, an incredibly impressive reach for a league based out of 1 country.  As I move through the other leagues you’ll really get an idea of just how impressive that is.

MLB (Major League Baseball)

Major League Baseball doesn’t have the global presence of the Premier League.  Baseball is the great American pastime and has some of the most storied franchises around such as the New York Yankees and the Chicago Cubs.  It is also the oldest of the North American professional leagues starting in 1876.

Revenue

Despite its smaller reach, the revenues don’t seem to suffer one little bit.  In 2015 the league brought in $8.4 billion – more than double that of the Premier League.  In fairness, the league has 10 more teams than the Premier League.  Similar to the European Football juggernaut, the revenue by team is quite broad.  The Yankees top the list bringing in $516 million while the Rays in Tampa Bay came in at 193 million.

Payroll

Much like the Premier League, MLB does not have a hard salary cap so teams can essentially buy talent if they have the financial backbone to do so.  Teams do have a soft cap of $189 million, however they simply need to pay a luxury tax if they exceed that number.  In 2015 for example the LA Dodgers had a team payroll of $227 million exceeding the soft cap by $38 million.  The percentage charged for this tax is based on how many consecutive years the team is over the cap.  The first year the team is charged 17.5% on the amount they are over, after 4 years that percentage goes up to 50%.  The money goes into league development, player benefit fund and to sponsor start up leagues in other countries.  As far as the highest paid player, starting pitcher Clayton Kershaw has that distinction making just north of $32.5 million dollars a year.

Ratings

Where the MLB falls short is viewership, due mostly to the shorter reach of the sport on the global stage.  Baseball is huge in North America, big in Central America and has a significant following in Japan.  That said the global viewership barely tops the 1 billion mark.  That is still a large number of people, but pales in comparison to European football.

NBA (National Basketball Association)

Another sport that is easily accessible to people of various economic abilities is basketball.  Similar to European football, equipment is pretty insignificant.  You need a ball and at least one net, ideally two.  Nets can be found on most playgrounds, in schools and community centers.  Originally the net was a peach basket (hence “basket” ball).

Revenue

Revenue for the NBA also outranks that of the Premier League, but still falls short of that of the MLB.  In 2015 the league brought in about $5.2 billion with the 30 franchises.  The Knicks and the Lakers account for just over $300 million each, while the Bucks in Milwaukee and the Philadelphia 76’s made just over $125 million each.  With American dollars backing the league, an expansion into other markets may catapult this league to the top since it is so accessible, but for now it is middle of the pack.

Payroll

The NBA also has a luxury tax system for exceeding the soft cap; however that money gets passed on to teams that are under to create more parity in the league.  For the 2014-2015 season, the cap was set at $63 million – however it has grown significantly in the last couple of years up to $97 million for the 2016-2017 season.  The extra room works well for Cleveland, where LeBron James commands almost $31 million a year.

Ratings

Viewership is also on the rise with the NBA, it is highly touted as the fastest growing professional league in terms of revenue driven vastly by viewership.  Currently viewership is just over 1 billion, much like baseball but that number has grown and continues to grow significantly from year to year.  The increased popularity of the sport is particularly impressive in South Asia, Europe and China.

NHL (National Hockey League)

Hockey is my passion, but in terms of money the NHL is the smallest I’m tackling in this blog today.  Unlike European football, basketball and arguably baseball – hockey is not very accessible.  For one thing, you need ice which is pretty difficult to come by for a huge number of countries.  Secondly – the equipment to play the game is extensive and expensive.  Pads, skates, stick – big bucks are involved which makes the sport less relatable on the global stage.

Revenue

The NHL is the only league on my list today that brings in less revenue than the Premier League, despite being based in the economic powerhouses of North America.  While league revenues have grown significantly in the past ten years or so, they still fall short of the $4 billion mark.  The league currently has 30 teams, however starting in the 2017-18 a 31st team based out of Las Vegas.  The league leaders are the New York Rangers, who took advantage of the renovation of home arena Madison Square Gardens to haul $229 million in revenue.  The lowest revenue team is the Florida Panthers who muster up annual revenue of only $93 million.  For reference, that isn’t enough to hit the salary cap of an NBA team.

Payroll

The NHL has a hard salary cap – meaning that a team cannot exceed a certain payroll regardless of how much money the team has.  The salary cap is determined annually and is based on the performance of the league.  For the 2016-2017 season the salary cap is set at $73 million, and teams must reach a salary floor of $54 million.  That means that the Panthers must spend at least 58% of their total revenue on players.  The rest goes to operating expenses, coaching and management staff salaries, etc.  The league does have a revenue sharing program as well which essentially charges the profitable teams to keep the less profitable teams afloat.  Players are also capped off at a percentage of the total salary cap, no player can make more than $14.6 million for this season – with the highest paid player being LA King Anze Kopitar at $14 million.

Ratings

The NHL viewership is contained mostly to North America – since other hockey powerhouses like Russia have their own professional leagues to support (KHL).  The issue is that there is so much competition for viewership in North America with baseball, basketball and of course the behemoth that is the NFL which I’ll tackle next.

NFL (National Football League)

I have saved the biggest for last.  The NFL is the league that all other leagues are measured against.  Much like hockey, American football is not very accessible on the world stage.  Player safety demands that a huge amount of equipment is necessary; you can’t just play out on the street without risking serious injury.

Revenue

Regarding revenue, nobody comes close to the NFL.  The league, with 32 active teams, generates over $13 billion a year.  Massive stadiums, huge TV contracts and sponsorship deals command huge amounts of money.  The Dallas Cowboys bring in the most money consistently, with a 2015 revenue of over $650 million.  Even the lowest money maker, the Buffalo Bills bring in a whopping $296 million.  In comparison to hockey, that means the lowest earning team makes more per year than the top hockey team in the NHL.

Payroll

Just like the NHL, the NFL has a salary cap though with slightly different terms.  The cap number is quite a bit higher than hockey though, with teams limited to spending $155 million.  Looking at the revenue, even that numbers seems low.  Teams are however permitted to carry over some cap room to the next season with certain provisions.  The Jacksonville Jaguars for example have a cap space of around $190 million for the 2016-2017 season.  Andrew Luck, at just over $23 million a season makes the most on a single player basis as the quarterback for the Colts.

Ratings

TV contracts definitely drive the revenue of NFL teams, with 80% of American TVs tuning in to watch a game at some point.  NFL games make up the almost half of the top 50 shows, and is number one during all 17 weeks of the season.  Cracking the international stage may be a bit of a struggle for the NFL, despite successful exhibition games in Europe recently.

The Instant Replay

The biggest league in the world by revenue is obviously the NFL, again – nobody else comes close.  When we talk about sport finances, the league is head and shoulders above everyone else.  There is a reason why a 30 second Super Bowl ad costs a company over $5 million.  What is interesting is that because of the salary cap system employed by some leagues, it is most profitable to be a baseball player currently.  That being said, they also play significantly more games than any other athlete – 162, the next highest being 82 for NBA and NHL.

It is also interesting that with the NHL being the exception – the most watched league generates the least amount of money.  If only the Premier League could tap into those lucrative TV deals, the numbers would be incredible.

“Nothing surprises me any more in the NFL” – Tom Brady

What interests you in terms of the money behind sports?  Please let me know below.

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