The basis of any business is demand – when someone agrees or disagrees to pay for the product offered to him. It doesn’t matter whether we talk about physical product or service, the purpose is to meet the consumer’s needs, so that that to create a solid business platform like “needs – manufacturing – product sale.”
However, when we talk about sport industry as business, we face some unique challenges. The problem is that many people, for example, interested in tennis or football are not immediately ready to spend a certain amount of money by paying for sport event. There are countries where all sport competitions are free to watch for many centuries and it is hard to believe they can be monetized.
To convert a sport event from a free spectacle to a business project based on cost-profit model, sports managers have to think pragmatically and creatively at the same time. We are coming to the concept of show business in the sport industry, which is a local system of economic relations, capable of generating a substantial profits. The profit streams are coming not only from the main sport event (the show), but also from some related businesses, like catering and souvenir sales.
There is no doubt that organization of professional sport events remains the main source of income for many industry players like athletes, sport clubs, associations and unions. Without big competitions, collecting a large number of spectators would be a hard task, and without visitors this business model would not work. So, we are looking at professional sport industry as a part of show business.
Here comes very interesting question on the point of sport economics – what are commercially attractive and unattractive sports, why some games are able to generate significant revenues, while others – not. Take, for example, football, hockey or basketball – they are bring substantial income to the parties concerned, while other sport activities are left aside. Is it possible to ignite the interest of the audience to the particular sport just by developing a successful public relations campaign, and applying marketing and advertising?
The answer to this question from the point of view of show organizers and event managers is YES – those “non-commercial” sports can be profitable. However, this often requires not only advertising, good infrastructure and management, but also some changes to the rules of the sport in question, to make it more dynamic and appealing to people.
One key member of the sports business industry is the State, which has its benefits in terms of tax revenues, direct and indirect promotion of sport and a healthy lifestyle. For this reason only, there is a tough competition among many States for the opportunity to host the Olympic Games, World Championships and European Cup. In other words, the State has its share of benefits from every sport event conducted, therefore it is actively supporting its organization.
Another major party in the sport industry is media, which greatly changed the scale of the events, making them truly global and affordable at the same time despite a
great number of spectators that are at a considerable distance from the sports venues.
The involvement of media into sport industry has greatly changed the structure and content of the business processes. In economic terms, we are talking about the “volume scale factor”, where athletes themselves continue to produce the same product, but other parties in the business chain like Media and Event Organizers are bringing the larger numbers of “consumers” – now through the radio, television and Internet. Thus, the costs incurred by the athletes and organizers of sports business remain the same – no increases in the costs of the training process, transportation, technical staff and facilities. However, they are now paying off, not only by the audience who came to the stadium, but also by all other fans using radio, television and Internet.
This creates two major assumptions for athletes and their coaches:
a) their recognition and fame increases dramatically; b) their income increases significantly.
The transformation of professional sport in a meaningful segment of show business means the entry into tough competition with other broadcasters like cinema, theater, circus and other leisure and entertainment institutions. To survive this competition, sports events should be interesting, informative and contain elements of celebration and novelty, which, in turn, requires special training of sports managers and event organizers.