‘Can UK Sport do the Business?’ by Jim White, Management Today, January 2012

Sports teams - with football as the highest profile example - are a fascinating topic for those interested in business and financial management.  Why is it that some teams seem to survive against all the odds yet others go belly up?  Why do business people - including many dodgy characters from overseas - want to put money into such a high risk business?  And is it so much different from running any other business?

This article starts slowly and spends far too much time telling us what we already knew - that English football teams are famous in the far reaches of the world - but it then moves on to ask a fundamental question.  How can the English Premier League, with such global recognition, make so little profit and be such a business basket case?  It is not just individual clubs that are badly run, it is the whole sport. For brands with such recognition, the revenue is pitiful - equivalent to a few megastores - and there is no profit; football clubs have not discovered how to convert their global reach into money.  Instead they allow global brands like Nike to exploit their popularity with low cost sponsorship.

However, the status of basket case is not restricted to football.  Even sports that may seem well run - cycling, rowing - are dependent on government subsidy and those that make a small profit - like Rugby Union - are bedevilled by serial incompetence. So it’s hard to find a sport that could be described as a well-run business.

The article does however come up with two exceptions; one from a different country, one from another sport with global appeal.  The exception from another country is the American National Football League which turns over $8 billion a year and makes double figure profit margins.  And the reason is clear; it is run as a league rather than as individual clubs and they work hard to share resources and ensure equal competition, the exact opposite to what happens in the UK where dog eats dog.  And Americans who have bought into Premier League clubs, hoping for the same level of success, have received a rude awakening.

The unique example of global sporting success is Formula One motor racing which continues to make enormous sums of money and contributes large sums to the British economy where much of the development activity takes place.  This is partly due to the fact that it is supported by the motor industry but the other key factor is that it is run by shrewd business people who know how to monetise their assets, even if the race tracks seem like ‘a parade of advertising logos’.

Having made lots of interesting points, the article tends to fade out without a firm conclusion, but it does leave readers with an interesting question.  Should success in sport be measured in financial or cultural terms? It closes by relating that question to this year’s Olympics but leaving the question hanging in the air.  This is an interesting issue that, in my view, should have a wider airing, particularly during times of austerity.  It would be good to see a follow up article developing this point.

Click below to see the original article;

http://www.managementtoday.co.uk/features/1109847/UK-sport-business/