Tom Mayenknecht: Who have been the biggest winners and losers in the business of sport since the turn of the millennium?
The 1960s marked the first real turning point in the commercialization of sport, but never has a period of financial growth, dynamic change and technological upheaval been as significant as the first two decades of the 21st century. Much of that has happened in the 15 years that we’ve evaluated and discussed the bulls and bears of sports business, including in this corner.
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The Sport Market made its debut as Canada’s premier sports business radio show over the weekend of Super Bowl XLII, the memorable game featuring David Tyree’s “Helmet Catch,” an extraordinary game that upset Eli Manning and the New York Giants a 17-14 Victory over Tom Brady and the New England Patriots at what is now State Farm Stadium in Glendale, Arizona. The championship game was one of the biggest upsets in sports history and thwarted the Patriots’ plans for a perfect season. It kept the 1972 Miami Dolphins as the only NFL team in history to come to and through the Super Bowl undefeated. To date, this achievement has not been achieved.
American Idol’s Jordin Sparks sang the national anthem at Super Bowl XLII, the late Tom Petty and his Heartbreakers were the halftime show, Marv Albert and Boomer Esiason did the radio show for Westwood One and Joe Buck and Troy Aikman – now from Monday Night Football on ESPN and TSN – dubbed the game for FOX Sports, the network holding the rights this weekend, 15 years later.
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A 30-second Super Bowl commercial, now $7 million, sold for $2.7 million in February 2008. That means more than doubling costs – and revenues – in just 15 years.
With an average US audience of 97.5 million on FOX, that game has been the pinnacle for the largest annual event in North American esports to this day. It showed how far professional sports had come since the Cincinnati Red Stockings were the first of the original pro baseball franchises formed more than 150 years ago in the late 1860s and early 1870s.
In the early 1900s, professional football, hockey, and basketball began under the auspices of the predecessor leagues of the NHL (officially formed 1917), NFL (formed 1920), and NBA (born 1949). Football really took off with the NASL in the 1970s, more than a century after the first professional clubs were formed in Europe in 1857 (Sheffield FC and the soon to be formed English Football League). The PGA of Golf was officially established in April 1916 but did not really begin to dominate the game until the late 1950s.
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The 1960s were more than a cultural revolution. They ushered in the era of professional tennis and the rise of men’s Pro Tour golf, both of which had a tremendous impact on the way the Big Four team sports did business, particularly in terms of corporate sponsorships. In many ways, it was Arnold Palmer and Mark McCormack, founders of global marketing agency IMG, who literally invented the modern version of sports business in 1960.
Palmer and Arnie’s Army were leaders in endorsements, licensing, and advertising. IMG then signed Jack Nicklaus and Gary Player and the professional revolution had really begun. So has the rise of television sports, which has been inseparable from the rising tide of monies being invested in professional sports. Recognizing the opportunity for athletes to outperform their own salaries or prize money through advertising revenue, McCormack was truly the father of sports marketing.
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By 1968, the “open era” of professional tennis was transforming the sport in North America and around the world. IMG was also involved there – on a large scale. Professionalism continued to advance in Europe in the 1960s, and in 1963 the German Bundesliga was founded.
By 1980, dasher board signage had replaced the all-white gangs in arenas hosting NHL hockey clubs. Forty-three years later, every inch of the NHL’s rinks – and ice rinks – is covered in branded advertising, with rotating digital signage now the trend of the day. Add giant video boards and perimeter video boards, games are played within the cornucopia of brand marketing.
Helmet decals in the NHL and jersey patches in the NBA and MLB are now becoming commonplace, including in San Diego where the Padres were the first to announce a regular-season jersey patch deal. They will be wearing Motorola in the coming season. Heritage brand Boston Red Sox will carry MassMutual for $17 million a year. And just today, the Houston Astros became the latest MLB franchise to announce a lucrative jersey patch deal with Texas energy company Oxy.
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The digitization of rink advertising and the proliferation of corporate patches and decals are just two of the trends that have made the last 15 years game-changing on multiple fronts. The question arises: Who have been the biggest winners and losers in the sports business since the turn of the millennium?
bulls of the new millennium
Franchisee: The major North American professional sports leagues have made big money, even if their balance sheets continue to show losses. That’s because their equity has grown more than eightfold in 20 years. They clearly own the hottest properties in the world. The poster child for the explosion in company value is Jerry Jones, owner of the world’s richest franchise, the Dallas Cowboys.
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He bought the Cowboys in February 1989 for $150 million. They were worth $2.65 billion in 2008 (the first to cross that threshold). They are now valued at $8 billion by Forbes magazine. They are also the world’s first $1 billion annual sports franchise. When The Sport Market launched in 2008, there were a dozen teams around the world valued at $1 billion or more. Fifteen years later, there are more than 100 franchises that are part of the Billion Dollar Club.
athletes: In the beginning, ownership completely dominated the macroeconomics of professional sports. Even in the 1960s and 1980s, some athletes made little more than the sportswriters who covered them. That has changed a lot. Team Governors still hold the hammer of ownership and have redeployed their original investments many times over the past few years.
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But the new normal now sees players in the major North American leagues splitting their earnings essentially on a 50-50 basis. This has made most major league athletes instant millionaires. In the NFL, recently retired Tom Brady made $350 million during his playing career and will make more than $375 million if and when he joins the FOX Sports NFL broadcast booth in 2024. And that doesn’t count his endorsements, many of which will live on into retirement.
Coaches and Executives: Over the past 15 years, the earning power of head coaches, general managers, team presidents and CEOs has changed fundamentally, not to mention the commissioners of the five major North American leagues. When Sean Payton signed as head coach of the Denver Broncos this week, he did so with a contract that will earn him $18 million a year, surpassed by the New England Patriots’ Bill Belichick ($20 million a year).
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Salaries have increased across team operations, particularly in managerial positions, but the real exponential growth has been since the year 2000. It has been made possible by rising media rights, larger corporate partnerships, the royalties stemming from record sportswear sales and, of course, the new revenue streams related to single-event sports betting, one of the biggest storylines in sports business in 2023.
Bears-of-the-new-millennium
Fans of Misplaced Franchises: Relocations are the dark side of professional sports. Just ask football fans in St. Louis who lost the Rams seven years ago…the same Rams who won the Super Bowl last year. Whenever it happens, it hurts the most among the fans who have an emotional bond with the team that has moved on. Vancouverians are still bitter about how the late Michael Heisley and the NBA moved the Grizzlies to Memphis in 2001.
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There are still fans of the old Quebec Nordiques who wistfully wonder if their Center Videotron, an NHL-class arena, will ever be home to Nordiques 2.0. And imagine you were a sports fan in Oakland. You’ve seen their Golden State Warriors move into the Chase Center in downtown San Francisco and the Oakland Raiders became the Las Vegas Raiders. How long before Major League Baseball’s Oakland Athletics move to Las Vegas? That would mean a complete loss of the professional sports infrastructure that used to help define the working-class city. Remember, the NHL’s Oakland Seals (and later the California Golden Seals) were also there as an expansion team in 1967 before moving on.
Ticket reseller: Scalpers used to be the only source of tickets for sold-out sporting events. Now everyone is a ticket reseller – including the season ticket holder himself, of course. Partnerships with TicketMaster, StubHub and others dominate the so-called secondary market. This does not mean that all scalpers have gone out of business; those that remain simply compete in a much more crowded institutional reseller market.
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Athlete Safety: Professional sports are safer than they were 15 years ago, and the rise of comprehensive sports medicine departments on major league teams is a good thing. In fact, one of the defining characteristics of the sports business in the 2020s is that owners are investing more to bring out the best in their elite athletes. But the major North American leagues — and the NFL in particular — still have work to do when it comes to athlete safety in general and concussion prevention and management in particular.