Sports. We all love them – whether we are watching them, playing them or shouting at the TV like we can do any better. While most of us focus on the action itself, we often ignore the huge economic impact it has on the world. Obviously, the players are well compensated, with the ten highest-paid athletes in 2024 raking in a cumulative 1.38 billion USD. The majority of a player’s income comes from on the pitch, with 200 of Cristiano Ronaldo’s 260 million dollars in 2024 coming from his salary for playing football. However, 400 million of these 1.38 billion dollars came from ‘off-pitch’ earnings. This begs the question: how do sports teams and promotions make their money off the pitch? 

Before zooming in, it’s important to realise the scale of the sports business. It is ranked as the ninth largest industry worldwide, with a revenue of 2.65 trillion USD coming from a diversified list of income streams, including, but not limited to merchandise, broadcasting and sponsorship. The sports world is rapidly expanding, growing by $338 billion since 2019, even amidst Covid, which seriously impacted the industry as sports facilities were among the first closed by the pandemic. The sports market, with an expected compound annual growth rate (CAGR) of 4% over the next 5 years, shows incredible promise, not only as a source of entertainment, but as a serious driver of both global and local economies. 

Sponsorships are crucial to making money in the sports space. They provide companies with exposure and customers, drawing heavily on advertisement and branding. It is a massive market in itself, worth over $114 billion in 2024, expected to grow with a CAGR of 8.7% until 2030. With Lionel Messi and Cristiano Ronaldo each having billion-dollar sponsorship deals with Adidas and Nike, and Manchester United signing a £906 million deal with Adidas, sponsorships generate much income for the sports industry. The deal between Nike and Michael Jordan, signed in the 1980s, produced $6.99 billion in 2024, a testament to the long-lasting potential of sponsorship deals. Traditionally, companies like Adidas, Puma and Coca-Cola invest huge amounts into sports sponsorships. However, recently, there has been a shift towards technological involvement in sports sponsorships with the Tokyo Olympics partnering with Intel and Alibaba. Intel provided technological support, with 5G connectivity and real-time data analytics, while Alibaba focussing on cloud computing and e-commerce solutions. Sponsorships provide a constant income source for players, teams and organisations alike, boosting the brand’s sales and keeping promotions afloat in tough times. 

Entertainment is another income stream for sports, with the largest deals coming from broadcasting and media rights. In modern sports, where 99.9% of fans are not watching the games live, having a strong media and broadcasting presence is important for any big sports organisation. Take the NFL, it makes around $20 million per match from TV deals, compared with around $8 million from the live event. With a $110 billion media rights deal lasting from 2023-2033, the NFL has a serious presence in media rights. Broadcasters are fighting for rights, Netflix paying $150 million to air two NFL games on Christmas Day in 2024. The English Premier League’s media rights are valued at £6.7 billion over the next 4 years, marking a shift towards a more digital age, where the media experience is more valuable than the in-person one. 

With the sports merchandise market valued at over $33 billion in 2022 and an expected CAGR of 4.9% through to a final expected value of $50 billion in 2030, sports merchandise goes hand-in-hand with sponsorships. For instance, Barcelona generated over $150 million from merchandise with their partnership with Nike in a single season. The growth of sports merchandise is driven by an increase in sports fans and urbanisation making the online retail industry expand. Urbanisation, compacting more and more people into towns and cities, drives consumer demand for convenience and efficiency. This makes internet connectivity and digital infrastructure more widespread, and with the relative ease of placing an Amazon order, online retail has and will continue to grow in populatiry. Licensed products with logos attract sports enthusiasts, and also enable teams to charge a premium, making sports merchandise a lucrative way for fans to show their allegiance and feel closer to the sport, its players and teams. 

While sports bring in money from off the pitch, what is the impact of hosting sports events on local economies? Hosting sporting events like the FIFA World Cup and the Olympics carries global recognition, significantly contributing to the economy, and is a prestigious opportunity for host cities. The Olympics are interesting in that they cast doubt over the actual value of hosting large sporting events since they often leave the countries with long-term debt and empty stadiums. The last three Summer Olympics before Paris 2024 cost well over $50 billion, almost tripling budgets. Alongside this, the number of cities willing to host has gone down. The Olympic hosting bid, which is non-refundable and how cities apply to host the Olympics, was $60 million for 2024. Toronto couldn’t justify spending this much for a chance to host the Olympics, where they may not have broken even, so they did not bid.  

Despite long-term benefits, like visibility, tourism and aiding local business, short-term costs often outweigh the revenue, with transportation and construction projects often requiring investment that can be difficult to secure. London spent over £7 billion on transportation improvements for the 2012 Olympic Games and only saw around £10 billion in revenue after spending £15-20 billion. The Rio 2016 Olympic Games attracted over half a million visitors, leading to a 4.8% increase in tourism and a 6% rise in revenue, amid one of the worst recessions in recent history. This short-term benefit helped them during a tough time, but with a cost of $13.3 billion and overall economic impact estimated at $6.2 billion, Rio was operating at a loss of $7 billion. New development in transportation systems and sport venues for these events revitalise neglected areas and boost local businesses, but the cost of hosting them often proves prohibitive when compared to the gains. 

Sport is not only a source of entertainment, but a global industry and business that has a significant economic impact both locally and globally. In an increasingly digital age, marked by changes in viewing patterns and shopping habits, the ‘off-pitch’ value of sports is becoming ever more important to the economic success of sports, and with the integration of Artificial Intelligence, Virtual Reality and Augmented Reality technology in the sports space, the coming years promise to be revolutionary.