Sports fans typically have only a passing interest in their favorite team’s financial state of affairs. They don’t really care if the billionaire owner can afford to upgrade his yacht or whether the front office convinces a sponsor to purchase one of those plush corporate suites.
Sports fans simply are looking for entertainment from athletes who try hard, hopefully win more than they lose and may even occasionally challenge for a title. Soccer, for example, is the world’s most popular sport, yet many professional clubs struggle to meet their financial obligations, according to Stefan Szymanski, author of Money and Soccer. They’ll never win a championship and can’t afford the star players that could really make a difference, but are loved by their adoring followers anyway.
Szymanski’s observations are particularly noteworthy against the backdrop of the UEFA European Championships (Euro 2016), a prestigious month-long event featuring 24 countries that begins on Saturday, June 10 at venues across France. After the tournament, the players will go their separate ways, returning to their respective professional clubs. And the millions of fans who united in the spirit of national pride will resume cheering for their favorite teams.
“Many soccer clubs never win anything and can’t pay their bills,” Szymanski writes, “but professional soccer has never been in better shape.”
Although some teams go out of business, a majority of those that struggle financially stay afloat mainly because “they embody communities,” says Szymanski. “The social significance of soccer clubs to local communities often means that creditors are unwilling to enforce their rights.”
Traditional powerhouses such as AC Milan, Bayern Munich and Manchester United are successful on the field and generate enormous profits. In 2014, for instance, Spain’s famous Real Madrid reported more than $600 million in yearly revenues. Clearly, Real Madrid and the others can afford to pay exorbitant salaries to the best players, ensuring that competitive imbalance remains a painful reality. Though businessmen welcome the opportunity to make money, ownership in sports is often ego driven; glory and prestige represent the grand prize.
The World Cup and Olympic Games are perhaps the ultimate example of egos run amok. Host countries spend millions on infrastructure and stadiums, only to discover afterward that their investment was much greater than originally anticipated and will not pay dividends in the long run.
“Claims that hosting the Olympics or the World Cup is an engine of economic development find little corroboration in independent studies,” writes Andrew Zimbalist in Circus Maximus.