Question

If a sports team is maximizing their wins, is that the same as maximizing their profits? Explain at least three ways that teams seek to maximize their profits.

b. Using at least 2 teams from the following list, explain how teams can become wealthy even if they do not win all the time.

The World Cup and NBA free agency have dominated the sports headlines this month. Soccer and basketball are global sports with incredible growth prospects, thanks to their international reach. More than three billion people tune in to watch the World Cup every four years. Nike uses NBA stars like LeBron James and Kevin Durant to pitch the wares of the sports giant around the globe.

But despite the global popularity of basketball and soccer, American football is still king on the financial ledger. The NFL lands 29 teams among the 50 most valuable sports teams in the world (only the Bills, Bengals and Lions missed the cut from the NFL). Football ranks well ahead of basketball (8 teams), soccer (7 teams) and baseball (6 teams).

The NFL is still the dominant sport in the world's biggest economy. Thirty-seven percent of Americans picked football as their favorite sport to watch in the latest Gallup Poll. Football is down from it's peak of 43% a dozen years ago, but it still crushes basketball (11%), baseball (9%) and soccer (7%).

TV networks pay billions to satisfy viewers wanting NFL action. NFL teams evenly divvied up $8.2 billion, or $255 million per team, last season from shared league revenue, with TV rights deals from CBS, NBC, Fox, ESPN and DirecTV the bulk of the money. Factor in a salary cap that restricts player costs to 50% of league revenue and NFL owners are minting money with average profits of $101 million per team in the sense of earnings before interest, taxes, deprecation and amortization.

Below is a breakdown of the world's 50 most valuable sports franchises. Click here for more on the top teams.

Rank, Team, Value, 1-Year change (Sport)

1. Dallas Cowboys, $4.8 billion, 14% (NFL)

2. Manchester United, $4.123 billion, 12% (Soccer)

3. Real Madrid, $4.09 billion, 14% (Soccer)

4. Barcelona, $4.064 billion, 12% (Soccer)

5. New York Yankees, $4 billion, 8% (MLB)

6. New England Patriots, $3.7 billion, 9% (NFL)

7. New York Knicks, $3.6 billion, 9% (NBA)

8. Los Angeles Lakers, $3.3 billion, 10% (NBA)

8. New York Giants, $3.3 billion, 6% (NFL)

10. Golden State Warriors, $3.1 billion, 19% (NBA)

10. Washington Redskins, $3.1 billion, 5% (NFL)

12. Bayern Munich, $3.063 billion, 13% (Soccer)

13. San Francisco 49ers, $3.05 billion, 2% (NFL)

14. Los Angeles Dodgers, $3 billion, 9% (MLB)

14. Los Angeles Rams, $3 billion, 3% (NFL)

16. Chicago Cubs, $2.9 billion, 8% (MLB)

17. San Francisco Giants, $2.85 billion, 8% (MLB)

17. Chicago Bears, $2.85 billion, 6% (NFL)

19. Boston Red Sox, $2.8 billion, 4% (MLB)

19. Houston Texans, $2.8 billion, 8% (NFL)

21. New York Jets, $2.75 billion, 0% (NFL)

22. Philadelphia Eagles, $2.65 billion, 6% (NFL)

23. Chicago Bulls, $2.6 billion, 4% (NBA)

23. Denver Broncos, $2.6 billion, 8% (NFL)

25. Miami Dolphins, $2.575 billion, 8% (NFL)

26. Green Bay Packers, $2.55 billion, 9% (NFL)

27. Boston Celtics, $2.5 billion, 14% (NBA)

27. Baltimore Ravens, $2.5 billion, 9% (NFL)

29. Atlanta Falcons, $2.475 billion, 16% (NFL)

30. Manchester City, $2.474 billion, 19% (Soccer)

31. Pittsburgh Steelers, $2.45 billion, 9% (NFL)

32. Seattle Seahawks, $2.425 billion, 9% (NFL)

33. Minnesota Vikings, $2.4 billion, 9% (NFL)

34. Oakland Raiders, $2.38 billion, 13% (NFL)

35. Indianapolis Colts, $2.375 billion, 9% (NFL)

36. Brooklyn Nets, $2.3 billion, 28% (NBA)

36. Carolina Panthers, $2.3 billion, 11% (NFL)

38. Los Angeles Chargers, $2.275 billion, 9% (NFL)

39. Arsenal, $2.238 billion, 16% (Soccer)

40. Houston Rockets, $2.2 billion, 33% (NBA)

41. Los Angeles Clippers, $2.15 billion, 7% (NBA)

41. Arizona Cardinals, $2.15 billion, 6% (NFL)

43. New York Mets, $2.1 billion, 5% (MLB)

43. Kansas City Chiefs, $2.1 billion, 12% (NFL)

45. Jacksonville Jaguars, $2.075 billion, 6% (NFL)

46. Chelsea, $2.062 billion, 12% (Soccer)

47. Tennessee Titans, $2.05 billion, 2% (NFL)

48. New Orleans Saints, $2 billion, 14% (NFL)

49. Tampa Bay Buccaneers, $1.975 billion, 10% (NFL)

50. Cleveland Browns, $1.95 billion, 5% (NFL)

Answer 1

Answer (a): Profit is the crux of every business around the world. In the lure of earning more profits, people have now converted many selfless organizations in to profit minting firms. More so, the sports tournaments across the world have also developed in to a huge profit maximizing mediums. More than the content of the game being played, it is the way of its presentation that matters now, as presentation maximizes profits. In a game, maximizing win and maximizing profit are not the same. Maximizing win would mean that a team and its management would play to win and therefore showcase their ultimate potential as players, irrespective of how much they earn out of the games. However, maximizing profit means that the team or its management will look at the benefit that accrue out of the games they play, and then look as which one is more beneficial for them in terms of more profit: winning the game or losing the game. Now a days, a team does not only focus on the per match fee as their earning source. Many new methods and sources have been set up. Such as, a team can earn more profit by advertising or promoting for a brand, or it can attend any function of dignitaries which also mints a lot of money for them, the team can reach out to public through advertisements and portfolio captures. All these steps bring the players in the teams closer to the public, and the people then, are ready to pay any amount of money to watch these players play. Thus, these team earns a lot of profit.

Answer (b): From the list of the NFL teams given, let us select two teams: Los Angeles Rams and New York Jets. These are two are probably one of the earning teams with $3 billion (3%) and $2.75 billion (2.75%) of their profit share. Now the Los Angeles Rams is equal to many of the other teams in terms of its price capitalization, however, it still ranks below them. Here, the reason for its low rank is because of its low popularity. People go to watch the games of only those teams or those particular players, which they like, and therefore is essential for the Los Angeles Rams players to get closer to the people, so that their valuation increases. The New York Jets on the other hand, does not have any NFL share percentage instead of minting $2.75 billion. This again attributes to their popularity among the local and national consumers. It also reflects that they have not been competing well in the games. Sometimes, more than the win, what matters is how much of a competition that a team can put together for the opposite team. They need to buckle up and start performing on the ground in order to make more profit.