Just about everyone is benefiting from the growth of professional sports. Television networks have been able to increase their viewership and charge more for ad dollars. Professional sports teams are making more money off of television contracts and sponsorship deals have grown. Owners have seen their net worth go through the roof as team revenues increase. Players are receiving millions of dollars in compensation and are becoming multimillionaires. But how much are these groups really making?
IN PICTURES: Top 5 Super Bowl Host Cities
Major sporting events are an earnings bonanza for television networks. Television stations like Fox, CBS and ABC are able to generate large amounts of revenue from the popularity of sporting events.
For example, NBA fans were not the only ones happy that the finals lasted seven games. ABC was as well. A 30-second ad spot cost $400,000 during the Lakers/Celtics final. With 60 slots available per game, that's $24 million in ad sales for ABC.
Equally profitable was Fox. The network had no problem selling out its ad slots for the 2009 World Series between the Yankees and Phillies. Advertisers ponied up $400,000 for each 30-second slot.
And then there's the Super Bowl: the ultimate advertising cash cow. NBC was able to charge advertisers $3 million for a 30-second commercial during the 2009 Super Bowl. Super Bowl ad sales generated a staggering $213 million in revenue for the network. (You may think it goes without saying that Super Bowl host cities benefit from the event, but as it turns out officials have been using some creative math. Check out The Not-So-$uper Bowl.)
A professional sports franchise has the ability to take a millionaire owner and thrust him into the billionaire stratosphere. Former Yankees owner George Steinbrenner is a perfect example. Steinbrenner led a group of investors that paid $10 million dollars to purchase the Yankees in 1973. According to Forbes, the entire Yankees franchise, media properties and enterprises are now valued at $3.4 billion. The group's $10 million dollar investment reaped a remarkable return of 33900%.
Another example is NFL owner Jerry Jones, who bought the Dallas Cowboys in 1989 for a reported $180 million dollars. Jones' investment has grown in value nearly nine times over. Today, the Dallas Cowboys are ranked by Forbes as the second most valuable franchise in all of professional sports with a total value at $1.65 billion dollars. (For more, see For Athletes, Is There Life After Sports?)
Professional sports athletes have seen their salaries explode as revenues have increased. The NFL is the most popular sports league in the United States and players receive 58% of the total revenue collected by the league. During the late '80s, the NFL paid out $2.4 billion to the players in salaries. Today, the players take in just under $5 billion dollars.
NBA players have a similar agreement with players receiving 57% of the total revenue. Contracts over $100 million are now standard operating procedure in the league. Just look at the Miami Heat where LeBron James, Dwayne Wade and Chris Bosh are all making over $100 million each.
Major League Baseball may have the best union, but its pro players get the smallest percentage of revenue back via salaries of the three major sports. Just 53% of MLB revenue is paid out to big league ballplayers.
But don't feel too badly for these guys. If you want to see how salaries have jumped in MLB, just look at the biggest contracts. The highest paid player in MLB in 1990 was Kirby Puckett making an average of $3 million per season. The league's current highest-paid player is Alex Rodriguez making an average of $27.5 million per season. (To learn more, check out the Top 7 Pro Athlete Contracts.)
Nike was bringing in $900 million dollars in revenue before signing a young rookie out of North Carolina in 1984. That rookie turned out to be the greatest basketball player in the history of the NBA and made Nike a sporting super-power. Michael Jordan's popularity and superstar status helped turn Nike into the sports giant that it is today. Now Nike is the largest athletic shoe company in the world with over $19 billion in annual sales.
In addition, without the growth and popularity of professional sports over the last 20 years, where would Electronic Arts be? The video game maker made its name off of its sports division titled EA Sports. This division developed one of the most popular video games ever, Madden Football. Electronic Arts has profited by using the images and likenesses of professional athletes in its Madden Football, NBA Live and NHL games.
Players aren't the only ones smiling when teams reward them with mega deals - so are their agents. Sports agents have become extremely wealthy negotiating contracts for the biggest stars. Superagent Tom Condon has Peyton Manning, Drew Brees, Sam Bradford and Eli Manning as clients. His sports agency has represented seven of the last eight #1 picks in the NFL Draft. According to Forbes, Condon's agency has closed $1.3 billion in deals over the past five years. (These multi-million dollar contracts have haunted the players who scored them, then failed to deliver. Learn more in Top 10 Most Hair-Raising Sports Contracts.)
And Condon is not alone in getting rich off of his negotiation skills. Scott Boras has famously negotiated blockbuster deals in major league baseball for Alex Rodriguez, Manny Ramirez and Mark Teixeira. Arn Tellem has closed big deals for Derrick Rose, Chase Utley and Tracy Grady.
The Bottom Line
As you can see, professional sports have been a cash cow for everyone from agents to owners. The multimillion dollar paydays will continue for all involved as long as no one does anything to kill the golden goose.
Catch up on your financial news; read Water Cooler Finance: Billionaire Pledges and Other Positive Press.