The landscape of financial world order is changing. A peak of capitalism has been witnessed that has embedded a sense of false financial optimism in the mind of current generation workforce . excessive leverage in the financial system,  the increase in materialist demands has channeled a surge of liquidity in the system that hasn’t been seen for a long time. The cost revenue mismatch has shaken the business models of many businesses across the globe. There is increased pressure to optimize revenue from every resource.

Sports for a long time was thought to be insulated from this world chaos. World War 2 had a major impact on international sports events, the reasons were political rather than being financial. Yet the current changing dynamics of world order are putting a financial strain on the business models for many sports.

Primetime mainstream sports events have always commanded a certain premium over other sports events but with increased globalisation & an exponential jump in international viewership, the gap has increased multifold. Sports events such EPL, NBA, F1, Moto GP, that were a rarity for Asian audience today have many Asian sponsors on board. Tata Communications, a leading Indian IT company is the official technology provider to F1 championship. Venky’s from India have bought Blackburn, an EPL club. Manchester City, another leading EPL club, and winner of 2012 EPL championship is owned by individuals with a huge business interest in the Middle East. The new sponsors & stakeholders from Asia have brought in more money for the sports and a large base of new viewers.

This new money in sports has had a cascading effect impacting every possible element of the game. To maintain a parity between revenue and costs, as the former increased from advertising, broadcasting, sponsorships etc, the latter increased in form of player salaries, prize money, administration fees etc. However as the global economy is starting to find its feet again, many high profile advertisers & sponsors are not convinced about their multi-million dollar deals that they had signed to be associated with these prime time sports. The cracks have started to show up.

F1 which has always been the epitome of technology advancement in the automobile is finding it hard year on year to have a stable set of teams running. Global brands such as BMW, Honda, Toyota have withdrawn from the sport. Backmarkers every year struggle to raise funds to put their cars on the grid. The high capital requirement in the sport has lead to the emergence of “paid drive” where mediocre talent is getting a drive while better talent is being left out due to their inability to bring sponsors onboard. Another fallout is controversies like Crashgate, where the team indulged in malpractice to get their better driver to finish ahead of their second driver just to score extra points, earn some extra cash & keep the advertisers happy, just to get the extra revenue into the team.

EPL, the richest soccer league in the world is living with its own demons. The oil money from the Middle East has changed the profile of Manchester City. The team had spent close to USD 930 million in buying players which lead them to win 2012 EPL title. However, the win wasn’t without its own set of controversies. The manner of the win for Manchester city in the final match of EPL 2012 raised doubts about fixing in soccer. Many referees have been caught of indulging in actions that influence the outcome of the game ( As I’m finishing this post, BBC breaks the news of fixing in soccer)

Indian Premier League ( IPL ) created first of its kind of cocktail of sports & entertainment in India. Jaw dropping prices were paid to buy the teams and the players in auctions. Overnight India, had its equivalent of EPL, but not without its set of thriller saga. Lalit Modi being accused of favouring friends & family while managing the show. The late night IPL parties. Overseas players preferring cash-rich IPL over their national duties. Constant rumours about betting & fixing of matches. (“Bookie Gambler Fixer Spy”, a book recently published just adds more fuel to the rumour of fixing in cricket.)

The financial stakes & exposure in sports is putting pressure on those involved to justify ROI ( Return on Investment ). It’s no more about providing an impetus to the sports. The frequent instances around fixing, administration crisis etc all have the undertone of unethical practices & favouritism to benefit the few & help them justify the ROI so that they continue to support the sport.

It is ironic that today we can’t enjoy a mainstream sport without doubting the sudden changes in the course of the game, or a genuine mistake, or a win of the underdogs. The stigma of excessive capitalism has taken away most of the loyal fans & ambassadors of the sports.

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Sports Capitalism – Landscape and Impact

by Samraat Kakkar time to read: 4 min