An analysis of factors affecting financial performance in English professional team sports

Abstract

Research activity surrounding professional team sports, is heavily linked to the field of economics and principally the concepts of uncertainty of outcome, competitive balance and profit, utility and win maximisation. These concepts are important as professional sport teams ultimately operate under multiple objectives and, theoretically, to become financially sustainable or make a profit. The two most prominent objectives are generally (1) to maintain a high level of on-field performance and, (2) to maximize offfield commercial business operations in the pursuit of revenue gains. It is widely acknowledged in the existing literature that these objectives are linked but there is no clear consensus as to which is the cause and effect. Normally, in business the fundamental aim is to make profit. However, this situation is not as straightforward in the professional sport industry and in particular sport teams; which make them in particular an interesting and contemporary research focus in the sport management industry. Little evidence also exists which explores the relationships and lessons that leagues can take from each other. Using empirical data, collected from professional sport team financial statements, league tables and the Active People Survey, these papers evaluate the sporting and nonsporting performance of each league (in each of the three sports), the success of ownership structure (in football), the impact on sporting and non-sporting performance of managerial change (in football) and competitive balance (in football). There are three inter-connected dimensions to the research, which provide a coherent analysis of the factors affecting financial performance in the sports identified: first, measuring the performance of individual teams/clubs (sporting and non-sporting); second, factors that affect the performance of individual teams/clubs (ownership and management); and third, the impact of the performance of individual teams/clubs on the league as a whole (competitive balance). These interconnected dimensions allow the identification of where clubs and leagues sit on the theoretical continuum of profit and utility maximisation and, ultimately, the critical factors which lead to positive financial performance. As such, the research portfolio explores a new contribution to knowledge by evaluating these characteristics and how they relate to a professional sport team's strategic direction by examining three popular sports in England, namely; football, rugby union and rugby league.