The business models of sports organizations
Understanding the particularities of how sports organizations make money
This article aims to summarize the first chapter of the book Sports Marketing and Sports Events. The purpose of this project is to understand and analyse the business ecosystems of sports institutions based on 3 models of organization: the relation model, the reputation model and the fan relationship management model.
One of the particularities of a sports organisation producing sports shows is its ability to attract and federate a network of stakeholders. In order to produce a sports event, there are several stakeholders that are necessary, such as athletes, public organisations, media, private partners, fans, technical suppliers, etc. In this way, part of the resources mobilised by the sports event company do not belong to the company itself, but to the partners or stakeholders. The question of financing thus becomes the main issue for the owners and decision-makers of clubs and events.
In this context, there are different financing methods:
- Training, sale and resale of players or coaches within the framework of a professional club
- The ticket office
- Private or public partnership contracts
- Media rights
Each stakeholder is capable of making a significant commercial contribution to the organisations producing shows.
Before analysing the business model, it is important to know the resource base of a club or event. Resources can be classified according to the contribution of each stakeholder.
“Each type of resource contributes to the business model of a sports organisation. However, at this stage, the question that arises is how to create and maintain these resources in order to build a sustainable and profitable whole for sports organisations. The answer lies in the ability of organisations to combine their resources, i.e. by associating them with each other according to their degree of co-specialisation”.
It is important to note that each resource interacts with another. So, it is not the resource itself that is the most important, but what it gives back to the other resources. For example, athletes/coaches make the reputation of a club and conversely the reputation can attract athletes.
Depending on how well resourced and skilled the clubs are, the managers combine their assets to build their business model. The business model helps to formalize and clarify the strategic choices regarding the configuration and deployment of its assets.
In the context of multi-stakeholder entities, leaders of sports organisations must have the ability to manage assets that they may not always have.
We will analyse three types of supply system observed in the sports business industry according to the resource base and the core business of a club or event.
The Relational Model
This model relies on personal networks to attract funding partners for their club or event. Partners can be communities or private companies. This strategic base configures sports organizations that do not have significant TV rights, so the resource of a company or community proportionally replaces what represents the TV right for a major sports event.
Relational asset makes the brand capital more attractive ->main partnership contracts->economically attracts the athletes and the sports management part ->this sum of money finances the costs of facilities and hospitality in sports venues -> new relations by reputation effect ->new partnerships in the context of the evolution of physical supports associated with the events.
The Reputation Model
The model of big sports events and clubs or leagues financed mainly by TV rights. The configuration is centred on the reputation capital which attracts media partnerships thanks to the sporting exceptionality. Non-media partnerships aim to develop their own brand through media exposure.
This is the model for major events such as the Olympic Games, the Football World Cup, Roland Garros, etc. They attract attention both through their sporting rank but also through media promotion.
The Fan Relationship Management Model
This is the business model that places their physical support at the base of their economy. In the case where the club or event owns and operates its sports arena, the latter is the source of revenue directly (sale of tickets or services and derivative products within the stadium).
The sports organisation establishes a dynamic relationship with its fans and businesses through its physical support. Then media and non-media partners are activated by the media and relational potential. These feed the reputation of the club or event.