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Arkansas State University

Learn About The Financial Side of Sports

One of the most fascinating courses in the Arkansas State University Master of Science in Sport Administration online degree program is Sport Finance and Budgeting. It covers the fiscal and budgetary control of professional and amateur sports organizations. Topics include public sport facility financing and ownership, financial analysis, and feasibility and economic impact studies. In exploring these areas, students learn to analyze the financial challenges and strategies of professional and intercollegiate sports.

Sports organizations are wide ranging, from public parks, recreational facilities and leagues to private golf courses and tennis clubs; from sporting goods manufacturers to sports media networks; from collegiate teams to professional franchises. Opportunities abound in the public, nonprofit and commercial sectors, and each requires an understanding of its unique financial structure.


Sports is a multibillion-dollar business, so no wonder top athletes are among the highest paid professionals in any industry. Sports was not always so lucrative. In the early- to mid-20th century, many athletes played for their leagues as second jobs, earning a few hundred to a few thousand dollars per year.

Today’s athletes in the NBA, NFL, MLB and NHL earn millions of dollars a year on average. Contract figures for the superstars are high: Nolan Arenado of the Colorado Rockies (MLB) earns $32.5 million per year on a $260 million contract. Steph Curry of the Golden State Warriors (NBA) makes $40 million per year on a $201.2 million contract.

For all of this compensation, teams get more than just the play on the field from their players. Contracts include language about ownership of the athlete’s image for marketing purposes and rights to their participation in business and philanthropic activities.

Salaries are only the beginning of today’s complex contract structures. There are guaranteed portions as well as “outs” for teams to cut a player before the full term of the contract. There are also anti-trade clauses and options for teams to exercise additional years at a predetermined price.

Salary Cap

The salary cap in the NBA, NHL and NFL serves two primary purposes. It helps ensure parity so that fans in cities across the country have an opportunity to see their teams compete for championships. In baseball, where there is no salary cap, small-market teams typically spend a fraction of what larger market teams spend and essentially serve as a farm system for the teams perennially in contention.

The cap also keeps free-market competition for players from eroding owner profits. Without a salary cap, the leagues likely would operate on thin profit margins and be unable to accumulate the savings needed to survive a labor stoppage  — or a pandemic — that shuts everything down for a season.

Collective Bargaining

The first collective bargaining agreement in U.S. sports history was signed between the Major League Baseball Players Association and MLB management before the 1968 season. Today there are powerful players unions in each major professional team sport — the NFLPA, NBPA, NHLPA, WNBPA, MLSPA and PHPA — that protect the rights and welfare of athletes. Prior to this monumental achievement, owners could amass vast profit while sharing little with the athletes who risked their bodies and drew the fans.

Collective bargaining enables the players union to negotiate with the league owners on a variety of rules governing the league. These include the percentage of revenues to be allocated to player salaries and benefits, medical coverage and retirement plans; the level of salary caps imposed on teams; player free agency requirements; player safety issues; player drafting provisions; and disciplinary rules and game rules.

The result of the process is a set of parameters within which the leagues operate. Neither side should gain an unfair advantage, because both sides have representation and both have leverage, which includes player holdouts and league lockouts.

These are just three of the many financial concepts in the wide world of sports. Though they are among the most widely understood, there are plenty more that are equally worth exploring.

Learn more about A-State’s M.S. in Sport Administration online program.


Business Insider: The 28 Highest-Paid Players in the NBA for the 2019-20 Season

For the Win: The 15 Richest Contracts in Sports History, Ranked

Money Smart Athlete: Collective Bargaining Agreements in Sports: How Do They Work in the United States vs Europe?

SB Nation: Years Ago, Marvin Miller and the MLBPA Changed Sports Forever

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