Hyperinflation in Sports Markets
by Çağlar Genç
Ever since sports have been recognized as a profitable business, the sports market has been rapidly increasing in size. This includes worldwide known sports such as basketball and football. In this article, I will be addressing these
sports by going in detail on how and why the sports market is being affected by hyperinflation. Undoubtedly the biggest sport in the world, (real) football attracts millions of people every game. According to FIFA, over 3.5 billion people watched the 2018 World Cup final that was held in Russia. However, the most profitable part of football is club football. Club football includes huge organizations such as Barcelona FC, Manchester United and Real Madrid. Barcelona FC alone makes up to a billion euros in profit every year.
High levels of interest and fan support have made football a very profitable market for investors. The first player transfer happened in 1893 when Scottish striker Willie Groves transferred from West Bromwich Albion to Aston Villa for only 100 British Pounds. Ever since this transfer took place, the price tags of players have been rising at an incredibly fast rate. In 1996, clinical English striker Allan Shearer transferred from Blackburn Rovers to Newcastle united for over 15 Million Pounds. This transfer kick started a number of record-breaking buyouts. Recently in 2018, Brazilian footballer Neymar Jr. was sold to PSG from Barcelona for over 222 million euros.
It’s clear that the price tags of players have risen to incredible heights. There are two main reasons behind the hyperinflation that is occurring in the football transfer market which are corporate interest in the sport and fan support in general. The first critical one that needs to be addressed is big corporations and extremely wealthy people purchasing teams. This trend started as the Russian oligarch Roman Abramovich acquired the London football team Chelsea. He invested a lot of capital in the club and with this funding the team was able to make critical transfers that lead to them winning the most prestigious football competition in Europe, the Champions League. Following in his footsteps, Qatar Sports Investments, which is directly connected, with the State of Qatar bought PSG (Paris Saint-Germain) in 2011 and have completely changed the clubs fortunes. PSG had never been a very big club when compared to Barcelona or Manchester United but due to the Qatari investment they are now recognized as one of the biggest and most powerful football clubs in the world. English football club Manchester City have gone through a similar change as City Football group, which is owned by CITC capital and Abu Dhabi United Group, purchased the club in 2008. With their new found resources, Manchester City have won the English Premier League 2 times and also recorded the most points tally ever by a Premier League side. These huge corporations bought these teams while considering the high level of interest in the sport. According to fcbusiness.co.uk, UK football fans spend an average of 712 British Pounds on purchasing merchandise, watching matches via TV and buying tickets. However, diehard Premier League fans spend an average of 1118 British Pounds every year. These statistics show how much fans of football are willing to spend on “the beautiful game” every calendar year. This level of interest is the main reason behind the new corporate power in football.
Furthermore, the sport of basketball has been going through a similar change as well. The main basketball league I will be addressing is the NBA. Based in the United States, The National Basketball Association (NBA) is the biggest basketball league in the world and attracts millions of fans from all around the world. It is considered as the most competitive and entertaining basketball league in the world. Ever since it was founded in 1946, the league has been rapidly increasing in size and in estimated revenue. One of the best basketball players of all time (if not the best), Michael Jordan made around 30 million US dollars in 1996. This number was extremely high compared to other players from the league as the second highest earning player, Horace Grant, only made about 14 million US dollars. However, these days nearly every team has a player that is earning up to 30 million us dollars. This season, Stephen Curry is the highest earning player in the NBA as he earns 40 million us dollars every year. Similar to football, this newfound capital is due to increasing fan and corporate interest. The NBA is known all around the world for its flashy highlights and incredible personal performances by the leagues superstars. This makes the sport very entertaining for most sports fans and makes the demand for NBA content extremely high. In 2017, the NBA finally allowed companies to be able to advertise their businesses by buying places on the NBA teams’ jersey. This is a clear example of the NBA becoming more corporate as it becomes a very profitable business. Due to this fact, the value of NBA teams has reached record-breaking heights.
Both sports have been affected by hyperinflation in many ways. They also share very similar reasons to why hyperinflation occurred in the first place with the main reason being fan interest in the sports. It’s unclear if hyperinflation is a positive event for these sports but many people have started to claim that these days sports are not about team spirit or winning for their fans, it’s only about making money. I agree with similar statements but I don’t think its realistic to assume that these sports have lost their fan spirit since without fan spirit the sports wouldn’t even be in the financial place they are at now.