Different Ways That Sports Stadiums Make Money (2024)

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  • Published On:December 24, 2021
  • By: Charlie Kane

When you look at sports venues, I think you have to be very cognizant of the fact that a naming rights agreement with a stadium provides a lot of different benefits to both parties. The building enjoys the annual revenue, but it can't stop there. Just getting a check from a sponsor for 10, 15, or 30 years is transformative from a financial standpoint. Oftentimes, the naming contracts are used to help finance buildings. So, it's critical to have a great partner. From the perspective of the naming sponsor, though, it's important to connect with the fans. And, in doing so, you've got to recognize that it's a long-term contract. It can't just be signed and then walked away from. It needs to be evaluated on a regular basis. Is it working? Is it not working? Have we changed the way we do business in a way that might change how the fans interact with that sponsorship? Is the company being bought or sold over that time period? And so, the contract has to be done in a way that it's increasing the pie for everybody involved. One example we can look at is Little Caesars Arena. Little Caesars Pizza is the naming sponsor for the Detroit arena. It's also a family-held business of the Detroit Red Wings. So, the Ilitch family controls both Little Caesars Pizza and the Detroit Red Wings. It's a related party transaction, but it has to be beneficial for both. It has to be a way to engage fans with the pizza brand and allow them to connect with it, and for the Detroit Red Wings to connect with the people who enjoy using that brand. We can also look at the TWA Dome in St. Louis, which was the name of the Rams NFL team's stadium when they first entered St. Louis, and TWA was a marquee airline brand. So how did they activate that brand with fans of the Rams? The answer is that the contract describes how it will be done. It can't just be "We'll collect the check, and then move forward." Well, TWA got bought by American Airlines, and American Airlines felt that it wasn't really a great use of their money, and they had already invested in two other named arenas in the United States, in Dallas and Miami. So, they decided to terminate the contract at the first juncture of doing so. These are the kinds of contracts that, over 30 years, the partners need to be constantly looking at and reviewing whether or not the agreement is providing the benefits to both the fans and the sponsoring entity. Stadiums make money in a variety of ways. One of the more interesting ways is ancillary real estate. People associate stadiums with players, and with fans coming there to watch a game, but many stadiums also develop real estate around their buildings. If you take the New England Patriots for example, Patriot Place has a museum there, shopping, big-box retail, and also the stadium, which houses the Patriots of the NFL and also the New England Revolution MLS franchise. So, when you go there, not only can you spend money in their museum or watching a game, but you could also go there when there's not even a game, and just go shopping and take in the New England sports experience. Similarly, the Dallas Cowboys make a fair amount of money from fans touring their facility, and fans can be involved and immersed in Dallas Cowboys culture when there's not even a game going on. If you're interested in learning more about the financial workings of sports, or global sports trends and marketing, or sports management strategies and concepts, online sports management education might be perfect for you. It's a convenient way to get a sports management education without even leaving the house.

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FAQs

Different Ways That Sports Stadiums Make Money? ›

Any sports stadium has direct and indirect income. The most obvious is the first: ticket sales, rental of facilities, operation of food and drink areas, club shop, tour, and any other income dedicated to entertainment or marketing.

How do sports stadiums make money? ›

Advocates argue that new stadiums spur so much economic growth that they are self-financing: subsidies are offset by revenues from ticket taxes, sales taxes on concessions and other spending outside the stadium, and property tax increases arising from the stadium's economic impact.

What are the sources of revenue for stadiums? ›

The ensuing opportunities for diversification of revenue streams generally compensate the publicly funded maintenance of a stadium (or museum). Revenue is generated by ticket sales, parking fees and the wages of people employed by the stadium management and teams, who partly reinvest their income as consumers.

What are the different ways stadium projects are usually financed? ›

Twenty-nine of the publicly financed stadiums were funded through a hotel tax, 27 were funded through general obligations, 24 were funded through sales taxes, 23 were funded through bonds and four were funded from lottery or gambling revenues, NCSL said.

Are sports stadiums profitable? ›

Stadium advocates often argue that stadium funding is a worthwhile public investment because game-related commerce improves local economic well-being by generating jobs, income, and tax revenue. But in reality, stadiums have a poor record of producing such benefits.

How do NFL stadiums make money? ›

The league negotiates national merchandise, licensing, and TV contracts, which make up most of the national revenue. The 32 teams receive equal shares of this money, regardless of individual team performance. The teams generate local income through concession sales, ticket sales, and corporate sponsors.

Do publicly funded stadiums pay off? ›

Public funds used for a stadium or arena can generate new revenues for a city only if one of the following situations occurs: 1) the funds generate new spending by people from outside the area who otherwise would not have come to town; 2) the funds cause area residents to spend money locally that would not have been ...

What are the 4 major sources of revenue in professional sports? ›

This article explains the different revenue models used in the sports industry, including ticket sales, broadcast rights, sponsorships, and merchandising.

What is the main product of stadium sales? ›

Stadiums count on food and beverage sales as a major revenue source, so it should come as no surprise that today's trends mirror the restaurant industry as a whole. As a result, menus now play a more substantial role in these venues.

Why do companies pay for stadiums? ›

When deciding to buy naming rights, they want fans' warm feelings toward the home team to rub off on their corporate or brand names. For instance, Wrigley Stadium became a beloved institution to Chicagoans while Busch Stadium achieved the same result in St. Louis.

What are 3 methods of funding? ›

Retained earnings, debt capital, and equity capital are three ways companies can raise capital. Using retained earnings means companies don't owe anything but shareholders may expect an increase in profits. Companies raise debt capital by borrowing from lenders and by issuing corporate debt in the form of bonds.

How are MLB stadiums funded? ›

' Today, however, most MLB teams play in publicly funded stadiums. 2 Local governments pay on average between seventy and eighty percent of the costs of new stadium construction. 3 In addi- tion, local governments often subsidize the costs of roads and infra- structure that surround these new stadiums.

What are the three other sources of funding? ›

Other Funding Sources

Funding sources also include private equity, venture capital, donations, grants, and subsidies that do not have a direct requirement for return on investment (ROI), except for private equity and venture capital. They are also called “crowdfunding” or “soft funding.”

How much money does a stadium make? ›

The average stadium generates $145 million per year, but none of this revenue goes back into the community. As such, the prevalent idea among team owners of “socializing the costs and privatizing the profits” is harmful and unfair to people who are forced to pay for a stadium that will not help them.

Why do companies buy sports stadiums? ›

A big advantage of sponsoring a stadium is being able to have countless opportunities to promote the company. When a professional sporting team hosts a playoff competition in a stadium named after a corporation, it leads to increased recognition of the company name.

Do stadiums pay royalties? ›

The league or team in that league also provides song information so the PRO knows what songs are being used and what songs should be paid. The fees paid out by the PROs are for the songwriters only. Artists do not get a royalty for their performance of the song in a public venue. Hope this is helpful!

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