The Role of Television Contracts in Supporting Professional Sports Salaries

Professional sports teams in the United States have managed to maintain multi-million dollar salaries for their players, despite the lack of real attendance at games. How do they do this? The primary answer lies in television contracts that owners receive from televised games, licensing contracts, and other forms of media revenue. These sources of income provide a significant portion of the funds necessary to support the operations of a professional sports team, including player salaries.

TV Contracts and Sponsorships

TV sponsorships and endorsements are integral to the financial structure of professional sports franchises. Both individually and as a collective organization, players and teams generate significant revenue through television advertising and sponsorships. Furthermore, teams and athletes earn considerable income from licensing deals, such as video games and merchandise, as well as from commercial endorsements. This multimillion-dollar revenue stream ensures that teams can continue to provide players with substantial salaries, even without traditional attendance revenue.

Television Advertising and Sponsorships

The primary source of revenue for many professional sports leagues is television advertising and sponsorships. Despite the limited number of home games and typical season ticket sales, these leagues generate the majority of their income from television contracts. For example, the National Football League (NFL) depends on TV as each team’s home games are restricted to just eight opportunities annually. On the other hand, the NBA, MLB, and NHL also benefit from significant TV revenue, though they derive a larger proportion of their income from fans in the stands.

But the impact of television and marketing revenues extends well beyond just player salaries. Every purchase of an item featuring a well-known sports brand, such as Nike or Adidas, contributes to the total revenue that eventually goes into the financing of professional sports. Additionally, the fees charged for phone services, utilities, and communications also help to finance the salaries of athletes who perform in these arenas.

The Financial Reality of Professional Sports

The financial reality of professional sports today is vastly different from the circumstances of the mid-20th century. Teams no longer rely primarily on ticket box revenue to operate. Instead, the bulk of the revenue that finances professional sports comes from television marketing and commercial advertising. The income generated from television contracts, sponsorships, and marketing far outweighs the revenue from ticket sales.

A significant indicator of this is the financial statement of Green Bay Packers, a publicly owned team. In their 2018–19 financial statement, Green Bay showed $274 million in national revenue including TV money, road game revenue sharing, and NFL media operations, alongside $203 million in local revenue from ticket sales, merchandise, and visits to Lambeau Field attractions.

This shift in revenue streams means that teams can focus on maximizing the available TV money. The urgency to return to playing is partly driven by the desire to capture as much of this television revenue as possible. However, it's important to note that fans still do have to pay for the right to watch games, which helps cover the costs of operations and salaries.

While television and marketing revenues are crucial, it's also worth mentioning that teams still have obligations to players. Contracts often ensure that players are compensated despite the revenue mismatch. This means that even when attendance is down or ticket sales are not robust, teams are legally required to meet their financial commitments.

Ultimately, the financial structure of professional sports in the United States is complex and multifaceted. While attendance revenue remains important, television and marketing are the primary drivers of the financial health of these teams, allowing them to maintain high salaries for players and support the overall operations of the sports franchises.