Cricket World Cups, FIFA, Grand Slams and the Olympics, our generation has witnessed by far the most glamorous era in the history of sports. Over the last few years, the sports industry has gained major momentum not only in India but also worldwide.
Sports is a significant tool to trigger a positive influence on the public by building a social culture among children, youth and adults, fostering the social inclusion of the disadvantaged and contributing towards the economic development of regions and states.
Across the globe several countries have put sports under primary focus not only to earn the reputation of winning major international tournaments but also in the pursuit of hosting them.Sporting events have not only helped build a tourism industry in its entirety but also played a pivotal role in uplifting economies.
Being closely associated with this space for more than a decade, I have gained profound knowledge of the significant financial requirements every sports related project has. Sports infrastructural ventures are highly capital intensive and sports training programs leave no room for compromise as every country wants to send a highly competent team of athletes to events like the Olympics and the World Championships.
All of this involves money, A LOT OF MONEY.
A developing country like India alone allocated INR 2826.92 crore towards the sports budget in 2020. At the Rio Olympics in 2016 our expenses totalled INR 30 crore out of an estimated INR 45 crore set aside for the games. The Indian Premier League, one of our most prominent sports events of the year has an estimated brand value of INR 475 billion.
Even individual sportspersons make exorbitant earnings through their existing brand value and other endorsements, for example, Virat Kohli one of the highest paid sportspersons in India has an annual income of INR 7 crore. With significant cash inflows and outflows involved with major sports events, financial administration in this industry has become more crucial.
This has led to the emergence of an independent niche domain of “Sports Finance”, a study of the financial administration and management practices specific to the sports industry. Financial administration basically deals with the way funds are managed and how practical solutions are devised to budget problems. In context to the sports industry it provides an understanding of how sports finance along with business administration act as a critical success factor in today’s world.
WHAT IS SPORTS FINANCE?
Successful sports financing is based on making decisions that will maximize the overall value for organizations. Planning, budgeting, forecasting, variance analysis, control all come within the ambit of effective financial administration.
With sports events and organizations up scaling their level of operations, effective financial administration is significant in today’s world as a major source of both revenue and employment opportunities.
Therefore, given the current scenario a study of the financial policies and decision making in the sports industry has become a popular domain in both developed and developing countries. Sports as a business has changed dynamically which has led to fundamental rethinking and radical redesign of financial management in the sport industry.
Significant changes have been incorporated to reflect the global nature of sports. Financial administration is a crucial part of local and global sports events that allows for a more structured recognition of business policies and financial decision making in sports and sports event management.
There is a need for an in depth understanding of sports finance as a whole in order to gain insights of how it contributes to the economy and people, the significant changes in the policies and the prevailing trends.
THE FUTURE OF SPORTS FINANCE
Developed economies have actively used sports finance in order to build a flourishing sports industry, but in most developing countries it is still in the very primitive stage. There has been a lack of scholarly research on sports finance as a niche business function.
Local/regional sports institutions, major sports events and large sports organizations, set the stage for empirical studies that are likely to advance sports finance planning and management.
This has led to radical development of the field of financial administration in the sports industry. It is thus safe to say that the sports industry has abundant opportunities that can be leveraged as a major source of revenue and employment to be developed into a flourishing industry.
Finance has become the backbone of the sports industry, with almost all business decisions channelized toward exploiting major revenue opportunities that sport presents across the globe.
financial administration has emerged as the most important business function in today’s world.