Sports Myth 101: Sports Teams can't be profitable

We often hear that sports teams are not profitable; all they do is either generate expenses or just earn theright amount of money to continue existing.  I believe this is not true and actual profits can be made from professional sports teams in any kind of sport. For this post I will closely analyze soccer teams, as they are notorious for their inability to generate profits. So, the question is how do we make a sports team profitable? The answer is in fact simpler than you think! All we need to do is follow these two steps:

1.     Business Model:

We need to choose a business model for our team, this will determine how we will run  & manage our team.  Before we do that we need to understand that professional sports is a form of entertainment, people watch sports because they want to be amused and entertained.

-With this in mind, the basic model for any business in the entertainment industry is to generate content that customers consider valuable and are willing to pay for it. This is the model Real Madrid utilizes and other big soccer teams do as well. All of their efforts are directed in attracting the best talent in the world to play for their team, this in turn will generate more revenue, from tickets, merchandise, TV rights and other ventures. They create pure entertainment for their fans.

-The other model is based on developing talent, creating meaningful content (although not as valuable as the premier sports content big teams can create), enough to generate some revenues from tickets, merchandise and TV, but most of the revenue will come from selling the talent you are able to develop. This means developing a player that becomes so good that other teams are interested in acquiring his services.

When executed properly both models can be hugely profitable, examples are Real Madrid and Udinese.

2.     Set Up strong financials systems:

Just like any other business, a sports teams need to have proper accounting systems to manage their finances. They need to have a balance sheet, income statement and most important of all cash flow statements, the entertainment industry has big expenses and sports is no exception, some of the biggest expenses for sports teams are wages for soccer players. Understanding and controlling these expenses, and other financial information will make the difference between earning a profit or not. Another great tool is the use of ratios, to measure amongst others, liquidity, profitability, efficiency, and any other ratio a particular team might want to incorporate. For example for both of the models, talent= soccer player and it has to be viewed as an asset, so using a ratio such as the return on asset, or even the net return on assets, to take into consideration the payment of both interest and taxes will help maximise the earning potential of the player. Such ratios can help the management in the development of a profitable sports team.  There are several examples of profitable teams already in a wide variety of sports! 

Our aim at PASSIONIS is to assist in the development of successful sports teams, no matter the sport or level. We understand the importance of sports in the world and most of all we understand that teams are special organizations that can inspire others as well, so we want to be an essential partner in the universe of sports! Our success is the success of the team!

Never, Ever Give Up: That’s Why We Are Here

Why is Passionis here on Earth? Because we won’t give up on sports and transforming lives through them. I will explain this with three reasons:

Many times we hear amazing stories about athletes and how they achieve great things, sometimes we get inspired to do something just like them other times we think they are extraordinary human beings out of this world, and as such we can’t do what they are doing. But this is wrong. Sports are for everybody and everybody can be great in their own way thanks to sports.  Diana Nyad is the representation of this, since her early 20s she had the dream to swim from Cuba to Florida, after several failed attempts she managed to achieve it at the age of 64! She had to endure trainings and very difficult times in the water; this proves that anyone can achieve something great.  Passionis Sports  believes sports have a power nothing else on this world has to transform lives.

 The firs reason, As Diana Nyad says in her TED Talk “Never, Ever, Give Up”. In the talk she shares some insights, and she reveals something really important the destination is not as important as the journey and what you become in that process is better than the actual achievement. Diana mentions how she failed many times before been able to achieve her objective, and what she learned was very simple don’t give up, because everyday in our lives is epic. That is our mission help promote sports as a way to transform people from ordinary to extraordinary. Practicing a sport or exercising regularly is a journey, it is not about becoming the best, losing weight or something like that it is about being better than yourself everyday.  It is about taking action, small steps everyday to transform your life through sports and achieve something great, everybody has greatness inside and it is our mission to help you find your greatness and become extraordinary.

The second reason:  sports are much more than winning, as Coach John Wooden point out in his TEDTALK, about  how he motivated his players to be the best version of themselves. He used poetry to motivate his team, and this is great, words have a very strong power and can resonate with people, but coming back to Diana Nyad, words need to be backed by action and both Diana Nyad and Coach John Wood did this, each of them on very different fields of sports, this just shows that there is not one definition of success, each of us can be successful and unique in our own way. We need to be the best version of ourselves, this  is the reason Passionis Sports want to create a new kind  of entertainment in the world of sports: events, short stories, comics anything but associated to characters that are normal people just like you and me! Anyone can be a part of the amazing world of sports and learn about its many values and in Passionis people will find a companion right next to them.

The third reason is because even professional athletes need to practice and go through a journey and learn about respect, discipline, resilience, patience, persistence and other values. In his TED TALK Chris Kluwe describes how the future of sports could be with augmented reality, it would give us fans a closer look into the action and also we could learn that it is not as easy as it looks and also understand how athletes are regular people with great determination thanks to their commitment and training. Technology is changing the way we, practice and watch sports and Passionis Sports wants to be on the frontline embracing technology and its benefits to achieve our mission. In his talk, Chris Kluwe also talks about the empathy augmented reality would bring, if people had the chance to view things from the players perspective and see the amount of effort it requires to be “great” and “successful”, it would serve as a motivator for them to practice a sport as well. If Passionis helped promote technology aligning with athletes, teams and others, we could start transforming lives more easily attracting people to sports entertainment and convincing them to start their own journey and be the best they can be!

This is why we are here, we simply: DON’T GIVE UP!

Business Model Canvas in the world of Sports: Part III

As we have mentioned before the business model canvas is a unique tool that  helps you create and design a succesful business. The sports entertainment industry is no different than other businesses. We have been building a business model canvas for an imaginary soccer team, to create a business model that provides value both on the field and off it to make our team a profitable business.

Coming up are the “Key Activities” section of the canvas, this section requires us to think about the main tasks we need to do, in order to deliver our value proposition to our customers. So where do we start, first we need to remember our value proposition: give our fans an immersive experience in the world of sports, providing entertainment for them both on the field and off it with related products.

 It sounds daunting but we will start step by step: first we need to understand our purpose, which is to be a team that plays in an entertaining way, with its own identity while transmitting a clear set of values through sport. Real Madrid are a great example of this, their objective is not only to win, but to play an entertaining brand of football, while representing values such as teamwork, discipline, humility and others.  This purpose has made Real Madrid one of the top brands in the world of sports entertainment.

So now that we have our purpose we can analyze the key activities. First we need to have a coach and staff capable of leading our team to play in an attractive manner while communicating the values our team stands for, a great example of this is Arsenal FC, with Arsene Wenger, they have a clear football philosophy engrained throughout the club and that has given the brand more value as cutomers have identified with it.

Then, we need to establish a channel to communicate with the coach, his staff and the players to aid them in representing our brand purpose on the field. It is up to the management team to ensure this, if we can’t get our fans (customers) to understand, identify and align with our purpose then our business will fail. 

In our value proposition section we mentioned that we also wanted to provide great entertainment off the field, so what do we need to do as a key activity to deliver on this promise?

We need to understand that every interaction our fans have with the team is a unique moment where we need to deliver our value proposition. So we need to incorporate as a key activity the management of our distribution channels to provide the best touchpoints for our fans. This includes stadium experience we need to provide the best experience for fans from beginning to end in our stadium, this means from the game itself to access to their seats, purchase of food or drinks. Then our website and social media, we have to manage this channels as an extension of the experience making it engaging and simple for customers to interact with us in the digital world. This means having a good CRM strategy.  

Lastly we need to understand and manage our revenue streams, even though that is another section of the canvas, we can discuss some of them, such as box office, official merchandise as well and concessions, are normal revenue streams for a sports team. So what do we need to do as a key activity, we need to manage those revenue streams, with box office we need to make sure customers can purchase tickets in the most convenient manner, via website or physical locations. This purchase has to be as easy as possible for the consumer, the same goes for concessions. Fans don’t want to miss the game but they want to enjoy a drink, so if we want to generate revenue from this we need to make sure that customers have access to this concessions easily. Also another key activity with our revenues is create metrics to measure how succesful they are, to be constantly evolving  our business and adapt to the needs of our customers. For example key activities regarding merchandise would be: prepare a licensing deal, choose an official partner (jersey supplier) to start selling other merchandise, also set up a special management team that handles licensing issues and analyzes how we could expand this revenue stream.

This are just some of the example of key activities we could have, the canvas provides a very visual tool to understand and manage all of these aspects. Passionis Sports can be an essential partner in helping you develop your sports brand the right way!

Business Model Canvas in the World of Sports

In our lastpost we began creating a business model canvas for a soccer team. We created the Value Proposition. In this post we will continue to fill out the business model canvas.

Ok, so we know that we provide entertainment and an emotional connection for fans, and that makes us unique to them, we give them a special relationship while we entertain them. We can say that we provide an experience of entertainment. Knowing our value proposition is great, but we still need to find out exactly who our customers are; we can’t produce value without knowing who they are, this is called customer segment in the canvas, and we have to ask ourselves several questions.

The first one is tied to the value proposition; for whom are we creating value? For our soccer team we need to think of these questions by asking ourselves who do we wish to attract and engage as a fan of our team? It could be men, women, a family crowd, young adults, children and so on.  Thankfully soccer has a broad market due to the attractiveness of the game so we are able to attract all of the different markets mentioned before. Soccer is appealing to both male and female, raging from ages 12 through 50+, this gives our canvas more information in order to make our business and value proposition successful.

With this information we can move on to another question; who are our most important customers? To answer the question we have to do two things, first create a hypothesis, creating a hypothesis is very simple, we just have to ask ourselves where do we want to focus our efforts and who would we like to see using our products. This means, do we want to focus on kids, young adults, females or older crowds? For example we could say: we want to segment our market into young male adults, ages 18-35 with a income of 30k-50k and also family crowds, where there are children between ages 12-15 with an income of 50k-70k.  This is where you need to stop and understand this is just theory we need to see if this is true, how do we do this? with  customer development. What we basically have to do is try to interact with as many potential customers and see if they are the right market for our product (soccer entertainment), this requires experimenting with our valueproposition. Once we do this we can truly find out who are our customers and how we can segment the market.

So our after following this process we can see how our canvas looks:

In step 1, we created a hypothesis of our market, as you see this is very general, we understand that soccer is very appealing to diverse markets, then following the customer development and value proposition experimentation, we came up with step 2, by interacting with potential customers we actually discovered who our customers really were and even got more detailed information about them, this allowed us to segment our market and be prepared to serve those two market segments in a unique way as they are aligned with our value proposition.

So now we understand what we will give to our customers (value proposition) and who are our most important customers (customer segment). Following the lean start up methodology we can say that we have something to offer that is actually attractive in the sports entertainment field! This validation positions our soccer team for success in the industry!

Our aim at Passionis is to align fans expectations with any kind of sports team (or organization) who can cater to their needs; this will create a win-win situation and actually enhance profitability for sports teams without letting down fans, which in reality are   customers for sports entertainment and related products. 

On our next post we will continue to build up our business model canvas!