When the economy looks uncertain, any investor would go for stability and predictability. As an investor, you have the opportunity to invest in businesses that have been around for several decades and are continuously growing in popularity. These businesses have a lot of loyal customers, making them a good choice for anyone.
So what industry is this? It is the professional sports industry, specifically its franchises. This investment might seem like a gold mine, but you have to understand that it also has its risks. In fact, it can be riskier than conventional corporations. Let us take a good look at the advantages and disadvantages of sports investing before betting everything you’ve got.
Advantages of Sports Investing
Economics defines demand as the desire to buy goods and services. Sports programs, both in the collegiate and professional level, have strong emotional bonds with their fans. Big-time athletes and sporting teams gain a sense of brand loyalty that other businesses simply cannot compete with and never achieve.
Furthermore, people spend a lot of money just to renovate rooms in their homes to show their support for their universities. Some even make use of customized table covers to show that they are avid supporters. Other fans would go as far as using customized inflatable arches. Collegiate and professional sporting teams have also adapted to the changes in technology. Now live sports can be viewed in mobile devices. Distribution channels also include pay-per-views and satellite radio broadcasts.
The NFL has, in fact, started a television network of its own so they don’t have to share advertising revenue with other TV networks like FOX and CBS. And if you are a loyal customer or a sponsor, you would not mind paying the price.
Another benefit of sports investing is these sports leagues don’t really have competition. Some have tried to challenge major sports league, but all of them have failed. Also, some leagues are protected by an anti-competition law.
Lastly, these businesses make lots of money from repeat business. Fans wouldn’t just settle for a single NFL shirt! They have lots of them. Families also tend to pass down their loyalty to certain sporting teams to their children.
Disadvantages of Sports Investing
Like any other business, sports teams may also suffer from economic shocks. The demand for sports entertainment greatly depends on the state of the economy. A weak economy can hurt attendance at different sporting events. Ticket sales can significantly go down, as an average American could only enjoy sports entertainment when there is extra income. Economists say that the attendance in sporting events depends on a person’s income and the cost of the product. This is one reason why sports investing can be risky.
Moreover, sports scandals can hurt any business. It can damage reputations and affect revenue. One example is how NBC’s golf ratings took a dive when the news about Tiger Woods’ extramarital affairs came out. The network has not fully recovered from the effect of the scandal, which is why potential sports investors should be wary of where they are placing their money.
Sports investing can be profitable especially with high consumer demands and lack of competition. However, it is important to understand that this type of business also has risks. So before you take that big leap, make sure you know that sports entertainment is still considered a luxury and its success highly depends on the state of the economy. The emotions that lure people to spend money on sporting products and events can quickly become sour as a result of scandals and other unforeseen events. At the end of the day, sports investing can still go either way and it is still your responsibility to be fully prepared before you make any investment.