31 August 2012

The Entrepreneurs of Sport

Ever since I read Moneyball many years ago, I could not help but to seek parallels between the sports world and business.  In Michael Lewis' chronicle of the Oakland A's baseball club,  GM Billy Beane used novel analytics and an outsider approach to build a perennial winner despite having 1/3 of the payroll of teams such as the Yankees.  The compelling tale reads like an entrepreneur's blueprint for success; a cash-strapped upstart completely changes the industry through innovation and creativity.  Are there other examples of game-changing entrepreneurs in the cut-throat world of big sports?

Certainly one of the biggest changes in recent history is the almost instantaneous access to almost any sport thanks to the rise of ESPN.  Similar to other founders, Bill Rasmussen turned his personal desire (Connecticut Sports) into a businesses phenomenon.  Several early moves, such as the negotiations of NCAA basketball rights and launch of SportsCenter, turned the fledgling network into an almost overnight success.  Like other startups, unfortunately, the need for early cash diluted Rasmussen's power and equity forcing him out well before the real money came in.  The rest of the story is pretty well documented as ESPN has become the most influential network in modern day sports.

Due to the strict revenue share rules, it is hard to find innovators in the greatest sports cash machine that is the NFL.  Robert Kraft's unorthodox acquisition and success of the New England Patriots might be the closest thing.  Starting with an option to buy the adjacent land next to the Pats' old stadium, he later acquired the stadium and eventually the team through a decade long series of transactions.  Smart personnel moves (Brady and Bellichek in 2000) and a unique focus on the collective team versus star players (managed like an interchangeable "portfolio of 53 stocks") has led the team to three super bowl titles and the best winning percentage in the league during his ownership.  Oh by the way, it doesn't hurt that the team is worth at least ten times more than Kraft's initial purchase price.

Kraft's story was a bit unusual as the traditional sports franchise ownership story is pretty uninspiring.   A billionaire hobby owner buys the team at a premium using debt, raises ticket prices, and throws alot of cash at the team in hopes for championships.  Sometimes this results in an increase in franchise value (Mavericks, Yankees) and other times they land in bankruptcy (Dodgers, Rangers).  The most recent example of this is Manchester United's IPO where it is still too early to assess whether the Glazer's investment will ultimately pay off.  But in the end, it usually doesn't matter for the billionaire owner who has made their money elsewhere.

Hobby owners aside, from apparel juggernauts we all know such as Nike to the latest social media sport startups, savvy entrepreneurs have channeled their unbridaled passion for sport into thriving businesses throughout the years.  Of course, just as in the business world, there have been some slip ups along the way (remember the USFL?).  As power continues to shift to fewer and fewer hands (don't get me started on the BCS), it will be interesting to see the creative destruction that new startups can create as a counterbalance. Certainly the passion for sport will not dissipate which should keep the business side thriving - let's just hope future Billy Beane's continue to emerge among the clout of billion dollar TV deals.     


  1. Really enjoyed the article. I have long viewed the Patriots model as very interesting. Very surprised that at least one other team in the NFL does not follow it.

    NFL has a salary cap and more parity than any other league. Do you think that the new salary cap rules that are being gradually implemented in the NBA will lead to parity?

  2. Good question. I don't know if the NBA will ever get to NFL-type parity, but i think it would strengthen the league as a whole. In business, this is equivalent to small business tax breaks/incentives; there are two sides to the argument on whether it helps or hurts business production overall in the long-run.

  3. One of the ways that NFL achieves parity is scheduling...if a team has a lousy season, they wind up getting a watered down schedule the following year...with balanced schedules, that would never happen in NBA...

  4. Good point. The scheduling helps with parity and would be hard to implement in an 82 game
    Season. Plus one individual is more valuable then in the nfl which makes it even tougher to bounce back without roster changes. As an aside the new forbes franchise list came out. Man u and Dallas cowboys are now each worth over 2B.