Pro Sports teams have always been known for excessive spending, but this has caused some of the heavyweight teams to end up with huge amounts of debt. Financial blog Overdraft Apps has taken a look at what teams from the worlds sports leagues have accumulated the most debt and how they manage to get there.
The top teams in every major sports league are all struggling with their finances, from the NBA to the Premier League, teams like the Golden State Warriors and Manchester United are both scrambling with debts of over $700 million.
Pro athletes pay
Despite spiraling costs from player salaries and new stadiums, top clubs show no sign of slowing down with their spending. Salary caps have been increasing year over year in most leagues, up over 6% to $177.2 million per team in the NFL and up 34% to $94.1 million per player in the NBA. These increases mean teams can offer huge sums to get the best players, which has contributed to an unprecedented rise in athletes salaries over the past 20 years. In 2015 the 40 highest-paid athletes earned a cumulative $1.3 billion which is a 180% increase from just 20 years earlier, in 1995.
Clubs revenues are not able to meet the high salary demands for players so they are having to come up with new ideas to pay these cost. Barcelona FC gave its top player, Lionel Messi, a $100 million signing bonus last season but had already spent 84% of its revenue on player salaries, so they looking to sell the naming right to their home, The Camp Nou, in a $200 million deal to cover the costs.
Stadium bills are soaring
Stadiums are another huge cost for teams with many still paying off the debt for the stadiums they are currently in, yet The Tampa Bay Rays have just unveiled plans for a new $892 million stadium, so it’s no surprise that some speculate they could be facing bankruptcy soon.
Teams aren’t able to keep fans in the stands
Big spends like these can only be justified when there is an income to match and for a lot of pro sports, their fan bases are disappearing. The NFL, NBA, and UEFA have all seen a huge rise in ticket prices over the past few years, that along with a lack of fan engagement has resulted in a huge drop in attendance for some top teams, like the LA Rams who saw their stadium at less than 30% capacity at some games last season.
These unfilled seats are bad news for the Rams, most major sports teams still make a large chunk of their profit through ticket sales and without fans coming through the turnstiles their finances aren’t going to improve. Earlier this year the NFL passed a debt waiver for the Rams of $2.25 billion (which will allow them to borrow more than the $350 million debt cap for teams under league rules) to help them pay for their new stadium after the move from St Louis. If they can’t fill seats in their stadium, their excessive debt might cause them to go bankrupt.
There’s no doubt that there is still money in sports with an NFL revenue that topped $8 billion last year. But, poor management, higher ticket prices, and player salaries are causing fans to lose interest and sending clubs on the road to financial ruin.
About Overdraft Apps
Overdraft Apps is a finance and overdraft blog dedicated to helping consumers manage personal finance – specifically helping people lower their overdraft fees. The founders believe that transparency is key and are putting a lot of efforts in to provide consumers with an honest review of their finance options.