The never-ending increase of prices in the sports industry
The amount of money paid to professional sports athletes is on an exponential increase and it doesn’t seem like this trend is bound to stop anytime soon. Sports teams are willing to spend more and more money to have certain players on their team and that brings up the question where all of that money actually comes from.
40 years ago in 1979 the 19 year old Diego Maradona had just won his first “Footballer of the Year” award and the promising young striker Andy Gray made a record-setting €3 million move from Aston Villa to the Wolverhampton Wanderers after leading the 1st English Division in goals in 1977 and 1978 and after winning the England Youth Player of the Year and England Player of the Year awards in 1978. Comparing this transfer move to modern transfers it seems almost a joke of a transfer fee. When Paris Saint-Germain purchased Neymar from Barcelona in 2017 they paid a transfer fee of €222 million and set a new benchmark with this number. So how can this massive increase be explained?
One explanation that comes to mind is inflation. Given the ECB is trying to keep inflation rates at around 2% per year, over 40 years this inflation might partially account for this growth. Looking at the numbers though, the US$ has seen a 253.66% inflation from 1979 to 2019, while the highest transfer fee paid has seen an increase of 7,300% over the same time. That shows us that while inflation does have a small impact, the main changes have to be found in a different area.
One very important area is the TV industry. With technology improving quickly, cable television became available cheaper and cheaper. With time sports became widely spread on television and the number of viewers watching each sporting event drastically increased. That allowed sports associations to charge higher fees for broadcasting rights and automatically brought a lot more money into the sports industry. Today almost everyone in Western Europe and America owns a TV or has access to sports in some way, but still, the money in the sports industry is growing faster than ever before.
The reason for that could be the technological emergence of developing countries. Especially in Africa the internet is spreading out rapidly and with it the excitement for international sports. Africa and Asia are two huge markets and if the sports industry keeps growing in those markets there seems to be no end to the constant increase in money. This popularity of sports unravels a problem in Africa though.
Africa is the poorest continent in the world, even though it has mineral resources with astronomically high value in its soil, but they can’t benefit from them, because they need help from rich countries to mine them. With sports getting more popular in Africa, many Africans try to become professional athletes and leave their home country. Similar to the brain drain effect, Africa loses all its major athletes and many of them even change their nationality when they go to Europe or America. Even though Africa has a lot of talented athletes, these athletes don’t benefit Africa, because they can’t play for a good team in Africa, or get the best preparation in Africa. Therefore African countries miss out on taxes and on top of that poor people in Africa who now have access to the internet are more likely to bet on African athletes. In many parts of Africa, sports gambling is gaining popularity quickly, as for some people it is the only possible way to make that kind of money in that short of time and with sports getting more popular in Africa this trend will only continue.
So the money in the professional sports industry doesn’t seem to stop growing anytime soon. At the cost of others though, as one man’s benefit is another man’s loss. Professional athletes are already earning ridiculous amounts of money and with these amounts growing even further we might reach a point where this growth has to be limited artificially.