ABSTRACT

Unlike most firms, sports teams do not necessarily maximize profit. They may instead try to maximize wins, but even win maximizers cannot afford to ignore profits entirely. Teams derive revenue from ticket sales, the sale of media rights, licensing income, other venue-related income, and transfers from other teams. Revenue sharing among teams varies among leagues, with the greatest sharing occurring in the NFL.

In the sports industry, most costs are fixed over a single season. Primary sources of costs are player salaries, stadium leases, and administrative costs. In the NHL and MLB, subsidies to minor league affiliates for player development also add to total costs.

Leagues regulate the behavior of teams on and off the field. Financially, leagues attempt to keep revenue imbalances in check and control costs. In some cases, it is useful to view the league as the monopoly and teams as producers of a joint product.