The business of sport : towards a viable commercial model for the management of professional football in Africa

Abstract

Sport plays a big part in the lives and psyche of not only South Africans and the world's citizens, but also those of the corporate world. As the era of professional sports grows and gains a foothold in more and more sporting codes, so the amount of money that is being spent is growing as well. Humphreys and Ruseski (2009) recognise the challenges confronting economists in both defining and measuring the size and scope of the sport industry. According to Chalip (2006) the development of the recreation and sport management field requires two complementary streams: one that tests the relevance and application of theories derived from other disciplines, such as finance and economics, and one that is grounded in sport phenomena. Linking economic and financial theory to the context of the sport industry, and specifically professional football, to try and understand this most popular and universal of activities from a business perspective in Africa, is the basis for this study. Professional football clubs as an element of the South African sport industry depend largely on four main sources of revenue: sponsorships, gate revenue, television and broadcasting rights, and merchandising. The challenges these professional football clubs face include rising ticket prices; corporate sponsorship facing economic and regulatory concerns; broadcasters facing a great challenge in integrating social media into their offerings; and rising player costs and talent development with long lags before they pay off. As a result professional football clubs are increasingly finding it difficult to balance the needs of stakeholders and be commercially viable at the same time. It is this new reality reflected by the challenges mentioned above, that has caused many organised professional football clubs to look beyond the traditional financing concepts and strategies that have been used and to supplement them with innovative approaches. It is postulated in this research that professional football clubs in Africa are required to seek out scarce resources from a wide range of possible revenue sources and to use their knowledge of sport and financing skills to ensure that the scarce revenue sources are allocated in such a way as to yield optimum satisfaction for their fans and commercial profits for their club owners. Further, failure to do so by these professional football clubs in Africa has resulted in these clubs not being commercially viable and lagging behind Europe in so far as the commercialisation of professional football is concerned. The reality that South African and most African professional football clubs are not financially viable and thus do not yield healthy returns on investment for their owners, resulted in formulating two research questions to guide this study: 1. Why are African professional football clubs not commercially viable? 2. Can commercially relevant, practical, measurable and consistent variables from successful European professional football clubs be transferred to develop a viable business model for the effective management of professional football in Africa? This study followed a mixed-method design. The data collection also involved gathering both quantitative numeric information (three-year financial records of leagues and clubs in Europe and Africa) as well as qualitative text information (semi-structured interviews and professional football expert research document analysis). The procedure for both qualitative and quantitative data collection and analysis was conducted rigorously. The study began with a detailed financial analysis of leagues and clubs in Europe and Africa in order to generalise results to a population and then focuses, in the second phase, on detailed qualitative, semi-structured interviews to collect detailed views from professional football experts. Why is the African professional football business model not commercially viable? From the collective results obtained it became clear that the answer to this important study question is both complex and multi-layered. Triangulation protocol was used determine reliability and consistency of the results.