Economics in Football Nishk Moorjani

Football is the biggest sport in the world, with the recent Qatar World Cup having a global audience of 1.4 billion viewers. This immense industry is not only a source of entertainment, but brings in billions of dollars annually, and economics can play a crucial role in the sport through many different ways.

The first way is player wages, which can be determined by supply and demand. Why are professional players paid so much? When in all likelihood they would be ready to play football for less than £1000 per week, they earn over £20,000 per week. The first point to keep in mind is that only a very small percentage of football players receive these extremely expensive salaries. The two fundamental factors of supply and demand determine these astronomical wages. For example, acquiring one of the best strikers in the world comes at a very steep cost, due to their supply being so limited, meaning that the commodity's supply curve is completely inelastic The wage will then be decided by the demand curve where any rise in demand for that player will lead to an increase in price.

It is worth to think of major sports teams as entertainment firms. The truth is that the more people who see the product, the more money can be produced Player acquisitions don't just benefit a club in terms of winning games and prize pools, but they also generate revenue for clubs in shirt sales and ticket sales. This is why some clubs are willing to pay so much for a player’s transfer fees and wages; They aren’t just paying for the player’s ability, but also the revenue that the big name will generate from fans purchasing replica shirts and scarves to mugs and keychains.

For example, Cristiano Ronaldo is widely recognised as the world’s greatest athlete. Apart from the success he was expected to bring, Ronaldo arrived to Juventus with more than 500 million followers across various social media platforms, which the club sought to monetise by appealing to fans in both established and emerging markets. According to the club's most recent financial statements, the accountants anticipated that this would boost the team's broadcasting, sponsorship, and match-day income, which together accounted for more than 64% of Juventus' revenue.

It can be difficult for a football club to maintain profits given the vast expenditure required in the club, where they have to allocate spending on player salaries, transfer fees, stadium maintenance, and coaching staff salaries. However, the main way that clubs can generate revenue in order to afford costs and maintain profits is from sponsorship deals, which surprisingly make up a majority of a clubs revenue.

The top teams in the world rely on this as a substantial source of income. This includes naming rights to stadiums, shirt and sleeve sponsorships, kit sponsorships, and any other sponsorships you can think of. Top companies pay upwards of cash to partner with football clubs. For example, Since 1998, Adidas and Real Madrid have been working together under a deal that is estimated to be worth $113 million annually. Adidas jerseys have been worn by Real Madrid while they have earned numerous trophies. 2019 saw an entirely new renewal of the agreement. The game shirts and training attire for Real Madrid are designed and manufactured by the German sportswear business because it is the club's official kit supplier. The average football fan might be perplexed as to why these companies would pay so much to have their logos displayed on these shirts, but from the standpoint of marketing, it makes sense given that approximately 400 million individuals follow Real Madrid on social media globally.

To conclude, the economics that can be applied to the sport of football is very important to the success of the game. The sport has been able to develop into the multibillion-dollar industry that it is today due to the industry's enormous income routes for its teams, players, as well as businesses.