Sports have become big sources of revenue and entertainment world over.
Last year IPL was valued at US $10.7 Billion, turning into a decacorn. Same year Wimbledon viewership generated over US $95 Million in sponsorships. The broadcast rights of Wimbledon 2024 were itself sold for 66 Million US Dollars and those of US open were sold for US $75 million.
Apart from the better marketing and better level of the sport, this is because of the 'Ease of Broadcast, where every sporting event can be seen by thousands of people from across the globe. Professor Steve Greenfield, Law School, University of Westminster says:
The Sports Industry as a source of entertainment has grown multifold. He says that the success of IPL is a great example of how changing Tech and new Media has given rise to Big Sports, today at par with Big Entertainment.1
Traditionally Sports Leagues were based on the Commissioner Model where a Commissioner would serve as a guardian of the game and a business champion employed by team owners. However this dual responsibility would often prevent the commissioner from acting impartially. Hence new models of the business are followed today. The most popular being the Pure Corporate Model. Subsequently some leagues also follow the Hybrid Model or the Panel Model.Â
In our opinion the Pure Corporate Model gives the organizers greatest Ease of Business, greatest control over assets and an overall easier management and maximum profit.
Today we are going to explore what legal hurdles are faced by corporations setting up a Sports League in the Pure Corporate Model and how they can solve it. Let us begin by understanding what is the Pure Corporate Model in the Sports Industry:
The pure corporate model proposed for sports leagues involves adopting a structure similar to a traditional business corporation. In this model:
Ownership and Governance:Â Team owners act as the board of directors, exercising exclusive decision-making authority over league affairs. They establish league policies and appoint a Chief Executive Officer (CEO) to execute their decisions in the day-to-day business operations of the league.
CEO's Role:Â The CEO, appointed by the team owners, is responsible for managing the business affairs of the league. The CEO acts under direct control and general supervision of team owners. The CEO's role is to represent the owners' interests and make decisions aligned with their preferences.
Decision-Making Process: The board of directors (team owners) formulates league policies without fear of second-guessing by the CEO, as the board's decisions are considered definitive. This centralized decision-making process is expected to result in more predictable, certain, and efficient league decisions.
Accountability:Â The CEO is accountable only to the team owners, and the owners, acting collectively as the board, maintain control over the CEO's appointment and termination. This structure aims to increase the accountability of the owners for both popular and unpopular decisions, as the CEO serves as the face of the league.
The Pure Corporate Model emphasizes efficiency and centralized decision-making. It is usually the preferred model for most League Owners, Franchise Owners, Investors and Sponsors alike.
Let us now examine how to set up a sports league, Sports League Management and the arsenal of Crucial contracts and Top Legal Documents you will need in order to start a Sports League:
League Constitution and Bylaws:
Draft a comprehensive constitution outlining the purpose, structure, and governance of the league.
Include provisions on membership, voting rights, decision-making processes, and dispute resolution mechanisms.
Team Ownership Agreements:
Prepare agreements with team owners defining their rights, responsibilities, and obligations.
Specify ownership percentages, financial contributions, and profit-sharing arrangements.
Chief Executive Officer (CEO) Employment Agreement:
Draft an employment contract for the CEO, outlining roles, responsibilities, compensation, and termination conditions.
Commercial Contracts:
Sponsorship Agreements: Contracts with sponsors detailing sponsorship terms, rights, and obligations.
Broadcasting and Media Rights Agreements: Contracts with media companies for broadcasting league events.
Merchandising Agreements: Contracts with manufacturers or retailers for the sale of league merchandise.
Player Contracts:
Player Agreements: Standard contracts for players, specifying terms such as compensation, duration, and performance expectations.
Agent Agreements: Contracts with player agents outlining their roles, fees, and responsibilities.
Venue Agreements:
Contracts with venue owners or operators for the use of facilities during league events.
Address terms such as rent, maintenance, and scheduling.
Intellectual Property Documents:
Trademark Registration: File for trademark protection for the league's name, logo, and any other relevant intellectual property.
Licensing Agreements: Contracts allowing third parties to use league trademarks or intellectual property.
Code of Conduct and Disciplinary Policies:
Establish a code of conduct for players, team owners, and other league participants.
Develop disciplinary policies and procedures for handling rule violations.
Insurance Policies:
Obtain necessary insurance coverage for liabilities, injuries, and other risks associated with league events.
League Membership Agreements:
Formalize agreements with league members, outlining their rights and responsibilities.
Include provisions on financial contributions, voting rights, and league participation.
Dispute Resolution Mechanisms:
Draft agreements specifying mechanisms for resolving disputes between league participants, such as arbitration clauses.
Anti-Doping Policies:
Develop and implement anti-doping policies in compliance with national and international regulations.
It is imperative to draft and optimize your contracts and other policy documents by a Lawyer who is well-versed in the field. Lawyers can anticipate the possible hurdles the you may face in the future.
Lawyers are also able to better understand the trends in the market and hence can safely predict your expected revenue. This way they can help you plan for maximum profit and minimum complications from Day 1.
Reach out to our Sports Attorney today! And Sign-up for our Newsletter below for more such regular legal content.
Credit:
2. Gregor Lentze, The Legal Concept of Professional Sports Leagues: The Commissioner and an Alternative Approach from a Corporate Perspective, 6 Marq. Sports L. J. 65