Athlete Salaries

Athletes are paid too much.

Given some of the recent professional sports contracts that have been signed, I've been hearing this a lot. American football, baseball, basketball, real football, players are receiving astronomical figures to play on a level we could only dream of.

But are the figures actually astronomical when you look at ROI for the owners of these teams? Sports franchises don't change hands frequently, but in March 2025, the Boston Celtics basketball team set a record for a North American sports team when they were sold for $6.1bn. The sellers had bought the Celtics in 2002 for $360m, that's a 1600% ROI in 22 years - an annualized return of 13.1%, plus you get to own a sports team!

In addition, the Celtics make annual profits - last year reporting income of $121m on revenue of about $440m, an operating margin of ~25%.

So, is paying a player $50m/year worth it. The short answer from the owners' perspective is, yes absolutely.

And if you don't like the thought of multi-millionaires getting even richer for essentially playing a game, the less professional athletes are paid, the wealthier the billionaire owners become. As long as we are buying match tickets and watching on TV, the money has to go to someone.

How to tie this rambling back to hedging...salary insurance. Sports are as volatile as markets and injuries can see players sidelined for weeks, months, or even seasons while they are still paid. Salary insurance reimburses the team should a player sustain a long-term injury. The premiums teams pay on the insurance policy are small compared to that potential 'loss'.

So, are athletes really overpaid or are they fairly compensated in a system that is primarily built to enrich the owners?