Well, is Karate a sport? The answer to this question depends entirely upon one's philosophy, and indeed for some the response may be both yes and no, depending on the context of the question. After all, for many people the word "sport" has a purely physiological aspect. In the context of physical and muscular development, coordination, respiration, and overall physical fitness, then yes Karate (and the vast majority of other martial arts) can be considered to be a sport. For many others, and indeed the vast majority, the word "sport" is inseparable from the word "competition". When one adds a competitive mindset to any activity, it is usually in the pursuit of an outward recognition for ones accomplishment in that discipline. This results in comparisons such as "so-and-so is world champion", or "this instructor can't really be that good because he has never competed in the national championship". My response to these kinds of statements is quite frankly "why does it matter so much?".
Most traditional martial arts disciplines are heavily entwined with one or more spiritual philosophies, with emphasis on continual personal improvement and the pursuit of perfection, not only of technique, but also one's own character. A few years ago, I once asked a national karate kumite champion his ultimate reason for practicing karate, and his answer was "to continually improve myself". He added that practicing karate instilled in him such qualities as discipline, respect and humility. I then asked him what his motivation was for competing in tournaments, to which his response was simply to "become the best".
In my mind, the two parts to his responses are mutually exclusive. Why? Let us take the second answer first. If one desires to become the "best" at any given activity, then inherently this means that one's definition of "best" must have a basis of comparison to his peers, colleagues, and rivals. If this is the case, then surely this contradicts the quality of humility?
If I take the first part of his response, "to continually improve myself", then this again is contradictory to the second part of the answer, because to improve one's self implies that the basis of comparison is within the individual, and the desire is to improve based on that point of reference. There is, of course, nothing wrong with using an external comparison as a point of reference, such as "this person is better than I, so I want to be as good as him". This provides a sense of direction and motivation to that self improvement, especially when it is difficult to identify inwardly the areas of specific improvement desired. However, when one then wants to "demonstrate" that he or she is better than someone else, it changes the entire philosophy and becomes merely someone seeking fame or recognition.
The martial arts involve techniques and actions which are lethal when applied, and as such these actions should be regarded with respect. When combining the technique with the concept of power and energy flow (ki / chi) they become devastating when applied. This is one of the reasons that most martial arts disciplines will teach that the art should only be used as a very last resort when there is no means to avoid a conflict. This is an aspect of the martial arts which existed even centuries ago, and is one of the reason that especially the martial arts from the orient place a heavy emphasis on spirituality, calmness, and humility. Why then would one want to voluntarily enter into combat in the first place, let alone wanting to do it in front of crowds of people for the sole purpose of seeing who comes out victorious and who wins the most medals?
To further expand this conundrum, there is another aspect to this. In karate training we learn a myriad of techniques, including open-handed techniques and "morote waza" (two-handed techniques). However, in competition, 99.999% of the time such techniques will never score even a "waza-ari" (half-point), let alone a full "ippon" (one point). Why is this? Simply because visually the technique "appears" weak and without effect. But let us remember that when working with a partner in sparring, or in competition, we need to "hold back" the technique to avoid injury (and/or disqualification in the case of competitions). As a result, judges in competitions are often looking for "form" rather than "technique", as well as reduction of the risk of injury. A "kizami-tsuki" or "gyaku-tsuki" with a highly visible (or even exaggerated) "hikite" is more likely to score a point than a simultaneous "osae-uke" with "haito-uchi" strike to the nerve-ending at the back side of the head between the earlobe and spine, or even a mae-geri kekomi (front thrust kick).
One may ask "if karate is an art, rather than a competitive sport, why are there so many ranks and why are they important?" Actually, this is a very good question, and one that I use in a rhetorical sense quite often. This is where we enter the realms of modern-day attitudes, and returning to the "competitive" aspects of the martial arts. Whether we like it or not, most martial arts are regulated internationally, nationally, and sometimes locally, by some form of federation or other governing body. While on one hand the goals of such bodies are laudable in that they seek to unify practitioners, and provide a set of standards train by, most of them are also under the guise of sporting organisations which inherently places emphasis on the competitive aspect. Further, because of this regulation of the arts, those who wish to pursue them must study under a teacher who is qualified by that organisation, and of course such qualification is often intrinsically linked to rank or grade. In this respect, sadly, rank and grade, and the recognition of that rank by the governing body or federation, is an unfortunate necessity if one wants to be able to not only learn and progress inwardly, but also to pass on what they have learned to others through teaching.
The introduction of grades into the martial arts was a good thing from the psychological point of view, by providing a means to motivate practitioners since they have an on-going feedback of their progress. The disadvantage to a ranking system is that, again, it inspires an attitude of competition and in some cases, envy. Yet again, so much for the "humility" aspect of the arts.
Having said that, among all of the martial arts, it is really only a small handful (and among the most popular, such as karate, kung fu, jujitsu and taekwon-do) which seem to place very heavy emphasis on rank. Sadly there are even some organisations which go even more overboard with this, such that you will find some people wearing fancy belts of multiple colours and longer or wider than everyone else, and giving themselves fancy titles such as 'shihan'. In my mind, this totally undermines the whole spirit of the martial arts, even the more modern ones developed purely for competition, such as kick-boxing, muy-thai, etc.
Interestingly, if you look at the more traditional martial arts, such as Iaido, Jodo, Battodo, Kyodo, there is little or no outward indication of rank of any of the practitioners, even though the ranks do indeed exist. This is because in the traditional arts, rank in and of itself is meaningless if one ignores the development of harmony between mind body and spirit.
Even in Aikido, which itself is a non-competitive art, there are ranks. Some organisations have outwardly visible and detailed indication of rank, while others have only a white and black belts. Even whether or not an aikidoka wears a hakama is not a reliable indicator of his or her rank, since some organisations only authorise the hakama by dan-grades, others by everyone starting at 3rd kyu, others at 1st kyu, and even some organisations use the hakama for absolute beginners (providing they have adequately learned and demonstrated body position and footwork, since the hakama has a tendency to conceal the foot and leg position and movements).
It is sad that too much emphasis is placed on the "sport" side of karate, and this has over the years led to many political battles between organisations not only internationally, but even nationally in some countries. It is this kind of political nonsense that led to the the introduction of a very much contested rule in the WKF regulations -- specifically rule 21.9 which prohibits any competition or "sporting relationship" with members of organisations not affiliated with the WKF. (Interpreted by some as "stamping out the dissident groups") The introduction of this kind of politics into the arts can only be detrimental to those who practice the arts and whose only goal is to develop themselves.