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WARM UP High Schoolers Becoming the Norm for the NBA Think Critically Why are more high school athletes skipping college careers? What is the financial.

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Presentation on theme: "WARM UP High Schoolers Becoming the Norm for the NBA Think Critically Why are more high school athletes skipping college careers? What is the financial."— Presentation transcript:

1 WARM UP High Schoolers Becoming the Norm for the NBA Think Critically Why are more high school athletes skipping college careers? What is the financial impact of endorsements? What are the risks associated with young, unproven players selected for large endorsement contracts? What kind of impact does the NBA draft have on college athletics?

2 SPORTS AND ENTERTAINMENT MARKETING PROFESSIONAL SPORTS Big League Sports Attracting a Professional Team

3 Big League Sports

4 Top 10 Sports in the World 10. Football 9. Basketball 8. Golf 7. Baseball 6. Table Tennis 5. Volleyball 4. Tennis 3. Field Hockey 2. Cricket 1. Soccer Source:

5 Soccer 260 million participants worldwide Truly global appeal – National, cultural, religious, gender, class Federation Internationale de Football Association (FIFA) – $700 million annual income – World Cup most widely viewed sporting event in the world Highest paid soccer players in world 3. Wayne Rooney, Manchester United ($17.9 million) 2. Zlatan Ibrahimovic, PSG ($18.8 million) 1. Samuel Eto'o, Anzhi Makhachkala ($25.9 million)

6 Top 10 Sports in the USA 10. Badminton 9. Motor Sports 8. Combat Sports 7. Golf 6. Tennis 5. Soccer 4. Hockey 3. Basketball 2. Baseball 1. Football Source:

7 Financial Impact Most valuable NFL football teams 1. Dallas Cowboys ($2.1 billion) 2. New England Patriots ($1.64 billion) 3. Washington Redskins ($1.6 billion) 4. New York Giants ($1.47 billion) 5. Houston Texans ($1.31 billion)

8 Financial Impact New Dallas Cowboy Stadium (2009) – Originally estimated to cost $650 million, actual cost $1.15 billion Financed through approved sales tax increases by the city of Arlington; $325 million bonds from city of Arlington (bonds); $150 million NFL loan; over runs paid by Jerry Jones One of the most expensive sports venues ever built – Seats 80,000 (110,000 including standing room) 2 nd largest NFL stadium

9 Cowboy Stadium Since opening, has hosted: – Super Bowl XLV (2011) – NBA All-Star Game (2010) Highest attended basketball game in history – Big 12 Championship Game (2009, 2010) – Cotton Bowl ( ) – Texas UIL State Championship ( ) – NCAA Final Four (2014)

10 Financial Impact SportYearly Revenue National Football League (NFL)$9 Billion Major League Baseball (MLB)$7 Billion National Basketball League (NBA) $3.8 Billion National Hockey League (NHL)$2.9 Billion Major League Soccer (MLS)$280 Million Source:

11 Financial Impact SportAverage Salary National Basketball League (NBA)$5.2 Million Major League Baseball (MLB)$2.5 Million National Football League (NFL)$1.75 Million National Hockey League (NHL)$1.3 Million Professional Golf Association (PGA) $0.973 Million Womens Tennis$0.345 Million Mens Tennis$0.260 Million Womens Golf$0.162 Million Source:

12 Financial Impact SportSalary Cap Major League Baseball (MLB)$178 Million National Football League (NFL)$120 Million National Hockey League (NHL)$64.3 Million National Basketball League (NBA)$58.04 Million Major League Soccer (MLS)$2.6 Million Source:

13 Financial Impact Source:

14 Financial Impact

15 Its All About the Money Professional sports are big business Depend on a large financial commitment and a large financial return A city gains a special identity with a professional team, and a winning tradition fuels the financial fire

16 How Teams Make Money Ticket Sales Merchandise Sponsorships Naming Rights Media Revenues

17 Ticket Sales Fan Cost Experience

18 Merchandise NFL Top Sellers 1.Pittsburgh Steelers 2.Dallas Cowboys 3.New Orleans Saints 4.Philadelphia Eagles 5.New England Patriots 6.Chicago Bears 7.New York Giants 8.Green Bay Packers 9.Indianapolis Colts 10.New York Jets NBA Top Sellers 1.Chicago Bulls 2.New York Knicks 3.Los Angeles Lakers 4.Miami Heat 5.Dallas Mavericks 6.Boston Celtics 7.Oklahoma City Thunder 8.Los Angeles Clippers 9.Denver Nuggets 10.Orlando Magic

19 Sponsors NFL Top Sponsors – Gatorade – Marriott – Pepsi – Bud Light – Visa – General Motors – Verizon – Fed Ex – Papa Johns Pizza MLB Official Sponsors – Anheuser-Busch – Bank of America – Bayer – Captain Morgan – Citi – Firestone – Frito-Lay – Gatorade – General Motors (Chevrolet) – Intel – Holiday Inn – MasterCard International – Nike – Pepsi-Cola – Scotts – Sprint – State Farm Insurance – U.S. Army

20 Sponsors NASCAR Official Sponsors 3M Bank of America Camping World Canadian Tire Chevrolet Coca-Cola Coors Light DIRECTV Dodge DRIVE4COPD DuPont Exide Featherlite Coach Featherlite Trailers Ford Freescale Freightliner Trucks Growth Energy Gillette Goodyear Head & Shoulders NASCAR Official Sponsors Mars Mobil 1 McLaren Nabisco (Kraft) National Corn Growers Assoc. Nationwide Insurance Office Depot Old Spice Safety- Kleen SIRIUS XM Radio Sprint Sunoco Toyota Unilever UPS USG Visa K & N Whelen Engineering Inc.

21 Naming Rights

22 Television Revenue Television Revenues by League NFL$5 billion NBA$500 million MLB $479 million NHL$200 million

23 Winning is Everything In order to keep ticket sales strong and charge high prices, owners must provide a winning team A team fresh off of a national championship will probably have sold-out games the next season because fans expect continued success

24 Most Winning Teams

25 Prestige, Power, Profitability Perks and payoffs Political clout Professional teams and the community Sociological ties to a professional team The bottom line

26 Prestige, Power, Profitability The value of sports franchises has skyrocketed due to prestige, power, and profitability Jerry Jones paid $140 million for the Dallas Cowboys in 1989 ($65 million for the franchise and $75 million for the stadium) The Cowboys franchise is currently valued at $2,100,000,000

27 Perks and Payoffs Perka payoff or profit received in addition to a regular wage or payment The position of team owner has many perks, including money and media exposure – Jerry Jones (Cowboys) – Jerry Beuss (Lakers) – George Steinbrenner (Yankees) – Ted Turner (Braves/Hawks) – Mark Cuban (Mavericks)

28 Political Clout Franchise owners who bring millions of dollars in business activity to a city often find themselves with political clout or influence Political Clout is frequently associated with wealth

29 Professional Teams and the Community Professional teams bring enthusiasm and heightened emotion People perceive teams as bringing many new jobs to a city Teams also generate a boost for area businesses Communities benefit from professional sports franchises that place high value on community outreach projects

30 Sociological Ties to a Professional Team Sports have a sociological impact on cities and their citizens Many people identify with their teams

31 The Bottom Line Winning is everything in sports Teams often provide players with special contract incentives for winning

32 Competition or Collusion? Teams are paid big money to win Sports clubs cannot operate independently – Must cooperate with one another in order to sell their entertainment services to the public

33 Role of the League Teams that are members of a professional sports league are contractually obligated to one another Teams that are members of a professional sports league are contractually obligated to one another The league determines: The league determines: the schedule of games the schedule of games makes and enforces game rules makes and enforces game rules sets the guidelines for hiring new players sets the guidelines for hiring new players determines when a new team will be admitted to the league and allowed to compete with its members determines when a new team will be admitted to the league and allowed to compete with its members

34 League Rules Competition on the field would diminish if any club had the ability to hoard the best athletic talent League rules are designed to ensure that each club has the opportunity to employ and retain quality players – Contracts, Drafts, etc. Because specific clubs may hold the exclusive right to contract with a player, athletes are not always free to work for the highest bidder

35 What Happens if No League Rules? More successful clubs would sell more tickets and team merchandise Earn higher profits Have the ability to attract the best players with higher salaries Over time, these clubs would become so much stronger than the less successful teams that competition on the playing field would deteriorate and become boring for spectators If spectators dont come, then everyone loses…

36 How Does it Work? Individual teams are separately operated businesses Cartela combination of independent businesses formed to regulate production, pricing, and marketing of a product

37 Cartels In the case of professional sports, the cartel is a number of independent sports teams grouped together and governed by a league agreement of operations The league controls the distribution of the teams, including the locations of the teams and the number of teams allowed to operate within the league Typically, Cartels are NOT allowed in business – special legislation exempting the professional sports leagues from antitrust laws

38 League Set Up

39 Expansion Plans Team owners must prove financial viability before the team can find a home city Owners and managers must convince the city that the costs of a team or new stadium will be repaid through increased spending by fans and by increased tax revenues

40 An NFL team can be a financial asset to a city if: 1.Everyone and everything involved with the team stays within the home city area 2.The stadium/arena is used for events other than those for which it was built 3.The team attracts other business development like hotels, restaurants, and retail shops

41 Bringing All the Resources Together Once the financial viability of a sports team is proven – media support, – marketing arms, – charitable concerns, – and other organizations come together to back it

42 How Easy is it to Add a New Team? Bringing a new team to a city takes more than just an owners desire for a new team – League must approve expansion plans – Potential owners have to have the financing to pay the current NFL owners for an expansion team – The new team must have a place to play to attract fans

43 How Easy is it to Add a New Team? Since there are more cities that want pro teams than there are teams available, the leagues control the location of the teams based on the business benefits to the leagues and owners. The leagues are in business to make a profit

44 Houston Texans 1997 Houston denied NHL expansion team 1997 Houston Oilers allowed to move to Tennessee 1998 Cleveland awarded 31 st Expansion team learn 32 nd Expansion team coming in next 2 years, cities being considered: LA (5.5 million households) Houston (1.8 million households) Toronto 1999 Team awarded to LA contingent on ownership team & stadium plans LA financers offering $540 million Houston financers offering $700 million ; won bid 2000 Begin building Reliant Stadium 2001 Hire Head Coach Dom Capers 2002 Expansion Draft to get athletes 9/8/2002 Home opener against Dallas Cowboys 2004 Hosted Super Bowl XXXVIII

45 It Takes Money The economics of pro sports involve huge amounts of money and risk on the part of the owners New stadiums offer luxury suites and upscale restaurants that increase the caches of profits, but these are not a guarantee of attracting a team Example: San Antonio Alamodome; taxpayers paid $156 million in 1989 to build the Alamodome; they still have not attracted a professional team.

46 It Takes Money Pricing of tickets, concessions, luxury seating, and merchandise related to a professional team all contribute to the financial picture The biggest profit center is TV revenues This revenue is generated through the sale of advertising time on TV channels that offer the games

47 Cashing In Super Bowl XXXVIII was played in Houstons Reliant Stadium in the venues 2 nd year of existence The Super Bowl deal was a part of the financial contract and agreement between the Texans & McNair & the NFL Houstons city government used the economic impact of the Super Bowl to justify tax support for the stadium – Taxpayers paid 60% of the $310 million stadium

48 It Pays Off… In addition to the 69,500 ticket-holding fans (paying anywhere from $1,950 - $4,800+ per ticket), another 10,000 – 40,000 non-ticket holders visited the city during the weekend activities The associated business that benefited from the crowd- lodging, food, beverage, & entertainment-generated about $300 million for the host city McNair bought franchise in 1999 for $700 Million, Houston Texans now valued at $1.3 Billion

49 Super Bowl To host the Super Bowl obligates to a city to meet 20 pages of NFL requirements including: – Having at least 17,500 hotel rooms available – 65 limos exclusively for NFL use – 1,000 buses for transporting fans – And many private and public golf courses for fan use

50 Super Bowl Rewards If a city does a good job hosting the Super Bowl; then the host city can expect to host the Super Bowl about every five years


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