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Sports and Entertainment Marketing © Thomson/South-Western ChapterChapter Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics.

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Presentation on theme: "Sports and Entertainment Marketing © Thomson/South-Western ChapterChapter Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics."— Presentation transcript:

1 Sports and Entertainment Marketing © Thomson/South-Western ChapterChapter Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics 2.2 Risk Management 2.3 Business Ethics 2.4 Financial Analysis 2

2 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 2 Winning Strategies one of the largest music content providers cost savings achieved through outsourcing of manufacturing in 2005, income grew due to legitimate sales of digital music the music industry embraces ever-changing technology and helps drive the economy EMI

3 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 3 Lesson 2.1 Sports and Entertainment Economics Goals Define profit and explain the profit motive. Describe types of economic utility.

4 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 4 Terms profit profit motive economics economic utility

5 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 5 THE PROFIT MAKERS profit the amount of money remaining from revenues after all expenses are paid

6 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 6 the money a business receives from the sales of goods and services profit motive making decisions to use resources in ways that result in the greatest profit revenue

7 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 7 Cultural Opportunities for Profits Worldwide distribution revenue is critical for movie profits.

8 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 8 China has a tremendous movie market. the government censors movies for content pirated movies diminish theater sales Marketers must understand the markets in which sales occur.

9 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 9 In addition to U.S. ticket sales, name two other large sources of revenue for U.S. film studios. International Ticket Sales DVD sales DVD Rentals Sale of Movie Themed Merchandise

10 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 10 ECONOMICS economics the study of how goods and services are produced, distributed, and consumed

11 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 11 the study of the economics of the entire society microeconomics the study of the relationships between individual consumers and producers Sports and entertainment marketers are focused on microeconomics. relationships with consumers macroeconomics

12 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 12 Sports and Entertainment Economics economic utility the amount of satisfaction a person receives from the consumption of a particular product or service

13 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 13 Types of Utility form utility when the physical characteristics of a product or service are improved time utility making the product or service available when the customer wants it place utility the product is available where it is wanted possession utility the product or service is available at an affordable price

14 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 14 List four types of economic utility.

15 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 15 Lesson 2.2 Risk Management Goals Define risk and describe the categories and classifications of risk. Name and describe four strategies for risk management.

16 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 16 Terms risk risk management liable

17 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 17 RISKING IT ALL risk the possibility of financial gain or loss or personal injury

18 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 18 Categories of Risk natural risk occurs from unavoidable weather conditions human risk dishonest customers and employees inadequately trained employees economic risk occurs due to changes in the economy

19 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 19 Additional Classification of Risk gain or loss risk speculative risk either a gain or loss could result pure risk a chance of an event occurring that could only result in a loss

20 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 20 if a loss can be prevented or the likelihood of its occurrence reduced uncontrollable risk nothing can be done to prevent the risk controllable risk

21 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 21 a pure risk for which the chances of loss are predictable and the amount of the loss can be estimated uninsurable risk the chance that a dollar loss could occur the amount of the loss cannot be estimated insurable risk

22 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 22 What is meant by a controllable risk?

23 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 23 MANAGING RISK risk management preventing, reducing, or lessening the negative impacts of risk by using the strategies of risk avoidance, risk insurance, risk transfer, and/or risk retention

24 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 24 Risk Avoidance Sports and entertainment marketers need to plan to avoid risky situations. liable the business is legally responsible for damages that occur

25 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 25 Risk Insurance risk insurance pays for predictable losses premium cost of insurance

26 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 26 Risk Transfer Some risks can be transferred to another company or even to the consumer. contracting with third parties for services including releases from liability on event tickets

27 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 27 Risk Retention risk retention assuming the cost of an uninsurable risk risk retention groups similar businesses facing similar risks pool resources resources are distributed to members that have a loss

28 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 28 Briefly describe four strategies for managing risk.

29 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 29 Lesson 2.3 Business Ethics Goals Define ethics. Discuss the impacts of unethical behavior.

30 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 30 Terms ethics principles

31 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 31 DO ETHICS COUNT? ethics a system of deciding what is right or wrong in a reasoned and impartial manner Business should be conducted with integrity, trust, and fairness.

32 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 32 Ethics and Character Matter principles high standards of rules and guidelines character development a progression in behavior where people advance from childish behavior to mature behavior based on principles Young people need good role models.

33 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 33 How does a persons character develop?

34 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 34 BUSINESS BEHAVIOR People and businesses should act ethically while pursuing a profit.

35 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 35 Seeking an Advantage Sometimes it is hard to continue to act ethically when you observe people who receive a benefit from acting unethically.

36 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 36 When Being Bad Profits Only fans can really influence the behavior of ethically challenged athletes and celebrities.

37 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 37 Effective and Ethical Good decisions are both ethical and effective. Good decisions are the right choices for the long term.

38 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 38 How can the bad behavior of celebrities be controlled?

39 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 39 Lesson 2.4 Financial Analysis Goals Discuss sources of funding and revenue for sports and entertainment businesses. Describe four tools for financial analysis.

40 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 40 Terms return on investment forecast budget balance sheet income statement

41 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 41 IT TAKES MONEY Profit is the primary purpose of sports and entertainment marketing.

42 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 42 Finding Funding Investors generally provide the funding for an event to cover all the costs that must be incurred before tickets are ever sold.

43 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 43 the income from a venture that is distributed to investors return on investment

44 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 44 Money Sources Funds to repay investors are raised through ticket sales broadcast rights licensing facilities

45 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 45 Name three sources of revenue from sports and entertainment.

46 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 46 WHERE IS THE MONEY? forecast a plan that predicts the expenses to be incurred and the revenues to be received

47 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 47 BUDGETS budget a plan for how available funds will be spent The purpose of a budget is to control costs so they do not exceed the funds available.

48 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 48 Financial Statements balance sheet net worth = assets – liabilities shows net worth at a specific point in time income statement shows revenues and expenses for a specific period of time reveals companys profit or loss

49 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 49 What is the purpose of a forecast?

50 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 50 PERFORMANCE INDICATORS EVALUATED Communicate pricing strategies for supply and demand. Analyze relevant data to determine varying ticket prices for home games. Explain the need for and use of additional revenue from higher-priced tickets.

51 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 51 Explain the benefits of increased revenue for consumers of foot-ball tickets. Demonstrate knowledge of appropriate pricing strategies.

52 Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 52 THINK CRITICALLY 1.Why have an increasing number of universities varied ticket prices to games based upon the opponent? 2.Why must universities consider the consumer before raising ticket prices? 3.If games become to expensive to attend, what other options do consumers have to watch the games? 4.How much revenue would be generated from the seven games if ticket prices were $40 all season long?


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