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3.1 Big League Sports. Financial Impact Big league pricing and planning Big league pricing and planning –“Big” refers to revenue potential – the better.

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Presentation on theme: "3.1 Big League Sports. Financial Impact Big league pricing and planning Big league pricing and planning –“Big” refers to revenue potential – the better."— Presentation transcript:

1 3.1 Big League Sports

2 Financial Impact Big league pricing and planning Big league pricing and planning –“Big” refers to revenue potential – the better the team the more money they make –Must determine costs for multimillion dollar contracts – Better athletes=better ticket sales Financial planning for a sports team Financial planning for a sports team –A sports team is a huge cost (stadium, facilities, etc) –Can bring in huge revenue – Must prove to the city –A professional team can be an asset to a city if:

3 NFL’s Team Values ) Dallas Cowboys - $3.2 bill. 2) New England Patriots - $2.6 bill. 3) Washington Redskins - $2.4 bill. 4) New York Giants - $2.1 bill. 5) Houston Texans - $1.85 bill. 30) Detroit Lions - $960 mill. 32) St. Louis Rams - $930 mill.

4 World’s Richest Athletes Floyd Mayweather - $105 mill. Floyd Mayweather - $105 mill. Cristiano Ronaldo - $80 mill. Cristiano Ronaldo - $80 mill. LeBron James – $72.3 mill. LeBron James – $72.3 mill. Lionel Messi - $64.7 mill. Lionel Messi - $64.7 mill. Kobe Bryant - $61.5 mill. Kobe Bryant - $61.5 mill. Tiger Woods - $61.2 mill. Tiger Woods - $61.2 mill. Roger Federer - $56.2 mill. Roger Federer - $56.2 mill.

5 Big League Pricing & Planning Professional athletes contracts Professional athletes contracts –Must determine what the team can afford – better players = better team and more income Corporate sponsorships Corporate sponsorships –Must have financial backing from corporations to support activities Television revenue Television revenue –The better the team and fan following the more likely a tv network is to pick up the game

6 Salary Caps Are spending limits affecting how much a team can spend on a certain player Are spending limits affecting how much a team can spend on a certain player Give teams limits on player total player spending Give teams limits on player total player spending May also affect individual player spending based upon factors such as years in the league and position May also affect individual player spending based upon factors such as years in the league and position Are mandated and regulated by the governing bodies of major sporting leagues Are mandated and regulated by the governing bodies of major sporting leagues Affect the National Football League ®, National Basketball Association ® and National Hockey League ® Affect the National Football League ®, National Basketball Association ® and National Hockey League ® –does not affect Major League Baseball ® –Major League Baseball ® is referred to as an “uncapped” league

7 Collective Bargaining Agreements Are contracts existing between the owners of a sport’s league and the player’s association Are contracts existing between the owners of a sport’s league and the player’s association Contain rules for player salaries Contain rules for player salaries Also contain requirements for salary caps Also contain requirements for salary caps Free agency is the process by which players are assigned a team. When a player is a “free agent” they are free to negotiate with any team with whom they wish to sign. Free agency is the process by which players are assigned a team. When a player is a “free agent” they are free to negotiate with any team with whom they wish to sign. Defines the rules for free agency Defines the rules for free agency

8 Financial Planning for a Sports Team A prof. sports team can be a financial asset to a city if A prof. sports team can be a financial asset to a city if –Everyone and everything involved with the team stays within the home city area –The stadium/arena is used for events other than those for which it was built –The team attracts other business development like hotels, restaurants, shops Increased spending by fans Increased spending by fans –If a team can get fans to the city they will spend on hotels, restaurants, shops, etc. Increased tax revenues Increased tax revenues

9 Bringing All Resources Together Media support Media support Marketing Marketing Charitable and other organizations Charitable and other organizations

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

11 Perks & Payoffs Perk—a payoff or profit received in addition to a regular wage or payment Perk—a payoff or profit received in addition to a regular wage or payment Company employees receive tickets Company employees receive tickets Media exposure for owners Media exposure for owners –Houston Texans

12 Political Clout Franchise owners bring millions of dollars in business activity to a city Franchise owners bring millions of dollars in business activity to a city –Often given money or other perks by city officials to entice team to stay in city Nashville and the Tennessee Titans Nashville and the Tennessee Titans Frequently associated with wealth Frequently associated with wealth

13 Professional Teams & the Community Teams bring new jobs to a city Teams bring new jobs to a city –Stadium construction, working games, other tourist businesses created (hotels, restaurants, etc.) Boost for surrounding businesses Boost for surrounding businesses –City of Detroit and Tigers playoff run Community service – team and coaches help out community in various ways Community service – team and coaches help out community in various ways

14 Sociological Ties to a Professional Team City’s “image enhancement” City’s “image enhancement” Residents feel pride Residents feel pride –Ex. - Pittsburgh Steelers, Detroit Lions, New York Yankees, Denver Broncos Wholesome family entertainment Wholesome family entertainment

15 The Bottom Line Winning is everything in sports Winning is everything in sports Special contract incentives for winning Special contract incentives for winning

16 Incentives can be….. Can mean different things to different parts of a professional sports organization Can mean different things to different parts of a professional sports organization Owner’s generally find success in making money Owner’s generally find success in making money Managers or coaches measure success in winning Managers or coaches measure success in winning Players find success in winning and reaching certain statistical milestones paying them bonuses Players find success in winning and reaching certain statistical milestones paying them bonuses –for example, a soccer player may have incentives, or motivators, in his contract to score more goals Front office personnel such as marketing or public relations might measure success based on fan attendance Front office personnel such as marketing or public relations might measure success based on fan attendance

17 3.2 Attracting a Professional Team

18 Goals Describe the distribution process for a professional sports team. Describe the distribution process for a professional sports team. Explain the process for financing a professional sports team. Explain the process for financing a professional sports team.

19 Distributing the Game Individual teams are separately operated businesses Individual teams are separately operated businesses Cartel—a combination of independent businesses formed to regulate production, pricing, and marketing of a product Cartel—a combination of independent businesses formed to regulate production, pricing, and marketing of a product The league controls the distribution of the teams The league controls the distribution of the teams

20 How Distribution is Decided Region with a large potential customer base Region with a large potential customer base Subsidies for the team Subsidies for the team Owner must have financing Owner must have financing Stadium to attract fans Stadium to attract fans

21 Attracting a Sports Team It takes money It takes money And more money And more money Cashing in Cashing in Another option Another option –Owned by community = GB

22 Try to attract sports teams for their positive economic impact Try to attract sports teams for their positive economic impact Also try to attract sports teams to build civic pride Also try to attract sports teams to build civic pride View the sports teams as advertising for the city View the sports teams as advertising for the city

23 Is done by giving the team a new stadium Is done by giving the team a new stadium –stadiums are the most expensive cost of owning a team –stadiums are often built by passing stadium taxes, which raise taxes for the local community Is also done by giving the sports team tax breaks to lure them to a new location Is also done by giving the sports team tax breaks to lure them to a new location

24 Successfully is a full time job Successfully is a full time job –small parts of city government must be allocated to lure a team May be accomplished through two ways: May be accomplished through two ways: –league expansion: when the league adds an additional team –team relocation: when the league relocates an existing team to an new location

25 For example, Portland Oregon has been campaigning to get a Major League Baseball ® Team. For example, Portland Oregon has been campaigning to get a Major League Baseball ® Team. The Oregon Sports Authority, Portland Baseball Group and Oregon Baseball Campaign have combined to form the Oregon Stadium Campaign, a coalition of fans and business who want to bring baseball to Oregon. Visit them online at: The Oregon Sports Authority, Portland Baseball Group and Oregon Baseball Campaign have combined to form the Oregon Stadium Campaign, a coalition of fans and business who want to bring baseball to Oregon. Visit them online at:

26 Usually requires the following: Usually requires the following: –a vote of the existing franchises to admit the team –a bid for the new franchise made by potential owners and cities for the location –contract negotiations with owners and location –stadium construction or lease agreement –creation of logos, team name and team colors, etc. –recruitment of staff and players 26 From the Playbook: Teams which are added to leagues are referred to as expansion teams since they expanded the league.

27 National Football League ® National Football League ® –the most recent expansion team in the NFL ® is the Houston Texans which began play in 2002 Major League Baseball ® Major League Baseball ® –the Tampa Bay Devil Rays and Arizona Diamondbacks were added in 1998 National Basketball Association ® National Basketball Association ® –Charlotte Bobcats were added in 2004

28 Entails a league moving an existing franchise to a new city Entails a league moving an existing franchise to a new city Is determined by league owners and managers Is determined by league owners and managers Is usually targeted toward franchises with financial problems Is usually targeted toward franchises with financial problems Involves attracting a franchise to the prospective city through competition Involves attracting a franchise to the prospective city through competition

29 National Football League ® National Football League ® –the Houston Oilers moved to Nashville, Tennessee and became the Tennessee Titans Major League Baseball ® Major League Baseball ® –the Montreal Expos moved to Washington D.C. and became the Washington Nationals National Basketball Association ® National Basketball Association ® –the New Orleans Jazz moved to Salt Lake City, Utah and became the Utah Jazz

30 Have increased in popularity and attendance in the last ten years Have increased in popularity and attendance in the last ten years Include basketball, golf, tennis, gymnastics, soccer, ice skating, etc. Include basketball, golf, tennis, gymnastics, soccer, ice skating, etc. Have created an additional marketing outlet for sports manufacturers Have created an additional marketing outlet for sports manufacturers –female athletes are now craving custom-designed golf clubs, soccer cleats, racing bikes, sporting apparel, etc. 30 From the Playbook: Jackie Mitchell, a female baseball pitcher, struck out Babe Ruth and Lou Gehrig in a 1931 exhibition game.

31 Mildred "Babe" Didrickson Zaharias (golf) Ann Meyers (basketball) Julie Krone (horse racing) Manon Rheaume (hockey) Cheryl Miller (basketball) Mary Lou Retton (gymnastics) Venus and Serena Williams (tennis) Sheryl Swoops (basketball) Billy Jean King (tennis) Jackie Joyner-Kersee (track) Annika Sorenstam (golf) Mia Hamm (Soccer) Janet Guthrie (auto racing) Danica Patrick (auto racing) 31

32 Vary in geographic popularity Vary in geographic popularity –American football is not very popular in Asia Also includes the following leagues which we have not discussed : Also includes the following leagues which we have not discussed : –Formula One Racing ® –Professional Golf Association ® –Women’s National Basketball Association ® –Ladies Professional Golf Association ® –NASCAR ® –Etc.

33 A League of Their Own Click image for clip Click image for clip

34 Professional sports is worth billions of dollars Professional sports is worth billions of dollars Includes sponsorships such as advertisements on a baseball field’s outfield wall Includes sponsorships such as advertisements on a baseball field’s outfield wall Also includes money paid for naming rights to a stadium, such as University of Phoenix Stadium, home of the NFL ® ’s Arizona Cardinals Also includes money paid for naming rights to a stadium, such as University of Phoenix Stadium, home of the NFL ® ’s Arizona Cardinals 34 From the Playbook: Think of the last time you saw a professional athlete endorsing a product on television. That is sports marketing in action. Do you remember the product, the athlete or both?

35 Agents, Managers, & Ethics

36 GOALS Understand the role of agents in marketing. Understand the role of agents in marketing. Explain ways that professional sports organizations and their sponsors develop an athlete’s character. Explain ways that professional sports organizations and their sponsors develop an athlete’s character. Assess the impact of ethical behavior on an athlete’s promotional value. Assess the impact of ethical behavior on an athlete’s promotional value.

37 $ Show Me the Money $ Agent – the legal representative of a celebrity Agent – the legal representative of a celebrity Athletes won the right to become free agents Athletes won the right to become free agents

38 Polishing the Marketing Value Professional athletes ultimately responsible for their own behavior Professional athletes ultimately responsible for their own behavior National Basketball Association – Rookie Training Camp National Basketball Association – Rookie Training Camp Illegal behavior may hurt ability to attract Sponsors & Endorsements Illegal behavior may hurt ability to attract Sponsors & Endorsements

39 Handlers Handlers – sponsor-paid individuals who work closely with athletes who are unable or unwilling to police themselves. Handlers – sponsor-paid individuals who work closely with athletes who are unable or unwilling to police themselves. For athletes to remain valuable to sponsors, they must behave! For athletes to remain valuable to sponsors, they must behave! Neither can afford negative publicity Neither can afford negative publicity

40 Advisors Financial and business counselors Financial and business counselors Advisors keep the athlete and sponsor together for the benefit of both Advisors keep the athlete and sponsor together for the benefit of both 30 for 30 Broke 30 for 30 Broke –Average career of pro athlete = 3 years –60% of NBA players & 78% of NFL players go broke within five years of retirement

41 Athletes Declare Bankruptcy Kenny Anderson, Wally Backman, Charlie Batch, Bruse Berenyi, Riddick Bowe, Randy Brown, Mark Brunell, Bill Bucker, Jason Caffey, Dale Carter, Jack Clark, Raymond Clayborn, Derrick Coleman, Dermontti Dawson, Jim Dooley, Lenny Dykstra, Luther Elliss, Eddie Edwards, Chris Eubank, Rollie Fingers, Archie Griffin, Ray Guy, Tony Gwynn, Dorothy Hamill, Scott Harrison, Steve Howe, Harmon Killebrew, Bernie Kosar, Terry Long, Rick Mahorn, Harvey Martin, Deuce McAllister, Darren McCarthy, Denny McLain, Craig Morton, Greg Nettles, Jonny Neumann, Gaylord Perry, John Arne Riise, Andre Rison, Rumeal Robinson, Manny Sanguillen, Warren Sapp, Billy Sims, Leon Spinks, Sheryl Swoopes, Roscoe Tanner, Lawrence Taylor, Duane Thomas, Bryan Trottier, Mike Tyson, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, Ray Williams, and Rick Wise Kenny Anderson, Wally Backman, Charlie Batch, Bruse Berenyi, Riddick Bowe, Randy Brown, Mark Brunell, Bill Bucker, Jason Caffey, Dale Carter, Jack Clark, Raymond Clayborn, Derrick Coleman, Dermontti Dawson, Jim Dooley, Lenny Dykstra, Luther Elliss, Eddie Edwards, Chris Eubank, Rollie Fingers, Archie Griffin, Ray Guy, Tony Gwynn, Dorothy Hamill, Scott Harrison, Steve Howe, Harmon Killebrew, Bernie Kosar, Terry Long, Rick Mahorn, Harvey Martin, Deuce McAllister, Darren McCarthy, Denny McLain, Craig Morton, Greg Nettles, Jonny Neumann, Gaylord Perry, John Arne Riise, Andre Rison, Rumeal Robinson, Manny Sanguillen, Warren Sapp, Billy Sims, Leon Spinks, Sheryl Swoopes, Roscoe Tanner, Lawrence Taylor, Duane Thomas, Bryan Trottier, Mike Tyson, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, Ray Williams, and Rick Wise have-declared-bankruptcy have-declared-bankruptcy have-declared-bankruptcy have-declared-bankruptcy

42 Do Ethics Count? Ethics – a system of deciding what is right or wrong in a reasoned and impartial manner. Ethics – a system of deciding what is right or wrong in a reasoned and impartial manner. Agents contacting college athletes Agents contacting college athletes

43 Ethics & Character Matter Lack of mature adult role models Lack of mature adult role models Media Influence – Frequent news accounts of unethical behavior by politicians, sports & entertainment figures, and religious leaders. Media Influence – Frequent news accounts of unethical behavior by politicians, sports & entertainment figures, and religious leaders. Can result in publicity that interferes with a marketing plan. Can result in publicity that interferes with a marketing plan.


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