1. CHAPTER 3 Professional Sports
SPORTS AND ENTERTAINMENT MARKETING
4/21/2017
CHAPTER 3 Professional Sports
3.1 Big League Sports
3.2 Attracting a Professional Team
3.3 Agents, Managers, and Ethics
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2. LESSON 3.1 Big League Sports
GOALS
Discuss the financial impact of professional sports.
Identify the perks associated with big league sports.
EQ: How big are big league sports?
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3. Financial Impact Big league pricing and planning
Refers to revenue potential or commercial value (money)
Financial planning for a sports team
Team owners/managers must prove financial viability* of a team
*Capable of success or continuing effectiveness
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4. Big League Pricing and Planning
Professional athletes have contracts – and get $$$$ money from them.
Highest paid athletes
But where do the teams/owners get money from?
Corporate sponsorships
Television revenue
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5. Financial Planning for a Sports Team
Financial viability* for the home city
High costs to the city
Increased spending by fans
Owners/managers must convince the city that the cost of a team or stadium will be repaid
Increased tax revenues
*Capable of success or continuing effectiveness
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6. Financial Impact* An NFL team can be a financial asset to a city if….
Everyone and everything involved with the team stays within the 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, and retail shops.
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7. Bringing All the Resources Together
Once the financial viability of a sports team is proven….
Media support
Marketing
Charitable and other organizations
All come together to back the sports team
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8. Stadium Economics
Minnesota Vikings franchise sold for $250 million in 1998
Cleveland Browns later that year sold for $530 million
Why the discrepancy in prices?
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9. Stadium Economics
The Vikings’ lease was signed in 1982—consistent with the 1980’s standards in the pro sports industry
Their revenue was controlled by and credited to the city of Minneapolis
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10. Stadium Economics
The Browns’ lease was signed at the time of the sale (1998).
The stadium lease obligated the Browns to pay only $250,000 annually in and the team owners could keep facility-related revenue.
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11. Prestige, Power, Profitability
Washington Redskins were valued at $845 million in 2002.
Took over first place from Dallas
Jerry Jones paid $140 million for the Cowboys in 1989
$65 Million for the franchise
$75 Million for the stadium
The Cowboys were valued at $784 Million in 2002….currently valued at $2.1 billion today!
Recent valuations
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12. Perks and Payoffs
Perk—(short for perquisite) a payoff or profit received in addition to a regular wage or payment. What perks to teachers get?
Company employees receive tickets
Media exposure for owners
Ex: Bob McNair (Owner of the Texans)
In 1999 paid a record $700 million for the NFL’s 32nd franchise
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13. Political Clout (Influence)
Franchise owners bring millions of dollars in business activity to a city
Frequently associated with wealth
Paul Allen
Owner of the Seattle Seahawks and Portland Trail Blazers tops the Forbes list with a net worth of $28.9 billion & teams valued at $716 million
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14. Professional Teams and the Community
Bring enthusiasm and heightened emotion and moral to a city
Teams bring new jobs to a city
Construction, jobs in the stadium, etc.
Boost for surrounding businesses
Tourist $$$, increased newspaper sales
Community service
Community outreach projects in the city
Enhances the image of the sports franchise while benefiting the recipients
Dr. Harding
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15. Sociological Ties to a Professional Team
City’s “image enhancement”
Residents feel pride
People identify with a team
Wholesome family entertainment
Loss of a team
Bring bitterness and depression
Art Modell moved the Cleveland Browns from Cleveland to Baltimore in 1995 (now the Ravens). New franchise was added in ’99 = Cleveland Browns.
Received death threats, hate letters, etc.
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16. The Bottom Line Winning is everything in sports!
Special contract incentives for winning
Ex: Barry Larkin bonus clause in contract
Earn additional $300,000 if he played a certain number of games and met specific offensive goals.
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17. LESSON 3.2 Attracting a Professional Team
GOALS
Describe the distribution process for a professional sports team.
Explain the process for financing a professional sports team.
Essential Question – how can an area start a new professional team?
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18. Getting in the Ballgame
Since there are more cities that want pro sports teams than there are teams available, the league controls the location of the teams based on the business benefits to the leagues and owners.
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19. Distributing the Game
Individual teams are separately operated businesses
Cartel—a combination of independent businesses formed to regulate production, pricing, and marketing of a product
The league controls the distribution of the teams
In most cases, cartels are prohibited by federal antitrust law.
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20. How Distribution Is Decided
Region with a large potential customer base are considered favorable
Owners want public funds to start the new team!
Many people think of this as “corporate welfare”
Subsidies* for the team
Owners want tax-paid subsidies
Has to be supported by the voters
*money usually given from the government to support that industry
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21. How Distribution Is Decided (cont’d)
Owner must have financing
The owners set the price of the new team and split an “expansion fee” among themselves
Must have a stadium to attract fans
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22. Attracting a Sports Team
There are fewer NFL teams than the market can support.
The lack of teams forces cities to compete whenever a team becomes available through expansion or moving.
Until 1960, teams generally owned their own playing facilities.
Now, some state and local governments are eager to share in subsidizing major sports by financing stadiums…why?
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23. Attracting a Sports Team
Some franchises are selling the naming rights of stadiums to subsidize the cost of building these facilities. Eagles? Phillies?
In late 1990s, taxpaying voters began showing some resistance to helping build facilities.
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24. Attracting a Sports Team
It takes money
Huge risk on part of the owners
New stadiums offer luxury suites and upscale restaurants to increase profits
1989 voters in San Antonio passed a referendum for construction of the Alamodome ($156 million)
Voters were convinced it would attract a pro football team. Do they have one yet?
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25. Attracting a Sports Team
It takes money (cont’d)
Pricing of tickets, concessions, luxury seating, and mdse related to a pro team all contribute to the financial picture.
The biggest profit center is TV revenue
The revenue is generated by selling advertising time through commercials during the game
Networks sell ad time which allows them to buy the right to air the game
And more money
Having multiple sites competing for the expansion team, allowed the NFL owners the option of increasing the team price
LA vs. Houston for 32nd expansion team
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26. Attracting a Sports Team
Cashing in
Houston’s Reliant Stadium hosted Super Bowl XXXVIII
Used as justification for tax support
Generated about $300 million for the host city
Tickets range from $1,950-$4,800
**To host to the SB**
Must meet 20 pages of the NFL requirements
At least 17,500 hotel rooms
65 limos
1,000 buses
Golf courses
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27. Attracting a Sports Team
Another option
Community Ownership – local gov’t or fans own the team and facility
Green Bay Packers
Benefits of fan ownership:
Loyalty
Sold out seats for decades
Mystique
Major Leagues have forbidden public ownership now
League Drawback
Holding fans “hostage” to get what they want
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28. LESSON 3.3 Agents, Managers, and Ethics
GOALS
Understand the role of agents in marketing.
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.
Essential question – why do players have agents?
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29. Show Me the Money! – (link)
Agent—the legal representative of a celebrity
Most agents are either attorneys or accountants
Agents are paid a % of earnings
Athletes won the right to become free agents
Play for the highest bidder
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30. Polishing the Marketing Value
Professional athletes ultimately responsible for their own behavior
National Basketball Association rookie training program
Illegal behavior may hurt ability to attract sponsors
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31. Handlers
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
Henry Gaskins served as a “mentor” to AI when he was with Philly.
Neither—company or the athlete--can afford negative publicity
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32. Advisors Financial and business counselors
Do NOT monitor behavior
NIKE’s Howard White
Michael Jordan
Advisors keep the athlete and sponsor together for the benefit of both
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33. Do Ethics Count?
Ethics—a system of deciding what is right or wrong in a reasoned and impartial manner
NBA Lockout ( )
Hakeem Olajuwon met with Billy Hunter (NBA Players Assoc. negotiator)
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34. Ethics and Character Matter
Moral Development can be divided into stages—childish behavior to mature and responsible behavior.
Lack of mature adult role models
Frequent news accounts of unethical behavior by politicians, sports and entertainment figures, and religious leaders
“Just Because Everybody is Doing it”
Can result in publicity that interferes with a marketing plan – Thanks Tiger!
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