1. chapter 4
Business of Sport

2. Chapter Outline Sport and the Economy Ownership of Professional Sports
Sport As a Monopoly
Collegiate Sports As Moneymakers
Business of Recreational Sport
Summary

3. Sport and the Economy Corporate sport
Today’s professional sports structured and organized
Developed by move from agrarian society to industrialized society
Sport adopted a corporate structure and athletes became workers

4. Ownership of Professional Sports
Majority wealthy, powerful males
Small number of teams owned by public and organizations
Historically owners loved the game and promoted the sport
Now just a business investment or means to promote other products, with many financial advantages despite lost revenue

5. Making Money From Professional Sports
Investments: Teams that sold for ~$200 million U.S. in early 1990s now sell for between $500 and $800 million U.S.
Taxes: Revenue lost from team offsets other profits.
Depreciation: Owners can write off depreciation of players each year.
Ticket sales: These sales account for 23% of all NFL revenue.
(continued)

6. Making Money From Professional Sports (continued)
Stadium revenues: Owners earn money from luxury boxes, concessions, and parking.
Media revenue: Revenue from TV ranges from 15% to 60% of team’s revenue.
Licensing fees for team merchandise
Leagues vary on amount of revenue sharing.
Licensing fees give advantage to larger markets.
Naming rights
Reliant Park in Houston sold rights for next 30 years for $300 million U.S.
See table 4.1 on page 57 for some of the deals in stadium naming rights.

7. Financing of Stadiums Can cost several hundred million U.S.
Public, private, or combination of funds
Public: sales tax, proximity and beneficiary taxes, bed tax, bonds, tax increment financing
Private: owner or league contributions, bank loans, local business loans, personal seat licenses

8. Pros of Building a Stadium With Public Funds
Team can promote the city
Increased revenue for local businesses
Media attention increases tourism
Local jobs

9. Cons of Building a Stadium With Public Funds
Money can be used for alternate means such as better public education, better city infrastructure, low-income housing for poor
Team may threaten to leave (blackmail) if city doesn’t provide stadium for them

10. Sport As a Monopoly Owners control competition and sales.
Existing leagues work together to eliminate new competing leagues.
Players can negotiate with only one team.
New or expansion teams have to pay large fees and need approval to relocate.
Owners cannot individually sell team merchandise.

11. Players’ Rights and Compensation
Players can negotiate with only one team.
In the United States, 15,000 professional athletes are currently bound to their team until their option year.
Average salary for U.S. professional athlete was $45,320 U.S. in 2005; see tables 4.2 and 4.3 for lists of top wage earners.
Salary caps or earnings based on performance limit wages.
Average length of a professional sports career is less than 10 years.
Making it to the pros does not mean an athlete is set for life.

12. College Sports As Moneymakers
University athletic departments are run as businesses.
Budgets can be more than $60 million U.S.
Big programs can increase contributions to other departments and enrollment.
Colleges can receive money from ticket sales, licensing fees, corporate sponsors, and television rights.

13. Key Point
Only 50% of Division I men’s football and basketball and less than 20% of women’s sport programs operate in the black.

14. Recreational Sports As Moneymakers
With increased leisure time, recreation increases.
Sales of sport equipment in United States are ~$50 billion U.S. per year.
Leagues earn participation fees.
Communities use funds to maintain public recreational areas.
How much do you spend on recreational sports?

15. Summary Professional sports teams have become corporate entities.
Ownership has become a business venture with athletes as workers.
Cities often spend public money to keep or lure franchises despite other spending areas that could benefit from those funds.
Collegiate and recreational sports are turning into big moneymakers.

16. On Deck… Questions and comments Assignments and readings
Next chapter: Media and Sport
Financial aspects
Reciprocal relationship