1. Structure of Sports Business
Lesson 3.2 – The Financial
Structure of Sports Business
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2. The Financial Structure of Sports Business
LESSON 3.2
Intro to Basic SEM Principles
The Financial Structure of Sports Business
Professional team sports are finding it increasingly difficult to achieve financial success
and turn a profit
Copyright © 2014 by Sports Career Consulting, LLC

3. The Financial Structure of Sports Business
LESSON 3.2
Intro to Basic SEM Principles
The Financial Structure of Sports Business
Last season, nine NBA teams lost money while eleven NHL teams lost money
Even the teams that are profitable (aside from NFL franchises) typically enjoy significantly lower profit margins than other for-profit entities such as banks or publicly traded companies
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4. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
+increasing revenue streams
+inflated media rights fees
+new means for generating
revenues
=overall franchise values have risen exponentially in the past decade
(expected to continue)
Revenue Stream:
The means for an organization’s cash inflow, typically as a result of the sale of company products or services
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5. LESSON 3.2
Intro to Basic SEM Principles
Discussion Topic
What revenue streams do you think sports organizations rely on to achieve profitability?
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6. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
Revenue Streams For Sports Teams
Ticket Sales
Sponsorship
Licensing and Merchandise
Concessions
Parking
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7. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
Additional Revenue Streams For Sports Teams
Luxury Suites
Club / VIP / Premium Seating
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8. Luxury Suites & Premium Seating
LESSON 3.2
Intro to Basic SEM Principles
Luxury Suites & Premium Seating
Often times the lack of suites or premium seating options within a venue or facility will prompt a sports franchise to lobby for a new stadium
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9. Why would a franchise do that?
LESSON 3.2
Intro to Basic SEM Principles
Discussion Topic
Can you think of an instance where a pro sports team has threatened to move the franchise if it didn’t receive funding for a new stadium or arena?
Why would a franchise do that?
Copyright © 2014 by Sports Career Consulting, LLC

10. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
In Chicago, the relationship between the Chicago Cubs ownership and their neighbors (affectionately known as “Wrigleyville”) soured when the team announced in 2013 plans to renovate the stadium. Proposed renovations would include a 6,000-square-foot video board in left field, a 1,000-foot advertising sign in right, a new hotel and more night games, an “open-air plaza” and an office building with retail space, all in an effort to create new revenue streams for the franchise.
According to a report in the San Jose Mercury News, the San Francisco 49ers sold $138 million worth of luxury suites before construction on the new Levi’s stadium was even completed.
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11. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
Additional Revenue Streams For Sports Teams
Television Contracts
Additional media contracts
(satellite, radio, internet)
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12. LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
TV contracts provide big money for franchises in the game of sports business, now accounting for a major portion of a team’s overall annual revenue
Copyright © 2014 by Sports Career Consulting, LLC

13. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
In 1973, the NBA signed a contract
with CBS, yielding $27 million in
revenue over 3 years
In 2006, the NBA inked a deal with
ABC/ESPN worth $2.4 billion through
2008 (the contract was extended in
2007 to run through the
season but terms were not disclosed)
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14. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
The Pac-12 conference agreed to a 12-year television
contract with Fox and ESPN worth about $3
billion, allowing the conference to quadruple its media
rights fees and start its own network
The contract, which will begin with the
season, will be worth about $250 million per
year, guaranteeing each of the 12 schools in
the conference about $21 million each per
season (in 2010 the entire conference
generated just $60 million in rights fees)
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15. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
Although the terms were not disclosed, the Sports Business Journal revealed the Los Angeles Dodgers’ plans to launch their own regional sports network worth an estimated $7 billion over 25 years.
Copyright © 2014 by Sports Career Consulting, LLC

16. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
According to the book The Cartel: Inside the Rise and Imminent Fall of the NCAA by Taylor Branch:
“In 2010, despite the faltering economy, a single college athletic league, the football-crazed Southeastern Conference (SEC), became the first to crack the billion-dollar barrier in athletic receipts. The Big Ten pursued closely at $905 million. That money comes from a combination of ticket sales, concession sales, merchandise, licensing fees, and other sources—but the great bulk of it comes from television contracts.”
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17. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
As competition for rights deals for live sports increases (NBC, CBS and Fox have all created sports networks to challenge ESPN), rights deals will likely continue to increase exponentially.
According to businessinsider.com, last year ESPN paid $15.2 billion over 10 years for the rights to Monday Night football, a 73% annual increase over the previous deal.
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18. Additional Media Contracts
LESSON 3.2
Intro to Basic SEM Principles
Additional Media Contracts
In 2007, Sirius Satellite Radio reached an agreement to broadcast NASCAR races and related events over a 5-year period for $107.5 million (the deal was extended in 2012 through 2016 but terms were not disclosed)
Copyright © 2014 by Sports Career Consulting, LLC

19. Additional Revenues Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Additional Revenues
The Green Bay Packers renovated Lambeau Field in 2003 with the goal of creating an added revenue stream by building an atrium that could host events (from corporate outings to weddings) year round. Thanks in large part to the number of events hosted in the atrium, Lambeau is enjoying its busiest years ever and the franchise is generating record profits. Thanks to record profits, the team was able to invest $140 million in atrium expansion and renovations in 2013 (work is expected to be completed in 2015) without turning to taxpayers to help with funding the project.
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20. Additional Revenues Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Additional Revenues
In 2014, the Kansas City Chiefs allowed fans to use the suites in Arrowhead Stadium as draft central for fantasy football leagues by charging $85 per person (minimum 8 people)
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21. LESSON 3.2
Intro to Basic SEM Principles
Additional Revenues
According to a Forbes report, the money that all MLB teams made from the $450 million sale of the Montreal Expos in 2006 was invested in hedge funds that are now worth more than $1 billion
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22. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
Sports Team Expenditures
Facility Rental / leasing arrangements
Staff / Player Salaries
(Payroll)
Marketing
Investment in the Customer
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23. Television Contracts Intro to Basic SEM Principles
LESSON 3.2
Intro to Basic SEM Principles
Television Contracts
The driving issue for NHL owners as it related to the last lockout wasn't revenues but expenses as many small market teams were unable to achieve profitability thanks in large part to high player salaries
Last season the Brooklyn Nets lost a reported $144 million with a player payroll of over $90
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24. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
MORE Sports Team Expenditures
General Operating Expense
Stadium/venue/facility financing
Information management/research
Team expenses (travel etc.)
Maintenance and security
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25. LESSON 3.2
Intro to Basic SEM Principles
To gain a better understanding of the financial structure of sports business, let’s review the NFL’s Green Bay Packers’ financials
Copyright © 2014 by Sports Career Consulting, LLC

26. Total revenue in the 2013-2014 season: $324 million
LESSON 3.2
Intro to Basic SEM Principles
Revenue
Total revenue in the season: $324 million
National revenue from the NFL: $187.7 million
Nike contract and NFL Network (television revenues are shared with all teams in the league)
Local revenue: $136.3 million
(Includes ticket sales, suite sales, premium seating sales, sponsorship etc.)
Expenses
Total expenses for : $298 million (18% increase)
Player Payroll expense: (includes team expenses): $171 million
Net Income / Profit
$25.3 million
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27. LESSON 3.2
Intro to Basic SEM Principles
PROFIT
Green Bay Packers’ profit for the NFL season: $25.6 million, down from 54.3 million due in large part to a significant increase in player salaries
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28. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
In 2004, Frank McCourt purchased the LA Dodgers for $430 million
In 2012, he sold the franchise to an ownership group that included former Lakers star Magic Johnson for a reported $2 billion
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29. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
In 2013, the San Diego Padres were sold for $800 million in a deal that ranked as the third largest in the history of Major League Baseball despite having appeared in the post-season just twice since 1999
Copyright © 2014 by Sports Career Consulting, LLC

30. Sports Business Financial Structure
LESSON 3.2
Intro to Basic SEM Principles
Sports Business Financial Structure
In 1981, former LA Clippers owner Donald Sterling paid $12.5 million for the team. After his involvement in a very public racism scandal, the NBA forced him to sell the team. At the time, it was valued by Forbes at $575 million, yet the sale price for the franchise fetched a whopping $2 billion (former Microsoft executive Steve Ballmer purchased the team).
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