Investigating sports business
IRE 2009
June 11-14, 2009
Baltimore
Jodi Upton, USA Today & Paula Lavigne, ESPN
jupton@usatoday.com
paula.lavigne@espn.com
Reporting on the business of sports isn’t much different than reporting on
business in general, but there are some unique facets that will help you focus
your efforts on the game at hand.
Professional sports
Player salaries: Through documents, agents and research, USA Today has
compiled a comprehensive database of salaries of professional athletes in the
NHL, NFL, NBA and MLB. You can find it here:
http://content.usatoday.com/sports/salaries/ . The salaries are searchable by
player, team and year.
Agents: Agents are obviously the link between players and teams, often a
multimillion dollar link. There are several agent directories online and it might be
worth investing in one. (Example: http://www.sports-agent-directory.com/) In
some states, agents have to be licensed. Agents are obviously good sources, but
take them with a grain of salt.
USAToday.com, ESPN and many other sites have been publishing salaries for
several years, but agents can be a good source for new contracts and new
players. http://content.usatoday.com/sports/football/nfl/salaries/default.aspx
Also, a sortable, searchable database of NFL drafted players and where they
came from is here: http://www.usatoday.com/sports/football/nfl/draft-historygraphic.htm
Teams: With few exceptions, most teams are privately owned in the U.S. But you
can often look into the individuals or companies that have a stake in them. Many
of those people or companies end up having some sort of public disclosure of
their assets or finances. Use the same tools to investigate them as you would
any business.
For public companies, examine their filings with the Securities and Exchange
Commission at www.sec.gov . Start with the company's annual report, or 10K.
They will include the names of the executives and the board of directors along
with their compensation. The SEC also has information on investment advisers
and brokers at http://www.sec.gov/investor/brokers.htm .
For non profits, use services such as Guidestar.org or CharityNavigator.org to
look at their IRS 990 files, which give the company's financials.
For private companies, you can rely on Hoovers.com for some free information
and a more-detailed report for a fee. If you have access to services such as
Lexis-Nexis or Westlaw, you might also have access to Dun & Bradstreet reports
that offer even more detail.
Other resources: Several online services, including those already mentioned
such as Lexis-Nexis and Westlaw, have information on all types of businesses. If
you can get access to it, Mergent Online at MergentOnline.com is also a
valuable, comprehensive resource for getting company financials.
Yahoo! Finance has a great (FREE!) collection of sports-related companies, both
public and private. It’s probably the best roundup I’ve seen:
http://biz.yahoo.com/ic/715_cl_all.html or Investing > Industries > Complete
Industry List > Sporting Activities (under services)
Other team-finance angles to consider:
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Sponsorships and endorsement deals. (Check public companies' 10-Ks to
see how much they spend on advertising and if they make specific
mention of the value of sports marketing.)
Stadium/facility construction. (Those funded partially with public funds
likely will have to disclose more information about their operation.) Be sure
to check marketing deals and considerations cities and states receive for
on-going support of the stadium. A little reverse-engineering of the
contract finances may yield a workable estimate.
Contracts with vendors, such as concessions, aircraft, uniform suppliers,
etc.
Campaign contributions. These can come from people employed by teams
or by a few sports-related political action committees.
Lobbying. Check
http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm or
http://www.opensecrets.org/lobby/search.php
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Federal funds. Find out if a company or institution is getting government
contracts or grants at FedSpending.org a project of OMB Watch. This also
shows grants given to colleges and universities, including a $700,000
grant to study fantasy football.
Charities. The leagues, teams and athletes have their own charitable
organizations. It’s worth taking a look at their financials. Here's a good
guide from the American Institute of Philanthropy that ran in The Seattle
Times:
http://seattletimes.nwsource.com/html/sports/2003855928_webevaluate02
.html
Keep an eye on court filings, especially breach-of-contract lawsuits and
bankruptcies. They can provide a great deal of information about teams,
agents and athletes.
Get copies of economic impact studies. These are the studies that
consultants or business managers put together when trying to decide
whether to bring - or keep - a team in town. They try to predict how much
money the new team or facility will bring to the city, or drain from it.
Simply check the company's Web site. Look in the "About us" section to
find names of executives and company histories.
UCC Lien. A Uniform Commercial Code lien is a financial document
stating that a lender (secured party) has a claim in certain property
belonging to someone else (debtor). UCC liens can show you who
someone has been doing business with and it can indicate whether
someone is in financial dire straits. By filing a UCC lien, a secured party
establishes his or her priority for payment over subsequent secured
parties if the debtor defaults on the loan. Some UCC liens are listed on a
state's Secretary of State Web page. Lexis-Nexis, Westlaw and related
services also have information on loans.
Corporation filings. When someone starts a business, he/she usually files
incorporation paper with the Secretary of State. Several Secretary of State
offices have online searchable databases. Just Google the name of the
state and "secretary of state." (I.E. "Texas secretary of state.") You might
have to dig around a bit, but you should find a link to a searchable
corporations or business filings database.
Unions: Players unions also have a significant impact on rules and salaries. You
can keep tabs on them through the U.S. Department of Labor site (and this
terrible URL):
http://www.dol.gov/esa/olms/regs/compliance/rrlo/lmrda.htm#1?link-ref=1956261
Immigration: You can track when teams request visas for players, coaches or
trainers through the Foreign Labor Certification Data Center or
FLCDataCenter.com . It also includes wage information and the status of some
applications. Players generally come in on P-1 or P-2 visas, but you'll want to
check to make sure.
College teams
Private colleges:
Most private colleges have to file an IRS 990 form, the financial disclosure
required for non profits. You can find these forms on Guidestar.org, and the law
also requires the nonprofit itself to provide its 990 upon request. Starting with
fiscal years beginning in 2008, non profits will be required to disclose even more
information, including more detail about top salary earners. This means that you'll
get even more information about the salaries of coaches at private schools.
Downside: it's usually filed a year or two in arrears.
Public colleges:
Information on revenue from ticket sales, licensed products, etc., and team
expenditures should be public record at most public colleges. Last updated in
2007, USA Today researched all 120 Division 1A head football coaches' salaries:
http://www.usatoday.com/sports/graphics/coaches_contracts07/flash.htm
Head coach salaries and average salaries for assistant coaches are reported to
the NCAA. Ask for the NCAA's EADA report (*not* the report filed with the
Department of Education, which is less accurate) which details athletic
expenditures and head coach salaries reported by the school. Also ask for the
outside income report, which all athletic-related employees must fill out. It can
include revenue from book deals, shoe contracts, etc.(see NICAR's tipsheet
library for specific examples of what the document looks like)
Ask for other types of contracts, including any related to construction or
renovations.
Keep in mind that some public colleges will try to hide their athletic expenditures
through the use of private foundations associated with the university or the
athletic department itself.
The same information applies to colleges as it does to teams in terms of
campaign contributions, lawsuits, etc. Make sure you check with both state and
federal agencies in this regard.
Other
High schools: At public high schools, data on salaries, expenditures,
sponsorships, etc., should be public information.
International: In some cases, you can get information on teams owned in other
countries. Public ownership of teams, especially football (soccer) clubs, is
actually more prevalent in Europe where several teams are listed (or listed via a
holding company) on the London Stock Exchange. (Londonstockexchange.com)
Olympics: Every four years, the International Olympic Committee makes its
financial statements available. You can find them on the Olympics.org site under
"Documents" at the bottom. Scroll down to IOC Interim and Final Financial
Reports and Marketing Reports. The U.S. Olympic Committee Committee's
annual reports and non-profit tax filings are on its Web site at www.usoc.org
under "About the USOC" and "Financial Information."
Economic data: You can find trend data on sports spending and industry
revenue at both Census.gov using the tools in the Economic Census links and
the Bureau of Labor Statistics at BLS.gov (just type in sports or athletes in the
BLS search field). The following link shows the list of databases the U.S. Census
Bureau has on sports and sports spending:
http://www.census.gov/compendia/statab/cats/arts_recreation_travel/recreation_
and_leisure_activities.html?link-ref=1892597
Ideas
(You can find many of these in IRE's story library. Story descriptions are from the
IRE site.)
Cold Cash: Ski Resorts Profit on Cheap U.S. Land: This 2002 San Jose Mercury
News story showed how "ski-resorts use federal land, such as national forests,
but pay barely any rent to the government. In some of the more extreme cases,
the resorts pay less than one cent per dollar."
Money Players: This 2002 U.S. News & World Report story showed how NFL
athletes have become victims to shady or inept financial advisors and have lost
millions.
High Schools in the money are also rich in sports titles: This 2004 USA Today
story proved that money buys scholarships as schools in wealthier
neighborhoods were more likely to win state championships than those in poor
neighborhoods.
Athletic spending grows as academic funds dry up: This 2004 USA Today story
shows that athletic budgets at DI schools rose at more than double the increase
of average university spending.
Average coach salary tops $1 million: These USA Today stories from 2006 and
2007 show more than a dozen Div. I coaches make seven-digit salaries, even
while schools are raising tuition and fees, and most athletic departments rely on
the university general fund and/or tax dollars to run.
Athletes sign autographs as punishment: This 2007 USA Today story showed
most athletes who break the law - everything from abandoning a puppy to
negligent manslaughter - usually sign autographs, make commericals or make
celebrity appearances at sports camps to atone.
Jerry's World: Operation Mickey Mouse: This 2003 New Times story showed how
pro-team owner Jerry Colangelo made more than $300 million on development
projects that never came to fruition.
O.J. Mayo's Inner Circle: This 2008 ESPN story details the murky relationship
among professional agents, pro teams and college athletes. NBA star O.J. Mayo
was found to have been involved with a secret bank account and credit card
used to finance luxurious gifts, meals, and travel.
Risky Business: This 2008 ESPN story revealed that at least 85 Division I
universities hired bus companies that violated federal safety standards amid
concerns that belt-tightening at colleges would lead to booking even more
questionable carriers.
Follow the Money: This 2008 ESPN story detailed how corruption among street
agents in the Dominican Republic has been public knowledge, but after a
Chicago White Sox assistant general manager tried to bring $40,000 in
undeclared cash into the United States a new story emerged: corruption among
MLB employees.
As its charity gives, Sonics receive: A 2007 story by the Seattle Post-Intelligencer
that shows that almost half of the $1 million the Sonics' charitable foundation
claims to have distributed as gifts went to buy Sonics tickets for underprivileged
children.
Pro sports figures more invested in this presidential campaign: A 2008 story by
ESPN showing that donations to McCain and Obama from pro sports figures
dwarf what the industry has given to past presidential candidates, with McCain
leading the way.
Miscellaneous resources
BusinessJournalism.org
The Donald W. Reynolds National Center for Business Journalism has
several valuable resources. Take advantage of the FREE online classes,
including lessons on how to read financial statements. It has offered targeted
sports business workshops in the past.
TheSportsEconomist.com
This online blog offers daily commentary on sports business trends, trades,
sponsorship deals, etc., at all levels of sport.
SportsBusinessJournal.com
Street & Smith’s Sports Business Journal provides in-depth coverage of all
aspects of the business of sport and is an interesting read. Subscription required
for most online content and for print edition.
Sports Law Blog at http://sports-law.blogspot.com/
Keeps tabs of legal proceedings and issues that affect the sports industry. The
list of contributors on the left menu includes some possible experts for whatever
story you might be pursuing.
Florida Coastal School of Law, Center for Law and Sports
Professor Rick Karcher, (904) 680-7743, rkarcher@fcsl.edu
San Diego State University Sports Business Management MBA Program
http://www-rohan.sdsu.edu/~cba/sports/default.htm
Check out the faculty/staff page for contacts.