Chapter 2
Sports and Entertainment
Means Business
Sports and Entertainment Marketing
© Thomson/South-Western
Lesson 2.1
Sports and Entertainment
Economics
Learning Targets
 I can define profit and explain the profit
motive.
 I can list and describe the FOUR types
of economic utility.
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Terms
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Profit
Profit Motive
Microeconomics
Macroeconomics
Economics
Economic Utility
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THE PROFIT MAKERS
 Revenue
 the money a business receives from the
sales of goods and services
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 Profit
 the amount of money remaining from
revenues after all expenses are.
 Goal of any business is to earn (make) a Profit.
 Profit Motive
 making decisions to use resources in ways
that result in the greatest profit.
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Opportunities for Profits
 Worldwide distribution revenue is critical for
profits.
Example: Movies
 Avg. Box Office income increases 50% to 100%
Titanic - highest ticket sales in last 100yrs.
Domestic (released just in USA) $600,800,000
vs.
International (released in multiple countries) $1,234,600,000
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 Marketers must always understand the
markets in which they target and sales occur.
 China’s market - over 1.3 Billion people
Sounds like a good market for movie makers correct?
 the government censors movies for content
 pirated movies diminish theater sales
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 In addition to U.S. ticket sales, name two other large
sources of revenue for U.S. film studios.
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International Sales
DVD Sales
DVD Rentals
Movie Merchandise
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ECONOMICS
 Economics
 the study of how goods and services are;
 Produced
 Distributed
 Consumed
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 Macroeconomics
 the study of the economics of the entire society.
 Microeconomics
 the study of the relationships between individual
consumers and producers.
Macro (large scale) / Micro (small scale)
NOTE - Sports and Entertainment marketers
are focused on Microeconomics.
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 Economic Utility
 the amount of satisfaction a person receives from
the consumption of a particular product or service.
NOTE – consumers (fans) are more likely to
purchase products/services if it provides higher
utility than their other choices/options.
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Types of Utility
 Form Utility
 when the physical characteristics of a product or service
are improved.
 Can result in changes to tangible parts of the product/service.
 Time Utility
 making the product or service available when the customer
wants it.
 24/7 Grocery Stores, Gas Stations, Wal-Mart, McDonalds
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Types of Utility
 Place Utility
 the product is available where it is wanted.
Note – making things convenient for consumers is a good business
practice.
 Possession Utility
 the product or service is available at an affordable price.
 Offering options to consumers regarding payment options;
24months Same as Cash, Cash Back, Credit Cards, Rent-To-Own,
Installment Loans, % off Coupons.
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Economic Utility Ad Assignment: 20pts
 Utilizing the Internet, Newspaper or Magazines, you
need to find FIVE products/services that
businesses/companies have changed one or more of
the economic utility (Form, Time, Place, Possession)
in regards to their product/service. Can’t use any of
the examples we have discussed in class.
 Do a compare/contrast (New vs. Old) and be sure to
list which utilities you believe have been changed and
describe how this was accomplished/why you feel this
is so.
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You must have addressed each of the four economic utilities (Form, Time, Place,
Possession).
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Example: ___________ Utility
Then…
Now…
Appearances can be deceiving…
Same great taste as always…
Something’s never change…
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Example: __________ Utility
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Example: _________ Utility:
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Example: __________ Utility
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Lesson 2.2
Risk Management
Learning Targets
 I can define risk and describe the categories
and classifications of risk.
 I can name and describe four strategies for
risk management.
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Terms
 Risk
 Risk Management
 Liable
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RISKING IT ALL
 Risk
 the possibility of financial gain or loss or personal
injury.
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Categories of Risk
 Natural Risk
 occurs from unavoidable weather conditions.
 Human Risk
 dishonest customers and employees.
 inadequately trained employees.
 Economic Risk
 occurs due to changes in the economy.
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Additional Classification of Risk
 Speculative Risk
 either a gain or loss could result.
 Pure Risk
 a chance of an event occurring that could only result in a
loss.
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 Controllable Risk
 loss can be prevented or the likelihood of its
occurrence can be reduced.
 Uncontrollable Risk
 nothing can be done to prevent the risk.
 No control.
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 Insurable Risk
 (pure risk) loss is predictable and the amount of
the loss can be estimated.
 Uninsurable Risk
 dollar loss could occur…loss cannot be estimated.
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Movie Theater
Risk Type – Tornado
Risk Type – Fire
Uncontrollable
Controllable
Golf Resort
Risk Type – Flood
Pure
Risk Type – Heat Wave
Uninsurable
Risk Type – Golf Cart in lake Insurable
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MANAGING RISK
 Risk Management
 preventing, reducing, or lessening the negative
impacts of risk by using the strategies of risk;
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Risk Avoidance
Risk Insurance
Risk Transfer
Risk Retention
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Risk Avoidance
 Sports and entertainment marketers need to
plan to avoid risky situations.
 Liable
 the business/team is legally responsible for
damages/injuries that occur.
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Risk Insurance
 Risk Insurance
 pays for predictable losses.
 Premium
 amount (cost) paid for insurance
 Deductible
 amount (payment) due to receive insurance
benefits.
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Textbook Assignment:
Encore pg. 41
On paper answer questions: 1, 2, 3
Due before you leave class today!
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Sports and Entertainment Marketing
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