3.1
Big League Sports

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Big league pricing and planning
– “Big” refers to revenue potential – the better the team the more money they make
– Must determine costs for multimillion dollar contracts – Better athletes=better ticket sales
Financial planning for a sports team
– A sports team is a huge cost (stadium, facilities, etc)
– Can bring in huge revenue – Must prove to the city
– A professional team can be an asset to a city if:

1) Dallas Cowboys - $2.3 bill.
2) New England Patriots - $1.8 bill.
3) Washington Redskins - $1.7 bill.
4) New York Giants - $1.55 bill.
5) Houston Texans - $1.45 bill.
28) Detroit Lions - $900 mill.
32) Oakland Raiders - $825 mill.
http://www.forbes.com

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Tiger Woods – $78.1 mill
Roger Federer - $71.5 mill
Kobe Bryant - $61.9 mill
LeBron James - $59.8 mill
Drew Brees - $51 mill
Aaron Rodgers - $49 mill
Phil Mickelson - $48.7 mill http://www.forbes.com/athletes/list/

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Professional athletes contracts
– Must determine what the team can afford – better players = better team and more income
Corporate sponsorships
– Must have financial backing from corporations to support activities
Television revenue
– The better the team and fan following the more likely a tv network is to pick up the game

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Are spending limits affecting how much a team can spend on a certain player
Give teams limits on player total player spending
May also affect individual player spending based upon factors such as years in the league and position
Are mandated and regulated by the governing bodies of major sporting leagues
Affect the National Football League ® , National Basketball
Association ® and National Hockey League ®
– does not affect Major League Baseball ®
– Major League Baseball ® is referred to as an “uncapped” league

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Are contracts existing between the owners of a sport’s league and the player’s association
Contain rules for player salaries
Also contain requirements for salary caps
Free agency is the process by which players are assigned a team. When a player is a “free agent” they are free to negotiate with any team with whom they wish to sign.
Defines the rules for free agency

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A prof. sports team can be a financial asset to a city if
– Everyone and everything involved with the team stays within the home 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, shops
Increased spending by fans
– If a team can get fans to the city they will spend on hotels, restaurants, shops, etc.
Increased tax revenues

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Media support
Marketing
Charitable and other organizations

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Perks and payoffs
Political clout
Professional teams and the community
Sociological ties to a professional team
The bottom line

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Perk —a payoff or profit received in addition to a regular wage or payment
Company employees receive tickets
Media exposure for owners
– Houston Texans

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Franchise owners bring millions of dollars in business activity to a city
– Often given money or other perks by city officials to entice team to stay in city
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Nashville and the Tennessee Titans
Frequently associated with wealth

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Teams bring new jobs to a city
– Stadium construction, working games, other tourist businesses created (hotels, restaurants, etc.)
Boost for surrounding businesses
– City of Detroit and Tigers playoff run
Community service – team and coaches help out community in various ways

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City’s “image enhancement”
Residents feel pride
– Ex. - Pittsburgh Steelers, Detroit Lions,
New York Yankees, Denver Broncos
Wholesome family entertainment

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Winning is everything in sports
Special contract incentives for winning

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Can mean different things to different parts of a professional sports organization
Owner’s generally find success in making money
Managers or coaches measure success in winning
Players find success in winning and reaching certain statistical milestones paying them bonuses
– for example, a soccer player may have incentives, or motivators, in his contract to score more goals
Front office personnel such as marketing or public relations might measure success based on fan attendance