3.1
Big League Sports
Financial Impact
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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:
NFL’s Team Values 2014
1) Dallas Cowboys - $3.2 bill.
2) New England Patriots - $2.6 bill.
3) Washington Redskins - $2.4 bill.
4) New York Giants - $2.1 bill.
5) Houston Texans - $1.85 bill.
30) Detroit Lions - $960 mill.
32) St. Louis Rams - $930 mill.
http://www.forbes.com
World’s Richest Athletes
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Floyd Mayweather - $105 mill.
Cristiano Ronaldo - $80 mill.
LeBron James – $72.3 mill.
Lionel Messi - $64.7 mill.
Kobe Bryant - $61.5 mill.
Tiger Woods - $61.2 mill.
Roger Federer - $56.2 mill.
http://www.forbes.com/athletes/list/
Big League Pricing &
Planning
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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
Salary Caps
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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
Collective Bargaining
Agreements
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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
Financial Planning for a
Sports Team
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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
Bringing All Resources
Together
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Media support
Marketing
Charitable and other organizations
Power, Prestige, &
Profitability
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Perks and payoffs
Political clout
Professional teams and the community
Sociological ties to a professional team
The bottom line
Perks & Payoffs
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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
Political Clout
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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
Professional Teams & the
Community
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Teams bring new jobs to a city
– Stadium construction, working games, other
tourist businesses created (hotels, restaurants,
etc.)
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Boost for surrounding businesses
– City of Detroit and Tigers playoff run
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Community service – team and
coaches help out community in various
ways
Sociological Ties to a
Professional Team
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City’s “image enhancement”
Residents feel pride
– Ex. - Pittsburgh Steelers, Detroit Lions,
New York Yankees, Denver Broncos
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Wholesome family entertainment
The Bottom Line
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Winning is everything in sports
Special contract incentives for winning
Incentives can be…..
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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
3.2
Attracting a Professional Team
Goals
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Describe the distribution process for a
professional sports team.
Explain the process for financing a
professional sports team.
Distributing the Game
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Individual teams are separately
operated businesses
Cartel—a combination of independent
businesses formed to regulate
production, pricing, and marketing of a
product
The league controls the distribution of
the teams
How Distribution is
Decided
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Region with a large potential customer
base
Subsidies for the team
Owner must have financing
Stadium to attract fans
Attracting a Sports Team
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It takes money
And more money
Cashing in
Another option
– Owned by
community = GB
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Try to attract sports teams for their
positive economic impact
Also try to attract sports teams to build
civic pride
View the sports teams as advertising for
the city
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Is done by giving the team a new stadium
– stadiums are the most expensive cost of owning
a team
– stadiums are often built by passing stadium
taxes, which raise taxes for the local community
Is also done by giving the sports team tax breaks to
lure them to a new location
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Successfully is a full time job
– small parts of city government must be
allocated to lure a team
May be accomplished through two ways:
– league expansion: when the league
adds an additional team
– team relocation: when the league
relocates an existing team to an new
location
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For example, Portland Oregon has been campaigning
to get a Major League Baseball® Team.
The Oregon Sports Authority, Portland Baseball Group
and Oregon Baseball Campaign have combined to
form the Oregon Stadium Campaign, a coalition of
fans and business who want to bring baseball to
Oregon. Visit them online at:
www.oregonstadiumcampaign.com
Usually requires the following:
– a vote of the existing franchises to admit the
team
– a bid for the new franchise made by potential
owners and cities for the location
– contract negotiations with owners and location
– stadium construction or lease agreement
– creation of logos, team name and team colors,
etc.
From the
Teams
whichand
are added
to leagues are
– Playbook:
recruitment
of staff
players
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referred to as expansion teams since they expanded the league.
26
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National Football League®
– the most recent expansion team
in the NFL® is the Houston Texans
which began play in 2002
Major League Baseball®
– the Tampa Bay Devil Rays and
Arizona Diamondbacks were
added in 1998
National Basketball Association®
– Charlotte Bobcats were added in
2004
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Entails a league moving an existing
franchise to a new city
Is determined by league owners and
managers
Is usually targeted toward franchises
with financial problems
Involves attracting a franchise to the
prospective city through competition
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National Football League®
– the Houston Oilers moved to Nashville,
Tennessee and became the Tennessee Titans
Major League Baseball®
– the Montreal Expos moved to Washington
D.C. and became the Washington Nationals
National Basketball Association®
– the New Orleans Jazz moved to Salt Lake
City, Utah and became the Utah Jazz
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Have increased in popularity and
attendance in the last ten years
Include basketball, golf, tennis,
gymnastics, soccer, ice skating, etc.
Have created an additional marketing
outlet for sports manufacturers
– female athletes are now craving
custom-designed golf clubs,
soccer cleats, racing bikes,
sporting apparel, etc.
From the Playbook: Jackie Mitchell, a female baseball pitcher, struck
out Babe Ruth and Lou Gehrig in a 1931 exhibition game.
30
• Mildred "Babe" Didrickson
Zaharias (golf)
• Ann Meyers (basketball)
• Julie Krone (horse racing)
• Manon Rheaume (hockey)
• Cheryl Miller (basketball)
• Mary Lou Retton
(gymnastics)
• Venus and Serena Williams
(tennis)
• Billy Jean King (tennis)
• Jackie Joyner-Kersee
(track)
• Annika Sorenstam (golf)
• Mia Hamm (Soccer)
• Janet Guthrie (auto racing)
• Danica Patrick (auto racing)
• Sheryl Swoops (basketball)
31
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Vary in geographic popularity
– American football is not very popular in Asia
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Also includes the following leagues which we have
not discussed :
– Formula One Racing®
– Professional Golf Association®
– Women’s National Basketball Association®
– Ladies Professional Golf Association®
– NASCAR®
– Etc.
A League of Their Own
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Click image for clip
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Professional sports is worth billions of dollars
Includes sponsorships such as advertisements on a
baseball field’s outfield wall
Also includes money paid for naming rights to a
stadium, such as University of Phoenix Stadium,
home of the NFL®’s Arizona Cardinals
From the Playbook: Think of the last time you saw a professional
athlete endorsing a product on television. That is sports marketing in
action. Do you remember the product, the athlete or both?
34
Agents, Managers, &
Ethics
Agents, Managers, &
Ethics
GOALS
 Understand the role of agents in
marketing.
 Explain ways that professional sports
organizations and their sponsors
develop an athlete’s character.
 Assess the impact of ethical behavior
on an athlete’s promotional value.
$ Show Me the Money $
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Agent – the legal representative of a
celebrity
Athletes won the right to become free
agents
Polishing the Marketing
Value
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Professional athletes ultimately
responsible for their own behavior
National Basketball Association –
Rookie Training Camp
Illegal behavior may hurt ability to attract
Sponsors & Endorsements
Handlers
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Handlers – sponsor-paid individuals
who work closely with athletes who
are unable or unwilling to police
themselves.
For athletes to remain valuable to
sponsors, they must behave!
Neither can afford negative publicity
Advisors
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Financial and business counselors
Advisors keep the athlete and sponsor
together for the benefit of both
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30 for 30 Broke
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– Average career of pro athlete = 3 years
– 60% of NBA players & 78% of NFL
players go broke within five years of
retirement
Athletes Declare
Bankruptcy
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Kenny Anderson, Wally Backman, Charlie Batch, Bruse Berenyi,
Riddick Bowe, Randy Brown, Mark Brunell, Bill Bucker, Jason Caffey,
Dale Carter, Jack Clark, Raymond Clayborn, Derrick Coleman,
Dermontti Dawson, Jim Dooley, Lenny Dykstra, Luther Elliss, Eddie
Edwards, Chris Eubank, Rollie Fingers, Archie Griffin, Ray Guy, Tony
Gwynn, Dorothy Hamill, Scott Harrison, Steve Howe, Harmon
Killebrew, Bernie Kosar, Terry Long, Rick Mahorn, Harvey Martin,
Deuce McAllister, Darren McCarthy, Denny McLain, Craig Morton,
Greg Nettles, Jonny Neumann, Gaylord Perry, John Arne Riise, Andre
Rison, Rumeal Robinson, Manny Sanguillen, Warren Sapp, Billy Sims,
Leon Spinks, Sheryl Swoopes, Roscoe Tanner, Lawrence Taylor,
Duane Thomas, Bryan Trottier, Mike Tyson, Johnny Unitas, Michael
Vick, Antoine Walker, Danny White, Ray Williams, and Rick Wise
http://www.businessinsider.com/a-shocking-list-of-athletes-whohave-declared-bankruptcy-2012-10
Do Ethics Count?
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Ethics – a system of deciding what is
right or wrong in a reasoned and
impartial manner.
Agents contacting college athletes
Ethics & Character Matter
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Lack of mature adult role models
Media Influence – Frequent news
accounts of unethical behavior by
politicians, sports & entertainment
figures, and religious leaders.
Can result in publicity that interferes
with a marketing plan.