Bell Ringer
• What is the total price of
an item that is $102.30, if
the sales tax rate is 6%?
Bell Ringer Answer
• $102.30 * 6% (.06) = $6.138  $6.14
• $102.30 + $6.14 = $108.44
Agenda
• Bell Ringer – 5 minutes
• Lecture / Note Taking – 35 minutes
– Complete chapter 4 vocabulary as we take notes,
if you have not already done so.
• FBLA / Business Demographic Survey (maybe)
• Marketing Math Problems – 30 minutes
Vocabulary
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Return on Investment
Forecast
Budget
Balance Sheet
Income Statement
Learning Objectives
• Discuss sources of funding and revenue for
sports and entertainment businesses.
• Describe four tools for financial analysis.
It Takes Money
• The main purpose of all business activity
surrounding sports and entertainment
marketing is to make a profit.
• An unprofitable venture will eventually run
out of money, and other businesspeople will
be unwilling to invest or become owners.
• The venture will cease to exist.
Finding Funding
• A number of entities generally come together
to stage an event, each entity has the
possibility to make or lose money.
– The people who are owners of the event idea
must risk their own money to stage and market
the event, or they must find others who are
willing to invest in or sponsor the event.
• The owners/originators must have a plan that will
convince investors of the potential for profit.
Finding Funding
• Investors generally provide the funding for an
event to cover all the costs that may be
incurred before tickets are sold.
– Costs may include: salaries for the cast and crew,
costs of the facilities, costs of promoting the event
to fans, all other costs that go into making an
event happen.
• In return for providing the money to cover
costs, the investors seeks a return on their
investment.
Finding Funding
• Return on Investment  is the income from a
venture that is distributed to investors.
– Investors must feel secure about their chances of
earning a return on investment before they will
risk their money to make a profit.
Money Sources
• The revenues used to repay investors are generated
through ticket sales, broadcast rights, licensing, and
facilities.
– Facility Sources
• Sponsor advertising, parking fees, rental of luxury boxes, and sales of
concessions.
• Television networks generate revenue by selling
commercial time to advertisers.
– To clear a profit they must bring in more revenue than they
spend on buying the rights to air sporting events or producing
and distributing programs.
• To air NFL games on CBS, Fox, ESPN, and NBC each network must pay
the NFL ~$3.1 billion.
• Resulting in higher commercial prices for companies.
Where is the Money??!
• Decisions made about where and how to
spend money impact profitability.
– Financing involves budgeting, finding ways to pay
the costs of doing business, managing the costs so
that they do not exceed the revenues coming in,
and helping customers pay for the products or
services.
• Careful financial plans for be prepared and
records must be kept.
Where is the Money?!?
• Forecast  a report developed to predict the
expenses to be incurred and revenues to be
received from an event.
Budgets
• A budget is a plan for how available funds will
be spent.
– Road map for spending and it has a specific
purpose – to control costs so they do no exceed
the funds available.
• Budgets are usually prepared for 1 fiscal year
and broken into monthly segments.
Financial Statements
• Records must be kept of all financial
transactions.
• Balance Sheet  shows the company’s assets
(items of value, including cash, property, and
equipment) and its liabilities (amounts owed
for purchases made on credit and loans) at a
specific point in time. The difference between
the two is the company’s net worth.
Financial Statements
• Income statement  a report that shows all
revenues received and all expenses incurred
over a specific period of time.
– Reveals if a company made a profit or
encountered a loss.
Marketing Math:
• A local band with five members has the following
expenses:
– Renting a recording studio, $2,400
– Creating a promotional web site, $5,000
– Duplicating and packaging 20,000 copies of a DVD,
$50,000
– Advertising and distribution costs, $62,000
– Agent and songwriter fees, 10% of revenues
• If the DVD sells for $15 per copy, how many
copies will need to be sold in order to earn
$10,000 for each band member.
Answer
• $10,000 (profit) * 5 band members = $50,000 total earnings
needed for band.
• Expenses: $2,400 + $5,000 + $50,000 + $62,000 = $119,400
total FIXED expenses.
• $119,400 + $50,000 (profit for band) = $169,400 (total
amount needed to raise).
• $15 * 10% = $1.50 per copy to agent and songwriter fees.
• $15.00 - $1.50 = $13.50 (gross revenue per DVD)
• $169,400 / $13.50 = 12,548.15
The band will need to sell 12,549 copies to earn $10,000 per
band member.
Marketing Math:
• A local band with THREE members has the
following expenses:
– Renting a recording studio, $3,000
– Creating a promotional web site, $5,000
– Duplicating and packaging 20,000 copies of a DVD,
$60,000
– Advertising and distribution costs, $42,000
– Agent and songwriter fees, 10% of revenues
• If the DVD sells for $12 per copy, how many
copies will need to be sold in order to earn
$8,000 for each band member.
Answer
• $8,000 (profit) * 3 band members = $24,000 total earnings
needed for band.
• Expenses: $3,000 + $5,000 + $60,000 + $42,000 = $110,000
total FIXED expenses.
• $110,000 + $24,000 (profit for band) = $134,000 (total
amount needed to raise).
• $12 * 10% = $1.20 per copy to agent and songwriter fees.
• $12.00 - $1.20 = $10.80 (gross revenue per DVD)
• $134,000 / $10.80 = 12,407.4
The band will need to sell 12,408 copies to earn $8,000 per
band member.
This chapter we have discussed:
• Sports and Entertainment
Economics:
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Profit
Profit Motive
Economics
Economic Utility
• Risk Management
– Risk
– Risk Management
– Liable
• Business Ethics
– Ethics
– Principles
• Financial Analysis
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Return on Investment
Forecast
Budget
Balance Sheet
Income Statement