Unit 3 – Introduction to
SEM Business Principles
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 OBJECTIVES
Intro to SEM
Business
Principles
1) Define and provide examples of sports
and entertainment industry segments
2) Explain the concept of revenue streams
and why they are important to an
organization
3) Understand the general financial
structure of a sports franchise
4) Recognize how entertainment
companies generate revenue
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 OBJECTIVES
Intro to SEM
Business
Principles
5) Define ancillary products
6) Define and understand the importance
of product placement
7) Describe industry trends
8) Provide an example of how an
organization may track shifts in
industry trend
9) Understand the concept of economic
impact
Copyright
© 2010 by Sports Career Consulting, LLC
Lesson 3.1 – Industry Segments
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Industry Segments
Industry Segments:
There are many
segments of the sports
and entertainment
industries
Copyright
Grouping of similar
types of products or
services offered to
consumers by
businesses within the
same industry
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Industry Segments
Segments In Sports Business
 Sports Tourism
 Recreation
 Sporting Goods
 Outdoor Sports
 Sports Apparel
 Health Clubs / Fitness
 Amateur Sports
 Sports Marketing Firms
 Olympic Sports
 Event Management
 High School Athletics
 Governing Organizations
 Collegiate Athletics
 Facility Management
 Professional Sports
 Action Sports
 Motor Sports
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Industry Segments
Segments In Entertainment Business
 Filmed Entertainment
 Publishing Sector
 Television Networks
 Digital Media Services
 Television Distribution
 Broadcasting-Satellite Services
 Recorded Music
 Theatre & Performing Arts
 Video Games
 Casinos & Gaming
 Radio Services
 Fine Arts
 Internet Advertising
 Theme Parks / Amusement Parks
Copyright
© 2010 by Sports Career Consulting, LLC
Lesson 3.2 – The Financial
Structure of Sports Business
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Television Contracts
Professional team
sports are finding
it increasingly
difficult to achieve
financial success
and turn a profit
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
As a result of increasing
revenue streams, inflated
media rights fees and
new means for
generating revenues in
professional sports,
overall franchise values
have risen exponentially
in the past decade, a
trend that is expected to
continue
Copyright
Revenue Stream:
The means for an
organization’s cash
inflow, typically as a
result of the sale of
company products or
services
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Discussion Topic
What revenue streams do you
think sports organizations rely
on to achieve profitability?
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Revenue Streams For Sports Teams
 Ticket Sales
 Sponsorship
 Licensing and Merchandise
 Concessions
 Parking
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Additional Revenue Streams For Sports Teams
 Luxury Suites
 Club / VIP / Premium Seating
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Luxury Suites &
Premium Seating
Often times the lack of suites or premium
seating options within a venue or facility will
prompt a sports franchise to lobby for a
new stadium
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Discussion Topic
Can you think of an instance
where a pro sports team has
threatened to move the franchise
if it didn’t receive funding for a
new stadium or arena?
Why would a franchise do that?
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Discussion Topic
The NBA’s Seattle Sonics made an
aggressive bid to gain funding for a
new arena from 2007 to 2008.
Why do you think they were lobbying
for a new arena?
Copyright
© 2008 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Discussion Topic
Key Arena lacked the modern day amenities
that help to generate additional revenue for
a team, such as luxury suites and club
seating, putting the Sonics in a position
where it was difficult to achieve profitability
Copyright
© 2008 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Discussion Topic
Eventually, the Sonics, unable to reach an
agreement for a new arena, were
relocated by its new ownership group to
Oklahoma City where they are now known
as the “Oklahoma City Thunder”
Copyright
© 2008 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
The Minneapolis Star Tribune reports that the Minnesota
Vikings plan to open a new premium club for the NFL season
in a converted administrative building adjacent to Mall of
America Field where memberships would cost $2,500 per
person and only be available to Vikings ticket holders.
The newspaper reported that the club would generate an
estimated $300,000 in new revenue which is significant
for the franchise given the lack of
revenues they currently generate playing
in an older venue that lacks many of the
revenue generating luxuries afforded by
newer facilities – a primary reason they
are seeking a new stadium.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Additional Revenue Streams For Sports Teams
 Television Contracts
 Additional media contracts
(satellite, radio, internet)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Television Contracts
TV contracts
provide big money
for franchises in
the game of sports
business, now
accounting for a
major portion of a
team’s overall
annual revenue
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Television Contracts
In 1973, the NBA signed a contract
with CBS, yielding $27 million in
revenue over three years
In 2006, the NBA inked a deal with
ABC/ESPN worth $2.4 billion through
2008 (the contract was extended in
2007 to run through the 2015-16
season but terms were not disclosed)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Television Contracts
In 2009, the University of Utah football program
generated $1.2 million in TV revenue as members
of the Mountain West Conference.
By jumping to the Pac-10, it is estimated that
they will increase that amount by more than $10
million.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Additional Media Contracts
In 2007, Sirius Satellite Radio reached an
agreement to broadcast NASCAR races
and related events over a five-year period
for $107.5 million
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Additional Media Contracts
CBS paid $6 billion for the rights to broadcast
the NCAA Tournament (March Madness) over an
11 year period, a deal that ends in 2013 that also
included the right to stream games over the
Internet (the online broadcasts generated an
estimated $30 million in ad revenue with its
March Madness on Demand package in 2009)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Additional Media Contracts
In 2009, the Yankee’s YES Network struck an
agreement with Major League Baseball to make
their games available on the Internet within the
New York area. The franchise now gains a
significant new revenue stream, from the millions of
broadband users in the market who are not sitting
in front of their televisions but are in offices and
other locations with a laptop or a wireless device
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Additional Revenues
When the Green Bay Packers renovated Lambeau
Field in 2003 with the goal of creating an added
revenue stream by building an “atrium” that could
host events (from corporate outings to weddings)
year round. In 2009, the atrium was booked for
more than 500 events, with 62 percent of the
bookings coming from outside the Green Bay market
and helped the franchise generate $43.7 million in
revenue (along with sales from the Packer Pro Shop)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Additional Revenues
The Boston Red Sox created Fenway Sports
Group, a marketing firm that develops publicity
campaigns for such organizations as Boston
College, NASCAR, online ads, and many more
areas (and owns equity in other properties like
Red Sox Destinations and Roush Fenway Racing)
They were profitable in their first year, and
brought in more that $200 million.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Sports Team Expenditures
 Facility Rental / leasing arrangements
 Staff / Player Salaries
(Payroll)
 Marketing
 Investment in the Customer
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Sports Team Expenditures
 General Operating Expense
 Stadium/venue/facility financing
 Information management/research
 Team expenses (travel etc.)
 Maintenance and security
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
To gain a better understanding of
the financial structure of sports
business, let’s review the NFL’s
Green Bay Packers’ financials
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Revenue
Packers’ total revenue in 2009: $247.9 million
Key revenue streams:
National revenue from the NFL: $147.1 million
National TV revenue: $94.5 million
Local revenue: $100.8 million
Marketing, Pro Shop and Atrium revenue: $43.7 mil
Stadium operations (concessions etc.): $7.7 million
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Costs
Packers’ total costs in 2009: $227.8 million
Primary expense (cost):
Player Payroll expense:
$165 million
Net Income
Packers’ net income in 2009: $20.1 million
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
PROFIT
After deducting
investment loss and
taxes, the Green Bay
Packers’ 2009 profit
was $4 million
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
In 1995, Chris Cohan purchased
the NBA’s Golden State Warriors
for $119 million
In July of 2010, he sold the
franchise to Boston Celtics minority
partner Joe Lacob and Mandalay
Entertainment CEO Peter Guber for
a reported $450 million
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Business Financial Structure
Also in 2010, the NBA’s New Jersey
Nets franchise fetched a cool $ 200
million from Russian billionaire Mikhail
Prokhorov.
Along with Prokhorov’s investment in the
franchise, he also has a minority stake in
the development of the new “Atlantic
Yards” sports and shopping complex,
which is designed to bring economic
renewal to a downtrodden area of
Brooklyn.
Copyright
© 2010 by Sports Career Consulting, LLC
Lesson 3.2 – The Financial Structure
of Entertainment Business
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Revenue Streams
Similar to sports products in that both products
can be developed into merchandise, used for
promotion, and create profit through sales of
ancillary products, licensing, and royalties
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Financial Structure
Ancillary products are products
related to or created from the core
product
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Revenue Streams
Because there are so many different
types of entertainment products, the
revenue generated by the marketing of
those products is very diverse
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Financial Structure
A single blockbuster Hollywood film can generate a
number of ancillary products:




Videos, DVDs, Electronic games
Cable TV and Pay-Per-View Rights
Licensed Merchandise
Film can be the basis for a video game, TV series,
book, or apparel (toys, games, apparel, etc)
The sale of those ancillary products makes a profit for
the film creators in the form of sales, royalties and
licensing fees
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Consider the Star Wars franchise of films
Videos, DVDs, CDs & Video Games
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Consider the Star Wars franchise of films
Licensed Merchandise and Apparel
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Consider the Star Wars franchise of films
Licensed Merchandise and Apparel
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Consider the Star Wars franchise of films
Licensed Merchandise and Apparel
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Financial Structure
Royalties are payments made to the
owner of copyrighted work for use of
their material
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Financial Structure
Songwriters like Bob Dylan and Paul
McCartney receive compensation when
other artists “cover” (record or perform
their own version) of the original song
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Financial Structure
The Dire Straits song "Romeo and
Juliet" was covered by The Killers on
their album "Sawdust"
American Idol winner Kris Allen recorded
a cover version of Kanye West’s
“Heartless” on his first studio album
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business Revenue Streams
Hollywood Marketing Strategy: Plan the
merchandising and product tie-ins before
you plan the casting and film production
schedule
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Hollywood Marketing Strategy
Increasingly, studios plan the merchandising,
products, DVD and electronic games and toys
they will tie in with their proposed film before the
actors and other technical staff are determined
Movies seen as revenue generators, artistic
statement is secondary
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Hollywood Marketing Strategy
If a film can be developed into a
franchise (a series of films which
will tie together), it will be!
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Hollywood Marketing Strategy
Film producers plan original merchandise tied to
the film and also product placement of existing
products within the film.
Audi paid Marvel Studios and Paramount to have
its car be the vehicle of choice for the lead
character in Iron Man. Audi also paid tens of
millions to help advertise the film.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Product placement is an advertising
approach in which commercial
products and services are used within
the contest of certain media where the
presence of a particular brand is the
result of an economic exchange
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Product Placement
Commonly referred to as product “tie-ins”
or product integration
When the featured product does not pay
for the exposure, it is referred to as a
product plug
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Not all product appearances are
intentional
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
A March, 2009 episode of “Grey’s Anatomy” showed
character Izzie Stevens drinking a bottle of Izze
Sparkling Pomegranate fruit beverage in one scene.
According to Pepsi, no money exchanged hands for
the product to appear during the cafeteria meal
scene.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
World Wrestling Entertainment (WWE) World
Heavyweight Champion, Phillip Jack Brooks (a.k.a.
CM Punk) has a Pepsi logo tattooed on his left
shoulder and is reportedly not a paid endorser of
Pepsi products
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
A 2010 episode of NBC’s popular TV show Modern Family
scripted an entire episode around a single product as a
featured storyline when one character wanted an Apple
iPad as a birthday gift. The attention given to the brand
drew the ire of many fans of the show and critics alike
with the Star-Ledger’s Alan Sepinwall, called the
references “icky”.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
The disappointed and critics, however, later learned
that the product placement was unintentional and
that the storyline was completely created by the
writers of the show and Apple paid them nothing in
return for the exposure
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Not all product appearances are
supported by the artists
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Fall Out Boy’s Pete Wentz had harsh criticism against
unexpected product placement in 2009 in the band’s
newest music video “I Don’t Care.” Allegedly, a new
model of Nokia phones were featured in the video
which didn’t sit well with Wentz, who posted the
following comments to the band’s website: “The
version of the video that we worked on night after
night is not the version that aired, yet somehow a
cut full of glorious camera-phone shots did.”
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Product placement is one of the
fastest growing advertising mediums
in the entertainment industry
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
In 2009, spending
on global product
placement
surpassed $24
billion in 2009
Burger King in a video game
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
In-game product
placements
generated $77.7
million globally in
2006 and are
expected to top $1
billion in worldwide
in-game advertising
spending by 2014
1 Bil +
1,000
800
Worldwide
In-Game
Advertising
Exenditures
(in Millions of
US Dollars)
600
400
295
200
77.7
0
2006
Copyright
© 2010 by Sports Career Consulting, LLC
2007
2014
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Microsoft has lined up Chevrolet as the first ad
partner attached to its Kinect Xbox 360 gaming
interface when Chevy's Volt electric car will appear
as a product placement in "Kinect Joy Ride," one of
the first games being designed for the console
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
In-video (music
videos) product
placement revenues
totaled $15-$20 million
in 2009, more than
double the amount in
2000, and spending by
the music industry on
that brand marketing
opportunity increased
8% last year
$20 mil
20
Worldwide
in-video
advertising
revenues (in
millions of US
dollars)
15
10
$8 mil
5
0
2000
Copyright
© 2010 by Sports Career Consulting, LLC
2009
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Recent blockbuster
“Iron Man 2” showcased
Dr. Pepper, Dick’s
Sporting
Goods, Audi, and
Oracle, and brought in
over $3 million in
revenues to the studio
Copyright
Audi in “Iron Man 2”
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Product placement
is presenting itself
in new, more
aggressive forms
Copyright
“Brands are tripling their
revenue (just) because of a
mention in a Jay-Z song, so
we go after the companies
and partner them with the
demographic. If you hear
an artist talking about his
new Fila sneakers, you’re
going to think about it
when you go shopping.”
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
During the NBA’s All-Star weekend, several brands
made unmistakable cameos. Rather than competing
in a traditional game of “horse”, three top NBA
players engaged in a shooting competition, spelling
out G-E-I-C-O rather than H-O-R-S-E. Throughout
the weekend’s All-Star coverage, television analyst
(and former NBA star player) Reggie Miller playfully
showed off his new BlackBerry cell phone on the air,
asking fans to text questions to “Reggie’s Mailbag”.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Subway continued with an aggressive placement
strategy within NBC’s hit show Chuck when, in
the 2010 season finale, a scene was included
showing Big Mike (the manager at Buy More, the
electronics store where much of the action in
Chuck takes place) enjoying a Subway breakfast
sandwich while uttering the phrase "build a better
breakfast", the central theme to Subway’s current
breakfast sandwich promotion.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
“Hello egg white omelet on english
muffin with my favorite banana
peppers to boot…160 calories of
deliciousness. I do know how to build
a better breakfast.”
- Big Mike in a scene from the show
‘Chuck’
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
More and more record labels are looking for ways to
recoup lost revenue through declining CD sales and
product placement provides a new avenue for
generating revenue.
Atlantic Record’s video for “Billionaire,” the hit song
by Travie McCoy that features Bruno Mars, includes
a paid placement of a Mini Cooper. The two artists
ride in the car and then Bruno Mars gives it away to
a man looking for a ride. The video has been
viewed more than 9 million times on YouTube.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
The 9.5 minute music video for Lady Gaga’s hit song
“telephone” featured product placement for 10
different brands, including Virgin Mobile, Miracle Whip,
Diet Coke, HP and Wonderbread (among others)
Not all artists are advocates of product placement as
pop star M.I.A. had this to say about Gaga’s
“telephone” video: “Lady Gaga plugs 15 things in her
new video. Dude, she even plugs a burger! That’s
probably how [record labels] are making money right
now—buying up the burger joint, putting the burger in
a music video and making loads of burger money.”
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Even authors and publishing companies engage in
product placement. For example, auto brands
make heavy appearances in the Twilight books
(Volvo is mentioned 16 times in the original book
and six times in Eclipse).
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Entertainment Business
Financial Structure
Within a struggling economy, marketers and
media agencies may choose to buy ads in
the spring selling period known as the
"upfront", which is when networks sell
much of the ad time for fall. Buying early
sometimes affords marketers more creative
flexibility, allowing them to ask for unique
ways to promote their brands.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Up Front Marketing
In April of 2009, Unilever (parent company of
marketer brands like Dove, Hellmann's and
Vaseline) held for a "reverse upfront," where its
brand managers discussed their new campaigns
and products with media companies and asked
them to come up with ideas on how to best
integrate the brands with their shows and stars
and across platforms
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Does Product Placement Work?
The decision to feature
Reese's Pieces in ET
catapulted the productplacement craft into the
Hollywood mainstream.
Sales of the candy
subsequently increased
80%.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Does Product Placement Work?
Etch A Sketch, Mr. Potato
Head and Slinky were toys in
the popular animated movie.
Etch A Sketch sales
increased 4,500 percent; Mr.
Potato Head sales increased
800 percent; Slinky, out of
business for 10 years, made
a comeback after getting
deluged with 20,000 orders!
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Does Product Placement Work?
In 2009, a Billabong brand
jacket featured in the
second Twilight film ignited
a buying frenzy. The brand
quickly sold out of the
jacket and it could later be
found on eBay going for
many times its retail price.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Reverse Product Placement
Reverse product placement occurs
when real life products are developed
that match products featured in a
fictional context
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Reverse Product Placement
If NBC licensed the name
“Dunder Mifflin” (from its
popular sitcom The Office)
and “Dunder Mifflin”
branded paper products
were then sold at Office
Max or Staples, they would
be implementing a reverse
product placement strategy
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Reverse Product Placement
One of the first examples of reverse
product placement occurred in 1996
when the Bubba Gump Shrimp Co., a
seafood restaurant chain inspired by
the hit movie "Forrest Gump”, opened
its first restaurant. There are now 21
Bubba Gump Shrimp Co. locations in
the United States and seven overseas,
including locations in Tokyo, Hong
Kong and Cancun.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Reverse Product Placement
For the Twilight films, reverse product placement
occurs with the Infinite Jewelry Co.'s "Bella
Engagement Ring." After Edward proposed to Bella
in the last film, Infinite created a line of replica
engagement rings in different price ranges, from
$35 to $1,999. President Shelli Ashton said Infinite
worked directly with Twilight author Stephenie
Meyer to create both the ring and "Bella' Bracelet.”
The result? According to Ashton, the company sold
"tens of thousands of bracelets and rings all over
the world including Russia, Japan, Brazil, Germany
and Australia."
Copyright
© 2010 by Sports Career Consulting, LLC
Lesson 3.4 – Tracking
Industry Trends
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
Shifts in industry trends could include:
 Customer buying patterns
 Consumer preferences / distastes
 Effective marketing techniques
(product placement for example)
 Product or service modifications
 New technology
 Efficient communication tools
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Tracking Industry Trends
Before adjusting, marketers must be
aware of changes within the industry
How do sports and entertainment
marketers effectively track industry
trends?
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
Marketers Must Effectively Track Changing Trends

Monitor sports and entertainment news
online

Read trade or business magazines,
journals or newsletters

Consider the marketing efforts involved
when attending competitor events
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
Marketers Must Effectively Track Changing Trends

Attend sport business conventions,
exhibitions and events

Obtain research from sport marketing
firms

Read local or national news publication
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
Marketers Must Effectively Track Changing Trends

Observe activity of competitors

Communicate with others within the
industry
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
Marketers Must Effectively Track Changing Trends
Marketers evaluate trends that fit their
respective marketing plans and implement
changes accordingly
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
In the summer of 2009, Sony
Pictures and Redbox
Automated Retail LLC signed a
multiyear agreement to supply
Redbox's video rental kiosks
with Sony films. Said David
Bishop, President of Sony
Pictures Home Entertainment:
"The consumer trend is
moving toward a rental model,
We're following consumer
trends and trying to maximize
consumer profitability within
that trend."
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Blockbuster, facing bankruptcy in 2010, came up
with a marketing plan: provide on-demand video via
T-Mobile’s Smart Phone, as well as Android and
Window’s Mobile phones. In addition, they reduced
the number of their stores and increased the amount
of merchandise sold in the stores. This includes
sunglasses and any other movie-related goods such
as tee shirts and hats with film logos on them.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Tracking Industry Trends
The Top Current Sports Industry Trends
1)
2)
3)
4)
5)
6)
Proliferation of Social Media and Sport
Variable ticket pricing
Realignment of college athletics
Battle over online media rights
Emergence of 3D television
Globalization in sport (led by the English Premier
League)
7) Collective Bargaining Agreement battles
8) Properties protecting sponsors from ambush
tactics
Copyright
© 2010 by Sports Career Consulting, LLC
Lesson 3.5 – Economic Impact
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Impact of sports and entertainment on economy
Sports, entertainment and events
inevitably make an impact on the
host city’s economy
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Economic impact can be defined as the net
change in an economy resulting from sport
or entertainment event related activity
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Economic Impact
This change is caused by either the
activities involved in the development
of new facilities and/or the revenue
generated from visitor and public
spending, employment opportunities
and taxes
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Indirect effects:
Direct effects:
The purchases needed
to meet the increased
demand of visitors for
goods and services
Copyright
The ripple effect of
additional rounds of
re-circulating the
initial spectators'
dollars
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
The Indiana state high school championships
played at Conseco Fieldhouse have steadily
drawn between 30,000 and 34,000 people to
downtown Indianapolis between over the last five
years. If 32,000 show up for the games,
estimates indicate that would bring $2 million in
direct visitor spending to the area.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Estimates for the 2010
Tour de France suggest
that there will be
approximately
15,000,000 spectators
over the 21 days of the
race, spending over $63
million dollars generating
a nice bump for the
economies of those cities
located along the route
Copyright
Because of the incredible
potential economic
impact, over 200 towns
in France alone apply
each year for a spot on
the famed Le Tour route
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
There is a reason six suitors pursued the free agent
LeBron James in 2010 as aggressively as they did:
He is a one-man economic engine
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Had he joined the Knicks, one analyst
suggested LeBron would bring an increase in
revenues to Madison Square Garden of $30
to $50 million annually while another analyst
added if the Knicks won the title it could
bring an estimated $60 million to the local
economy
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Had he joined the Bulls, LeBron would have
reportedly had the potential of boosting
Chicago’s economy by a whopping $3 billion
(according to an economist with the
University of Illinois at Chicago)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Some estimates have suggested that
LeBron’s departure from Cleveland could
have a negative economic impact on the city
of between $20 to $40 million per year
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
By winning the LeBron sweepstakes, the
Miami Herald reported that the Heat will
earn more than $10 million or more in
playoff revenue alone while referring to
James as a "walking, talking, free-throwshooting stimulus plan” and a Reuters
news report suggested the Heat
franchise was being valued at $600
million (in 2009, Forbes valued the
franchise at just over $360 million)
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Economic Impact Study
To measure economic impact, an
economic impact study is often
conducted
These studies attempt to determine the
financial implications an event has on a
particular market or region
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
In addition to fiscal
impact, studies will
often note the increase
in community visibility
and enhancement of
overall community
image as additional
benefits to hosting
large events in a
particular region or
area
Copyright
A study may be
conducted prior to a
city placing a bid to
host an event (or
building a new facility)
as a vehicle for
persuading local
officials or the
community at-large
that bringing the event
to the area will be a
positive thing for the
local economy
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
In October 2009, the USA Bid Committee released an
independent study that estimates a conservative domestic
economic impact of five billion dollars if the United States
is chosen to host the FIFA World Cup in 2018 or 2022
The analysis also estimates that
between 65,000 and 100,000
new jobs would be created in
the various host cities during
the preparation and operation
of the tournament in the year
of the event
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Economic Impact Study
Studies are often conducted after the
event takes place to measure the
overall impact the event had on the
local economy
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
San Diego’s two college football bowl (post-season)
games combined to produce an economic impact of
$52.3 million for the San Diego region in 2008
according to a study conducted by the San Diego
State University Center for Hospitality and Tourism
Research
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
The Pacific Life Holiday Bowl between the Oregon
Ducks and Oklahoma State Cowboys generated $34.7
million in economic impact.
Direct visitor spending totaled $18.0 million, while
$16.7 million was derived from indirect spending.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
The San Diego County Credit Union Poinsettia Bowl
between the TCU Horned Frogs and Boise State
Broncos generated an economic impact of $17.6
million.
Direct visitor spending totaled $9.1 million, while $8.5
million was derived from indirect spending.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Sports Corporations
Sports corporations typically operate as notfor-profit organizations
A sports corporation’s (also referred to as
“sports authority”, “sports foundation” or
“sports commission”) primary objective is to
attract events to the communities they
represent
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Sports Corporations
The Greater New Orleans
Sports Foundation is
responsible for bringing
the Ironman competition
in 2010, Super Bowl XLVII
in 2011, the Bassmaster
Classic in 2011, and the
NCAA Basketball Final
Four (men’s and
women’s) to the city of
New Orleans
Copyright
According to the
organization’s website,
the GNOSF has turned a
$25 Million investment,
from public and private
sources, into a $1 Billion
Economic impact
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Sports Corporations
Sports corporations can sometimes be
the driving force behind economic
impact studies
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
According to Naples News, the Florida Sports
Foundation commissioned a study in 2009 to learn
exactly what the Boston Red Sox and Minnesota Twins
presence meant to the local economy during their stay
in the area throughout spring training. Specifically,
they wanted to learn who comes from where to see
games, how many games they watch while in town,
whether they come solely for spring training baseball
and how much they were spending. That information
would then be used to help determine whether to
spend $75 million to build a new spring training
facility.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Impact of economy on sports and entertainment
Sports and entertainment are not recession proof
According to Brett Yormark, chief executive of the
NBA's New Jersey Nets: "We're not just competing
for people's entertainment dollars anymore, We're
going up against milk and orange juice"
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Through May, MLB attendance was down more than 5
percent compared to the same period last season. To
avert a similar decline, 27 NBA teams will maintain
ticket prices the same or lower than next season,
while three quarters of the NFL and two thirds of the
NHL teams will not raise prices next season. The 2009
Kentucky Derby saw wagering ($104 million) $10
million less than last year.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Attendance for the 2009 Preakness Stakes was just
under 78,000, the 2008 Preakness was attended by
more than 112,000 fans representing a 30% decrease
in just one year.
The event also suffered a 10% decline in corporate
sponsorships while the number of corporate tents in
the infield dropped from 45 in 2001 to about 30 for
2009.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
As the economy began to show signs of life,
attendance at the 2010 Stakes rebounded, showing
a 10% increase over the previous year
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
In 2010, the Minnesota Timberwolves cited the struggling
economy as the primary factor in the decision to lower
ticket prices. Said Glen Taylor, owner of the NBA
franchise, “"The economy right now is uncertain and we've
listened to our fans' concerns and responded by providing
reduced ticket pricing, new payment plan options and
protection against job loss - all of which are important to
Minnesotans right now. I don't want these uncertain times
to deter our fans from coming out to Target Center and
enjoying NBA basketball.”
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
According to NASCAR estimates, attendance has
dropped in 14 of the first 19 races of the 2010 season
(as of July), and the average crowd of 99,853 projects
to 3.6 million — which would be nearly a million off
the total in 2003 when NASCAR crowds were at their
peak
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
The Wichita County Mounted Patrol in Texas gave up
on the 2009 Red River Rodeo scheduled for June
when it couldn't raise enough sponsorship funding.
This would have been the 52nd year of the rodeo,
which costs from $60,000 to $70,000 to host.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Product Placement
Impact of economy on sports and entertainment
Sometimes a poor economy can help
certain segments of the sports and
entertainment industry
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Netflix actually increased membership from 2008 to
2009 while profits rose from $26.6 million to $32.4
million in the same time period.
While much of the economy struggled in 2008 and
2009, the movie industry enjoyed a box-office surge
with ticket sales growing by 17.5 percent to $1.7
billion. Attendance also enjoyed an increase, rising
nearly 16 percent.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Attendance is up for the Staten Island Yankees, too,
and team officials attribute it to the troubled economy
driving consumers to seek a bigger bang for each
dollar. The team, a Yankees affiliate, expects to sell
out a record 30 of its 76 regular-season games this
year, according to the team president, Joe Ricciutti.
“During a recession, people don’t want to throw
money away on other entertainment choices,”
he said. “They want an evening of value.”
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
With attendance down at a lot of major sporting
events, television ratings are up:
With the significant drop in attendance at the 2009
Preakness, television ratings enjoyed a significant
increase with NBC’s ratings jumping 27% from the
previous year
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Economic Impact
Smaller amusement parks found their
attendance increasing during the 2009
economic recession, while at the same
time larger theme parks had decreasing
attendance. Their lower ticket prices, and
an ability to attract local populations
without an expensive overnight stay, drew
guests looking for family entertainment at
a reasonable cost.
Copyright
© 2010 by Sports Career Consulting, LLC
Intro to Basic SEM Principles
UNIT 3
Blank Slide Available
for Teacher Edits
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
1) Define and provide examples of sports
and entertainment industry segments
 Sports Tourism
 Recreation
 Sporting Goods
 Outdoor Sports
 Sports Apparel
 Health Clubs / Fitness
 Amateur Sports
 Sports Marketing Firms
 Olympic Sports
 Event Management
 High School Athletics  Governing Organizations
 Collegiate Athletics
 Facility Management
 Professional Sports
 Action Sports
 Motor Sports
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
1) Define and provide examples of sports
and entertainment industry segments
 Filmed Entertainment
 Television Networks
 Television Distribution
 Recorded Music
 Video Games
 Radio Services
 Internet Advertising
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
1) Define and provide examples of sports
and entertainment industry segments
 Publishing Sector
 Digital Media Services
 Broadcasting-Satellite Services
 Theatre and Performing Arts
 Casinos and Gaming
 Fine Arts
 Theme Parks and Amusement Parks
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
2) Explain the concept of revenue streams
and why they are important to an
organization
Revenue streams are the means for an
organization’s cash inflow, typically as a
result of the sale of company products
or services. Without revenue, an
organization cannot achieve
profitability.
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
3) Understand the general financial
structure of a sports franchise
Sports teams could rely on a number of
avenues for generating revenue:
Ticket sales, sponsorship, licensing and
merchandise, concessions, parking, fan
clubs, kid’s clubs, luxury suite sales,
premium and club seating sales,
television contracts and additional media
contracts (satellite, radio, Internet)
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
4)
Recognize how entertainment
companies generate revenue
Entertainment products are similar to
sports products in that both products can
be developed into merchandise, used for
promotion, and create profit through sales
of ancillary products, licensing, and
royalties.
The sale of those ancillary products makes
a profit for proprietors in the form of sales,
royalties and licensing fees in addition to
revenues generated by the original product
or service.
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
5)
Define ancillary products and
explain why they are important to the
sports and entertainment industry
Ancillary products are products
related to or created from the core
product
6)
Define product placement
An advertising approach in which
commercial products and services are
used within the contest of certain
media where the presence of a
particular brand is the result of an
economic exchange
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
7)
Describe industry trends
Trends could include customer buying
patterns, effective marketing
techniques, product and/or service
modifications or new technology
(among other things)
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
8)
Provide an example of how an
organization may track shifts in
industry trends
Monitor sports and entertainment news
online, read trade or business magazines,
journals or newsletters, consider the
marketing efforts involved when attending
competitor events, attend sport business
conventions, exhibitions and events, obtain
research from sport marketing firms and
read local or national news publications
Copyright
© 2010 by Sports Career Consulting, LLC
UNIT 3 REVIEW (ANSWERS)
Intro to SEM
Business
Principles
9)
Understand the concept of economic
impact
Economic impact can be defined as the net
change in an economy resulting from sport
or entertainment event related activity.
This change is caused by either the activities
involved in the development of new facilities
and/or the revenue generated from visitor
and public spending, employment
opportunities and taxes.
Copyright
© 2010 by Sports Career Consulting, LLC
End Unit 3
Copyright
© 2010 by Sports Career Consulting, LLC