Chapter 2
Sports and Entertainment
Means Business
2.1 Sports and Entertainment
Economics
2.2 Risk Management
Sports and Entertainment Marketing
© Thomson/South-Western
Lesson 2.1
Sports and Entertainment
Economics
Goals
 Define profit and explain profit motive
 Describe types of economic utility
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Do Now
Discuss with the person next to you the
reasons to run a business (this includes
sports teams and concerts).
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THE PROFIT MAKERS
 profit
 the amount of money remaining from revenues
after all expenses are paid
 revenue
 the money a business receives from the sales of goods and
services
 profit motive
 making decisions to use resources
in ways that result in the greatest
profit
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Cultural Opportunities for
Profits
 Worldwide distribution revenue is
critical for movie profits.
 China has a tremendous movie market.
 The government censors movies for
content
 Pirated movies diminish theater
sales
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Sports and Entertainment Marketing
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ECONOMICS
 economics
 the study of how goods and services are
produced, distributed, and 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
 Sports and entertainment marketers are
focused on microeconomics.
 relationships with consumers
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Sports and Entertainment
Economics
 economic utility
 the amount of satisfaction a person
receives from the consumption of a
particular product or service
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Types of Utility
 form utility
 when the physical characteristics of a product or
service are improved
 time utility
 making the product or service available when the
customer wants it
 place utility
 the product is available where it is wanted
 possession utility
 the product or service is available at an affordable
price
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 List the four types of economic utility
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Sports and Entertainment Marketing
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Do Now
What is risk?
What does Turner Field or Phillips Arena do
to reduces the risk of injury to an attendee
during a concert or game?
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Sports and Entertainment Marketing
© Thomson/South-Western
Lesson 2.2
Risk Management
Goals
 Define risk and describe the categories
and classifications of risk.
 Name and describe four strategies for
risk management.
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Sports and Entertainment Marketing
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RISKING IT ALL
 risk
 the possibility of financial gain or loss or
personal injury
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Sports and Entertainment Marketing
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Three Categories of Risk
1. Natural risk
 occurs from unavoidable weather
conditions
2. Human risk
 dishonest customers and employees
 inadequately trained employees
3. Economic risk
 occurs due to changes in the economy
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Three Additional Classification
of Risk
1. gain or loss 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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Three Additional Classification
of Risk
2. controllable or uncontrollable risk
 controllable risk
 if a loss can be prevented or the likelihood of its
occurrence reduced
 uncontrollable risk
 nothing can be done to prevent the risk
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Sports and Entertainment Marketing
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Three Additional Classification
of Risk
3. Insurable or Uninsurable risk
 insurable risk
 a pure risk for which the chances of loss are
predictable and the amount of the loss can be
estimated
 uninsurable risk
 the chance that a dollar loss could occur
 the amount of the loss cannot be estimated
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Sports and Entertainment Marketing
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 What are four steps a sports venue could
take to avoid risk of injury to fans
attending games?
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Sports and Entertainment Marketing
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MANAGING RISK
 risk management
 preventing, reducing, or lessening the
negative impacts of risk by using the
strategies of risk avoidance, risk insurance,
risk transfer, and/or risk retention
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Sports and Entertainment Marketing
© Thomson/South-Western
Strategies to Manage Risk
1. Risk Avoidance – precautions to avoid
risky situations
2. Risk Insurance – buy insurance for
predictable risk
3. Risk Transfer – put the liability on
another company or even the customer
4. Risk Retention – retain money to cover
the cost of a given risk
Chapter 2
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Sports and Entertainment Marketing
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Chapter 2
Sports and Entertainment
Means Business
2.3 Business Ethics
2.4 Financial Analysis
Sports and Entertainment Marketing
© Thomson/South-Western
Lesson 2.3
Business Ethics
Goals
 Define ethics.
 Discuss the impacts of unethical
behavior.
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DO ETHICS COUNT?
 ethics
 a system of deciding what is right or wrong
in a reasoned and impartial manner
 Business should be conducted with
integrity, trust, and fairness.
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Ethics and Character Matter
 principles
 high standards of rules and guidelines
 character development
 a progression in behavior where people
advance from childish behavior to mature
behavior based on principles
 Young people need good role models.
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 Prepare a 3 minute skit to show what
ethics is.
 be sure you can explain the relevance
 make sure it is appropriate
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Sports and Entertainment Marketing
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BUSINESS BEHAVIOR
 People and businesses should act
ethically while pursuing a profit.
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Seeking an Advantage
 Sometimes it is hard to continue to act
ethically when you observe people
who receive a benefit from acting
unethically.
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Sports and Entertainment Marketing
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When Being Bad Profits
 Only fans can really influence the
behavior of ethically challenged
athletes and celebrities.
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Sports and Entertainment Marketing
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Effective and Ethical
 Good decisions are both ethical and
effective.
 Good decisions are the right choices for
the long term.
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Sports and Entertainment Marketing
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Bell Ringer: October 12, 2015
Start a new bell ringer document for this week!
 How can the bad behavior of celebrities
be controlled?
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Lesson 2.4
Financial Analysis
Goals
 Discuss sources of funding and
revenue for sports and entertainment
businesses.
 Describe four tools for financial
analysis.
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IT TAKES MONEY
 Profit is the primary purpose of sports
and entertainment marketing.
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Finding Funding
 Investors generally provide the funding
for an event to cover all the costs that
must be incurred before tickets are ever
sold.
 Would you be willing to provide funding
to boost someone’s career?
Why or Why not?
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 return on investment
 the income from a venture that is
distributed to investors
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Money Sources
 Funds to repay investors are raised
through




ticket sales
broadcast rights
licensing
facilities
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Sports and Entertainment Marketing
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 Name three sources of revenue from
sports and entertainment.
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Sports and Entertainment Marketing
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WHERE IS THE MONEY?
 forecast
 a plan that predicts the expenses to be
incurred and the revenues to be received
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Sports and Entertainment Marketing
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BUDGETS
 budget
 a plan for how available funds will be spent
 The purpose of a budget is to control
costs so they do not exceed the funds
available.
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Financial Statements
 balance sheet
 net worth = assets – liabilities
 shows net worth at a specific point in time
 income statement
 shows revenues and expenses for a
specific period of time
 reveals company’s profit or loss
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Sports and Entertainment Marketing
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 What is the purpose of a forecast?
Chapter 2
Slide 40
Sports and Entertainment Marketing
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Bell Ringer October 13, 2015
What types of documents
does an investor want to see
before making an
investment?
Chapter 2
Slide 41
Sports and Entertainment Marketing
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Bell Ringer October 14, 2015
Name 3 sources of revenue
from sports and
entertainment.
Chapter 2
Slide 42
Sports and Entertainment Marketing
© Thomson/South-Western
Bell Ringer October 15, 2015
What are the four strategies
for managing risk?
Chapter 2
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Sports and Entertainment Marketing
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Bell Ringer October 16, 2015
Review for test.
Chapter 2
Slide 44
Sports and Entertainment Marketing
© Thomson/South-Western