SPORTS AND ENTERTAINMENT MARKETINGSPORTS AND ENTERTAINMENT MARKETING

CHAPTER 3 1

CHAPTERCHAPTER 33Professional Sports

3.13.1 Big League Sports

3.23.2 Attracting a Professional Team

3.33.3 Agents, Managers, and Ethics

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LESSON 3.1LESSON 3.1

Big League Sports

GOALSGOALSDiscuss the financial impact of professional sports.Identify the perks associated with big league sports.

EQ: How big are big league sports?

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Financial Impact

Big league pricing and planning Refers to revenue potential or

commercial value (money)

Financial planning for a sports team Team owners/managers must prove

financial viability* of a team

*Capable of success or continuing effectiveness

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Big League Pricing and Planning

Professional athletes have contracts – and get $$$$ money from them. Highest paid athletes

But where do the teams/owners get money from?Corporate sponsorshipsTelevision revenue

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Financial Planning for a Sports Team

Financial viability* for the home city High costs to the city

Increased spending by fans Owners/managers must convince the city that

the cost of a team or stadium will be repaid

Increased tax revenues

*Capable of success or continuing effectiveness

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Financial Impact*

An NFL team can be a financial asset to a city if…. Everyone and everything involved

with the team stays within the 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, and retail shops.

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Bringing All the Resources Together

Once the financial viability of a sports team is proven….Media supportMarketingCharitable and other organizations

All come together to back the sports team

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Stadium Economics

Minnesota Vikings franchise sold for $250 million in 1998Cleveland Browns later that year sold for $530 millionWhy the discrepancy in prices?

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Stadium Economics

The Vikings’ lease was signed in 1982—consistent with the 1980’s standards in the pro sports industry Their revenue was controlled by and

credited to the city of Minneapolis

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Stadium Economics

The Browns’ lease was signed at the time of the sale (1998). The stadium lease obligated the

Browns to pay only $250,000 annually in and the team owners could keep facility-related revenue.

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Prestige, Power, Profitability

Washington Redskins were valued at $845 million in 2002. Took over first place from Dallas

Jerry Jones paid $140 million for the Cowboys in 1989 $65 Million for the franchise $75 Million for the stadium

The Cowboys were valued at $784 Million in 2002….currently valued at $2.1 billion today!Recent valuations

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Perks and Payoffs

Perk—(short for perquisite) a payoff or profit received in addition to a regular wage or payment. What perks to teachers get?Company employees receive ticketsMedia exposure for owners Ex: Bob McNair (Owner of the Texans)

In 1999 paid a record $700 million for the NFL’s 32nd franchise

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Political Clout (Influence)

Franchise owners bring millions of dollars in business activity to a cityFrequently associated with wealth Paul Allen

Owner of the Seattle Seahawks and Portland Trail Blazers tops the Forbes list with a net worth of $28.9 billion & teams valued at $716 million

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Professional Teams and the Community

Bring enthusiasm and heightened emotion and moral to a city Teams bring new jobs to a city

Construction, jobs in the stadium, etc.

Boost for surrounding businesses Tourist $$$, increased newspaper sales

Community service Community outreach projects in the city

Enhances the image of the sports franchise while benefiting the recipients

Dr. Harding

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Sociological Ties to a Professional Team

City’s “image enhancement”Residents feel pride People identify with a team

Wholesome family entertainmentLoss of a team Bring bitterness and depression

Art Modell moved the Cleveland Browns from Cleveland to Baltimore in 1995 (now the Ravens). New franchise was added in ’99 = Cleveland Browns.

Received death threats, hate letters, etc.

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The Bottom Line

Winning is everything in sports!Special contract incentives for winning Ex: Barry Larkin bonus clause in

contract Earn additional $300,000 if he played a

certain number of games and met specific offensive goals.

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LESSON 3.2LESSON 3.2

Attracting a Professional TeamGOALSGOALS

Describe the distribution process for a professional sports team.Explain the process for financing a professional sports team.Essential Question – how can an area start a new professional team?

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Getting in the Ballgame

Since there are more cities that want pro sports teams than there are teams available, the league controls the location of the teams based on the business benefits to the leagues and owners.

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Distributing the Game

Individual teams are separately operated businessesCartel—a combination of independent businesses formed to regulate production, pricing, and marketing of a productThe league controls the distribution of the teams In most cases, cartels are prohibited by

federal antitrust law.

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How Distribution Is Decided

Region with a large potential customer base are considered favorableOwners want public funds to start the new team! Many people think of this as “corporate welfare”

Subsidies* for the team Owners want tax-paid subsidies Has to be supported by the voters

*money usually given from the government to support that industry

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How Distribution Is Decided (cont’d)

Owner must have financing The owners set the price of the new

team and split an “expansion fee” among themselves

Must have a stadium to attract fans

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Attracting a Sports Team

There are fewer NFL teams than the market can support. The lack of teams forces cities to compete whenever a team becomes available through expansion or moving.Until 1960, teams generally owned their own playing facilities.Now, some state and local governments are eager to share in subsidizing major sports by financing stadiums…why?

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Attracting a Sports Team

Some franchises are selling the naming rights of stadiums to subsidize the cost of building these facilities. Eagles? Phillies? In late 1990s, taxpaying voters began showing some resistance to helping build facilities.

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Attracting a Sports Team

It takes money Huge risk on part of the owners New stadiums offer luxury suites and

upscale restaurants to increase profits

1989 voters in San Antonio passed a referendum for construction of the Alamodome ($156 million) Voters were convinced it would attract a

pro football team. Do they have one yet?

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Attracting a Sports TeamIt takes money (cont’d)

Pricing of tickets, concessions, luxury seating, and mdse related to a pro team all contribute to the financial picture.

The biggest profit center is TV revenue The revenue is generated by selling advertising time

through commercials during the game Networks sell ad time which allows them to buy the

right to air the gameAnd more money

Having multiple sites competing for the expansion team, allowed the NFL owners the option of increasing the team price

LA vs. Houston for 32nd expansion team

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Attracting a Sports Team

Cashing in Houston’s Reliant Stadium hosted Super

Bowl XXXVIII Used as justification for tax support Generated about $300 million for the host city Tickets range from $1,950-$4,800

**To host to the SB** Must meet 20 pages of the NFL requirements

At least 17,500 hotel rooms 65 limos 1,000 buses Golf courses

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Attracting a Sports Team

Another option Community Ownership – local gov’t or

fans own the team and facility Green Bay Packers

Benefits of fan ownership: Loyalty Sold out seats for decades Mystique

Major Leagues have forbidden public ownership now

League Drawback Holding fans “hostage” to get what they want

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LESSON 3.3LESSON 3.3

Agents, Managers, and Ethics

GOALSGOALSUnderstand 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.Essential question – why do players have agents?

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Show Me the Money! – (link)

Agent—the legal representative of a celebrity Most agents are either attorneys or

accountants Agents are paid a % of earnings

Athletes won the right to become free agents Play for the highest bidder

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Polishing the Marketing Value

Professional athletes ultimately responsible for their own behaviorNational Basketball Association rookie training programIllegal behavior may hurt ability to attract sponsors

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Handlers

Handlers—sponsor-paid individuals who work closely with athletes who are unable or unwilling to police themselvesFor athletes to remain valuable to sponsors, they must behave Henry Gaskins served as a “mentor” to AI

when he was with Philly.

Neither—company or the athlete--can afford negative publicity

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Advisors

Financial and business counselors Do NOT monitor behavior NIKE’s Howard White

Michael Jordan

Advisors keep the athlete and sponsor together for the benefit of both

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Do Ethics Count?

Ethics—a system of deciding what is right or wrong in a reasoned and impartial manner NBA Lockout (1998-1999)

Hakeem Olajuwon met with Billy Hunter (NBA Players Assoc. negotiator)

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Ethics and Character Matter

Moral Development can be divided into stages—childish behavior to mature and responsible behavior.Lack of mature adult role modelsFrequent news accounts of unethical behavior by politicians, sports and entertainment figures, and religious leaders“Just Because Everybody is Doing it”Can result in publicity that interferes with a marketing plan – Thanks Tiger!