Unit 3 – Introduction to SEM Business Principles Copyright © 2010 by Sports Career Consulting,...

Unit 3 – Introduction to

SEM Business Principles

Copyright © 2010 by Sports Career Consulting, LLC

Intro to SEM Business Principles

UNIT 3 OBJECTIVESUNIT 3 OBJECTIVES

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



UNIT 3 OBJECTIVESUNIT 3 OBJECTIVES


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

Lesson 3.1 – Industry Segments


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Intro to Basic SEM Principles

Industry Segments

Industry Segments:

Grouping of similar types of products or services offered to consumers by businesses within the same industry

There are many segments of the sports and entertainment industries


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Industry Segments

Segments In Sports Business

Sports Tourism

Sporting Goods

Sports Apparel

Amateur Sports

Olympic Sports

High School Athletics

Collegiate Athletics

Professional Sports

Motor Sports

Recreation

Outdoor Sports

Health Clubs / Fitness

Sports Marketing Firms

Event Management

Governing Organizations

Facility Management

Action Sports


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Industry Segments

Segments In Entertainment Business

Filmed Entertainment

Television Networks

Television Distribution

Recorded Music

Video Games

Radio Services

Internet Advertising

Publishing Sector

Digital Media Services

Broadcasting-Satellite Services

Theatre & Performing Arts

Casinos & Gaming

Fine Arts

Theme Parks / Amusement Parks


Lesson 3.2 – The Financial

Structure of Sports Business


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Television Contracts

Professional team sports are finding

it increasingly difficult to achieve financial successand turn a profit


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Sports Business Financial Structure

Revenue Stream:

The means for an organization’s cash inflow, typically as a result of the sale of company products or services

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


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Discussion Topic

What revenue streams do you think sports organizations rely on to achieve profitability?

Revenue Streams For Sports Teams

Ticket Sales

Sponsorship

Licensing and Merchandise

Concessions

Parking

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Additional Revenue Streams For Sports Teams

Luxury Suites

Club / VIP / Premium Seating

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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


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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?

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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?

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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

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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”

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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.

Additional Revenue Streams For Sports Teams


Additional media contracts (satellite, radio, internet)

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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


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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)

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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.

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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

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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)

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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

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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)

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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.

Sports Team Expenditures

Facility Rental / leasing arrangements

Staff / Player Salaries (Payroll)

Marketing

Investment in the Customer

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Sports Team Expenditures

General Operating Expense

Stadium/venue/facility financing

Information management/research

Team expenses (travel etc.)

Maintenance and security

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To gain a better understanding of the financial structure of sports business, let’s review the NFL’s Green Bay Packers’ financials

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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

Revenue

Packers’ total revenue in 2009: $247.9 million

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Packers’ net income in 2009: $20.1 million

Costs

Packers’ total costs in 2009: $227.8 million

Primary expense (cost):

Player Payroll expense: $165 million

Net Income

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After deducting investment loss and taxes, the Green Bay Packers’ 2009 profit

was $4 million

PROFIT

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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

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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.


Lesson 3.2 – The Financial Structure

of Entertainment Business

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


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Ancillary products are products related to or created from the core product


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Entertainment Business Financial Structure


Because there are so many different types of entertainment products, the revenue generated by the marketing of those products is very diverse


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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


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Consider the Star Wars franchise of films


Videos, DVDs, CDs & Video Games

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Consider the Star Wars franchise of films


Licensed Merchandise and Apparel

Royalties are payments made to the owner of copyrighted work for use of their material


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Songwriters like Bob Dylan and Paul McCartney receive compensation when other artists “cover” (record or perform their own version) of the original song


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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


Hollywood Marketing Strategy: Plan the merchandising and product tie-ins before you plan the casting and film production schedule


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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


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If a film can be developed into a franchise (a series of films which

will tie together), it will be!


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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.

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


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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

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Not all product appearances are intentional

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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.

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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

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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”.

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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

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Not all product appearances are supported by the artists

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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.”

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Product placement is one of the fastest growing advertising mediums

in the entertainment industry


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In 2009, spending on global product

placement surpassed $24 billion in 2009


Burger King in a video game

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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


Worldwide In-Game Advertising Exenditures (in Millions of US Dollars)

1,000

0

200

400

600

800

77.7

295

1 Bil +

2006 2007 2014

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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


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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


Worldwide in-video advertising revenues (in millions of US dollars)

20

0

5

10

15

$8 mil

$20 mil

2000 2009

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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


Audi in “Iron Man 2”

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Product placement is presenting itself in new, more aggressive forms

“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.”

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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”.

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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.

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“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’

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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.


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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.”

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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).


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.


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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

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Does Product Placement Work?

The decision to feature Reese's Pieces in ET

catapulted the product-placement craft into the Hollywood mainstream.

Sales of the candy subsequently increased

80%.


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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!


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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.



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Product Placement Reverse Product Placement

Reverse product placement occurs when real life products are developed that match products featured in a fictional context

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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

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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.

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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."

Lesson 3.4 – 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

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Tracking Industry Trends



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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?

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

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Attend sport business conventions, exhibitions and events

Obtain research from sport marketing firms

Read local or national news publication

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Observe activity of competitors

Communicate with others within the industry

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Marketers evaluate trends that fit their respective marketing plans and implement changes accordingly



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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."

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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.

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1) Proliferation of Social Media and Sport2) Variable ticket pricing3) Realignment of college athletics4) Battle over online media rights5) Emergence of 3D television6) Globalization in sport (led by the English Premier

League)7) Collective Bargaining Agreement battles8) Properties protecting sponsors from ambush

tactics

The Top Current Sports Industry Trends


Lesson 3.5 – Economic Impact



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Sports, entertainment and events inevitably make an impact on the host city’s economy

Impact of sports and entertainment on economy

Economic impact can be defined as the net change in an economy resulting from sport or entertainment event related activity


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Economic Impact


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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


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Economic Impact

Direct effects:

The purchases needed to meet the increased demand of visitors for goods and services

Indirect effects:

The ripple effect of additional rounds of re-circulating the initial spectators' dollars

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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.

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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

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

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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

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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

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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)

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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

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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-throw-shooting 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)


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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


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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

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

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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


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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

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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

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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.

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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.


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Product Placement Sports Corporations

Sports corporations typically operate as not-for-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

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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

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


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Product Placement Sports Corporations

Sports corporations can sometimes be the driving force behind economic impact studies

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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.


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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"

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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.

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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.

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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

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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.”

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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

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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.


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Product Placement Impact of economy on sports and entertainment

Sometimes a poor economy can help certain segments of the sports and entertainment industry

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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.

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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.”

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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

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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.

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Blank Slide Available

for Teacher Edits



UNIT 3 REVIEW (ANSWERS)UNIT 3 REVIEW (ANSWERS)



Sports Tourism

Sporting Goods

Sports Apparel

Amateur Sports

Olympic Sports

High School Athletics

Collegiate Athletics

Professional Sports

Motor Sports

Recreation

Outdoor Sports

Health Clubs / Fitness

Sports Marketing Firms

Event Management

Governing Organizations

Facility Management

Action Sports





Filmed Entertainment

Television Networks

Television Distribution

Recorded Music

Video Games

Radio Services

Internet Advertising





Publishing Sector

Digital Media Services

Broadcasting-Satellite Services

Theatre and Performing Arts

Casinos and Gaming

Fine Arts

Theme Parks and Amusement Parks



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.




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)



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.




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




7) Describe industry trends

Trends could include customer buying patterns, effective marketing techniques, product and/or service modifications or new technology (among other things)




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




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.

End Unit 3


Unit 3 – Introduction to SEM Business Principles Copyright © 2010 by Sports Career Consulting,...

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