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2. Sports and Entertainment Means Business. 2.1 Sports and Entertainment Economics 2.2 Risk Management 2.3 Business Ethics 2.4 Financial Analysis. Winning Strategies. EMI. one of the largest music content providers cost savings achieved through outsourcing of manufacturing - PowerPoint PPT Presentation
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Sports and Entertainment Marketing© Thomson/South-Western
Chapter Chapter Chapter Chapter
Sports and Entertainment Means Business
2.1 Sports and Entertainment 2.1 Sports and Entertainment EconomicsEconomics
2.2 Risk Management2.2 Risk Management
2.3 Business Ethics2.3 Business Ethics
2.4 Financial Analysis2.4 Financial Analysis
2
Chapter 2Slide 2
Sports and Entertainment Marketing© Thomson/South-Western
Winning Strategies
one of the largest music content providers cost savings achieved through outsourcing
of manufacturing in 2005, income grew due to legitimate
sales of digital music the music industry embraces ever-changing
technology and helps drive the economy
EMI
Chapter 2Slide 3
Sports and Entertainment Marketing© Thomson/South-Western
Lesson 2.1
Sports and Entertainment EconomicsGoals Define profit and explain the profit
motive. Describe types of economic utility.
Chapter 2Slide 4
Sports and Entertainment Marketing© Thomson/South-Western
Terms profit profit motive economics economic utility
Chapter 2Slide 5
Sports and Entertainment Marketing© Thomson/South-Western
THE PROFIT MAKERS
profit the amount of money remaining from
revenues after all expenses are paid
Chapter 2Slide 6
Sports and Entertainment Marketing© Thomson/South-Western
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
revenue
Chapter 2Slide 7
Sports and Entertainment Marketing© Thomson/South-Western
Cultural Opportunities for Profits Worldwide distribution revenue is
critical for movie profits.
Chapter 2Slide 8
Sports and Entertainment Marketing© Thomson/South-Western
China has a tremendous movie market. the government censors movies for
content pirated movies diminish theater sales
Marketers must understand the markets in which sales occur.
Chapter 2Slide 9
Sports and Entertainment Marketing© Thomson/South-Western
In addition to U.S. ticket sales, name two other large sources of revenue for U.S. film studios.
Chapter 2Slide 10
Sports and Entertainment Marketing© Thomson/South-Western
ECONOMICS
economics the study of how goods and services are
produced, distributed, and consumed
--
Chapter 2Slide 11
Sports and Entertainment Marketing© Thomson/South-Western
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
macroeconomics
Chapter 2Slide 12
Sports and Entertainment Marketing© Thomson/South-Western
Sports and Entertainment Economics economic utility
the amount of satisfaction a person receives from the consumption of a particular product or service
Chapter 2Slide 13
Sports and Entertainment Marketing© Thomson/South-Western
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
Chapter 2Slide 14
Sports and Entertainment Marketing© Thomson/South-Western
List four types of economic utility.
Chapter 2Slide 15
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.
Chapter 2Slide 16
Sports and Entertainment Marketing© Thomson/South-Western
Terms risk risk management liable
Chapter 2Slide 17
Sports and Entertainment Marketing© Thomson/South-Western
RISKING IT ALL
risk the possibility of financial gain or loss or
personal injury
Chapter 2Slide 18
Sports and Entertainment Marketing© Thomson/South-Western
Categories of Risk
natural risk occurs from unavoidable weather
conditions human risk
dishonest customers and employees inadequately trained employees
economic risk occurs due to changes in the economy
Chapter 2Slide 19
Sports and Entertainment Marketing© Thomson/South-Western
Additional Classification of Risk 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
Chapter 2Slide 20
Sports and Entertainment Marketing© Thomson/South-Western
if a loss can be prevented or the likelihood of its occurrence reduced
uncontrollable risk nothing can be done to prevent the risk
controllable risk
Chapter 2Slide 21
Sports and Entertainment Marketing© Thomson/South-Western
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
insurable risk
Chapter 2Slide 22
Sports and Entertainment Marketing© Thomson/South-Western
What is meant by a controllable risk?
Chapter 2Slide 23
Sports and Entertainment Marketing© Thomson/South-Western
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
Chapter 2Slide 24
Sports and Entertainment Marketing© Thomson/South-Western
Risk Avoidance
Sports and entertainment marketers need to plan to avoid risky situations.
liable the business is legally responsible for
damages that occur
Chapter 2Slide 25
Sports and Entertainment Marketing© Thomson/South-Western
Risk Insurance
risk insurance pays for predictable losses
premium cost of insurance
Chapter 2Slide 26
Sports and Entertainment Marketing© Thomson/South-Western
Risk Transfer
Some risks can be transferred to another company or even to the consumer. contracting with third parties for services including releases from liability on event
tickets
Chapter 2Slide 27
Sports and Entertainment Marketing© Thomson/South-Western
Risk Retention
risk retention assuming the cost of an uninsurable risk
risk retention groups similar businesses facing similar risks pool
resources resources are distributed to members that
have a loss
Chapter 2Slide 28
Sports and Entertainment Marketing© Thomson/South-Western
Briefly describe four strategies for managing risk.
Chapter 2Slide 29
Sports and Entertainment Marketing© Thomson/South-Western
Lesson 2.3
Business Ethics
Goals Define ethics. Discuss the impacts of unethical
behavior.
Chapter 2Slide 30
Sports and Entertainment Marketing© Thomson/South-Western
Terms ethics principles
Chapter 2Slide 31
Sports and Entertainment Marketing© Thomson/South-Western
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.
Chapter 2Slide 32
Sports and Entertainment Marketing© Thomson/South-Western
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.
Chapter 2Slide 33
Sports and Entertainment Marketing© Thomson/South-Western
How does a person’s character develop?
Chapter 2Slide 34
Sports and Entertainment Marketing© Thomson/South-Western
BUSINESS BEHAVIOR
People and businesses should act ethically while pursuing a profit.
Chapter 2Slide 35
Sports and Entertainment Marketing© Thomson/South-Western
Seeking an Advantage
Sometimes it is hard to continue to act ethically when you observe people who receive a benefit from acting unethically.
Chapter 2Slide 36
Sports and Entertainment Marketing© Thomson/South-Western
When Being Bad Profits
Only fans can really influence the behavior of ethically challenged athletes and celebrities.
Chapter 2Slide 37
Sports and Entertainment Marketing© Thomson/South-Western
Effective and Ethical
Good decisions are both ethical and effective.
Good decisions are the right choices for the long term.
Chapter 2Slide 38
Sports and Entertainment Marketing© Thomson/South-Western
How can the bad behavior of celebrities be controlled?
Chapter 2Slide 39
Sports and Entertainment Marketing© Thomson/South-Western
Lesson 2.4
Financial Analysis
Goals Discuss sources of funding and
revenue for sports and entertainment businesses.
Describe four tools for financial analysis.
Chapter 2Slide 40
Sports and Entertainment Marketing© Thomson/South-Western
Terms return on investment forecast budget balance sheet income statement
Chapter 2Slide 41
Sports and Entertainment Marketing© Thomson/South-Western
IT TAKES MONEY
Profit is the primary purpose of sports and entertainment marketing.
Chapter 2Slide 42
Sports and Entertainment Marketing© Thomson/South-Western
Finding Funding
Investors generally provide the funding for an event to cover all the costs that must be incurred before tickets are ever sold.
Chapter 2Slide 43
Sports and Entertainment Marketing© Thomson/South-Western
the income from a venture that is distributed to investors
return on investment
Chapter 2Slide 44
Sports and Entertainment Marketing© Thomson/South-Western
Money Sources
Funds to repay investors are raised through ticket sales broadcast rights licensing facilities
Chapter 2Slide 45
Sports and Entertainment Marketing© Thomson/South-Western
Name three sources of revenue from sports and entertainment.
Chapter 2Slide 46
Sports and Entertainment Marketing© Thomson/South-Western
WHERE IS THE MONEY?
forecast a plan that predicts the expenses to be
incurred and the revenues to be received
Chapter 2Slide 47
Sports and Entertainment Marketing© Thomson/South-Western
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.
Chapter 2Slide 48
Sports and Entertainment Marketing© Thomson/South-Western
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
Chapter 2Slide 49
Sports and Entertainment Marketing© Thomson/South-Western
What is the purpose of a forecast?
Chapter 2Slide 50
Sports and Entertainment Marketing© Thomson/South-Western
PERFORMANCE INDICATORS EVALUATED Communicate pricing strategies for supply
and demand. Analyze relevant data to determine varying
ticket prices for home games. Explain the need for and use of additional
revenue from higher-priced tickets.
Chapter 2Slide 51
Sports and Entertainment Marketing© Thomson/South-Western
Explain the benefits of increased revenue for consumers of foot-ball tickets.
Demonstrate knowledge of appropriate pricing strategies.
Chapter 2Slide 52
Sports and Entertainment Marketing© Thomson/South-Western
THINK CRITICALLY1. Why have an increasing number of
universities varied ticket prices to games based upon the opponent?
2. Why must universities consider the consumer before raising ticket prices?
3. If games become to expensive to attend, what other options do consumers have to watch the games?
4. How much revenue would be generated from the seven games if ticket prices were $40 all season long?