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WARM UP
High Schoolers Becoming the Norm for the NBA
Think Critically• Why are more high school athletes skipping college
careers?• What is the financial impact of endorsements?• What are the risks associated with young, unproven
players selected for large endorsement contracts?• What kind of impact does the NBA draft have on college
athletics?
SPORTS AND ENTERTAINMENT MARKETING
PROFESSIONAL SPORTS
Big League SportsAttracting a Professional Team
Big League Sports
Top 10 Sports in the World
10. Football 9. Basketball 8. Golf 7. Baseball 6. Table Tennis
5. Volleyball 4. Tennis 3. Field Hockey 2. Cricket 1. Soccer
Source: http://mostpopularsports.net/
Soccer• 260 million participants worldwide• Truly global appeal– National, cultural, religious, gender, class
• Federation Internationale de Football Association (FIFA)– $700 million annual income– World Cup most widely viewed sporting event in the world
• Highest paid soccer players in world3. Wayne Rooney, Manchester United ($17.9 million)2. Zlatan Ibrahimovic, PSG ($18.8 million)1. Samuel Eto'o, Anzhi Makhachkala ($25.9 million)
Top 10 Sports in the USA
10. Badminton 9. Motor Sports 8. Combat Sports 7. Golf 6. Tennis
5. Soccer 4. Hockey 3. Basketball 2. Baseball 1. Football
Source: http://mostpopularsports.net/
Financial Impact
• Most valuable NFL football teams1. Dallas Cowboys ($2.1 billion)2. New England Patriots ($1.64 billion)3. Washington Redskins ($1.6 billion)4. New York Giants ($1.47 billion)5. Houston Texans ($1.31 billion)
Financial Impact
• New Dallas Cowboy Stadium (2009)– Originally estimated to cost $650 million, actual
cost $1.15 billion• Financed through approved sales tax increases by the
city of Arlington; $325 million bonds from city of Arlington (bonds); $150 million NFL loan; over runs paid by Jerry Jones• One of the most expensive sports venues ever built
– Seats 80,000 (110,000 including standing room)• 2nd largest NFL stadium
Cowboy Stadium
• Since opening, has hosted:– Super Bowl XLV (2011)– NBA All-Star Game (2010)• Highest attended basketball game in history
– Big 12 Championship Game (2009, 2010)– Cotton Bowl (2010-2012)– Texas UIL State Championship (2010-2012)– NCAA Final Four (2014)
Financial ImpactSport Yearly Revenue
National Football League (NFL) $9 Billion
Major League Baseball (MLB) $7 Billion
National Basketball League (NBA) $3.8 Billion
National Hockey League (NHL) $2.9 Billion
Major League Soccer (MLS) $280 Million
Source: http://www.statisticbrain.com/professional-sports-average-salary-revenue-salary-cap/
Financial ImpactSport Average Salary
National Basketball League (NBA) $5.2 Million
Major League Baseball (MLB) $2.5 Million
National Football League (NFL) $1.75 Million
National Hockey League (NHL) $1.3 MillionProfessional Golf Association (PGA) $0.973 Million
Women’s Tennis $0.345 Million
Men’s Tennis $0.260 Million
Women’s Golf $0.162 Million
Source: http://www.statisticbrain.com/professional-sports-average-salary-revenue-salary-cap/
Financial ImpactSport Salary Cap
Major League Baseball (MLB) $178 Million
National Football League (NFL) $120 Million
National Hockey League (NHL) $64.3 Million
National Basketball League (NBA) $58.04 Million
Major League Soccer (MLS) $2.6 Million
Source: http://www.statisticbrain.com/professional-sports-average-salary-revenue-salary-cap/
Financial ImpactSport or competition Athlete League, competition Earnings
1 Boxing Manny Pacquiaoguaranteed minimum for two 2011 WBO title bouts
$50,000,000
2 Auto racing Fernando AlonsoFormula 1, Ferrari, 2011 salary and prize money
$40,000,000
3 Football Charles Johnson NFL, Carolina Panthers, 2011 total salary $34,000,000
4 Baseball Alex Rodriguez MLB, NY Yankees, 2012 total salary $30,000,000 5 Basketball Kobe Bryant NBA, LA Lakers, 2011-12 total salary $25,244,000 6 Soccer Wayne Rooney EPL, Manchester United, 2011-12 salary $20,821,300 7 Horse Racing (jockey) Ramon A. Dominguez Horse Racing, 2011 $20,567,032 8 Tennis (men) Novak Djokovic ATP Tour, 2011 prize money $12,619,803 9 Hockey Brad Richards NHL, NY Rangers, 2011-12 salary $12,000,000
10 Golf (men) Luke DonaldEuropean, PGA Tours, combined 2011 prize money
$9,509,604
11 Poker Pius HeinzPoker winnings, land-based tournaments, 4/9/11 thru 4/8/12
$8,876,067
12 Tennis (women) Petra Kvitova WTA Tour, 2011 prize money $5,145,943 13 Golf (women) Yani Tseng LPGA Tour, 2011 prize money $2,921,713
14 Bull Riding Silvano AlvesProfessional Bull Riders, 2011 PBR prize money
$1,461,964
15 Rugby Union Sebastien ChabalLNR, French National Rugby, Racing Metro 92, 2011 salary
$1,318,195
Top Earning Athlete per Sport
Source: http://espn.go.com/espn/story/_/id/7858863/racing-boxing-highest-paying-sports-espn-magazine
Financial ImpactSport or competition Athlete League, competition Earnings
16 Drag racing Del Worsham NHRA Top Fuel, 2011 prize money $1,193,000 17 Equestrian Rolf-Göran Bengtsson Show Jumping, 2011 prize money $1,161,280
18 Sumo wrestling HakuhoJapan Sumo Association, 2011 base salary, prize money
$1,100,000
19 Darts Phil TaylorPro Darts Corp. 2011 tournament prize money
$938,497
20 Distance running (men) Emmanuel MutaiDistance running (2011 prize money from various events)
$815,000
21 Distance running (women) Liliya ShobukhovaDistance running (2011 prize money from various events)*
$720,000
22 Fishing Kevin VanDamBassmaster Elite Series, 2011 prize money
$706,500
23 Alpine Skiing (women) Lindsey Vonn FIS World Cup Skiing, 2011 prize money $612,417 24 Surfing (men) Kelly Slater ASP World Tour, 2011 prize money $556,250 25 Alpine Skiing (men) Marcel Hirscher FIS World Cup Skiing, 2011 prize money $510,192
26 Rodeo Trevor BrazileProfessional Rodeo Cowboys Assn, PRCA 2011 overall earnings
$365,293
27 Beach volleyball (women)Larissa Franca/Juliana Felisberta da Silva
FIVB Swatch World Tour, 2011 prize money
$326,700
28 Beach volleyball (men)Emanuel Rego/Alison Cerutti
FIVB Swatch World Tour, 2011 prize money
$306,700
29 Eating Joey Chestnut Major League Eating, 2011 prize money $205,000 30 Billiards Shane Van Boening Billiards, 2011 prize money $160,450 31 Bowling Sean Rash PBA Tour, 2011-12 prize money $140,250
Top Earning Athlete per Sport
It’s All About the Money
• Professional sports are big business
• Depend on a large financial commitment and a large financial return
• A city gains a special identity with a professional team, and a winning tradition fuels the financial fire
How Teams Make Money
• Ticket Sales• Merchandise• Sponsorships• Naming Rights• Media Revenues
Ticket Sales
• Fan Cost Experience
League Average
Ticket Price Average
Attendance Average Ticket Sales per Game
# of Games per Season
Average Ticket Earnings per
SeasonMLB 26.98$ 30,884 833,250$ 2,421 2,017,299,025$ NFL 78.38$ 67,358 5,279,520$ 254 1,340,998,090$ NHL 57.39$ 17,455 1,001,742$ 1,230 1,232,143,214$ NBA 48.48$ 17,274 837,444$ 990 829,069,085$
Ticket Sales
Merchandise
• NFL Top Sellers1. Pittsburgh Steelers2. Dallas Cowboys3. New Orleans Saints4. Philadelphia Eagles5. New England Patriots6. Chicago Bears7. New York Giants8. Green Bay Packers9. Indianapolis Colts10. New York Jets
• NBA Top Sellers1. Chicago Bulls2. New York Knicks3. Los Angeles Lakers4. Miami Heat5. Dallas Mavericks6. Boston Celtics7. Oklahoma City Thunder8. Los Angeles Clippers9. Denver Nuggets10. Orlando Magic
Sponsors• NFL Top Sponsors– Gatorade– Marriott– Pepsi– Bud Light– Visa– General Motors– Verizon– Fed Ex– Papa Johns Pizza
• MLB Official Sponsors– Anheuser-Busch– Bank of America– Bayer – Captain Morgan– Citi– Firestone– Frito-Lay– Gatorade– General Motors (Chevrolet)– Intel– Holiday Inn– MasterCard International – Nike – Pepsi-Cola – Scotts – Sprint – State Farm Insurance – U.S. Army
Sponsors• NASCAR Official Sponsors
3M Bank of America Camping World Canadian TireChevroletCoca-Cola Coors LightDIRECTV Dodge DRIVE4COPD DuPont Exide Featherlite Coach Featherlite Trailers Ford FreescaleFreightliner TrucksGrowth Energy GilletteGoodyearHead & Shoulders
• NASCAR Official SponsorsMars Mobil 1 McLaren Nabisco (Kraft) National Corn Growers Assoc. Nationwide InsuranceOffice Depot Old Spice Safety- KleenSIRIUS XM Radio Sprint Sunoco Toyota Unilever UPS USG Visa K & N Whelen Engineering Inc.
Naming RightsFacility Key Tenants
M & T Bank Stadium Baltimore RavensBank of America Stadium Carolina PanthersInvesco Field at Mile High Denver Broncos
Ford Field Detroit LionsOffice Depot Center Florida Panthers
Reliant Stadium Houston TexansRCA Dome Indianapolis Colts
ALLTEL Stadium Jacksonville JaguarsGillette Stadium New England Patriots & Revolution
Network Associates Coliseum Oakland RaidersLincoln Financial Field Philadelphia Eagles
Heinz Field Pittsburgh SteelersQualcomm Stadium San Diego Chargers
Monster Park San Francisco 49ersQwest Field Seattle Seahawks
Edward Jones Dome St. Louis RamsRaymond James Stadium Tampa Bay Buccaneers
FedEx Field Washington Redskins
Television Revenue
• Television Revenues by League• NFL $5 billion• NBA $500 million• MLB $479 million• NHL $200 million
Winning is Everything
• In order to keep ticket sales strong and charge high prices, owners must provide a winning team
• A team fresh off of a national championship will probably have sold-out games the next season because fans expect continued success
Most Winning Teams
League City Franchise # of WinsMLB New York Yankees 27NFL Green Bay Packers 13NHL Montreal Canadienes 25NBA Boston Celtics 17FIFA Brazil 5
Most Winning Teams
Prestige, Power, Profitability
• Perks and payoffs• Political clout• Professional teams and the community• Sociological ties to a professional team• The bottom line
Prestige, Power, Profitability
• The value of sports franchises has skyrocketed due to prestige, power, and profitability
• Jerry Jones paid $140 million for the Dallas Cowboys in 1989 ($65 million for the franchise and $75 million for the stadium)• The Cowboys franchise is currently valued at
$2,100,000,000
Perks and Payoffs
• Perk—a payoff or profit received in addition to a regular wage or payment
• The position of team owner has many perks, including money and media exposure– Jerry Jones (Cowboys)– Jerry Beuss (Lakers)– George Steinbrenner (Yankees)– Ted Turner (Braves/Hawks)– Mark Cuban (Mavericks)
Political Clout
• Franchise owners who bring millions of dollars in business activity to a city often find themselves with political clout or influence
• Political Clout is frequently associated with wealth
Professional Teams and the Community
• Professional teams bring enthusiasm and heightened emotion
• People perceive teams as bringing many new jobs to a city
• Teams also generate a boost for area businesses
• Communities benefit from professional sports franchises that place high value on community outreach projects
Sociological Ties to a Professional Team
• Sports have a sociological impact on cities and their citizens
• Many people identify with their teams
The Bottom Line
• Winning is everything in sports
• Teams often provide players with special contract incentives for winning
Competition or Collusion?
• Teams are paid big money to win
• Sports clubs cannot operate independently – Must cooperate with one another in order to sell
their entertainment services to the public
Role of the League
• Teams that are members of a professional sports league are contractually obligated to one another
• The league determines: • the schedule of games• makes and enforces game rules• sets the guidelines for hiring new players• determines when a new team will be admitted to the
league and allowed to compete with its members
League Rules• Competition on the field would diminish if any club
had the ability to hoard the best athletic talent
• League rules are designed to ensure that each club has the opportunity to employ and retain quality players– Contracts, Drafts, etc.
• Because specific clubs may hold the exclusive right to contract with a player, athletes are not always free to work for the highest bidder
What Happens if No League Rules?
• More successful clubs would sell more tickets and team merchandise
• Earn higher profits• Have the ability to attract the best players with
higher salaries• Over time, these clubs would become so much
stronger than the less successful teams that competition on the playing field would deteriorate and become boring for spectators
• If spectators don’t come, then everyone loses…
How Does it Work?
• Individual teams are separately operated businesses
• Cartel—a combination of independent businesses formed to regulate production, pricing, and marketing of a product
Cartels
• In the case of professional sports, the cartel is a number of independent sports teams grouped together and governed by a league agreement of operations
• The league controls the distribution of the teams, including the locations of the teams and the number of teams allowed to operate within the league
• Typically, Cartels are NOT allowed in business– special legislation exempting the professional sports leagues
from antitrust laws
League Set Up
League Year
Established Commissioner # of TeamsMLB 1869 Bud Selig 30NFL 1920 Roger Goddell 32NHL 1917 Gary Beltman 30NBA 1946 David Stern 30
Expansion Plans
• Team owners must prove financial viability before the team can find a home city
• Owners and managers must convince the city that the costs of a team or new stadium will be repaid through increased spending by fans and by increased tax revenues
An NFL team can be a financial asset to a city if:1. Everyone and everything involved with the team
stays within the home city area
2. The stadium/arena is used for events other than those for which it was built
3. The team attracts other business development like hotels, restaurants, and retail shops
Bringing All the Resources Together
• Once the financial viability of a sports team is proven– media support,– marketing arms,– charitable concerns,– and other organizations come together to back it
How Easy is it to Add a New Team?
• Bringing a new team to a city takes more than just an owner’s desire for a new team
– League must approve expansion plans
– Potential owners have to have the financing to pay the current NFL owners for an expansion team
– The new team must have a place to play to attract fans
How Easy is it to Add a New Team?
• Since there are more cities that want pro teams than there are teams available, the leagues control the location of the teams based on the business benefits to the leagues and owners.
• The leagues are in business to make a profit
Houston Texans1997 Houston denied NHL expansion team1997 Houston Oilers allowed to move to Tennessee1998 Cleveland awarded 31st Expansion team learn 32nd Expansion team coming in next 2 years, cities being considered: LA (5.5 million households) Houston (1.8 million households)
Toronto1999 Team awarded to LA contingent on ownership team & stadium plans
LA financers offering $540 million
Houston financers offering $700 million; won bid2000 Begin building Reliant Stadium2001 Hire Head Coach Dom Capers2002 Expansion Draft to get athletes
9/8/2002 Home opener against Dallas Cowboys2004 Hosted Super Bowl XXXVIII
It Takes Money• The economics of pro sports involve huge amounts of money
and risk on the part of the owners
• New stadiums offer luxury suites and upscale restaurants that increase the caches of profits, but these are not a guarantee of attracting a team
Example: San Antonio Alamodome; taxpayers paid $156 million in 1989 to build the Alamodome; they still have not attracted a professional team.
It Takes Money
• Pricing of tickets, concessions, luxury seating, and merchandise related to a professional team all contribute to the financial picture
• The biggest profit center is TV revenues
• This revenue is generated through the sale of advertising time on TV channels that offer the games
Cashing In• Super Bowl XXXVIII was played in Houston’s Reliant
Stadium in the venues 2nd year of existence
• The Super Bowl deal was a part of the financial contract and agreement between the Texans & McNair & the NFL
• Houston’s city government used the economic impact of the Super Bowl to justify tax support for the stadium– Taxpayers paid 60% of the $310 million stadium
It Pays Off…
• In addition to the 69,500 ticket-holding fans (paying anywhere from $1,950 - $4,800+ per ticket), another 10,000 – 40,000 non-ticket holders visited the city during the weekend activities
• The associated business that benefited from the crowd-lodging, food, beverage, & entertainment-generated about $300 million for the host city
• McNair bought franchise in 1999 for $700 Million, Houston Texans now valued at $1.3 Billion
Super Bowl
• To host the Super Bowl obligates to a city to meet 20 pages of NFL requirements including:
– Having at least 17,500 hotel rooms available– 65 limos exclusively for NFL use– 1,000 buses for transporting fans– And many private and public golf courses for fan use
Super Bowl Rewards• If a city does a good job hosting the Super Bowl; then the host
city can expect to host the Super Bowl about every five years
Stadium Location # hosted Years hosted
Louisiana/Mercedes-Benz Superdome New Orleans, Louisiana7
1978, 1981, 1986, 1990, 1997, 2002, 2013
Miami Orange Bowl Miami, Florida 5 1968, 1969, 1971, 1976, 1979Joe Robbie/Pro Player/Dolphin/Sun Life Stadium Miami Gardens, Florida 5 1989, 1995, 1999, 2007, 2010Rose Bowl Pasadena, California 5 1977, 1980, 1983, 1987, 1993Tulane Stadium New Orleans, Louisiana 3 1970, 1972, 1975Jack Murphy/Qualcomm Stadium San Diego, California 3 1988, 1998, 2003Los Angeles Memorial Coliseum Los Angeles, California 2 1967, 1973Tampa Stadium Tampa, Florida 2 1984, 1991Georgia Dome Atlanta, Georgia 2 1994, 2000Raymond James Stadium Tampa, Florida 2 2001, 2009University of Phoenix Stadium Glendale, Arizona 2 2008, 2015Rice Stadium Houston, Texas 1 1974Pontiac Silverdome Pontiac, Michigan 1 1982Stanford Stadium† Stanford, California 1 1985Hubert H. Humphrey Metrodome Minneapolis, Minnesota 1 1992Sun Devil Stadium Tempe, Arizona 1 1996Reliant Stadium Houston, Texas 1 2004EverBank Field Jacksonville, Florida 1 2005Ford Field Detroit, Michigan 1 2006Cowboys Stadium Arlington, Texas 1 2011Lucas Oil Stadium Indianapolis, Indiana 1 2012
Super Bowl Venues