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chapter 4

chapter 4. Business of Sport. Chapter Outline. Sport and the Economy Ownership of Professional Sports Sport As a Monopoly Collegiate Sports As Moneymakers Business of Recreational Sport Summary. Sport and the Economy. Corporate sport

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chapter 4

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  1. chapter4 Business of Sport

  2. Chapter Outline • Sport and the Economy • Ownership of Professional Sports • Sport As a Monopoly • Collegiate Sports As Moneymakers • Business of Recreational Sport • Summary

  3. Sport and the Economy • Corporate sport • Today’s professional sports structured and organized • Developed by move from agrarian society to industrialized society • Sport adopted a corporate structure and athletes became workers

  4. Ownership of Professional Sports • Majority wealthy, powerful males • Small number of teams owned by public and organizations • Historically owners loved the game and promoted the sport • Now just a business investment or means to promote other products, with many financial advantages despite lost revenue

  5. Making Money From Professional Sports • Investments: Teams that sold for ~$200 million U.S. in early 1990s now sell for between $500 and $800 million U.S. • Taxes: Revenue lost from team offsets other profits. • Depreciation: Owners can write off depreciation of players each year. • Ticket sales: These sales account for 23% of all NFL revenue. (continued)

  6. Making Money From Professional Sports (continued) • Stadium revenues: Owners earn money from luxury boxes, concessions, and parking. • Media revenue: Revenue from TV ranges from 15% to 60% of team’s revenue. • Licensing fees for team merchandise • Leagues vary on amount of revenue sharing. • Licensing fees give advantage to larger markets. • Naming rights • Reliant Park in Houston sold rights for next 30 years for $300 million U.S. • See table 4.1 on page 57 for some of the deals in stadium naming rights.

  7. Financing of Stadiums • Can cost several hundred million U.S. • Public, private, or combination of funds • Public: sales tax, proximity and beneficiary taxes, bed tax, bonds, tax increment financing • Private: owner or league contributions, bank loans, local business loans, personal seat licenses

  8. Pros of Building a Stadium With Public Funds • Team can promote the city • Increased revenue for local businesses • Media attention increases tourism • Local jobs

  9. Cons of Building a Stadium With Public Funds • Money can be used for alternate means such as better public education, better city infrastructure, low-income housing for poor • Team may threaten to leave (blackmail) if city doesn’t provide stadium for them

  10. Sport As a Monopoly • Owners control competition and sales. • Existing leagues work together to eliminate new competing leagues. • Players can negotiate with only one team. • New or expansion teams have to pay large fees and need approval to relocate. • Owners cannot individually sell team merchandise.

  11. Players’ Rights and Compensation • Players can negotiate with only one team. • In the United States, 15,000 professional athletes are currently bound to their team until their option year. • Average salary for U.S. professional athlete was $45,320 U.S. in 2005; see tables 4.2 and 4.3 for lists of top wage earners. • Salary caps or earnings based on performance limit wages. • Average length of a professional sports career is less than 10 years. • Making it to the pros does not mean an athlete is set for life.

  12. College Sports As Moneymakers • University athletic departments are run as businesses. • Budgets can be more than $60 million U.S. • Big programs can increase contributions to other departments and enrollment. • Colleges can receive money from ticket sales, licensing fees, corporate sponsors, and television rights.

  13. Key Point Only 50% of Division I men’s football and basketball and less than 20% of women’s sport programs operate in the black.

  14. Recreational Sports As Moneymakers • With increased leisure time, recreation increases. • Sales of sport equipment in United States are ~$50 billion U.S. per year. • Leagues earn participation fees. • Communities use funds to maintain public recreational areas. • How much do you spend on recreational sports?

  15. Summary • Professional sports teams have become corporate entities. • Ownership has become a business venture with athletes as workers. • Cities often spend public money to keep or lure franchises despite other spending areas that could benefit from those funds. • Collegiate and recreational sports are turning into big moneymakers.

  16. On Deck… • Questions and comments • Assignments and readings • Next chapter: Media and Sport • Financial aspects • Reciprocal relationship

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