1 / 17

Entertainment and Media: Markets and Economics

Entertainment and Media: Markets and Economics. Contracts Between Talent and Entertainment Producers Appendix: A-Rod Deal. The Texas Deal for Alex Rodriguez. 2001 Signing Bonus = 10M 2001 21 2002 21 2003 21 2004 21 2005 25 2006 25 2007 27 2008 27 2009 27 2010 27

dhagen
Download Presentation

Entertainment and Media: Markets and Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Entertainment and Media: Markets and Economics Contracts Between Talent and Entertainment Producers Appendix: A-Rod Deal

  2. The Texas Deal for Alex Rodriguez • 2001 Signing Bonus = 10M • 2001 21 • 2002 21 • 2003 21 • 2004 21 • 2005 25 • 2006 25 • 2007 27 • 2008 27 • 2009 27 • 2010 27 • Total: $252M ???

  3. The Real Deal • Year Salary Bonus Deferred Salary • 2001 21 2 5 to 2011 • 2002 21 2 4 to 2012 • 2003 21 2 3 to 2013 • 2004 21 2 4 to 2014 • 2005 25 2 4 to 2015 • 2006 25 4 to 2016 • 2007 27 3 to 2017 • 2008 27 3 to 2018 • 2009 27 3 to 2019 • 2010 27 5 to 2020 • Deferrals accrue interest of 3% per year.

  4. Costs • Insurance: About 10% of the contract per year • (Taxes: About 40% of the contract) • Some additional costs in revenue sharing revenues from the league (anticipated, about 17.5% of marginal benefits – uncertain) • Interest on deferred salary - $150,000 in first year, well over $1,000,000 in 2010. • (Reduction) $3M it would cost to have a different shortstop. (Nomar Garciaparra)

  5. PDV • Using 8% discount factor • Accounting for all costs • Roughly $21M to $28M in each year from 2001 to 2010, then the deferred payments from 2010 to 2020 • Total costs: About $165 Million in 2001

  6. Benefits • More fans in the seats • Gate – the major component • Parking • Merchandise • Miscellaneous • Increased chance at playoffs and world series • Sponsorships • (Loss to revenue sharing) • Franchise value

  7. How Many New Fans? • Projected 8 more wins per year. • What is the relationship between wins and attendance? • Not known precisely • Many empirical studies (The Journal of Sports Economics) • My own study…

  8. A Dynamic Model for Attendance

  9. A Dynamic Model for Attendance

  10. Baseball Data • 31 teams, 17 years (1985-2001; fewer years for 6 teams) • Winning percentage: Wins = 162 * percentage • Rank • Average attendance. Attendance = 81*Average • Average team salary • Number of all stars • Manager years of experience • Percent of team that is rookies • Lineup changes • Mean player experience • Dummy variable for change in manager

  11. Baseball Data

  12. The Regression Model to Translate Wins into Attendance i = team, t = year Loyalty effect

  13. Translate Attendance into RevenueMarginal Value of One Win

  14. Marginal Value of an A Rod • 8 games * 63,734 fans = 509,878 fans • 509,878 fans * • $18 per ticket • $2.50 parking etc. • $1.80 stuff (hats, bobble head dolls,…) • $11.3 Million per year !!!!! It’s not close. (Marginal cost is at least $16.5M / year) • Increased probability of reaching playoffs times payoff of reaching • 7.5% for League Championship * 10M • 3.75% for World Series * 10M • Total, about $1,000,000 (if they do it every year!!)

  15. The IPN Player • A-Rod and Yankees – The Iconic Performance Network Player • Attendance rose to 4M in 2005, 4.3M in 2007 • MVP in 2005 and 2007 • Huge growth in the YES network • Seemed certain to break Bonds’ HR record (Asterisk?) • New deal: $275M over 10 years • Chicago Cubs offer included team ownership. • Drug Problems probably derailed this career path.

More Related