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3.1

3.1. Big League Sports. Financial Impact. Big league pricing and planning “Big” refers to revenue potential – the better the team the more money they make Must determine costs for multimillion dollar contracts – Better athletes=better ticket sales Financial planning for a sports team

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3.1

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  1. 3.1 Big League Sports

  2. Financial Impact • Big league pricing and planning • “Big” refers to revenue potential – the better the team the more money they make • Must determine costs for multimillion dollar contracts – Better athletes=better ticket sales • Financial planning for a sports team • A sports team is a huge cost (stadium, facilities, etc) • Can bring in huge revenue – Must prove to the city • A professional team can be an asset to a city if:

  3. NFL’s Team Values 1) Dallas Cowboys - $2.3 bill. 2) New England Patriots - $1.8 bill. 3) Washington Redskins - $1.7 bill. 4) New York Giants - $1.55 bill. 5) Houston Texans - $1.45 bill. 28) Detroit Lions - $900 mill. 32) Oakland Raiders - $825 mill. http://www.forbes.com

  4. World’s Richest Athletes • Tiger Woods – $78.1 mill • Roger Federer - $71.5 mill • Kobe Bryant - $61.9 mill • LeBron James - $59.8 mill • Drew Brees - $51 mill • Aaron Rodgers - $49 mill • Phil Mickelson - $48.7 mill http://www.forbes.com/athletes/list/

  5. Big League Pricing & Planning • Professional athletes contracts • Must determine what the team can afford – better players = better team and more income • Corporate sponsorships • Must have financial backing from corporations to support activities • Television revenue • The better the team and fan following the more likely a tv network is to pick up the game

  6. Salary Caps • Are spending limits affecting how much a team can spend on a certain player • Give teams limits on player total player spending • May also affect individual player spending based upon factors such as years in the league and position • Are mandated and regulated by the governing bodies of major sporting leagues • Affect the National Football League®, National Basketball Association® and National Hockey League® • does not affect Major League Baseball® • Major League Baseball® is referred to as an “uncapped” league

  7. Collective Bargaining Agreements • Are contracts existing between the owners of a sport’s league and the player’s association • Contain rules for player salaries • Also contain requirements for salary caps • Free agency is the process by which players are assigned a team. When a player is a “free agent” they are free to negotiate with any team with whom they wish to sign. • Defines the rules for free agency

  8. Financial Planning for a Sports Team • A prof. sports team can be a financial asset to a city if • Everyone and everything involved with the team stays within the home city area • The stadium/arena is used for events other than those for which it was built • The team attracts other business development like hotels, restaurants, shops • Increased spending by fans • If a team can get fans to the city they will spend on hotels, restaurants, shops, etc. • Increased tax revenues

  9. Bringing All Resources Together • Media support • Marketing • Charitable and other organizations

  10. Power, Prestige, & Profitability • Perks and payoffs • Political clout • Professional teams and the community • Sociological ties to a professional team • The bottom line

  11. Perks & Payoffs • Perk—a payoff or profit received in addition to a regular wage or payment • Company employees receive tickets • Media exposure for owners • Houston Texans

  12. Political Clout • Franchise owners bring millions of dollars in business activity to a city • Often given money or other perks by city officials to entice team to stay in city • Nashville and the Tennessee Titans • Frequently associated with wealth

  13. Professional Teams & the Community • Teams bring new jobs to a city • Stadium construction, working games, other tourist businesses created (hotels, restaurants, etc.) • Boost for surrounding businesses • City of Detroit and Tigers playoff run • Community service – team and coaches help out community in various ways

  14. Sociological Ties to a Professional Team • City’s “image enhancement” • Residents feel pride • Ex. - Pittsburgh Steelers, Detroit Lions, New York Yankees, Denver Broncos • Wholesome family entertainment

  15. The Bottom Line • Winning is everything in sports • Special contract incentives for winning

  16. Incentives can be….. • Can mean different things to different parts of a professional sports organization • Owner’s generally find success in making money • Managers or coaches measure success in winning • Players find success in winning and reaching certain statistical milestones paying them bonuses • for example, a soccer player may have incentives, or motivators, in his contract to score more goals • Front office personnel such as marketing or public relations might measure success based on fan attendance

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