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