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unfortunately, this is a business, and revenues from season ticket sales and corporate sponsorship in Long Beach have fallen short of expectations...
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Slide 1:Chapter 1- Warm-up: The Business of Sports
To Accompany Sports Economics, 2ED Rodney Fort (PrenticeHall, 2006) If we do everything right this year and win again, we probably will be able to break even. And Ill tell you this much: I didnt buy this team to break even. -Minnesota Twins Owner Carl Pohlad, 1992.
Slide 2:Overview
There is more to sports than their revenues. Standard economic tools can enhance understanding. Some befuddling things for fans. Skepticism over owner poverty claims. The owners points of view.
Slide 3:Business Statements
Were doing what every responsible corporation in America does-- look for ways to improve the bottom line unfortunately, this is a business, and revenues from season ticket sales and corporate sponsorship in Long Beach have fallen short of expectations frankly, the financial losses of the team were just too great to justify playing another season there. -Gary Cavalli, ABL Co-founder on shutting down a franchise (AP, NY, 8/26/98)
Slide 4:Big Business Sports
TSN 100- only 10% of the most powerful people in sports are players. Teams that spend the most win the most- why? Owner behavior- stadiums, admission prices, TV rights, player negotiations.
Slide 5:Big Business Continued
The price tag on the new York Yankees has increased from $460,000 to $650 million (bona fide offer) over the period 1915-1998. Return: 460,000(1+r)83=650,000,000. r = 9.1% NOMINAL Real (2004): 7,800,000(1+r)83=734,000,000 r = 5.6% REAL The real growth rate, economy-wide has been between 2% and 3.5%.
Slide 6:Expansion Fees ($2004 Millions)
NFL: Houston 94--$795 million NBA: Charlotte 03--$304 million. MLB: AZ/TB 98--$151 million. NHL: Atl/Colum/Min/Nash 97--$94 mil.
Slide 7:A Little Perspective?
MLB is about a $4 billion industry; NFL close to $7 billion. U.S. envelope production: $3 billion. U.S. cardboard boxes: $8 billion. 1993: Brewers ($45.3 million,1993) were about 0.2% of local economic activity. Lets keep it in perspective! (Economist Henry Aaron, Congressional Testimony on C-SPAN, 1994.)
Slide 8:But Remember. . . .
There is no envelope or cardboard box section in the newspaper every day! Measuring actual economic activity will not capture everything about the values and costs of sports.
Slide 9:Approach- Economics, Tried and True
Demand- The source of revenue. Costs- The decisions behind supply. Market Outcomes- Especially when firms have market power. The Input Market- Player pay and labor relations. Business and Government- Subsidies, tax treatment and antitrust.
Slide 10:Summary
There is more to sports than their revenues. Standard economic tools can enhance understanding. Some befuddling things for fans. Skepticism over owner poverty claims. The owners points of view.