The Business of Sport

1. The Business of Sport

2. The Business of Sport • Sport is a big business and one of the fastest growing industries in developed countries • Economic factors are now dominating major decisions in sport

3. Gate receipts Merchandise Buffalo Bills $50-$90 Chicago Bulls Jersey $90 Media Rights NBC paid $1.2 billion for London Olympics rights Licensing fees NHL fees 12% Concessions sales Sponsorship $5 hot dog In 2008 Jeff Gordon $17 in endorsements Others?

4. Commercial sports grow best under the following economic conditions: • Market economy where material rewards are highly valued • In societies with large, densely populated cities • Countries with a high standard of living • Large amount of capital (private or public)

5. Professional Sports in NA • Athletes are paid • Sports are privately owned http://www.youtube.com/watch?v=8E_BrSIeK0U&safe=active

6. Winning Is Everything • For professional sports teams, winning reinforces fan loyalty, which in turn results in bigger gate receipts, more sales of products featuring the teams “logo” or “brand,” and higher fees for more widely watched television broadcast of games • At this level, there is no difference between sporting events and concerts or even craft and trade shows • “Revenue streams” - various ways in which money is brought into the coffers of a pro sports team

7. Amateur Sport in Canada • Athletes do not make a salary, and participate for the love of the game/competition • There are no owners • There are governing bodies

8. Governing body (eg. Sport Canda, Canadian Olympic association) Develops the rules and policies that govern national sport organizations (NSOs) Controls athletes, events and revenues

9. Sport Sponsorship

10. What is sponsorship? • An agreement between a commercial company and an individual, team or sport • In return for money athletes advertise the names of sponsors • http://www.youtube.com/watch?v=_oACRt-Qp-s&safe=active

11. Promotional Success: The Nike Story • The Nike “swoosh” is emblazoned on all manner of sports clothing and equipment, both on players and fans alike • Marketing targeted at young athletes • Received negative publicity due to manufacturing in third world countries • Endorsements important in Nike’s success - paid US$40 million to Tiger Woods to wear their branded hat and shirts during competition

12. The Role of the Media • Television, radio, the Internet, newspapers, magazines, and all forms of advertising that appear in these media outlets have an impact on the world of sport • Introduction of the radio in the 1930s and 1940s allowed fans to be “part of the action” by allowing them to listen to live coverage https://www.youtube.com/watch?v=84yat8f1BK0

13. The Influence of Television • First broadcasts were primitive • NHL hockey games first came to home viewers in Canada in 1952 • Large potential audience; free access to the broadcast; large target audience for advertisers • Television reshaped the rules of sport; redesigned uniforms and equipment and has even affected the duration and tempo of sporting events • Recent explosion of sports media

14. The Sports-as-Entertainment Industry • The actual action involved in a game, race, or contest is just one part of the overall entertainment package that is presented to the viewers as part of the telecast • Sports extras – celebrity play-by-play announcers, pre- and post-game analysis sessions, interviews with players

15. The Sports-as-Entertainment Industry – cont’d • Broadcasting Rights • Key to the extremely large amounts of money change hands as broadcasters bid for the right to televise sporting events • Broadcasters attempt to recoup these fees from advertising revenue

17. Key Players in the Sports Business Field • The Owner’s Role • Professional sports team owners are generally looking to make large profits on their investment, and explore a number of ways to draw revenue beyond simply collecting money from ticket-holders • Many professional sports teams are now owned by large media conglomerates (e.g., AOL-Time Warner or Disney) • Average cost of a sports team • http://economics.about.com/library/weekly/aa043004g.htm

18. The Athlete’s Role • Professional athletes find themselves continually called upon to perform at a consistently high level in order to remain competitive • “You’re only as good as your last game” • Salaries have skyrocketed in recent years • Example: Vince Carter reportedly earned CDN$25 million per season when he was playing with the Toronto Raptors NBA team, not including endorsement payments

19. The Agent’s Role • Player’s representative, often with a legal background, who represents athletes in all levels of business dealings • Instrumental in negotiating player contracts and salaries with team owners • Many disagree with the increasingly powerful role played by sports agents – they argue that, because they make a living on commission, they are negotiating high salaries simply for their own personal gain

20. The Fan’s Role • Consumer loyalty is key to a professional team’s success • Fans purchase tickets, watch televised games and related sports programming, and attend games, all in support of their favourite team

21. Sports Spin-Offs • Replica Products • Food and Beverage Sales • Stadium Concessions • Alternative Use of Sports Stadiums • Air Canada Centre: Leafs and Raptors, Concerts • Charities • “Cujo’s Kids” • Contribution to Local Economies • Taxes, Generate Revenue (food, parking, clothing) • https://www.youtube.com/watch?v=ouQJJ4mP4hI