Sports Marketing Ch 2 Notes

Sports Marketing:                                                                                    Chapter 2

Sports Business

 

Economics

 

What is Profit?

            The amount of money remaining from revenues after expenses are paid.

            Revenue – Expenses = Net Profit or Net Loss

 

Types of expenses in sports: 

1.    Cost of items or services needed to generate revenues in a specific period.

a.    Salary (staff and talent)

b.    Advertising, printing, equipment, Insurance, travel, meals, supplies

 

Types of revenues in sports:

1.    Results from providing a service or product in exchange for a monetary equivalent.

a.    Ticket sales, Advertising, Tours, Merchandise, Athletes, Concessions, Event Sales, TV Radio Revenues

 

Profit Motive:  Teams use profit motive to make decisions to use resources in ways that result in the greatest profit.

 

 

Football info:  Players receive 59.5% of the total football revenue.

                        Top 15 high revenue teams give 150 million to low revenue teams.

 

What is economics?

1.    The study of how goods and services are produced distributed and consumed. 

a.    Macro – The study of economics of the entire society. 

b.    Micro – The study of relationships between individual consumers and producers.

                                                       i.     Sports focus on Micro with relationships with customers.

 

In sports we use the term “economic utility” – the amount of satisfaction that a customer believes they will receive from the sport or entertainment product.

 

1.    Form Utility: when physical characteristics are changed

2.    Time Utility: making a product or service available when the consumer wants it.

3.    Place Utility: ensures that the product or service is available where the consumer wants it.

4.    Possession Utility:  making the product or service available at an affordable price.

 

Risk Management

 

Risk: the possibility of financial gain or loss due to revenue and expenses

1.    Natural risk: weather (New Orleans), domes

2.    Human Risk: results from customer dishonesty, employee theft

3.    Economic Risk:  relies on the state of the economy.

4.    Insurable Risk – the chances for loss are predicable and can be estimated.  Uninsurable risk includes loss of ticket sales.

 

Risk Management: the preventing, reducing, or lessening of the negative impact of risk.  Marketers develop strategies to ensure that all possible risks are addressed.

 

Being Liable: the business is legally responsible for damages and might have to pay for medical and other costs.

 

 

Ethics

 

Ethics: a system of deciding what is right or wrong in a reasoned impartial manner

 

Principles: high standards of rules and guidelines in both business and personal life.

            “Bending the rules”: taking drugs to perform better

                                    Drinking, Legal issues, gambling

 

Financial Analysis

 

Teams always formulate a Budget: A budget is a form for how funds will be generated and spent.

 

Forecast: this predicts how revenue and expenses are to be received.

 

Income Statement: a report that shows all revenue and expenses and the resulting profit.

 

How do marketers interpret Financial Requirements?

 

They look at the word “Big” or increased revenues

 

-       Increase Attendance (location & population)

-       Advertising

-       Merchandise

-       Stadiums

-       Other stars

 

Top five NFL teams in what they are worth and why

 

 

Top five MLB teams in what they are worth and why

 

 

Top five NBA teams in what they are worth and why

 

 

Top five grossing movies

 

 

Top five sports franchises in the world worth and why

 

What are some of the advantages of having a sports team in your neighborhood?

 

            Jobs: both in construction and then daily operation s

            Revenue: fans spend money on merchandise, food, transportation

            Image:  enhances city image

 

 

What are some of the risks involved in owning a team?

            Can you make money (profit)

            Can you draw and afford the talent

            Do you have a good facility with good access?

            What type of population are you serving (NY vs Seattle)

            Can you get tax deals or other concessions from the Gov’t