The Business of Sport

The Business of SportSport is a big business and one of the fastest

growing industries in developed countriesEconomic factors are now dominating major

decisions in sport

Gate receipts

Buffalo Bills $50-$90

Merchandise

Chicago Bulls Jersey $90

Media Rights

Licensing fees

Concessions salesSponsorship

Others?

NBC paid $1.2 billion for London Olympics rights

NHL fees 12%

$5 hot dog In 2008 Jeff Gordon $17 in endorsements

Commercial sports grow best under the following economic conditions:Market economy where material rewards are

highly valuedIn societies with large, densely populated

citiesCountries with a high standard of livingLarge amount of capital (private or public)

Professional Sports in NAAthletes are paidSports are privately owned

http://www.youtube.com/watch?v=8E_BrSIeK0U&safe=active

Winning Is EverythingWinning Is EverythingFor 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

Amateur Sport in CanadaAthletes do not make a salary, and

participate for the love of the game/competition

There are no ownersThere are governing bodies

Governing body(eg. Sport Canda, Canadian

Olympic association)

Controls athletes, events and revenues

Develops the rules and policies that govern national sport organizations (NSOs)

Sport Sponsorship

What is sponsorship?An agreement between a commercial

company and an individual, team or sportIn return for money athletes advertise the

names of sponsors

http://www.youtube.com/watch?v=_oACRt-Qp-s&safe=active

Promotional Success: The Promotional Success: The Nike StoryNike StoryThe Nike “swoosh” is emblazoned on all manner

of sports clothing and equipment, both on players and fans alike

Marketing targeted at young athletesReceived 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

The Role of the MediaThe Role of the MediaTelevision, 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

The Influence of TelevisionThe Influence of TelevisionFirst 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

The Sports-as-Entertainment The Sports-as-Entertainment IndustryIndustryThe 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

The Sports-as-Entertainment The Sports-as-Entertainment Industry – cont’dIndustry – cont’dBroadcasting 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

Key Players in the Sports Business Key Players in the Sports Business FieldFieldThe Owner’s RoleThe 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/http://economics.about.com/library/weekly/

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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

The Athlete’s RoleThe Athlete’s Role

The Agent’s RoleThe Agent’s RolePlayer’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

The Fan’s RoleThe Fan’s RoleConsumer loyalty is key to a professional team’s

successFans purchase tickets, watch televised games

and related sports programming, and attend games, all in support of their favourite team

Sports Spin-OffsSports Spin-OffsReplica ProductsFood and Beverage Sales

Stadium ConcessionsAlternative 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