Unit 3: Introduction to Sports & Entertainment Business Principles



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Sports & Entertainment Marketing

Unit Three Outline, 5th Edition

Unit 3:

Introduction to Sports & Entertainment Business Principles





Unit three provides an introduction to the basic principles that create the foundation for the business of sports and entertainment. Students will explore the many segments that make up the industry and gain an understanding of how sports and entertainment organizations generate revenues in an effort to achieve profitability.


OVERVIEW




OBJECTIVES




1) Define and provide examples of sports and entertainment industry segments

2) Explain the concept of revenue streams and why they are important to an organization

3) Understand the general financial structure of a sports franchise

4) Recognize how entertainment companies generate revenue

5) Define ancillary products

6) Define and understand the importance of product placement

7) Describe industry trends

8) Provide an example of how an organization may track shifts in industry trends

9) Understand the concept of economic impact





LESSONS




Lesson 3.1 Industry Segments

Lesson 3.2 The Financial Structure of Sports Business

Lesson 3.3 The Financial Structure of Entertainment Business

Lesson 3.4 Tracking Industry Trends

Lesson 3.5 Economic Impact





KEY TERMS





Ancillary Products Economic Impact Industry Segment Product Placement Revenue Stream Royalties




Lesson 3.1

Industry Segments
A. There are many segments of the sports and entertainment business industry

1. Industry segments refer to a grouping of similar types of products or services offered to

consumers by businesses within the same industry

B. Sports business segments

1. Sports tourism

2. Sporting goods

3. Sports apparel

4. Amateur and Olympic sports

5. High school athletics

6. Collegiate athletics

7. Professional sports

8. Motor sports

9. Recreation

10. Outdoor sports

11. Health clubs and fitness facilities

12. Sports marketing firms

13. Event management

14. Sports-governing organizations

15. Venue and facility management

16. Extreme or “action” sports

C. Entertainment business segments

1. Filmed entertainment

2. Television networks (broadcast and cable)

3. Television distribution (station, cable and satellite)

4. Recorded music

5. Video games

6. Radio services

7. Internet

8. Publishing sector (newspapers, books, magazines)

9. Digital media services

10. Broadcasting-satellite services

11. Theatre

12. Casinos and gaming

13. Fine arts

14. Theme parks and amusement parks

Lesson 3.2

The Financial Structure of Sports Business


  1. Team Sports

1. Professional team sports are finding it increasingly difficult to achieve financial success

and turn a profit

a. In December of 2008, economic woes forced the Arena Football League to cancel the entire season. In 2009, the league folded. While the league reformed in 2010, most franchises reportedly struggled with attendance and sponsorship sales were stagnant.

b. In an interview with the Associated Press in July of 2009, NBA commissioner David Stern said less than half the teams in the league were profitable the previous season (2008-09 season) 1

2. Revenue Streams

a. Revenue streams are the means for an organization’s cash inflow, typically as a result of the sale of company products or services

b. As a result of increasing revenue streams, inflated media rights fees and new means for generating revenues in professional sports, overall franchise values have risen exponentially in the past decade, a trend that is expected to continue

c. Sports teams historically relied on several specific streams to generate the majority of their revenue

i. Ticket sales

ii. Sponsorship

iii. Licensing and merchandise

iv. Concessions

v. Parking

d. Teams operating today have several additional, often very lucrative, revenue streams

i. Luxury suite sales

ii. Premium and club seating sales

1. Often times the lack of suites or premium seating options within a venue or facility will prompt a sports franchise to lobby for a new stadium

2. The Minneapolis Star Tribune reports that the Minnesota Vikings plan to open a new premium club for the NFL season in a

converted administrative building adjacent to Mall of America Field where memberships would cost $2,500 per person and only be available to Vikings ticket holders. The newspaper reported that the club would generate an estimated $300,000 in new revenue which is significant for the franchise given the lack of revenues they currently generate playing in an older venue that lacks many of the revenue generating luxuries afforded by newer facilities – a primary reason they are seeking a new stadium.

iii. Television contracts

1. TV contracts provide big money for franchises in the game of sports business, now accounting for a major portion of a team’s overall annual revenue

2. In 1973, the NBA signed a contract with CBS, yielding $27 million in revenue over 3 years 2

3. In 2006, the NBA inked a deal with ABC/ESPN worth $2.4 billion through 2008 (the contract was extended in 2007 to run through the 2015-16 season but terms were not disclosed) 2

4. In 2009, the University of Utah football program generated $1.2 million in TV revenue as members of the Mountain West Conference. By jumping to the Pac-10, it is estimated that they will increase that amount by more than $10 million. 3

iv. Additional media contracts and rights fees (satellite, radio, Internet)

1. In 2007, Sirius Satellite Radio reached an agreement to broadcast NASCAR races and related events over a five-year period for $107.5 million 4

2. CBS paid $6 billion for the rights to broadcast the NCAA Tournament (March Madness) over an 11 year period, a deal that ends in 2013 that also included the right to stream games over the Internet (the online broadcasts generated an estimated $30 million in ad revenue with its March Madness on Demand package in 2009) 5

3. In 2009, the Yankee’s YES Network struck an agreement with Major League Baseball to make their games available on the Internet within the New York area. The franchise now gains a significant new revenue stream, from the millions of broadband users in the market who are not sitting in front of their televisions but are in offices and other locations with a laptop or a wireless device. 6

v. Additional revenues

1. When the Green Bay Packers renovated Lambeau Field in 2003 with the goal of creating an added revenue stream by building an “atrium” that could host events (from corporate outings to weddings) year round. In 2009, the atrium was booked for more than 500 events, with 62 percent of the bookings coming from outside the Green Bay market and helped the franchise generate $43.7 million in revenue (along with sales from the Packer Pro Shop). 7

2. The Boston Red Sox created Fenway Sports Group, a marketing

firm that creates businesses that are built on the team’s

community, firm and business relationships. They use their

connections with media, charity, retail and entertainment firms to

develop publicity campaigns for such organizations as Boston

College, create online ads, manage events and much more. The company also owns equity in other properties like Red Sox Destinations and Roush Fenway Racing. They were profitable in their first year, and brought in more than $200 million.8

3. Costs could include

a. Facility rental/leasing arrangements

b. Staff and player salaries (payroll)

i. Also includes retirement and health care benefits

c. Marketing

d. Investment in the customer

e. General operating expense

f. Stadium/venue/facility financing

g. Information management/research

h. Team expenses (travel etc.)

i. Maintenance and security


  1. A sports franchise’s basic financial model

    1. To gain a better understanding of the financial structure of sports business, let’s review the NFL’s Green Bay Packers’ financials

    2. Packers’ revenue 7

a. Packers’ total revenue in 2009 (fiscal year ending March 31st): $247.9 million

b. Primary revenue streams

i. National revenue from the NFL: $147.1 million, which includes $94.5 million in national TV revenue

ii. Local revenue: $100.8 million

1. Sales and marketing revenue (includes ticket sales, suite sales, premium seating sales, sponsorship etc.) accounts for 50 percent of local revenue

2. Marketing, Pro Shop and Atrium revenue: $43.7 million

3. Stadium operations: $7.7 million (includes concessions etc.)

3. Packers’ costs

a. Green Bay Packers total costs in 2009: $227.8 million 9

b. Primary expense (cost)

i. Player payroll cost (includes team expenses): $165 million 10

4. Net income and profit 10

a. Green Bay Packers net income in 2009: $20.1 million

b. After deducting investment loss and taxes, team profit was $4 million




  1. Franchise Valuation

1. Unlike industrial or financial business, which is generally valued on cash flow and assets, sport franchises are valued on their revenues for two reasons:

a. For the long term, the operating expenses within each league are about the same for every team 11

b. Franchise revenues most closely measure the quality of a team's venue and track athletic performance, ultimately the two most critical elements in the evaluation of team’s overall value 11

2. Professional sport team values have risen over the past decade and are expected to rise to unpredictable levels for the next few years

a. In 1995, Chris Cohan purchased the NBA’s Golden State Warriors for $119 million. In July of 2010, he sold the franchise to Boston Celtics minority partner Joe Lacob and Mandalay Entertainment CEO Peter Guber for a reported $450 million, breaking the record for largest sale in NBA history (previously held by the $401 million that Robert Sarver paid in 2004 for the Phoenix Suns). 12

b. Also in 2010, the NBA’s New Jersey Nets franchise fetched a cool $200 million from Russian billionaire Mikhail Prokhorov. Along with Prokhorov’s investment in the franchise, he also has a minority stake in the development of the new “Atlantic Yards” sports and shopping complex, which is designed to bring economic renewal to a downtrodden area of Brooklyn.13



Lesson 3.3

The Financial Structure of the Entertainment Business
A. Entertainment business revenue streams

1. Similar to sports products in that both products can be developed into merchandise,

used for promotion, and create profit through sales of ancillary products, licensing, and royalties 14

a. Ancillary products are products related to or created from the core product 12

2. Because there are so many different types of entertainment products, the revenue

generated by marketing can be very diverse

a. A single blockbuster Hollywood film can generate a number of ancillary products

i. Videos

ii. DVDs

iii. Electronic games

iv. Rights can be sold to cable television

v. Rights can be sold to pay-per-view television

vi. Film can be the basis for a video game, TV series, book, or clothing line

vii. Rights can be sold for licensed merchandise (toys, games, apparel, etc)

b. The sale of those ancillary products makes a profit for the film creators in the form of sales, royalties and licensing fees

i. Royalties are payments made to the owner of copyrighted work for use of their material 15

1. Songwriters like Bob Dylan and Paul McCartney receive compensation when other artists “cover” (record or perform their own version) of the original song

2. For example, The Dire Straits song "Romeo and Juliet" was covered by The Killers on their album "Sawdust" and American Idol winner Kris Allen recorded a cover version of Kanye West’s “Heartless” on his first studio album

c. Hollywood Marketing Strategy: Plan the merchandising and product tie-ins before you plan the casting and film production schedule

i. Increasingly, studios plan the merchandising, products, DVD and electronic games and toys they will tie in with their proposed film before the actors and other technical staff are determined

ii. Movies seen as revenue generators, artistic statement is secondary

iii. If a film can be developed into a franchise (a series of films which will tie together), it will be.

1. Harry Potter, James Bond, Batman, Pirates of the Caribbean

iv. Film producers plan original merchandise tied to the film and also product

placement of existing products within the film. Audi paid Marvel Studios and Paramount to have its car be the vehicle of choice for the lead character in Iron Man. Audi also spent millions to help advertise the film.16

3. Product placement

a. Product placement is an advertising approach in which commercial products and services are used within the context of certain media where the presence of a particular brand is the result of an economic exchange

i. Commonly referred to as product “tie-ins” or product integration

ii. When the featured product does not pay for the exposure, it is referred

to as a product plug

iii. Product placement can be present in a number of media outlets 1. Theatre, film, television, music, video games and books

iv. Not all product appearances are intentional

1. A March, 2009 episode of “Grey’s Anatomy” showed character Izzie Stevens drinking a bottle of Izze Sparkling Pomegranate fruit beverage in one scene. According to Pepsi, no money exchanged hands for the product to appear during the cafeteria meal scene. 17

2. World Wrestling Entertainment (WWE) World Heavyweight Champion, Phillip Jack Brooks (a.k.a. CM Punk) has a Pepsi logo tattooed on his left shoulder despite reportedly not being a paid endorser of Pepsi products

3. A 2010 episode of NBC’s popular TV show Modern Family scripted an entire episode around a single product as a featured storyline when one character wanted an Apple iPad as a birthday gift. The attention given to the brand drew the ire of many fans of the show and critics alike with the Star-Ledger’s Alan Sepinwall, called the references “icky”. 18

4. The disappointed and critics, however, later learned that the product placement was unintentional and that the storyline was completely created by the writers of the show and Apple paid them nothing in return for the exposure 18

v. Not all product appearances are supported by the artists

1. Fall Out Boy’s Pete Wentz had harsh criticism against unexpected product placement in 2009 in the band’s newest music video “I Don’t Care.” Allegedly, a new model of Nokia phones were featured in the video which didn’t sit well with Wentz, who posted the following comments to the band’s website: “The version of the video that we worked on night after night is not the version that aired, yet somehow a cut full of glorious camera-phone shots did.” 19

b. Product placement is one of the fastest growing advertising mediums in the entertainment industry

i. In 2009, spending on global product placement surpassed $24 billion in 2009 20

ii. In-game product placements generated $77.7 million globally in 2006 and are expected to top $1 billion in worldwide in-game advertising spending by 2014 (Microsoft has lined up Chevrolet as the first ad partner attached to its Kinect Xbox 360 gaming interface when Chevy's Volt electric car will appear as a product placement in "Kinect Joy Ride," one of the first games being designed for the console) 21

iii. In-video (music videos) product placement revenues totaled $15-$20 million in 2009, more than double the amount in 2000, and spending by the music industry on that brand marketing opportunity increased 8% last year 22

iv. Recent blockbuster film “Iron Man 2” showcased several brands, including

Dr. Pepper, Dick’s Sporting Goods, Audi, and Oracle, and brought in over $3 million in revenues to the studio 23

c. Product placement and brand integration is presenting itself in new, more aggressive forms

i. According to Adam Kluger, CEO and founder of the Kluger Agency: “Brands are tripling their revenue (just) because of a mention in a Jay-Z song, so we go after the companies and partner them with the demographic. If you hear an artist talking about his new Fila sneakers, you’re going to think about it when you go shopping.” 24

ii. During the NBA’s 2010 All-Star weekend, one brand made unmistakable cameo. Rather than competing in a traditional game of “horse”, three top NBA players engaged in a shooting competition, spelling out G-E-I-C-O rather than H-O-R-S-E.

iii. Subway continued with an aggressive placement strategy within NBC’s hit show Chuck when, in the 2010 season finale, a scene was included showing Big Mike (the manager at Buy More, the electronics store where much of the action in Chuck takes place) enjoying a Subway breakfast sandwich while uttering the phrase "I do know how to build a better breakfast", the central theme to Subway’s current breakfast sandwich promotion. 25

iv. More and more record labels are looking for ways to recoup lost revenue through declining CD sales and product placement provides a new avenue for generating revenue

1. Atlantic Record’s video for “Billionaire,” the hit song by Travie McCoy that features Bruno Mars, includes a paid placement of a Mini Cooper. The two artists ride in the car and then Bruno Mars gives it away to a man looking for a ride. The video has been viewed more than 9 million times on YouTube.

2. The 9.5 minute music video for Lady Gaga’s hit song “telephone” featured product placement for 10 different brands, including Virgin Mobile, Miracle Whip, Diet Coke, HP and Wonderbread (among others).

3. Not all artists are advocates of product placement as pop star M.I.A. had this to say about Gaga’s “telephone” video: “Lady Gaga plugs 15 things in her new video. Dude, she even plugs a burger! That’s probably how [record labels] are making money right now—buying up the burger joint, putting the burger in a music video and making loads of burger money.” 26

v. Even authors and publishing companies engage in product placement. For example, auto brands make heavy appearances in the Twilight books (Volvo is mentioned 16 times in the original book and six times in Eclipse). 27

d. Up-front marketing

i. Within a struggling economy, marketers and media agencies may choose to buy ads in the spring selling period known as the "upfront", which is when networks sell much of the ad time for fall. Buying early sometimes affords marketers more creative flexibility, allowing them to ask for unique ways to promote their brands. 28

ii. In April of 2009, Unilever (parent company of marketer brands like Dove, Hellmann's and Vaseline) held for a "reverse upfront," where its brand managers discussed their new campaigns and products with media companies and asked them to come up with ideas on how to best integrate the brands with their shows and stars and across platforms 28

e. Is product placement effective?

i. The decision to feature Reese's Pieces in ET catapulted the product-placement craft into the Hollywood mainstream. Sales of the candy subsequently increased 80%. 29

ii. Etch A Sketch, Mr. Potato Head and Slinky were toys in the blockbuster Disney movie Toy Story. Subsequently, Etch A Sketch sales increased 4,500 percent; Mr. Potato Head sales increased 800 percent; Slinky, out of business for 10 years, made a furious comeback after getting over 20,000 orders. 29

iii. In 2009, a Billabong brand jacket featured in the second Twilight film ignited a buying frenzy. The brand quickly sold out of the jacket and it could later be found on eBay going for many times its retail price. 29

iv. In 2009, British lawmakers upheld a ruling to ban product placement practices from television programming in the U.K. through at least 2010

f. Reverse product placement

i. Reverse product placement occurs when real life products are developed that match products featured in a fictional context

1. If NBC licensed the name “Dunder Mifflin” (from its popular sitcom The Office) and “Dunder Mifflin” branded paper products were then sold at Office Max or Staples, they would be implementing a reverse product placement strategy

2. One of the first examples of reverse product placement occurred in 1996 when the Bubba Gump Shrimp Co., a seafood restaurant chain inspired by the hit movie Forrest Gump, opened its first restaurant. There are now 21 Bubba Gump Shrimp Co. locations in the United States and seven overseas, including locations in Tokyo, Hong Kong and Cancun. 30

3. For the Twilight films, reverse product placement occurs with the Infinite Jewelry Co.'s "Bella Engagement Ring." After Edward proposed to Bella in the last film, Infinite created a line of replica engagement rings in different price ranges, from $35 to $1,999. President Shelli Ashton said Infinite worked directly with Twilight author Stephanie Meyer to create both the ring and "Bella' Bracelet.” The result? According to Ashton, the company sold "tens of thousands of bracelets and rings all over the world including Russia, Japan, Brazil, Germany and Australia." 31



Lesson 3.4

Tracking Industry Trends
A. Trends are constantly shifting within the sports and entertainment industry, making it critical

for marketers to effectively track them

1. Shifts in industry trends

a. Customer buying patterns

b. Consumer preferences / distastes

c. Effective marketing techniques (product placement for example)

d. Product and/or service modifications

e. New technology

f. Efficient communication tools

2. How do sports and entertainment marketers adjust accordingly?

a. Before any adjustment can be made, marketers must first be aware of changes or shifts in trends

b. How do sports and entertainment marketers effectively track industry trends?

i. Monitor sports and entertainment news online

ii. Read trade or business magazines, journals or newsletters

iii. Consider the marketing efforts involved when attending competitor events

iv. Attend sports/entertainment business conventions, exhibitions and events

v. Obtain research from sports/entertainment marketing firms

vi. Read local or national news publication

vii. Observe activity of competitors

viii. Communicate with others within the industry

c. Marketers evaluate trends that fit their respective marketing plans and implement changes accordingly

i. In the summer of 2009, Sony Pictures and Redbox Automated Retail LLC signed a multiyear agreement to supply Redbox's video rental kiosks with Sony films. Said David Bishop, President of Sony Pictures Home Entertainment: "The consumer trend is moving toward a rental model, We're following consumer trends and trying to maximize consumer profitability within that trend." 32

ii. Blockbuster, facing bankruptcy in 2010, tweaked their marketing plan:

provide on-demand video via T-Mobile’s Smart Phone, as well as

Android and Window’s Mobile phones. In addition, they reduced the

number of their stores and increased the amount of movie related merchandise sold in the stores. This includes sunglasses and any other movie-related goods such as tee shirts and hats with film logos on them.33

3. What are some current trends in the sports industry? 34

a. The Top Current Sports Industry Trends as of July 2010

i. Proliferation of Social Media and Sport

ii. Variable (“dynamic”) ticket pricing

iii. Realignment of college athletics

iv. Battle over online media rights

v. Emergence of 3D television

vi. Globalization in sport (led by the English Premier League)

vii. Collective Bargaining Agreement battles

viii. Properties protecting sponsors from ambush tactics


* TEACHER’S NOTE *
Now would be an excellent time to distribute the unit three case study included in the year one curriculum. The case study discusses George Lucas (legendary producer of the Star Wars films) and his tracking of industry trends. Given the recent explosion in 3D film offerings, this case should spark a vibrant class discussion.

Lesson 3.5

Economic Impact

A. Impact of sports and entertainment on economy

1. Economic impact

a. Sports, entertainment and events inevitably make an impact on the host city’s economy

b. Economic impact can be defined as the net change in an economy resulting from sport or entertainment event related activity

i. This change is caused by either the activities involved in the development of new facilities and/or the revenue generated from visitor and public spending, employment opportunities and taxes

ii. Direct effects are the purchases needed to meet the increased demand of visitors for goods and services 35

iii. Indirect effects are the ripple effect of additional rounds of re-circulating the initial spectators' dollars 35

c. Examples

i. The Indiana state high school championships played at Conseco Fieldhouse have steadily drawn between 30,000 and 34,000 people to downtown Indianapolis between over the last five years. If 32,000 show up for the games, estimates indicate that would bring $2 million in direct visitor spending to the area. 36

ii. Estimates for the 2010 Tour de France suggest that there will be approximately 15,000,000 spectators over the 21 days of the race, spending over $63 million dollars generating a nice bump for the economies of those cities located along the route 37

1. Because of the incredible potential economic impact, over 200 towns in France alone apply each year for a spot on the famed Le Tour route

iii. Superstar athletes like Lebron James can provide an economic engine on their own

1. Had he joined the Knicks, one analyst suggested LeBron would bring an increase in revenues to Madison Square Garden of $30 to $50 million annually while another analyst added if the Knicks won the title it could bring an estimated $60 million to the local economy 38

2. Had he joined the Bulls, LeBron would have reportedly had the potential of boosting Chicago’s economy by a whopping $3 billion (according to an economist with the University of Illinois at Chicago) 39

3. Some estimates have suggested that LeBron’s departure from Cleveland could have a negative economic impact on the city of between $20 to $40 million per year 40

4. By winning the LeBron sweepstakes, the Miami Herald reported that the Heat will earn more than $10 million or more in playoff revenue alone while referring to James as a "walking, talking, free-throw-shooting stimulus plan” and a Reuters news report suggested the Heat franchise was being valued at $600 million (in 2009, Forbes valued the franchise at just over $360 million) 41

2. Economic impact study

a. To measure economic impact, an economic impact study is often conducted

b. These studies attempt to determine the financial implications an event has on a particular market or region

i. In addition to fiscal impact, studies will often note the increase in community visibility and enhancement of overall community image as additional benefits to hosting large events in a particular region or area

c. A study may be conducted prior to a city placing a bid to host an event (or building a new facility) as a vehicle for persuading local officials or the community at-large that bringing the event to the area will be a positive thing for the local economy

i. In October 2009, the USA Bid Committee released an independent study that estimates a conservative domestic economic impact of five billion dollars if the United States is chosen to host the FIFA World Cup in 2018 or 2022 42

ii. The analysis also estimates that between 65,000 and 100,000 new jobs would be created in the various host cities during the preparation and operation of the tournament in the year of the event 42


* TEACHER’S NOTE *
To further investigate the concept of economic impact and economic impact studies, consider sharing the handouts marked “Unit 3 - Student Handout - Economic Impact Study” and “Unit 3 - Student Handout - Economic Impact Study 2” with your class. The two handouts provide excellent examples of how an organization might analyze economic impact.
d. Studies are often conducted after the event takes place to measure the overall impact the event had on the local economy

i. San Diego’s two college football bowl (post-season) games combined to produce an economic impact of $52.3 million for the San Diego region in 2008, according to a study conducted by the San Diego State University Center for Hospitality and Tourism Research 43

1. The Pacific Life Holiday Bowl between the Oregon Ducks and Oklahoma State Cowboys generated $34.7 million in economic impact. Direct visitor spending totaled $18.0 million, while $16.7 million was derived from indirect spending. 43

2. The San Diego County Credit Union Poinsettia Bowl between the TCU Horned Frogs and Boise State Broncos generated an economic impact of $17.6 million. Direct visitor spending totaled $9.1 million, while $8.5 million was derived from indirect spending. 43



3. Sports Corporations

a. Sports corporations typically operate as not-for-profit organizations

b. A sports corporation’s (also referred to as “sports authority”, “sports foundation” or “sports commission”) primary objective is to attract events to the communities they represent

i. The Greater New Orleans Sports Foundation is responsible for bringing the Ironman competition in 2010, Super Bowl XLVII in 2011, the Bassmaster Classic in 2011, and the NCAA Basketball Final Four (men’s and women’s) to the city of New Orleans 44

1. According to the organization’s website, the GNOSF has turned a $25 Million investment, from public and private sources, into a $1 Billion Economic impact 45

c. Sports corporations can sometimes be the driving force behind economic impact studies

i. According to Naples News, the Florida Sports Foundation commissioned a study in 2009 to learn exactly what the Boston Red Sox and Minnesota Twins presence meant to the local economy during their stay in the area throughout spring training. Specifically, they wanted to learn who comes from where to see games, how many games they watch while in town, whether they come solely for spring training baseball and how much they were spending. That information would then be used to help determine whether to spend $75 million to build a new spring training facility. 46

B. Impact of economy on sports and entertainment

1. Sports and entertainment are not recession proof

a. According to Brett Yormark, chief executive of the NBA's New Jersey Nets: "We're not just competing for people's entertainment dollars anymore, We're going up against milk and orange juice" 47

i. Through May, MLB attendance was down more than 5 percent compared to the same period last season. To avert a similar decline, 27 NBA teams will maintain ticket prices the same or lower than next season, while three quarters of the NFL and two thirds of the NHL teams will not raise prices next season. The 2009 Kentucky Derby saw wagering ($104 million) $10 million less than last year. 48

ii. 2009 Preakness Stakes

1. Attendance for the 2009 Preakness Stakes was just under 78,000, the 2008 Preakness was attended by more than 112,000 fans representing a 30% decrease in just one year 49

2. The 2009 Preakness also suffered a 10% decline in corporate sponsorships while the number of corporate tents in the infield dropped from 45 in 2001 to about 30 for 2009 50

3. As the economy began to show signs of life, attendance at the

2010 Stakes rebounded, showing a 10% increase over the previous year

iii. In 2010, the Minnesota Timberwolves cited the struggling economy as the primary factor in the decision to lower ticket prices. Said Glen Taylor, owner of the NBA franchise, “The economy right now is uncertain and we've listened to our fans' concerns and responded by providing reduced ticket pricing, new payment plan options and protection against job loss - all of which are important to Minnesotans right now. I don't want these uncertain times to deter our fans from coming out to Target Center and enjoying NBA basketball.” 51

iv. According to NASCAR estimates, attendance has dropped in 14 of the first 19 races of the 2010 season (as of July), and the average crowd of 99,853 projects to 3.6 million — which would be nearly a million off the total in 2003 when NASCAR crowds were at their peak. 52

v. The Wichita County Mounted Patrol in Texas gave up on the 2009 Red River Rodeo when it couldn't generate enough sponsorship revenue to fund the event. It would have been the 52nd year of the rodeo, which typically cost from $60,000 to $70,000 to put on. 53

2. Sometimes a poor economy can help certain segments of the sports and entertainment industry

a. Netflix actually increased membership from 2008 to 2009 while profits rose from $26.6 million to $32.4 million in the same time period, despite the recession. 54

b. While much of the economy struggled in 2008 and 2009, the movie industry enjoyed a box-office surge with ticket sales growing by 17.5 percent to $1.7 billion. Attendance also enjoyed an increase, rising nearly 16 percent. 55

c. Attendance was up in 2009 for the Staten Island Yankees, with team officials attributing the boost to a troubled economy driving consumers to seek more bang for the buck. According to the team president, Joe Ricciutti, the team expected to sell out a record 30 of its 76 regular-season games. “During a recession, people don’t want to throw money away on other entertainment choices. They want an evening of value.” 56

d. With attendance down at a lot of major sporting events, television ratings can subsequently see a significant bump

i. After a significant drop in attendance at the 2009 Preakness, television ratings enjoyed a significant increase with NBC’s ratings jumping 27% from the previous year 57

e. Smaller amusement parks found their attendance increasing during the

2009 economic recession, while at the same time larger theme parks had

decreasing attendance. Their lower ticket prices, and an ability to attract

local populations without an expensive overnight stay, drew guests looking

for family entertainment at a reasonable cost. 58




Unit 3 Key Terms Defined:
Ancillary Product: A product related to or created from the core product

Economic Impact: The net change in an economy resulting from sport or entertainment event related activity

Industry Segment: A grouping of similar types of products or services offered to consumers by

businesses within the same industry



Product Placement: An advertising approach in which commercial products and services are used within the context of certain media where the presence of a particular brand is the result of an economic exchange

Revenue stream: The means for an organization’s cash inflow, typically as a result of the sale of company products or services

Royalties: Payments made to the owner of copyrighted work for use of their material


Unit 3 References & Resources:
1) http://www.google.com/hostednews/ap/article/ALeqM5gSVVDj25qxGKb9ayy3HDccmcJdxgD99EJ50O0

2) http://www.insidehoops.com/nba-tv-contracts.shtm

3) http://www.signonsandiego.com/news/2010/jun/17/utah-becomes-pac-10-12th-team/

4) http://query.nytimes.com/gst/fullpage.html?res=9F04E6DC163DF930A15751C0A9639C8B63

5) http://ncaatournament.fanhouse.com/2009/03/18/could-march-madness-really-leave-cbs/

5) http://www.nytimes.com/2009/06/07/sports/baseball/07mlbtv.html

7) http://www.jsonline.com/sports/packers/48692082.html

8) http://www.fastcompany.com/magazine/124/the-red-sox-secret-lineup.html

9) http://www.bizjournals.com/milwaukee/stories/2009/06/15/daily75.html

10) http://www.jsonline.com/sports/packers/48692082.html

11) http://www.thesportjournal.org/2002Journal/Vol5-No3/econimic-values.asp

12) http://www.huffingtonpost.com/2010/07/15/warriors-sold-for-record-_n_648172.html

13) http://www.businessweek.com/news/2010-05-12/prokhorov-s-200-million-purchase-of-nets-gets-nba-approval.html

14) Sports & Entertainment Marketing, Glencoe-McGraw Hill, 2nd ed., p. 32

15) Sports & Entertainment Marketing, Glencoe-McGraw Hill, 2nd ed., p. 33

16) http://www.nytimes.com/2010/04/05/business/media/05screen.html

17) http://adage.com/madisonandvine/article?article_id=135712

18) http://www.mediaite.com/online/ipad-product-placement-on-modern-family-actually-wasnt-still-angered-fans/

19) http://www.productplacement.biz/200809292605/News/Music/product-placement-fall-out.html

20) http://adage.com/madisonandvine/article?article_id=144720

21) http://paidcontent.org/article/419-play-time-in-game-ad-spending-to-top-1-billion-by-2014/

22) http://www.productplacement.biz/200906263143/News/Product-Placement-Research/more-product-placements-from-travel-and-hospitality-industry.html

23) http://www.productplacement.biz/201005112449/product-placement/product-placement-in-iron-man-2.html

24) http://www.productplacement.biz/200906043114/News/Music/music-gets-branded.html

25) http://watching-tv.ew.com/2010/05/25/chuck-season-finale

26) http://www.brandchannel.com/home/post/2010/07/06/Lady-Gaga-Spurs-Product-Placements.aspx

27) http://www.brandchannel.com/home/post/2010/07/06/Twilight-Product-Placement-Blood-Bath.aspx

28) http://www.usatoday.com/money/advertising/2009-05-18-network-tv-advertising_N.htm

29) http://www.brandchannel.com/home/post/2010/06/30/Twilight-Product-Placement-Draws-Blood.aspx

30) http://abcnews.go.com/m/screen?id=3340667&pid=74

31) http://www.brandchannel.com/home/post/2010/06/30/Twilight-Product-Placement-Draws-Blood.aspx

32) http://online.wsj.com/article/SB124813913097467201.html

33) http://money.cnn.com/2010/03/24/news/companies/blockbuster/index.htm

34) “Ten Sports Trends to Keep an Eye On.” Partnership 2.0 Newsletter. July 2010. PartnershipActivation.com.

35) http://www.thesportjournal.org/article/review-economic-impact-study-sport-events

36) http://thescore.ibj.com/content/?p=859

37) http://realanalytics.wordpress.com/2009/07/01/the-economic-impact-of-the-tour-de-france/

38) http://www.dailyfinance.com/story/lebron-james-economic-impact-of-the-nbas-hottest-free-a/19525923/

39) http://www.dailyherald.com/story/?id=391262

40) http://espn.go.com/video/clip?id=5369124

41) http://bleacherreport.com/articles/417835-lebron-james-economic-impact-on-the-miami-heat-south-beach-florida

42) http://www.sportbusiness.com/news/170813/study-estimates-economic-impact-of-usa-world-cup-at-5bn

43) http://www.holidaybowl.com/2009/local-bowl-games-have-record-economic-impact-for-region.html

44) http://www.gnosports.com/page.php?id=9

45) http://www.gnosports.com/page.php?id=4

46) http://www.naplesnews.com/news/2009/jul/02/baseball-shutting-out-lee-state-spring-training-fi/

47) http://online.wsj.com/article/SB122394181925330941.html

48) http://sportsmedianews.com/06/weekly-features-across-espn-platforms-8/

49) http://www.wbaltv.com/sports/19490286/detail.html

50) http://www.baltimoresun.com/sports/bal-te.sp.preakness20may20,0,2038662.story

51) http://www.nba.com/timberwolves/news/Wolves_ShakeUp_Ticket_Prices-303242-1193.html

52) http://www.usatoday.com/sports/motor/nascar/2010-07-20-nascar-brickyard-fans-chase-attendance-tv_N.htm

53) http://www.comcast.net/articles/news-finance/20090719/US.Rodeo.Economy/

54) http://www.bloomberg.com/apps/news?pid=20601103&sid=aQuJC0CLDWV4

55) http://www.nytimes.com/2009/03/01/movies/01films.html

56) http://www.nytimes.com/2009/06/14/nyregion/14minors.html

57) http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajgxmMFd5158&refer=home

58) http://articles.latimes.com/2010/mar/18/business/la-fi-seaside-parks19-2010mar19/2

TEACHER NOTES






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