EXSS 324 Midterm
When the key factors you identified in immediately above question come into play, how are various components of the sports industry impacted? How are various amateur and professional sport organizations impacted?
- amateur sports: usually first thing to cut when economy is down - olympic sports: really dependent on sponsorships - college sports: broadcasts, ticket sales, donors - Nascar- also dependent on sponsorships
What is meant by "facility sustainability?"
- arms race- we are spending so much money on these facilities but then we are not able to keep up with the costs to have them kept nice - also fenway park built in 1912 and still good but seatle kindgom only lasted 20 years
What do you know about some of the most common budget development/management mistakes?
- budget does not endeavor to meet objectives - overestimating revenue production - underestimating costs - no/ unrealistic contingency - lack of inclusion and communication
*What are the primary reasons fans are less likely to actually attend sports events? Why is this seen as problematic in pro sports?
- cost of attendance - comfort of watching at home - traffic/ parking - lateness of game
In what ways can the amount of money athletic departments spend on scholarships be at times misleading?
- cost of tuition varies -in state vs out of state - it makes sense that schools make the athletic department pay for the scholarships because people would easily pay the whole price it is to go to the school
There are various "popular beliefs" that are not necessarily accurate concerning Title IX. What do you know about these various "myths?"
- equal number of teams - same salaries - equal spending - external funding - common compliance
Can you describe incremental budgeting?
- increase/ decrease based on previous year - 'line-item' budgeting - fair share approach- no one hurt too badly - simplicity in budget development *not connected to : what are you trying to accomplish? - encourages 'up to budget' spending- spending it or lose it - failure to identify/ reduce inefficiencies --> this is more palatable in good times
What do you know about compensation trends for coaches of sports outside the football/basketball orbit?
- it does not compare - the difference gap is closing - it is against antitrust to put salary caps
What are some of the key fiscal challenges facing contemporary sport administrators?
- limited discretionary funds - frequency of facility upgrades - gate receipts down, costs up techno competition
What do you know about relatively recent and emerging pro sport revenue sources?
- luxury seating - seat licenses - secondary ticket market - variable/dynamic ticket pricing - fantasy sports/ gambling
Can you describe ways in which pro sport team owners sometimes present a deceptive view if how much money they make/lose?
- reserve clause - player drafts - revenue sharing - salary slotting - salary arbitration - salary caps - luxury tax
Can you describe zero-based budgeting?
- start from zero- no "promised" funding - organizational goals - necessary funding - actors/ initiatives toward goal realization *maybe most advisable when $ times are tough* - "financial planning is often based on behavior learned from previous bad habits or mistakes" - breakdown: necessities, necessary improvements, pie in the sky 'separators'
Can you describe the three primary components/requirements of Title IX compliance in terms of athletics?
1. athletic financial aid (scholarships must be equal to number of % ex; 56% male athletes, 56% of scholarships go to males) 2. operational components: equal treatment and benefits: not so much of equal in terms of money, but more so in terms of equity in for them to compete safely. efficiently (laundry list of things- locker rooms, per diem, coaching staff ect) 3. effective accommodation of interests/ abilities - goes into 3 prong test 1. proportionality (~1% off) 50% males at school, 50% athletes males) 2. regularly adding teams- to represent the under represented gender (every 3-4 years) 3. effective accommodation of interests/abilities - consistent club team- adding them as a team )
How is UNC doing in terms of Title IX compliance?
1. great 2. very good 3. could be doing better (effective accommodation of interests/ abilities)
How might you categorize Division I college athletic programs? What factors distinguish a school in one category from schools in other categories?
1. super elite- rolling in the money, they get it from football revenue, ticket sales, donors 2. elite- they are doing fine, making a lot of money- but sometimes have to worry where they will get all of the money from 3. in da club- they are just happy to be getting the revenue sharing from being in a power 5 conference, they stay in the league to get the money 4. the wannabees- they have good athletics and would kill to be in the power 5 conferences to get some of that money, not terrible programs, they are just in small conferences so they do not get a lot of money 5. have nots- bad at athletics and do not have the resources to fund them- really needing money- can't keep doing business this way, bad athletic programs and bad conference
What do you know about Grove City v. Bell?
1984- tried to find another loophole in title IX- said that if you are not using the federal funding do you have to abide by the rules of title IX- basically said that title IX should only be applicable to schools that use money from federal funding -> won until this was reversed
What two particular events served to strengthen Title IX enforcement and why?
Civil Rights Restoration: taking back Grove city Vs Bell- basically if you get any federal funding from the state- you have to abide by the laws of Title IX Gwinnett Vs Franklin: this was a case on sexual assault- in the past if there was this issue, you would just have to fix it- but now you have to fix it and you can be sued for the damages (punitive damages)
What do you know about mandated budget reductions (causes, best practices)?
Common causes for budget cuts: - funding cutbacks/ reduced revenue - new competition/ lower demand - lower revenue growth than projected - pricing competition - "unusual" cost events Best Practices (consider) - potential impact on morale - potential impact on external relations - 'top down' reductions - 'participatory' reductions
What are some key points to consider when trying to measure the economic "size" of the sports industry?
GDSP- gross domestic sport product, but it is so hard to measure because sometimes sport facilities are under construction, sports clothing is under retail, sports broadcasting is under informational TV
What do you know about new federal gambling legislation and how it might impact professional sports?
NBA commissioners want it - players may just play to what they are betted on- adjust the game to how they are fixed to play - takes away from the game, but better for the fans involvement
What is the most fiscally solvent pro sports league in the U.S? Why?
NFL because of huge broadcasting deals
What do you know about the Oakland Raiders move to Las Vegas from a fiscal standpoint?
PSL (personal Seating License) is up 91% bringing in over 400M dollars- it is transitioning Las Vegas from a gambling mecca to an entertainment meccca
Can you discuss (not just "list") the primary budgetary challenges facing contemporary sport administrators?
Title IX- equally spending the money keeping up with the jones's- arms race rising tuition fee- having to pay for the tuition in full now (full cost of attendance) legal precedent- current and future legal precedent makes a difference autonomy- power 5 in charge of making rues- more money salary increases- to be good you have to get a good coach, costs a lot of money
What do you know about the recent WNBA Collective Bargaining Agreement?
WNBA is improving, but it still as a ways to go to be in comparison to what the NBA is doing, salary cap in 2019-2020 is approximately $1 million- now $1.3 million
What is meant by budget forecasting?
anticipating things that might impact the plan - using tools to help predict the future
What is the difference between arbitration and mediation?
arbitration is when an outside source makes the decision, mediation is where you sit down with the person you do not get along with and you try to negotiate together
What do you know about college athletic "subsidies?"
athletic subsidies, student athlete subsidies, money from the government- the further down the food chain you go, the higher the fees
What do you see as the potential benefits and pitfalls of the zero-based budgeting method?
benefits- start fresh every year pitfalls- more time consuming
What do you know about the benefits and pitfalls of professional sports teams offering "comped" or reduced priced tickets?
benefits: ancillary funds will do well because people will spend more at the game when they are there Pitfalls: devalues worth of the ticket, sets a standard of cheap tickets
What do you see as the potential benefits and pitfalls of the incremental budgeting method?
benefits: palatable in good times, you can spend a lot of money (usually spend it all or lose it) pitfalls- failure to identify/ reduce inefficiencies, not connected to *what are you trying to accomplish*, encourages useless spending, does not really allow for changing circumstances
How would you describe "optimal budgeting" and why is it important in terms of the budget development process?
clear connection between budgeting and the organizational goals
What roles do professional sport commissioners play?
commissioners are hired by owners, work for owners, can be fired by owners - negotiate broadcasting contracts - arrange for league-wide licensed merchandise sales - negotiate collective bargaining agreement - discipline/ mete out punishment (sometimes)
When thinking about the more general financial/economic factors that impact the sports industry, what key factors come to mind?
condition of the economy, and discretionary income of the consumers
How would you distinguish between "direct" and "ancillary" spending in the sports industry?
direct: costs directly associated with the sporting event (ex: ticket to the game/ tournament) ancillary: costs not directly associated with the sport but are apart of the entire experience (ex: flight, hotel cost)
Is it easer to accurately budget for the short term (ex. a 3-game series in baseball) or the long term (ex. an entire baseball season)? Can you rationalize your answer?
easier to budget for the long term- this is because you can take into account a number of weather days and it will usually level out over the long term- but if you do not account for one rain day over the three days it is a bigger impact on the budget because it is a smaller amount of time - forecasts for large interrelated items/events are typically more accurate than for individual items/events
Can you cite and describe three "economic cycle keys" and how each might impact the sports industry?
economic growth- economy is growing faster than the rate of inflation, new stadiums, arenas, growth of leagues, sellout streaks, salary increases economic recession- this gets tough for amateur sports, olympic sports, this is when the economy is growing at a lower rate than inflation, but sports generally stay afloat because of the passion for sports- also ticket sales , sport spending often saved (go down but stills saved) economic depression- 2+ years of economic recession
How might the "litigious nature of American society" impact college sport finance/economics?
everyone sues everyone for everything, no one takes responsibility for things either
What do you know about the NFL and its female fan base?
female fan base is growing - 55/45 M/F ratio - LA chargers are making podcasts for female fans
What are the key guidelines/tenants of budget forecasting? Can you give an example of each guideline?
having a best case, mid case, and worst case (ex: average ticket sales, best case = 50,000 tickets sold; mid-case 40,000; worst case- 30,000 - develop more than one forecast - base forecast on different factors - rely on historical information, but be flexible - forecasts for large interrelated items/events are typically more accurate than for individual items/events -consider how often a plan needs to be evaluated
What reasons can you offer as to why it was particularly difficult for Flood to take his stance against the reserve clause?
he did not get any support from other big name baseball players, it was also hard because he was losing money- it was in the middle of his career and he would have to make money but he was selfless in standing up for what he believed in
What do you know about Marvin Miller?
he was a union leader- he had a big impact in the baseball world as he made it known that a union is a union- the people who play sports still have rights as well. he had to communicate to the players that they have legal rights
*What do you know about Curt Flood?
he was an amazing baseball player who was traded from the cardinals to the phillies, he did not want to go which was selfless because he wanted to make a stance about free agency
What do you know about Spencer Haywood and his role in expanding player rights?
he was expanding rights through NBA- he took it on twice
Which of these two budget development methods (incremental, zero-based) do you favor? Why?
i believe zero based budgeting is better because you start fresh every year and even though it takes more effort, i think it is more efficient in seeing where you want to go and going towards specific goals
Do you favor revisiting a budget annually or more than once during a given fiscal year? Why?
i personally favor revisiting a budget annually, i think there are highs and lows to ride out and it is easier to do this when you have a longer period to go by-with just waiting to see how it plays out versus changing every quarter or every month
Was Flood's fight against the reserve clause successful? Why/why not?
in court it did not get passed but it raised awareness- later players started to do similar things
What is a particular key way in which the business of professional sports differs from more traditional businesses?
it is different from traditional businesses because besides just competing, they also have to cooperate with each other
Why would there be a professional squash championship held in NYC's Grand Central station terminal and why would a company be willing to front the money to sponsor such an event?
it is estimated that over 200,000 people walk through grand central station a day - it would be great for brand awareness and brand exposure
What do you know about Title IX's initial intention and evolution as a law?
it was intended as an educational law, not a sports law- if people knew it was a sports law no way it would have been passed, equality must be the case to receive federal funding, started with civil rights act 1964- it was an amendment to it in 1972- womens movements inspired it, all about eliminating discrimination
What do you know about the financing of Division I mid/low major athletic departments? Are they economically sustainable? Why/why not?
its a lot harder for them because they are not pulling in nearly as much money from the revenue sharing, they are actually putting money into athletics but they are not making money- they are losing money
Why do some people and team owners believe revenue sharing is necessary in pro sports?
keep the competitive balance of the league
How does "intensity of participation" impact spending for sports fans and participants?
marathon runner versus a hobby jogger- marathon runner will typically spend much more
Why did Miller and the MLB Player's Association compromise and rather than accepting full free agency with no limitations (which was determined to be legal) accept a free agent model with some limitations?
miller was looking after the players first- and then they were looking out for the benefit of the league second (economics of the league), if there was no limit on free agency, then the economics of the sports would shrink
What are the primary revenue generators for college athletic programs?
now it is media and broadcast (27%) used to be ticket sales- down to like 19% but it has switched over the years- fundraising is also up there 20%
There are a variety of differential ways that colleges do/do not report expenses/revenue that can make it difficult to know precisely how much money athletic programs profit or lose. Can you describe why the budget reports we may not be accurate and do not tell the fiscal "whole story?"
one example of this is firing a coach that already had a contract and you have to continue to pay him. There is exclusion/ differential reporting of capital costs and execution. differential reporting of indirect costs--> many loopholes
What do you know about the 3-prong test?
only have to fulfill one of the three components to make it a success of the third prong
Why is it important for sport administrators to understand the concept of "opportunity cost?
opportunity cost: cost of what you are doing is the lost money for another opportunity - important for administrators to know what makes an event worth it- when it comes to choosing what to spend on and making an event worth it for fans
What was the reserve clause in professional sports? How did it work?
part of a player contract which stated the rights to players were retained by the team upon the contract's expiration. Players under these contracts were not free to enter into another contract with another team - reserved the right to renew the same salary for one year- they only let them do this for one year(marvin miller) to help protect the players
Can you give an example of budget forecasting?
planning ahead for weather problems, quality of opponents, game dates, game times
How do "planning" and "forecasting " interact in terms of budget development?
planning: identify objectives, select actions to achieve objectives forecasting: anticipating things that might impact the plan, using 'tools; to predict the future
What is the primary challenge facing a professional sports league commissioner?
pleasing both the owners and doing what is best for the sport- not always easy
What is the fiscal impact of Power 5 conference expansion that has led to larger conference geographic footprints?
positive financial impact since the conference games are being brought to new households and market places - acc brought in BC because they wanted the Northeastern TV market
What are the primary expense areas for college athletic programs?
primary expenses are SALARIES and BENEFITS (35%) next would be facilities at 19%, scholarships at 15%
Can you offer examples of reliable internal and external data and why these data might be useful in terms of zero-based budgeting?
reliable internal data- past balance sheets, annual reports, research/development reports, employee surveys- they are helpful to look at and see how everyone is doing, so you know what areas are struggling/ what areas are doing well external data- fan/consumer surveys, follow industry trends, attendance/consumer trends, read!! research!!! this is so important to see how you are doing compared to others and what others are thinking of your company
What is the primary operating expense for most professional sport leagues?
salaries
How would you describe challenges presented by the "cluttered marketplace?"
so many different outlets for entertainment- which one will you choose to watch - less popular sports or teams get hurt by this trend
What do you now know about the current/ongoing NIL debate?-
states are passing laws so players can profit off of their NIL and the NCAA will most likely come out with NIL rules for everyone to follow so it's not state by state- - have seen a shift in congress members: before NIL--> in favor of student athletes now-- in favor of universities/ NCAA not passing it
What do you know about the interaction of on the field/court rules and the economics of pro sports?
the games keep evolving to be like what we want- we like games where people can score- shot clocks, hand checking, speeding up baseball, playoff expansion, playoff creation
What do you know about the financial impact the College Football playoff has on Division I college sport programs?
the higher division teams get way more money! money that the universities get to keep- the NCAA gets nothing - if in a power 5, there is a huge payout for just making it to a bowl
What do you know about the composition and financial side of the National Collegiate Athletic Association (NCAA) - the Association itself, not the member schools.
the ncaa makes 80% of its money from march madness and from televising rights 5 sports that are fully self sufficient - march madness - mens lacrosse - college world series - wrestling - hockey
What do you know about the 1964 NBA All-Star game and its role in expanding player rights?
the two star players (1 hour before the game) said if there were not changes they would not play- the owner was like if they don't play now, they will never be able to play and this did not stop them
*What do you know about "league" revenue as opposed to "local" revenue?"
there is a big payout for league revenue sharing- but the local money is also very beneficial -60/40 for ticket sales - but everything from concessions, to parking, to things within the stadium is local revenue which is added money
What do you know about "artificial restrictions" that exist in pro sports?
these are all collectively bargained for- because they would be anti trust violations if they were not worked out between the players and the coaches/ owners, have the same legal rights
What do you know about the ongoing conflict between Major League Baseball and Minor League Baseball - both players and individual franchises?
they are cutting 42 teams- MLB owns the minor leagues- the players rights for the minor league teams are not very good, they are trying to get together to earn more money (they work 60 hour weeks, do not get any spring training money, $25 per diem. not good money) - franchise location: excessive travel -poor/unsafe facilities for pro athletes -players with no realistic chance to make the MLB
What do you know about pro sport expansion fees?
they are extremely expensive and keep increasing.. new charlotte MLS team was just bought for $325M
How are professional athlete player's unions like other more traditional unions (ex. plumbers, carpenters)?
they are the same! there is no difference in a plumbing union and a regular union
What do you know about the roles pitchers Andy Messersmith and Dave McNally played in ultimately achieving free agency?
they both played a year without a contract (reserve clause) and this led to arbitration- which an arbitrator said that they were free
What role did baseball's biggest stars play when Flood was fighting the reserve clause in the courts? What was the likely motivation for their actions? Why is this important?
they did not back him up- they were looking out for their own salaries- it would have been important if they also took a stance to see that the best players are against the current ways
What do you know about the MLB Player's Association in the years prior to Miller's involvement?
they did not know that they did have the rights that any other union would have- they thought they were just there to play the game
What do you know about the recent MLS Collective Bargaining Agreement?
they have a 5 year collective bargaining agreement- raises pay and improves working conditions, players will earn more money under the new agreement (minimum salary will also raise) this is an attempt to raise salaries for players who are good but are not the superstars of the team
Approximately how much money do "Power 5" universities report spending on athletics annually?
they spend around 100M on average for the power 5... but the super elite like texas a&m and ohio state spend like 212 million a year
What do you know about the financing of University of Washington football recruiting efforts?
they spend so much money for their recruits, they picked them up in a limo and they took them to a nice steak dinner- everything is so expensive and they had ice sculpture and everything
When there appear to be differences in support for men's sports compared to women's sports, how might these differences be rationalized?
this can be rationalized because it doesn't have to be equal in money- it is in effectiveness and equity (example of the lacrosse uniforms)
How has free agency impacted professional sports from a fiscal/economic standpoint?
this has allowed for players to make the most out of their peak playing time
What do you know about the "Full Cost of Attendance" (FCA) issue? How did FCA come about? What sorts of challenges might it create for college sport administrators?
this is increasing their budget- so they can not increase their subsidies but their budget is having to increase- conflicting
What do you know about the Title IX "laundry list?"
this is the operational components- equal benefits and treatments- locker rooms, practice facilities, coaching staff, game facilities, travel, per diem
What is the Sherman Antitrust Act? How did it apply to professional sports?
this was basically that there can be no monopolies, this prohibited anti-competitive agreements, baseball was exempt from this because they saw baseball as an amusement/entertainment and not a business
What do you know about the ongoing debate re: the possibility of MLS shifting to a promotion/relegation system. What would this mean in financial terms for the league/American pro soccer?
this would make it more competitive. Benefits- more is on the line, added interest for leagues and through season, increased attendance & matchday revenue, compelling broadcast content, motivated ownership at all levels, improved player development -means there can be no tanking, increase popularity of lower leagues (if they get moved up), franchise values may go down, broadcasting maybe will improve the televising of this
If you consider Fan Cost Index data, are there reasons other than maximum ticket revenue production that a professional team might seek to lower the index?
this would maybe get more people to the games, get the fan experience, spend more money inside- better all around
What do you know about the evolution of girl's/women's participation in sport as it pertains to the passage of Title IX?
title IX has increased girls participation - we have come a long way
Who was John Tower and how did he attempt to influence Title IX?
tower amendment of 1974 (2 years later) and wanted to have title IX for every sport but the revenue producing sports- said it would ruin college sports
What do you know about how student athletic fees work and why they are sometimes controversial? Are student fee trends different at "major" D-I schools as opposed to "non-major" D-I schools? If yes, how so/why?
very controversial because the smaller schools have to pay more because not as many people go to their sporting events 900 vs 250 per student smaller schools athletic fee is 90% of their budget
What do you know about revenues and expenses for UNC-CH athletics?
we do pretty well- it 'evens out' our revenue is about 103 mil and our expense is about the same
What are the primary ways in which we "consume" and "interact" with sports?
we spend so much on sports (from tickets, to merchandise, to going to games, food we buy when we go to the games) - participation (playing, watching, listening, going to games) - interacting ( playing (fantasy), gambling, chatting)
What do you know about the "pro sports economic disconnect?"
working class game, business class prices - for a family of four the typical amount spent on an outing is significant
Why are revenues derived from local broadcasting, sales of concessions, premium seating, and parking particularly important to people who run the finances for pro teams?
you get to keep all of this money. it is for your stadium- that is why local things are really good for a program