KINS 4520 Exam 2

parking and concessions

**Most common items to bundle**

state taxes

- Gives some states an advantage in free agent - Extends to houses and endorsement deals as well

MLB

- Has NO Salary Cap (Unique) - Does have a luxury tax (Produces incentive for low revenue teams to trade high cost players to team that regularly exceed the threshold (Marlins/Yankees)) - 2018 tax was $197 million

55%, 45%, 48%

- Money dedicated to player salaries is complicated•___ media revenue / ____ of NFL Venture Postseason revenue - Means that approximately ____ of league revenues are dedicated to players

teams image, reputation, goodwill

- Packers have a waitlist of 100,000 people. Can raise prices...BUT change in price wouldn't affect attendance. - There is value to having a waitlist. Teams advertise this. Fans know the ticket is a hot item and they should want to go. It also signals that they should get their ticket early! - If fans believe they are being gouged, they are less sympathetic toward things like public sector investment in facilities. Want a positive image with fans

NHL

- Payrolls well below other leagues - After lockout, league implemented a salary cap - Also implemented a salary floor - payrolls have increased quite a bit since lockout

Bill Veeck

- While working for the Chicago Cubs, he planted the famous ivy at Wrigley- As owner of St. Louis Browns, he played 3 foot, 7 inch Eddie Gaedel, who walked on four pitches- He had a game where fans voted on all managerial decisions- Started bat day giveaways- As part owner of White Sox he started shooting fireworks when one of the White Sox players hit a home run and started putting player's names on the back of jerseys

NBA

- has salary cap, luxury tax, and modest revenue share - Most complicated revenue structure

condominium seats

- similar to PSLs - price charged is normally several hundred thousand dollars - buyer can occupy a seat for every game or event that is held at facility for a fixed period of time (1 year to 20 years in come cases) - Condominium seat holder does not have to pay for any ticket to any individual game or event during their tenure

expanded revenue

000 Report in MLB endorsed ____ _____ arguing that smaller-market teams would have the resources to attract and retain better payers. With better players - more likely to compete for championships

reasons to use revenue sharing even if small market teams do not use funds on player talent

1. Some revenue is generated by the league. Most of the NFL comes from TV/Media contracts. MLB has a lot of revenue from web-based delivery of games 2. These payments can also be seen as a way to discourage owners from small markets from demanding to relocate into a larger market 3. It decreases players salaries

Fay Vincent

2010, former MLB commissioner ________ wondered why star players were not taking advantage of tax law. Argued players with large contracts could save millions in taxes if they negotiated a % of ownership- Players income would be in form of capital gains (lower rate than income)

$73 million, $54 million

2017: cap was ____, floor was _____

$178 million

2018 rosters has each NFL team spending _______ on players

lockouts

A lot of new stadiums were built after the ______ in both Hockey and MLB and they may have offset some of the issues

$47 million

A new facility on average will increase regular season ticket revenue by ________ for NBA teams

$117 million

A new facility on average will increase regular season ticket revenue by __________ for MLB teams

$21.5 million

A new facility on average will increase regular season ticket revenue by __________ for NHL teams

future sales

A teams start is very important for ___________ as demand can be quickly lost in baseball

conference (except ND)

A vast majority of colleges negotiate through

number of years of service

Ability to auction one's talent (free agency) is reserved for those with a sufficient ____

7

All but ___ states have some form of an income tax

season ticket packages

All teams offer ______________ as well as other multigame packages

higher

Alternatively, if fans are not worried about ticket availability, but rather their own availability, there is value in waiting to decide. Can be altered by team performance. If a fan can get the same ticket months later, they will just wait. In this case, prices should be ___________

perishable

An empty seat is a ___________ good (it is worthless after the game).

2-3%

Another_____ of sports teams fans will switch their allegiances to minor league sports in absence of major league teams

slight decreases

As a facility ages, there are ________ in attendance. All revenue streams become less profitable. Sometimes renovations can be made to upgrade technology. This can be more expensive and not improve revenue enough that it is often easier to just build a new venue.

increase

As a rule teams set prices relatively low. If teams increased their ticket prices, then ticket revenue would

higher

At _______ prices, teams will sell fewer tickets, which decreases cash inflow

short term demand factors

Attendance Winning Other Factors (Superstar, Offense) Marketing Competitive Balance Television

winning team

Both individual and corporate fans want to see a _________________, and both groups enjoy amenities of new and well maintained facilities

popular

But this could imply that K.C. is a baseball market where sport remains ____________ despite on field performance

luxury taxes

Calculated as a percent of a team's payroll that exceeds a certain threshold. - is the equivalent of a tax on high revenue (usually large market) teams. Because this is structured differently than revenue sharing, there is a greater chance that this will increase competitive balance

promotion and regulation

Commonly used in European Soccer - Practice of having various levels of leagues and promoting some teams into better divisions while relegating others to lower levels - If team in threatened with relegation, an owner might invest more in talent - Does not help team profits. Any time player investment increases, salaries rise (good for players) and costs increase (bad for owners) - Competitive balance is helped but does not help small markets catch large markets

NY, LA, Chicago, DC

Corporate payrolls the highest in

fans who pay higher price, the team

Cost initially falls to _____, but because eventually higher ticket prices deter fans, the buck is pass to ____

contracts

Could be argued that owners responsibility to depreciate player through ____ rather than writing off during tax season

Two-Part Pricing (used by Sam's and Costco)

Customers pay a membership fee and get discount on products. Happens at golf courses all the time! Capture fans willingness to pay for the entire season

true

Depreciation implies that an asset's value decreases across time. Most players get better before decline hits.Player costs are already considered when calculating profit.Cost of players is already counted against profit and depreciated

regarding market

Do fans care about the nationality of players?

segments

Do fans care about uncertainty in the sporting event (a close game?) or would they prefer their team to dominate

Indy, Minny, and Phoenix

Domed facilities in places like _____,_____,______ competes with arenas for indoor events in

asking residents to attend more games

Due the size of K.C. market, it is far more difficult to elevate demand by _________ that already high average and generate the revenue needed to pay salaries of established star athletes

money, funds

Each league has guidelines that influence how teams receive _______ and how those _______ can be spent

10.3% decrease

Economic Competition leads to an average of a ______________ in attendance to the existing team

really not different

Empirical data suggests that balance before a draft and after are _____

$2.5 billion

Europe: Individual teams in La Liga and Serie A. Collective rights in Premier league (although large markets share higher revenue than equal split). Under contract for 2016-2019 at ______________ a year

delivering to customers exactly what they want in the manner in which they want it

Every Business owner understands that profitability depends on

Cleveland Cavs

Exception? LeBron changed fortunes, although failed during first tenure with the team. Went to larger market, won two titles, then returned and won one with free agent signings

increase television ratings

Fans like watching games with high attendance (better feel). New facilities have improved views of fans for television. TV hides empty seats Teams that embrace TV do very well in the long run. More fans likely to go to game in future if watch on TV

market penetration rate (definition 1)

Focuses on one product's sale compared to the sale of all similar products in a market. Could mean looking at its ticket sales relative to all tickets sold to sport and entertainment events in their market

market penetration rate (definition 2)

Focuses on the volume of product sales in a particular market compared to the same product in different markets. Could mean looking at team's total ticket sales as a percent of a measure of population (total population or sport fans, etc). Then would compare their region vs other teams in the same league in other regions.

Milwaukee Brewers Timeless Tickets

For $1,000 fans would get 9 tickets that they can use at any regular-season game, with the exception of opening day, and one bronze ticket that could be used for any future Brewers game. Should the owner of bronze ticket wait until the Brewers play in World Series? (1/15 chance any given year)

NCAA

For colleges, _____ is critical to governing process, but policies adopted by each conference are important

television

For many teams, ______ revenue is more important than stadium revenue- hard to collect data though

tax-exempt status for universities

For some of their incomes, taxes are not paid In past, university donors could write off donations to the school and athletic department (particularly for tickets)•Changed in 2017, but it was common for universities to require a donation for rights to purchase seats. Illustrates the gray area of altruistic giving and simply purchasing a product New tax law will change way tickets are sold and revenues will decrease in theory. Commercial activities are subject to federal and state taxes

higher

Frequently ____ attendance in last year of an old facility as fans capitalize on their memories. (Mets and Yankees surged while not finishing above .500

17.5%, 30%, 40%, 50%

From 2012-2016, teams who exceed the threshold for the 1st time must pay ____ amount they are over, ____ for the 2nd year, ___ for the 3rd, and ____ for 4 or more consecutive years

buy tickets total supply

Fundamental question: What will the market bear??To answer that question, one must first understand how much wealth exists to ____ _____, then place that demand in the context of the ____ _____ of sports and entertainment produced for the region

future options

Happens most in cases of playoff tickets Similar to PSLs but different because a team may or may not actually appear in the playoffs. Buy the right to purchase a ticket at face value sometimes If the team does not appear, then the buyer holding the _____ ticket loses the value of his/her investment. MLB sanctions the use of futures options (no 3rd party). Try to market optimism about their teams in small markets are a form of insurance. If you buy, you will not be gouged. Sellers like it b/c they might make more money that just selling the ticket after the playoffs begin.

Minneapolis, San Diego, Seattle, and Denver

Highest average household spending cities were

league, teams

If _____ is selling rights, they can charge whatever media companies are willing to pay. If ____ are selling rights, media companies can buy rights from the team with the best deal

more likely

If a baseball team won when a boy was 8-12 years old, they were much _________ to be a fan of that team

inelastic

If fans who buy tickets early are your most dedicated and don't want to miss. Demand is ________ and change in price won't change the quantity sold

1.8

If home team winning percentage increases by .1, their ratings will increase by _____ rating points (11,600-121,000 households depending on market size)- Visiting team winning percentage has 1/6 of this affect

collective bargaining

If players agree to a salary cap, owners might have to make other concessions to establish ________

less

If small market teams acquires talented player, the amount an owner could earn from employing them is ____ than a big market. Should that player receive less in compensation because of market size?

progressive

If tax rates are ____, there is incentive to smooth out profits over time instead of earning massive profits during one year

more

If team charges low price, then _______ units will be sold

creates a monopoly, so teams earn higher profits

If team sells rights collectively, there is an incentive to sell rights to fewer games. If fewer games are televised, the price per game is higher. The market is moving up the demand curve.

1% increase 1% decrease

If teams are maximizing revenue from tickets, they should see that a ________ in prices leads to a _____________ in the number of tickets sold. At this point, it is impossible to get more revenue from ticket sales.

raise the price for both jersey and increase revenue for both teams

If teams sell individual for Curry and Lebron Jersey, then Lakers and Warriors are competing to sell If NBA is selling, they will ___________

unit elastic

If the price is such that a 1% increase causes a 1% decrease in quantity, This is the price that maximizes revenue!

fewer

If the team charges a high price, it is likely that ________ units will be sold

why teams sell through the league and not individually

If there is only one seller the price will be high (monopoly), if only one buyer (monopsony), the price will be low

importance of third view penetration rates (1)

If two teams in different-sized markets have similar penetration rates, but one attracts way more fans, should salary caps be instituted to equalize each owner's ability to attract the best players?

financial

Important _______ decision is to set the price charged for each of its products

competitive balance

Important aspect of the product that teams and athletes sell is the unpredictability of outcomes in games and matches - Refers to the homogeneity of team quality- Some think it should mean different combinations of teams with higher winning percentage in different seasons, while others think that a team that did poor the year before still has a chance the next year- Fans argue its needed, that does not mean it is required

Knicks

In 2016-2017 - _____ had league leading $141 million profit with estimated $376 million revenue generated while LOSING

less than one

In New York, where the supply of tickets exceeds 13.7 million, teams need to sell ________ ticket to each resident to secure sellouts. 20 million residents makes it easier to sell at a given price level

general sports fans

In most cases teams compete with other professional teams and amenities for....

other competitors

In sport, every team and individual athlete NEEDS

smaller

In the end, teams with ______ market sizes often trade the rights to these players in return for excess profits. (European soccer sees this with transfer fees)

present value of a per ticket surcharge

Income generated by PSLs is nothing more than ___________________. Team could stop PSL and charge higher ticket price, or could charge PSL and lower ticket price. It does improve a team's cash flow

ticket taxes

Increase the cost of sports and entertainment tickets by adding an additional fee taxes ensure that users of the venue are paying for its construction and maintenance, as opposed to general public. Only fans and concert-goers are paying the fee as citizens are not being forced to pay for amenities they don't use

disposable income

Is there sufficient ___ ____ in New York market to buy the entire supply of tickets for all events held at these and other smaller venues (Radio City Music Hall, Carnegie Hall, etc.)

upsets

It is crucial for fans to believe that _____ are possible. Same issue for individual sports

Orioles

It is easier for teams logistically to have tickets sold earlier, so some organizations just set standard to give early fans a break and charging more day of increases revenue. What team is known to do this?

invest more in talent

It is true that revenue evens out the funds, but does not necessarily mean that small market teams will _____. There are no restrictions on how the shared revenue can or should be spent

new stadiums built

LA is still not studied until

discount

Large groups of fans might be able to get a ____________ for a particular game

decrease in player costs

Large market teams gain from the overall ______ but must make a monetary transfer to small market teams

8%, 0%

LeBron James left Cleveland for smaller contract for Miami but the difference in salary might not be as large as one thinks. Ohio had____ percent while Florida has ____

player drafts, revenue sharing, luxury taxes, and salary caps

League policies such as ____, ____, ____ and ____, can be of tremendous importance for a team's bottom line and for the salaries of the players

winner-take-all

Leagues are not a ___________ contest like we believe - there is motive to ensure the continued existence of all franchise within the league

1.League can change how teams invest in winning2.League can change the payoff structure

Leagues lead owners in the right direction in two ways:

work stoppage

Leagues lose money during a _____ , but effect on long term demand is not clear

similar payrolls

Logic is a salary cap ensures that all teams have _________. In the long run, this should equalize the chance of attracting and retaining quality players

competitive balance

Long term goal is to create _______. An effective salary cap can take market size and fan base out of equation. - however, the existence of salary cap and floor does not mean that difference does not exist

Third View of Penetration Rates

Look at penetration rate while displaying total attendance numbers - Helps illustrate the value of large markets. Large markets tend to have lower penetration rates than small markets, but often sold more tickets

concessions

Low ticket prices gets more fans to games. Teams have incentive to get fans into their facility MLB earns a higher percentage of its revenue from concessions than others. MLB does have lowest average ticket prices

12%, 42.5% and 45%

MLB Teams that exceed the threshold by 20-40% pay a _____ surtax on top of luxury tax. Teams with payroll in excess of $40 million pay a surtax of ___ and____ Funds distributed to low revenue teams

9 years

MLB attendance decreases too normal after

44%

MLB attendance grows ______ in 1st year of stadium

$189 million

MLB is pretty straightforward. MLB has a threshold set each year, if payroll exceeds that amount they are taxed. 2016 was _____

marginal tax rate

Managers must remember that assessment of the effect of taxes focuses on the _____ ____ ____, not the average

achieving competitive balance

Many see purpose of draft as ____

demand

Market penetration analysis can be useful in understanding

Monopsony

Market with only one buyer

monopoly

Market with only one seller

smaller, wealthier

Might be possible for a _____ area with ______ residents and substantial firms to be able to buy a sufficient number of tickets and luxury seating for teams to meet their financial goals

advertising/sponsorship sales

More fans = easier to find deals. More people have more people looking at advertisements, can charge a higher price

equals

Most businesses will raise tickets prices until the benefit of increasing prices _________ the cost of raising prices. In the absence of marginal costs, this means maximizing revenue.

NFL

Most egalitarian of all the leagues

small

Most financial decisions will have a ____ effect on income which is why use marginal rate

downward

Movement ______ highlight less consumer interest

upward

Movement ________ simply there is more demand for good or service

luxury and non-luxury

Must be able to crate a private experience to satisfy _____ seating while ensuring other fans are willing to attend in ____ seating

year 8

NBA isn't that sharp in first year, but climbs in year 2, 3, and 4 before returning by

$8.8 billion

NCAA Basketball sold rights in 2016 for ____ for an 8 year extension. Up from $740 million per year to $1.1 billion per year

touchbacks

NFL has tried to limit ______ so there are more chances for returns for touchdown - came into conflict with injury rate research

Brett Favre

NFL helped with ____ ____ chasing records

$39 million, $21.5 million

NHL 2005: cap was ___, floor was ___

Barclays, MSG, Nassau, Prudential Center and new home for Islanders

NYC will soon have five major arenas:

attendance

Naturally affects other revenue streams like concessions, parking, etc. Also affects businesses around stadium which normally owned by team/owner. Sellouts are normally rated to on-field performance

honeymoon or novelty

New facilities have a ____________ effect. New facilities increase in short term, but return to normal or lower levels which is where importance of winning or meeting fan expectations returns

92.5%

New initiatives could lead to higher salary caps - NFL Teams spent _____ of permitted funds. So when cap was $167 million, the average team spent $154.4

short-term

New research is showing few fans will switch their loyalties to other sports in the

competitors who can defeat them

No matter how good any team or player is, each requires ____________ or have sufficient talent to ensure there are exciting games- When highly skilled teams play against noncompetitive squads, they attract far fewer spectators

roster depreciation allowance

Once a team is sold, _________ starts all over again. Firms can normally only do this once, but not sports teams so they can increase the sale value

restricting player pay

One important financial component: Drafts are very effective at ____

Miami

Only NBA team in area but competes with MLB, NFL, NHL, soon MLS, as well as numerous games played by colleges and Bowl games

importance of third view penetration rates (2)

Or do owners of teams in larger markets effectively pay more for the franchise because of the larger market size and lower penetration rate so it offsets the cost of ownership?

victories, exciting games, fan experience

Overall attendance can be broken down into categories like ____ _____ and ______ inside stadium- The Cubs fan experience is so great they still sell when losing - Lovable Losers

in-venue spending G-4 plan

Owners required to share ____ ____ revenue, there is less incentive to build amenities NFL addressed this by committing to as much as $150 million towards the construction of new stadia when the facility privately financed (________ )

futures market for tickets

PSLs should be thought of as a ________________ - If demand increases, fans can sell for profit on ticket and PSL, if demand decreases, the fan could own a PSL or tickets worth less than the face value

labor

Players are clearly ___ and not capital. Because players are ____ they should get paid according to productivity. Teams should be paying their worth and players should lose value over time, then their contracts should reflect that

Ichiro/Mariners

Players from different countries can change attendance levels and create new fan segments - It has in past alienated fans who wanted to see domestic players- CFL and European Basketball limit foreign players because decreasing attendance- MLB saw this years ago, but trend has reversed- Overall research shows there is some discrimination from consumers, but the effect is now relatively small

competitive balance

Policies for professional leagues designed to achieve _____ _____ or to ensure small markets have equitable opportunities to enhance their fiscal status

the ability of its membership to forego a season of play

Power of players union rests on

bulk and group discounts

Price of a ticket is subject to change if bought for multiple games, or for multiple people

marketing advantages

Product Bundling has strong _________

bundling items

Product giveaways like hats, bats, bobble heads, and posters are just ____________

Gretzky

Record breaking performances helped hockey with

MLB

Research has shown that ____ teams have less attendance if another team is nearby, especially if other team is successful -Looked at supply and demand chart of sport event ticket inventory which showed stress in some markets - Although all teams within a region compete economically, the effect is biggest when teams are in the same league

5 and 15%

Research suggests that between ________ of teams fans will switch allegiances to another team in the same league if the original teams leaves for a new city.

when they were in adolescence

Researchers asked people to name the five greatest soccer players of all time and they consistently named players from ...

parking, concessions, and merchandise

Revenue streams from ___________ are excluded, along with luxury suites tickets prices so these are very conservative totals.

larger fan base

Rooting for teams can be addictive. Discounted tickets drives fans up frequency escalator Also raises TV ratings and merchandise once fan for life

1.2

Royals had penetration rate of ____citizens of K.C. that bought a ticket. Population is only 2.1 million but sold 2.6 million tickets

8 teams that have exceeded the luxury tax threshold

San Francisco Giants, the Boston Red Sox, the Los Angeles Angels, the Detroit Tigers, the Los Angeles Dodgers, the New York Yankees, the Chicago Cubs for the first time in 2016 and the Washington Nationals for the first time in 2018.

pay what you want

Seems odd to let fans do this, but many fans actually pay more Typically related to fundraising or non-profit activities Florida Panthers let fan make an offer, which may or may not be accepted - Priceline strategy

Cleveland Browns

Since 1999, 11 top-10 draft picks, 7 in top-3. But only over .500 twice. Only won 1 game in 2016 & 2017

12, 12

Since 2000, ___ teams have won Super Bowl and ___have won the World Series- Is this means different teams win championships then MLB and NFL are at highest level?

transfer of money

Small market teams benefit from revenue sharing because they pay less for talent but still receive a ______ from larger-market teams

uncertainty

Small payroll teams beat large payroll teams frequently. _____ exists if this is as necessary as made out to be

demand is there

So why doesn't the NFL sell the tickets at that value to begin with?

diminishing returns

Some fans get ______________ from attending games - they really like to go to one game, but after they become less interested. Therefore, demand decreases for multiple games.

compensation picks

Some leagues have made bidding for players more expensive by having _____ ____ when lose a free agent. Some players believe there is collusion among owners not to compete for free agents

larger payrolls and star players

Some teams have found that in their markets, they can make more revenue with ____ and _____, even when charged a luxury tax, than they could with a lower payroll below the threshold

attendance and TV viewership

Sport business managers grapple with finding right balance of _____ and ______so that each are maximized without causing an adverse effect on the other- It is possible that fans switch between going to sporting events and watching them on television, but not a lot of evidence- Also possible that going to a game makes fans tune in on television more often because they have memories with what they are watching-Attendance does not seem to be greatly affected if the game is televised

tax loopholes

Sport industry is seen as having mastered ____ _____, although most industries have exemptions

"Game Day Experience"

Sport products are not sold in a vacuum but part of the fan's

Michael Jordan

Studied _____ _____ - found a superstar can attract more television viewers and this increase did not translate to lower ticket sales

seasonal attendance

Studies show that MLB has higher ____________ than other leagues, so winning has a much larger effect on attendance

weekends, white

Study found that games broadcast on _____ have higher ratings, and NBA teams with more _____ players had higher television ratings than other teams in U.S.

lower

Tax should give incentive to ____ their expenditures, and if Yankees spend less money then player salaries go down across the league

discretionary income

Teams and investors must understand the level of competition for _____ ______ that exists

large markets that could negotiate higher

Teams are better if collectively sell broadcasting rights b/c gives more market power. Only teams that are worse off might be _____

increasing revenues and providing different consumer segments what they want

Teams are no different than other businesses when it comes to

lowest possible rate

Teams are often in complicated ownership structures, so easy to move profits so that they are taxed at the _____

giveaways

Teams are tying ________ to game statistics

product bundling

Teams bundle goods with ticket purchases - sellers are willing to sell at a discount if the buyers commit to buying multiple items

opponent

Teams change price depending on

bargain

Teams could price tickets lower and hope fans come with ________ admission price but spend more on food, beverage, and souvenirs which have higher profit margins

media contracts

Teams do no price _____ _____. Teams, leagues, or conferences sell rights to the highest bidding media company.•Very different from pricing tickets because so few parties involved

sell their entire inventory of tickets

Teams in regions with larger corporate payrolls are typically better equipped to

true

Teams only receive percentage of any one player's marginal revenue product

NBA, MLB, and NHL

Teams sell nationally and locally. Most leagues have a national contract. Local contracts are important to

NBA

Teams that see same players on team for longer times (Chipper, Favre, etc.) see increased attendance over teams that turn over roster, except in ______ (which shows very little effect [tanking?]

per ticket gain

Teams weigh the ______________ from the price increase with the feared decrease in the number of tickets sold

profit maximizing

Teams will invest in players and a facility to the point where the marginal return of that investment equals the marginal cost. Teams are ____ ____ (total revenues do not dictate how much they invest) Front offices always focus on this when signing a player no matter how profitable the team is: does the player have the potential to produce more money than it will cost

offense

Teams with more ____ tend to have slightly higher attendance at their games even after win/loss records taken into account

fewer than 0.5

Teams with one team (Jacksonville, San Antonio) must each sell _____ tickets per resident to sell out entire supply of ticketsSome regions need to think about adding collegiate ticket sales as a main competitors

Michael Jefferey Jordan (Wizards tenure)

Teams with superstar tend to win more anyways Teams with superstars that lose do not draw well because not meeting expectations Big Exception:

marginal

The _____ tax rate is defined as the percent of taxes paid on one extra dollar of income

average

The _____ tax rate is equal to the total amount of taxes divided by taxable income

understand what will maximize the benefits received by fans (consumers)

The challenge for sports business leaders is to

merchandise

The elasticity of _____ is similar to the elasticity of ticket sales The number of buyers and sellers is also important. Teams have a monopoly in regards to selling merchandise Fans choose between buying _____ from different teams in the same league, they gain more market power if collectively sell

women

The fandom for _________ tends to be less dependent on age

long-term

The goal is always ensure fans' ____________ commitments to the team

marginal returns from talent equals marginal costs

The problem: profit-maximizing teams should invest in talent to the point where ______. This draft model of allowing teams with least wins to pick first does not change that relationship

tourism, historic ballparks, new facilities

There are differences in ___________ which would impact total sales

Personal Seat Licenses (PSLs)

These are the rights to buy individual season ticket packages for a sporting club. - can cost a few hundred to tens of thousands fo dollars - Fans have the right to future season ticket packages and sometimes a discounted ticket price. Those who do not buy a PSL pay a higher price - PSLs are often sold before a new facility is built so a team has more upfront money, and therefore, needs to borrow less.

winning

This is fastest way to increase the demand for tickets in short term

inelastic

This leads team owners with ________ market penetration to consider whether paying more for quality players and an improved on field performance level would lead to the needed attendance levels to offset the lower revenue streams that accrue in smaller markets

lower

This makes the players less valuable to any single owner, and players only negotiate with one owner, their ultimate salary is _____, even if producing more profits for the entire league

rise

Ticket prices normally ____ in new facility, but the figures above are used against league averages rather than adjusting for potential increases in price and mix of luxury seating

21%

U.S., like most countries, has a progressive income tax system. As of 2018, all federal corporate taxes are a flat rate of ____

facility design

Understanding ___ _____ is important, as the more you have, general seating gets pushed farther back too which reduces their value

marketing

Variables such as _____ is important for short term demand

David vs. Goliath

We like ________ matchups. We tune in to March Madness. If the league was perfectly balanced, this could not happen

geography from where players played in college

When NFL started draft - it was based on _______ (1936). College was more popular

not be impacted

When a small market drafts a top tier athlete and resign them, they are often not able to also sign another free agent. Long term quality of team will ___ ___ _____ by player draft (maybe only short-term)

9.4%

When an exiting team is from another league, there appears to be a significant boost (_____) when teams leave.

price discrimination

When firms charge different customers different prices for identical goods. - Teams should dissect the demand curve. - Should be able to guess a customer's willingness to pay by a characteristic, then can set better prices - Fanatics have a very high demand for sports, while there are casual fans. Teams will get more revenue if charge different prices. - Student Discounts

home runs

When more _________ were hit, attendance soared

inelastic pricing

When prices are too low, say a price increase will have a relatively small effect on quantity sold

decline

When teams enter a new market, other franchises experience a

very little fan substitution

When teams from another league move into a market where another professional team (different sport) is already established there is

1.8%

When teams leave an area, very slight effect if they are in the same league. ____ percent increase for the new team, but not many examples to study.

sport

When you buy a car, its consumption is controlled by the driver, one person at a time______ is enjoyed live by millions through the broadcast, and each of these consumers is engaged in using the same product at the same time

small

While having a big-name player does increase attendance, the effect is actually relatively ____

common questions

Will fans pay to see a marquee player, even if past prime?

loyal

Winning creates more loyal fans who might follow a team across many years

short term, long term.

Winning has __________ effect but is tied to __________ effect too

high

Winning typically creates ________ expectations for the next season, so attendance tends to be ______ at beginning of following season

0.3

Yankees had market penetration of _____. Ticket price was $106 while Royals were at $43.- Higher population allows a higher price to be charged

Marlins and Pirates

___ and ____have come under criticism from MLB Player's Association for not spending enough on players salaries • Also, large market teams don't really want them spending that shared money to compete with them in free agents

complete competitive balance

____ _____ ____(all teams equal in quality) is probably not an optimal financial outcome for a league•March Madness flourishes with underdogs. The seeding process helps•LeBron and Steph are great for NBA but they have shifted the competitive balance, which is still good for the league!

Yankees

____ have paid more than any other team and have paid for 16 consecutive years. Sometimes called the _____' tax

Yankee Stadium, Citi Field and MetLife Stadium

____, _____, ____can hose concert events too.... at what point is it saturated?

recessions and booms

_____ and _____ along with the durations of them are hard to predict. But the size of the market and money consumers and companies have can be measured.

team quality and market size

_____ and ______ affect the price of PSLs

large market teams

_____ don't mind participating in revenue sharing because ultimately revenue sharing will lower the average player salary - player usually oppose bc decrease salaries

NFL

_____ teams are much more likely to play before sellout crowds regardless of win/loss

NFLPA

______ is considered relatively weak compared to other leagues - Typically because players do not have long careers and most players are members of the union for a brief time - Has lack of guaranteed income for the full value of contracts - Other leagues have managed to negotiate guaranteed contracts (NBA traded guaranteed contracts for right to implement salary cap)

draft

______ players rights are controlled by a single team. If best college player could auction their skills to all teams, they would receive way more money than what they earn now in current system.

luxury tax or exceptions

__________ provided if a team has to spend more money as a result of a player's injury that might require addition of new player to roster

Luxury seating

___________ comes with complimentary items such as food, beverage, or souvenirs - Some teams can offer unique experiences like special event w/ former player, standing in runway where players enter. - Seems free but the ticket is priced higher for this

tax paid by an MLB team

____________ also depends on the amount they have exceeded it by and the number of times they have exceeded the threshold

tickets, Marlins

____________ can be merchandise too ____________ sold perfect game tickets after the event

resentment

_____________ from fans seems short-lived although teams and players worry about it

NFL, NHL, NBA, and MLS

_____________ have some form of salary cap and most teams are financially stable and profitable - while each of these leagues do have a cap, teams can circumvent the established ceiling

Salary caps, luxury taxes, and player drafts

_______________ aim to lower the investment that each team makes in its players

multinational corporations

_____corporations try to move profits to the country with lowest tax rates, same as teams!

all owners

_____share the value of OBJ or Dak Prescott (in large market). This means neither the Giants or Cowboys will pay these players their true market value since their owners cannot realize the full return on their performance in the large market. **Dang Browns

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

Players' unions

are constantly negotiating policies or seeking new ones that increase the share of sport-related revenue that becomes the pool from which players are paid

businesses

are primary clients when teams look to sell luxury seating

"Jock Taxes"

are unique in that players are taxed in the cities they play games in, even as a visiting player - Because players are earning income in various states, they must pay various state taxes on that income. - Taxes are generally low, given the salaries, they can actually produce high numbers

promotions

can have short term demand effect, but consumers have to be interested in the game in the first place to hear about it-get consumers to seats earlier- does it simply substitutes fans away from some other game in the same season?

Yankees

can increase attendance by 20-30% compared to other teams

Revenue Sharing

change the payoff structure, and creates an even financial situation between winning and losing teams

winning

clearly raises television ratings while also a high-quality visiting team (studied regional tv numbers)

number, days

differences in demand are related to the _____ of games played in each sport and the ____ that games are played

web-based

distribution rights are usually conducted by the leagues

Monopsony

drafts create a _____ situation where there is only one team with which the player can negotiate, which limits players' bargaining power. Therefore players will be paid less and team profits will increase

not estimated properly

dynamic pricing lets franchise have flexibility if demand was

1. Tastes and Preferences 2. Income level of consumers 3. Population size 4. Price of Substitutes 5. Future Expectations

five factors that affect demand

attendance and tv ratings

focus on demand of games is related to ____ and _____- demand can be differentiated into different types of attendance

population growth, number of businesses in community, and employments numbers

government agencies also track

Scale of investment

has led to creation of secondary markets as fans look at PSLs as an investment. Value rises and falls with quality of play. Markets with waiting list see an increase in PSL value

NHL

has wages increasing while revenues were stagnant in 2004. The owners demanded a salary cap. While the players agreed, the ceiling was much higher than the owners would accept. Caused a lockout - A lost season is more difficult for labor. Several owners owned minor league teams and junior teams, NBA teams and MLB teams which continued to operate during lockout. Owners hosted concerts and events to replace game dates. After a year, these players accepted a salary cap that was lower than the owners original offer

NFL

have 10 home games

MLB

have 81 home games

Royals

have consistently high market penetration despite years of poor on-field performance. Easier to have high penetration rate in small market

decrease

higher prices will __________ costs because there are fewer fans

PSLs in college

identified as contributions or gifts - Even when don't have official system, higher donors have opportunity at best seats (was a tax deduction until 2018)

depreciable value

includes the total cost of an an asset, including installation - Rates of depreciation vary. Buildings are very slow and have long depreciable life, while items like computers depreciate very quickly. -Straight line means they depreciate the same each year.

increases

increase in price ______ the cash inflow for each ticket sold

wealth measurements

indicate the size of the market and its potential to support teams and events required to pay for a venue

optimal price

is affected by the SAME factors

NFL

is not normally studied in this area because most teams sell most, if not all , of their seats every year regardless of facility age

NFL

league that uses PSLs the most

how ticket resellers use bundling

limits on resale price of a ticket, but entrepreneurs will bundle an extra good like a coffee cup or delivery service. No limit on resale price of a ticket if it is attached to other goods and services

single product

market penetration rate data is used to asses the popularity of a

MSA

metropolitan statistical area

capital depreciation

occurs when capital loses value because it ages. Firms add the loss of value to their costs - IRS allows this because it is a real cost of doing business even though it does not affect short term cash flow

Buffalo, Cleveland, Detroit, New Orleans, and Pittsburgh

only sport markets that have lost population size between 2000 and 2016

Elastic Pricing

price change has a big effect on supply or demand

"open"

promotion and regulation: - European leagues are _____. Leagues in Europe compete with each other as Germany, England, Italy, Spain all have them. Salary cap might restrict costs, but could affect the overall talent level of the league

"closed"

promotion and regulations: North American sport leagues are _____ - no competing leagues offering similar salaries. Overall talent in the league will not change

Department of Commerce

provide wealth measurement statistics in an annual survey they conduct on discretionary income- also looks at annual changes in household income due to current economic trends

Giants and Jets

raised more than $5000 million using PSLs

Carolina Panthers

raised over $100 million in after tax revenue using PSLs

NHL

reduced size of goalie pads when scoring too low, but fans do not want to alter the fundamental nature of the game.

Conjoint Production

requires at least two producers

invest in winning

revenue sharing decreases the incentive to ______. Normal that it bring the lowest performing up to a pre-determined league average level. CBA's never let a team that is receiving end of financial support surpass a team on giving end

Variable Ticket Pricing (VTP)

sets ticket prices according to expected demand for a future game

Usain Bolt

skipped race in U.K. because of tax laws. 50% tax rate on appearance fees as well as a proportion of their total worldwide earnings. - athlete would have lost money running the race. If an athlete has 20% of events in U.K, then they tax 20% of endorsements. Has prevented golfers from playing there too. - The country gave an exemption to enable the Olympic Bid to go forward

Jets

sold 94.7% of tickets when 4-12 in 2015

day of game pricing

sometimes the price is less and sometimes it is more to encourage advance purchases

conjoint experience

sport managers should focus on on understanding what it is about the experience that can be differentiated and priced relative to demand and what cannot be separated from the

Conjoint Consumption

sports fans commonly engage in this as sport experience is usually far better when one watches a game with others

Law of Demand

state that when prices increase, consumers will want less of a good. This will focus on consumer preferences that shift the demand curve up or down

expenditure decisions and profitability

taxes impact ___ and ____

championship teams

tend to sell out in all markets

three teams that have exceeded luxury tax threshold more than once

the Red Sox, Dodgers and Yankees

location

the biggest long-term factor for a team is its

demand

the relationship between price and quantity of product

NFL

the weakest players union in professional sports

college football

there is often little doubt on outcome, but demand is high

Ownership level

there is usually unified opposition to the union's efforts to secure more revenue sources for player salaries and benefits.

remain profitable in the midst of a recession

third view of penetration rates also provide important insights into challenges of teams to ________. Small markets tend to feel it more

low

to economists prices are too _____

NFL

treats revenue from PSLs differently. Not shared with other clubs or the players. Ticket revenue is included in the revenue sharing plans. Teams can only issue a PSL when they are building or renovating a stadium. Incentive to build a new stadium, which helps the league

NBA and NCAA

use shot clocks to reduce possibilities that teams will waste time simply passing the ball

larger regions

usually have more fans and more corporate clients

Sosa/McGwire

was very short term effect as after steroids have been cracked down on, not many players hit 50 home runs in a season

Mets

went to World Series same year, sold 75.7% of tickets

Timberwolves

were lowest revenue generated with $154 million and Pelicans at $156 million

games, merchandise, and fan experiences

what do teams produce?

Florida, Texas, Washington state, and Washington dc

which states have no player taxes

loose partnerships

why leagues implement policies instead of allowing each team to function independently: Leagues are ___________that need actions to advance the league's collective self-interest - even if pursuing that goal interferes with some of individual interest of owners

players unions

why leagues implement policies instead of allowing each team to function independently: Many policies are due to the strength of the ________

labor and management

why leagues implement policies instead of allowing each team to function independently: ____________ negotiate for a favorable division of the profits produced by their collective action. When labor gains strength through organized efforts (unions), a logical response for owners is to do the same

financial cost

winning math seems easy, but winning comes at a _______ too

why players unions agree to draft even though salaries may decrease

•Younger players do not have as strong a voice in players' union as compared to veterans •Drafts do not affect veteran players •Pushing economic sacrifice onto rookie players to secure rewards for veterans appeals to the largest proportion of the union •The alternative could be a salary cap