Sport Business Final

How does sport sponsorship differ from a sport licensing agreement?

"A cash or in-kind fee paid to a property in return for access to the explitable commercial potential associated with that property" - "A commercial agreement between a company and sport body to enter into a joint venture to promote their mutual interests"

Licensee

"Borrower" of intellectual property to be used

Broadcast Network Model:

"Network - Advertisers - Audience" Cycle: - Advertising is predominant source of revenue - Distribution/retransmission fees also collected

Two types of bonds issued by private entities:

- Private placement bonds - Asset backed bonds

1 in 7 Americans is a cord cutter

15% of americans are cord cutters and 9% are cord nevers - 10% of US subscribers are extremely likely to cancel within the year - Subscription cancellations are driven by cases of affordability - 74% say too expensive (averages $103/month)

Trademark or Service Mark:

A trademark is a brand name - A trademark or service mark includes any word, name, symbol, device, or any combination, used or intended to be used to identify and distinguish the goods/services of one seller or provider from those of others, and to indicate the source of the goods/services. - "Just do it"

Facility Marketing: Marketing

Account for location of venue, culture of community, and production of events. - Internet has allowed easier bookings of events - Using online tools, the manager can quickly react to inquiries for available dates and can establish a routing for a program or show - Saturated markets with several venues in the local vicinity - Local economy will be driving for ticket sales

Monday Night Football:

Added entertainment to sport broadcast; technical component, human component. - Components of a successful televised sporting event: - Event had meaning - Viewers get to see event, experience event - Viewers are reminded of positive societal values

Sales Promotion in Sport Sponsorship:

Aimed primarily at short-term consumption. Also linked: - Greater brand recognition/awareness - Broadening sales distribution channels - Getting new customers to sample product/services

Convention Centers:

Almost always built and owned by a public entity - Built to lure conventions and business meetings to a particular municipality. - Publicly financed because rents and fees they charge do not always cover costs. - However, the economic impact through local spending during convention meetings can be large.

Why the Cable Model has Grown:

Audiences for single program are more spread out (smaller) - Audiences do not watch advertisements the way used to - Cable became widespread in TV households - About 90% of households had cable/satellite at its peak - Cable provides multiple outlets for programming - Tailor content to specific audiences - Provide variety of programming simultaneously - Cable provides at least one source of guaranteed revenue - Reduced reliance in advertising support.

Sport-Specific Sponsorship

Auto racing, triathlons, marathons

League/Team/Conference Owned Networks

BTN - Valuable properties - Generate BOTH subscription and advertising $$ - Capitalize on all available revenue (Added costs of production to consider)

Sports facilities are thought to improve local economy in four ways:

Building a facility creates construction jobs. 2. People who attend games or work for the team generate new spending in the community, expanding local employment. 3. Team attracts tourists/companies to the host city. 4. New spending has a "multiplier effect" as increased local income causes still more new spending and job creation.

Overstatement of the benefits of stadiums:

Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use it workers. ○ New sport facility: Extremely small effect on economic activity and employment. ○ Sport facilities attract neither tourists nor new industry. ○ A professional sport team creates a "public good." ○ No recent facility appears to have earned anything approaching a reasonable return on investment.

Event Sponsorship

College Bowl Games, McDonald's HS All American Game, Buick Open

Business Issues:

Colleges and Universities pay a portion of royalties (~50%) or CLC or LRG for their services - No over head or financial risk for university (Less revenue from sales) - Retail sales of collegiate licensed merchandise was $4.62 billion (2012) - Apparel accounts for ~62% of sales - Biggest growth trend is the "women's" category - EA sports NCAA football accounts for most of non-apparel sales

Facility Ownership and Management Staff 3 categories

Community or state, which may have a "plethora of regulations and procedures in place" ○ Colleges, where "funding is based on continues student growth, gifts, and institutional subsidies" ○ Private facilities, whose motive is solely for profit

University Venues:

Consist of stadiums and arenas that operate under different economic factors. - The market for university and college venues is generally dictated by the student population. - Universities tend to provide the venue with tenant teams as well as a certain amount of content through the university.

Cable:

Consumer pays network for a bundle of shows, channels.

Current Issues:

Continued Cord Cutting - Market bubble (Rights fees peaked) - Bundling challenges - New Technologies - Mobile Devices - Audience Fragmentation

Determinants of Sport Telecasts:

Cost of producing the event b. Audience characteristics i. Size ii. Demographics iii. Psychographics iv. Geographics

Designated market areas (DMA)

Currently about 211 DMAs - Geographical areas all over the U.S. - Nielsen "people meter" measures national and local DMA audiences - Know what areas of people will be more interested in an event or in a product - spend money to show there or advertise in that location.

Media Channel Sponsorship

ESPN College Gameday, College Bowl Week

How had TV Responded to this?

ESPN2, ESPNClassic, FS1, Golf Channel, SPEED, NFL, NBA, MLB networks, NBC Sports Network, Big Ten Network

Current Issues: Security

Ensure safety and comfort of all spectators - Increased focus, attention, and resource after 9/11 - Bag checks, pat downs, and mental detectors are now normal regular functions in day-to-day security operations - Includes physical barriers to entry, surveillance technology, and an increase in security personnel presence. - Crowd Management Plan: Categorizing the type of event; knowing surrounding facilities and/or environment; being aware of team or school rivalries, threats of violence, the crowd size and seating configuration; having an existing emergency plan, and using security personnel and ushers.

What are current trends and concerns associated with sport sponsorship?

Ethnic Marketing through sport sponsorship: - Globalization of sport and changing demographics of consumers - Over Commercialization of Sport Sponsorship - EVERYTHING is sponsored - Events are broken down to smaller units to allow exclusive sponsorship - Vices and Sport Sponsorship - Fighting negative perceptions of alcohol, gambling, tobacco (Slippery slope)

Benefits to sponsors include:

Exclusivity - "Official" designations - Rights to intellectual properties - Advertising support - In stadium signage and promotional announcements - Access to tickets - Potential new business

Facility Marketing: Facility Revenues and Expenses

Facilities generate revenues from tickets, luxury suites and club seating, concessions, parking, sponsorships, and rentals. - Primary expenses are mortgage and rent, maintenance and repairs, utilities, taxes, marketing and sales, personnel and insurance. - Ticket sales represent significant percentage of revenues - Ticket Rebate: Surcharge on ticket that goes to facility - Ancillary Revenue: Sale of food, beverage, parking, fees, and sponsorships - Marketing Fund: Profits from other shows put aside to invest in future programs

Financing Facilities:

Federal government allows state and local governments to issue tax-exempt bonds. - Tax exemption lowers interest rates on debt and thus reduces the amount that cities and teams must pay for a stadium. - Often by initiating or raising taxes on the state or local hospitality industry (hotels, restaurants, rental car fees). - Building public assembly facilities meant other services had to be neglected.

Professional Sport Venues

Financing not as clear cut. - From 1960s through the early 2000s professional sport venues of the big four cost approximately $24 billion with 64% of this being funded through tax dollars. - This is available through bonds, taxes (hard/soft).

ESPN+

First direct-to-consumer streaming service - Schedules to launch April 12 - Services provided: live sports, original shows and movies, studio programs, on demand library. - Offers services most people don't really care about seeing - $4.99 per month

In Venue Promotions:

Game day giveaways - Bobbleheads, thundersticks, Webkinz banners - Theme days - Continuity promotions - Fans must attend multiple games to obtain product

Why are these numbers important in the business of sport broadcasting?

Important to know if the event is being viewed or how popular it is - base off how well you are doing.

Rights Fees:

In most professional and college team sports, national television rights are controlled by league or conference and individual teams retain radio rights and some local television rights. b. For individual sports, such as tennis tournaments and boxing matches, the event organizer controls the television rights

Arenas:

Indoor facilities that host sporting and entertainment events. - Built to accommodate one or more sports/tenants. - Intercollegiate facilities are financed by private donations, endowments, student fees, fundraising campaigns, and public grants. - Public owner may manage its own facility or contract out for private management. - Recent trends in facility construction include adjacent practice facilities for the primary tenants to increase event bookings.

Usually handle marketing and sponsorship efforts as well

League Revenues (2010): - MLB: $2.5 billion - NBA: $2.5 billion - NFL: $3 billion - NHL: $1 billion

Governing Body Sponsorship

MLN, NCAA, IOC

Private:

Many universities across the country go this route through their athletic development and fundraising departments. - Ways to gain private funding for a facility project include naming rights, food and beverage rights, luxury suites and premium seating and advertising rights. - Private donors to university athletic departments also provide funding and have their names placed on the new facilities.

Live Streaming

Monetization can be a challenge - Twitter paid $10 million for NFL rights, reportedly generated %50 million in ad revenue - $15 million in profit - Amazon paid $50 million for rights to 10 NFL games - Same games broadcast on CBS or NBC - Amazon focused on selling ads and promoting its other video products

Bonds:

Money to build facilities usually obtained by issuing bonds. - Promise by borrower to pay back lender a specified amount of money, with interest, within specified time period. -Both types are sold by the team but private placement bonds provide a line on all future revenues generated by the team, whereas asset-backed bonds are secured through specific assets. - Pepsi Center (Denver Nuggets, Colorado Mammoth, Colorado Avalanche) was financed through asset-backed bonds in the 1990s.

Facility Sponsorship

Naming rights, pouring rights

Cable Network Model:

Network - Advertisers plus subscription fees - audience" Cycle - Advertising fees still key source of revenue - Subscriber fees are charges to cable providers - Per subscriber per month fee - ESPN charges Comcast $6 per subscriber per month for the right to include ESPN in its cable package - 100 million cable subscribers = $600 million per month for ESPN - "Bundling" is key aspect of this model

Return on Investment

No exact formula for measuring ROI - Difficult to precisely determine impact of sponsorship - Consumer survey - Outsource to research companies - companies now focus on determining quantitative values for the value of their investments.

federal registration of a mark advantages

Notice to the public of the registrant's claim of ownership of the mark - Legal presumption of ownership nationwide - Exclusive right to use the mark on or in connection with goods/services listed in the registration

Player Associations:

Operate their own licensing agreements related to the use of the player likeness and/or names (video games, trading cards, apparel, collectibles) Individual Professional Sport (PGA, LPGA, WTA, ATP): all operate their own licensing activities.

Combines:

Opportunities are available to combine private and public funding in order to build a new facility. - Denver voters approved to subsidize $300 million for the construction of a new football stadium for the Broncos while the ownership was required to provide $100 million of their own funds to cover the cost of any overruns.

Stadium

Outdoor or domed facilities for baseball, football, and outdoor soccer teams. - Stadium managers try to maximize bookings, but it is more difficult with a stadium than an arena. - Far fewer non-sport events can play in stadiums, primarily because stadiums are significantly larger than other venues and most other events cannot attract stadium sized crowds. - Stadium managers have become increasingly effective in creating events for their venues that take advantage of all available spaces (parking lots for carnivals).

Licensor

Owner of the intellectual property to be used

Duties/ Obligations of sponsors

Pay rights fees - Multi Year commitments - Advertising commitment - Activation: 3:1 spending ratio - $3 in advertising/promotion - $1 in rights fees - Real numbers might be closer to 2:1 - Sport entity promotional commitment

Ratings =

Percent of all tv household that are tuned in to the program - Apprix 119.6 million television households - Each rating point = 1% of households - National Ratings, Certain DMAs, Single DMA

Share =

Percent of tv households watching television who were tuned in to the program - Share is always larger than ratings - Smaller denominator

What were some the innovations and practices that made Monday Night Football such a success?

Pete Rozelle and Roone Arledge responsible for growth of sports broadcasting - Created 1st pooled network contract - Based on "league think" - Ruled in violation of antitrust law - Persuaded Congress to pass the Sports Broadcasting Act (1961) - Granted football, baseball, hockey, basketball antitrust immunity from the pooled sale of broadcast rights

In-store Promotions:

Premiums - Inducements to buy a certain product/item - Contests and sweepstakes - Sampling - Provide free samples of products - POS/POP displays (Kroger) - Coupons - Free standing inserts

How are licensing programs administered in professional sport leagues?

Professional Sport Leagues - Properties Division - For profit branch of the league - Duties and Roles - Approve licensees - Police trademark infringement - Distribute licensing revenues equally among league franchises

Private Management:

Provides expertise with dedicated personnel and network of facilities that create leverage in cultivating key event relationships and in-turn event bookings.

Current Issues: Sustainability

Public facilities consume more energy per square foot than any other retail industry - In response, the facility management industry is working to build green buildings, create "green management teams," reduce waste, cut energy usage usage and pollution and implement recycling programs - Makes financial sense: - Reduces operating expenses - Builds brand

Telecast Rights:

Rights and Production - Networks pay fee, and is responsible for all costs/expenses of production - High risk - High renewal model - Rights only - Network pays rights, organizer responsible for production - Often includes some form of barter - Time Buy - Organizer buys time on network and is responsible for the production

Functions:

Security, clean up, marketing and sales, scheduling and booking, operations, event promotions, and finance and box office operations

Local Civics:

Smaller capacity and are located in towns or small cities. - Provide the public with the desired event at the best time of the year to avoid undue competition with other events that may be occurring simultaneously.

How are licensing programs administered in collegiate sports?

Some larger Division 1 schools administer their own licensing activities - Retain a greater portion of sales revenues (overhead costs to operate program) - Other FBS and FCS schools outsource licensing activities to independent companies - Collegiate Licensing Company (owned by IMG College) represents: - Over 200 colleges, Bowl Games, Conferences, NCAA, Heisman Trophy - Learfield Licensing Partners

Cross Promotion:

Sponsorship shared with other companies and subsidiaries - Beneficial because: - Shared total cost or sponsorship - Promote several product lines within same company - Weaker company can "piggyback" on stronger company - Think of Wilson and Lincoln example

TIF (Tax Increment Financing)

TIF is available in a specific square mileage of land around the facility where the tax base is frozen and any additional taxes added are used to repay the TIF bonds. (areas for renewal or redevelopment). - KFC Yum Center is owned by the Louisville Arena Authority Inc and is home to University of Louisville basketball and volleyball teams and is surrounded by a TIF district with a 6 square mile radius.

Facility Marketing: Promoting

Task: Keep financial risks low and profit margins high - Co-promotional Model: Facility and promoters split the risk and revenue - Rental Agreements: Promoters pay specified amount up front and other costs covered by promoter - Majority shows brought by outside companies (Live Nation, AEG Live)

Key terms in the negotiation of a rights agreement include:

The amount of the rights fees, the territory in which the telecast can be distributed, the length of the deal, the process for selecting particular games for telecast, copyright ownership, sponsorship rights, the number of commercial units to be included in the telecast, procedures for preempting coverage in the events of the inclement weather or other unforeseen circumstances, whether the telecast will have the first right to negotiate a renewal of the agreement.

Cord Cutters:

The traditional paid tv subscriber industry is declining 2.4% every year (since 2013) - Reports Estimate that there will have been 6.5 million cord cutters and cord nevers combined over the last 4 years - In the first quarter of 2017, more than 500,000 Americans cut the cord. - Market loss in 2016 was 1.5 million subscribers

Athlete Sponsorship

Tiger Woods, Lebron James

Team Sponsorship

Tigers, US Olympic Team, Manchester City FC

Current Issues: Americans with Disabilities Act:

To prevent discrimination against qualified people with disabilities in employment, public services, transportation, public accommodations, and telecommunication services. - Requires new facilities to be accessible to people with disabilities including concession areas, public telephones, restrooms, parking areas, drop-off and pick-up areas, entrances and exits, water coolers, visual alarms and sings.

What are current issues related to the licensing of sport products?

Trademark Infringement - Estimated to be $200 billion annually - Manufactured and Licensee Conduct - Global Sourcing - Low wages & Unsafe Working Conditions (Sweatshops) - Logo Expansion and redesign - More licensed products of all types (onesies to coffins) - Changes in team colors and images

Branded' Products:

Tremendous growth in use of company logo over the past 20 years - Develop brand image and recognition - Reduce reliance on others intellectual property (Under Armour, Nike, Adidas)

Metropolitan:

Venues located in large cities such as MSG in NYC, the Wells Fargo Complex in Philadelphia, and the Staples Center in LA. - Venues like these are generally referred to as a must play based on the size of the potential audience. - Often have large capacities, allowing for greater ticket sales. - Skilled labor in metropolitan venues is almost always unionized.

General Obligation bonds

backed by the local government's ability to raise taxes to pay off the debt.

Soft taxes

include added taxes to car rentals, taxis, hotels, restaurants, and players ( additional tax imposed on visiting professional athletes) and affects a much smaller portion of taxpayers, making it easier to levy.

Hard taxes

include taxes on local income, real estate, personal property, and general sales and often require voter approval because the burden of payment becomes that of the public.

Branded apparel

is an excellent method of spreading awareness of your brand or company. A well-designed branded item creates opportunity to pique interest in yourbrand and, subsequently, have a conversation about it.

Sponsorship:

paying teams/leagues to be associated with them.

Management Staff Goal:

to provide clean, safe, and comfortable environment for patrons.

Cume =

total number of listeners/viewers over a specified period of time (Season, week, event)

Broadcasting

transmitted by radio waves from the terrestrial transmitter of a television station to a TV receiver having an antenna