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49 Cards in this Set
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Measuring economic size of sport industry
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-Few attempts have been made
-11th largest industry in the united states -Contributes a great deal to US and global economies -Has shown tremendous growth, but still not immune to fluctuations in the global economy -many areas recovered from global recession |
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One segment of sport industry that has seen tremendous growth over past decade
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Professional sport. Ex, in 2012 the NFL had operating revenues of approximately 9.5 billion
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Throughout last decade.......... .......... ....... ....... ....... have seen their ........... increase more than .......% annually
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-Major pro men's sport leagues
-Revenues -10 However, economic problems still remain |
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Most professional leagues attempt to equalize the differences in team revenues through........
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Revenue sharing. Ex, all four of the traditional major mens leagues share revenue from national TV rights and merchandise sales. Allows teams in smaller markets to compete financially with big market teams.
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In pro mens sport leagues, most money is generated from..........
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Media rights
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MLB still claim to be losing money because of..
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Cost increases in areas such as payroll, travel expenses, and coaching and staff salaries.
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NHL crisis 2012
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Difficulty controlling player salaries. In an attempt to change the economic system of the league, the owners agreed to lock out players before the start of the 2012-2013 season. Club owners and players union (NHLPA) were unable to agree on new economic system till january 2013. Over two months of games were lost
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The economic troubles, in addition to.......had a major effect on the sport industry
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unethical and even illegal financial behaviour
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NFL and NBA owners have been able to negotiate agreements with players through the.....
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Collective bargaining process
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Current financial situation of US college athletes
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-Rising costs
-Athletics departments face a difficult financial future as costs increase in areas such as travel, equipment, coaches, ect. (some have eliminated sports teams because of this. Additional revenue is seemed through turning to private donations, corporate sponsorship, television, and merchandising. Division 1 level uses television rights and ticket sales. |
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Many athletics departments are increasingly relying on ......
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Student fees and other forms of institutional support to avoid large budget deficits.
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Economics in sport
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The study of how people within the sport industry deal with scarcity. A sport product is considered scarce if people want more of the product then is available for consumption.
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Largest single source of revenue in collegiate athletics
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Annual mens basketball championship
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The most successful managers
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make the best use of limited resources
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Economic interaction
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The exchange of one product of value for another product of value. Ex, purchase of tennis racket. Not all involve cash.
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For sport managers, the area of .................. have the most effect on day to day operations of their organization
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microeconomics
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Microeconomics
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the study of the behaviour of individual businesses and households. uses economic theories to explain specific industries such as sport and recreation, automobile manufacturing, and health care. Studies variables such as price, revenues, costs and profits for individual organizations.
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market equilibrium
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the price which the quantity demanded equals the quantity supplied.
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market surplus
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quantity supplied is greater than quantity demanded
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market shortage
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quantity demanded is greater than quantity supplied
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Supply-demand model
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powerful tool in economics
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Law of supply
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suppliers will increase production as price of product increases and decrease production as price falls
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Law of demand
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consumers will demand less of a product when price increases and more as price falls.
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Community leaders beliefs about big sporting events such as the olympics
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Will stimulate local economies b/c of increased spending by out of town visitors, increasing local tax revenues and jobs.
However, smaller events can also increase economic activity. |
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Sport economic impact studies
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Analyses of how expenditures on sport tens, facilities, or events economically affect a specific geographic region. Helpful in measuring the increase in revenues, tax dollars, and jobs attributable to a sport event or facility.
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Researchers conduct economic impact studies by..
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collecting information on spending patterns of visitors to a sport event or facility. May distribute surveys to spectators to see related costs (hotels, rental cars, ect). Most often, researchers use computer software packages such as RIMS II and IMPLAN to calculate the final economic impact.
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Economic impact studies can be manipulated to produce a variety of results, readers should ask questions,,,
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1. Who conducted the research
2. how was research conducted |
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Functions of financial management
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1. Determining what to do with current financial resources
2. determining how to procure additional financial resources -Decide how to distribute money |
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Key roles of financial management
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-Determining how much money the organization will need to meet long term obligations
-How they will procure those funds (many leagues have collected large fees from expansion teams) |
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Financial statements
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-Developed by sport organizations on a regular basis to monitor financial situation
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Financial statements (balance sheet)
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Reflects the financial condition of an organization on a particular date. Generally reported at the end of a financial term (end of the year), but could be generated at any time such information is needed.
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Balance sheet categories
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Assets (current, long term) Liabilities (current, long term) Owners' equity |
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Balance sheet, assets
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Assets: the financial resources of the company---current assets, items that are cash or expected to be converted into cash within the next year. used to meet current obligations.
-long term, not expected to be turned into cash during the next year. Ex, land, buildings, and equipment |
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Balance sheet, liabilities
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-Obligations to pay money or or provide goods or services to another entity.
-Money, goods, or services owed to others -Current: those that are due to be paid in the next year -Long term: those that are due sometime after current year |
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Balance sheet, owners equity
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-Owners shares of the resources of business
-Includes money that they have put into company (paid in capital) and their earnings from company (retained earnings) |
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Total assets are equal to...
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Liabilities plus owners' equity
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Income statement
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Provides the financial results of the organizations operations over a specific period. Often reported at the end of a year but can be reported at any time. Most important financial statement because it presents the organizations bottom line (net profit or net loss)
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Income statement, two categories
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Revenue & expenses |
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Income statement: revenue
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Revenues: inflow of value not inflow of cash. Recorded when good or service is delivered to customer, not when cash is received. Ex, recorded at hockey game rather than when ticket's sold-Operating income: generated form teams main business. Most financial analysts concerned with this because its useful for predicting future revenue
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Income statement, expenses
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Direct expenses: "cost of sales", can be directly tied to main sources of revenue. Ex, manufacturing costs
Operating expenses: Other normal business expenses such as salaries, rent, utilities that can not be directly matched to revenue Other expenses: Those that occur outside normal business operations for a given company, such as interest expense and unusual losses Income tax expense: the amount the company pays to the IRS, the state, or city related profits for the year. |
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Types of sport organizations
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-Geared toward sport participation. Ex, High school sports, community rec programs, youth sport organizations.
-Seek to make profit, providing participation opportunities not offered by (or better than) not profit org's. -These include organizations that rent facilities to participants, seek to train people, and orgs' that provide equipment necessary to participate. -Many companies focus on sport spectators such as; professional sports and big time college sports |
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Sources of revenue unique in the sport industry
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-Game attendance (concessions, personal seat licenses, luxury suite hotels, athletic department donations)
-Media rights -Sponsorships -Licensed merchandise |
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Additional revenue from
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-Parking
-Concession -Personal seat licenses -Luxury or club suite |
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Corporations pay large amounts of money to athlete endorsers to...
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promote their products and services
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Two critical sources of expenses for most sport organizations
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-Cost of sport facilities: most sport orgs' try to persuade local communities to pay for stadiums, but they usually have to pay some costs. Can result in long term payments which may effect financial stability. Costly to maintain. Some sport orgs' can pay for some costs by collecting PSL and rental fees for luxury suites before opening stadium
-Cost of salaries: Salaries have increased dramatically in past 40 years in pro and college sport. player and coaches salaries often make up more than 50% of expenses. Big time college coaches are the highest paid employees on campus. |
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Financial management jobs in the past
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Generally not complicated. Many organizations had financial managers who were basically bookkeepers. Jobs now are far more sophisticated.
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Assistant general manager or vice president of financial operations
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Many professional teams hire these people because they possess sophisticated financial skills. This arrangement is common if the general manager does not possess the required skills to make complicated financial decisions.
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To help them make particularly complicated decisions, sport orgs' hire...
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consulting firms
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Ethical financial issues in sport
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Performance enhancing drugs
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