Transcript Sport and the Economy - West Virginia University

Sport and the Economy
SEP 271
Dr. Jack C. Watson II
Topical Outline
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Corporate Involvement in Sport
Owning Sports teams
Players and Owners
Salaries in Sport
Topical Summary
Discussion Questions
Who Benefits Economically from
Sports
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Players?
Coaches?
Owners?
Administrators?
Vendors?
Media?
General Public?
College Athletes?
Corporate America
• Lease the name rights to:
– Bowl games
– Stadiums (in 2000, $2.4 billion for 55 venues)
• $205 million for Fed Ex Field (see table 10.1)
– Segments of games
• Pay for the right to use a logo
– ABC $309 million for 1996 summer Olympics
– NBC $3.5billion for 2000-2008 games
– $50 million for sponsorship of games
• Pay for space on a car or jersey
• Pay for advertising on athletes’ bodies
Team Ownership
• An unregulated monopoly, or Cartel
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Control were services go
How they are run
Who can enter an organization
Bargains for services as a group
Limit player choices of employment
Collective Bargaining by owners
• Franchising
– Tax benefits
• Depreciation of assets (i.e., players)
– Services provided for you (stadiums)
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This affects normal people, & institutions such as education, housing
Increases prices of tickets preclude some from attending games
Wealthy businesses benefit more from money generated from games
Moves games away from the people
Taxes paid by community
Benefits of Team Ownership
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Celebrity status
Affiliation with high profile athletes
Benefit to other business opportunities
Increased prices of franchises
– Teams often worth in excess of $400 million
• helped by tax breaks, television rights, arenas,
monopoly
• Do not have revenue sharing for luxury
boxes, concessions and parking.
Players and Owners
• “Reserve Clause” gave sole ownership of players
to one team
– Players only negotiated salary with one team
• No free agency in MLB before 1974
• No free agency in NFL before 1976. Prior to this:
– Had to play out contract and one year at 90% salary (Rozelle Rule)
– Sign with team, and have team reimburse old team
• No free agency in NBA before 1976
– Option clause eliminated
– 1980 NBA teams can match offered salaries from other teams to
keep free agents
– Revenue sharing and salary cap in 1983
• Does free agency increase parity in League?
Players and Owners
(Cont…)
• Free Agency:
– Catfish Hunter (1974)
– Increased player salaries
– Collusion in baseball, 1985-87
• MLB paid players $280 million
– 1977 collective bargaining agreement in NFL
• Minimum salaries, and payments for picking free
agents
– 1995 Modified free agency in NFL (franchise
players)
Average Salaries by League
Year
1968
1976
1984
1991
1994
2001
NBA
$20K
$110K
$246K
$990K
$1.9M
$3.2M
MLB
$19K
$51K
$326K
$850K
$1.2M
$2.3M
NFL
$21K
$63K
$162K
$355K
$737K
$1.2M
(Table 10.2)
NHL
$20K
$90K
$130K
$370K
$463K
$1.4M
Topical Review
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Corporate Involvement in Sport
Owning Sports teams
Players and Owners
Salaries in Sport
Discussion Question
• Do “Amateur Sports” Exist?
– Are college athletes amateurs?
– Are business golfers amateurs?
– Who is an amateur athlete?
– How much money is put into sport?
– Who makes the money?
– Why is money invested in sport?