Transcript Principles & Practice of Sport Management

Chapter 19
Sporting Goods and
Licensed Products
Introduction
• Triple commodity nature:
– The activity or game form
– The service
– The goods
• Encompasses equipment,
apparel, and footwear
• Areas produce revenues in
billions of dollars worldwide
– Third largest source of
domestic revenue for major
sports properties
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History: Sporting Goods
• 1811: George Tryon, gunsmith, carved out niche
with people interested in sports; expanded into
fishing tackle business.
• Tyron became major sporting good wholesaler
east of the Mississippi River.
• 1840–1850s: Michael Phelan and John Brunswick
established production of billiards equipment.
• 1888: Rawlings began operations in St. Louis.
History: Sporting Goods
A. J. Spalding
• Created sporting goods manufacturing giant based
on selling to expanding American middle class
• Adopted technological advances for
manufacturing
• Created and fostered markets for products
• Produced guides on how to play/exercise and
promoted grassroots sport competitions
History: Sporting Goods
A. J. Spalding (cont.)
• Gained credibility with consumers by claiming
official supplier status with baseball’s National
League
• Created profitable distribution system:
– Company sold directly to retailers at a set price
with the guarantee that retailers would sell at a
price that Spalding set
• Created stable markets for Spalding goods and
eliminated price cutting at the retail level
History: Sporting Goods (cont.)
• 1906: Sporting Goods Manufacturers Association
(SGMA) founded
• 1950s: After Korean War, spending on sporting
goods increased
• 1960s: Imported products arrived in greater
numbers in American market
• 1970s: Increased recognition of product liability
and injuries associated with sports equipment
• 1980s–1990s: Growth as products and consumer
demographics became more diverse
History: Sporting Goods
Nike
• Began as an offshoot of Knight’s original Blue
Ribbon Sports company
• Net Sales for the year 2009 were $19.1 billion
• Competition trying to catch up
– Adidas bought Reebok for $3.8 billion in 2005
History: Sporting Goods
Licensed Products
• Licensed apparel
– Based on notion that fans will purchase goods to
draw them closer to their beloved organizations
and athletes
• 1947: University of Oregon allowed to use Disney’s
Donald Duck image for the university’s mascot
• 1973: UCLA credited with being first school to enter
into a licensing agreement
• 1975: NCAA formed its properties division to
license championship merchandise
History: Sporting Goods
Licensed Products (cont.)
• Pro sports licensing
– For-profit branch of the league is referred to as
a properties division
• 1963: NFL was the first professional league to
develop a properties component
• Properties divisions approve licensees, police
trademark infringement, and distribute licensing
revenues equally among league franchises
• Players’ associations also administer licensing
programs
Industry Structure
Sporting Goods
• Industry: Manufacturers of sporting goods
equipment, athletic footwear, sports apparel, and
accessory items to the sport and recreation market
Trade Associations
• SGMA: Trade association for manufacturers,
producers, and distributors of sport apparel,
athletic footwear, and sporting goods equipment
Industry Structure: Licensing
• Manufacturers of licensed products pay teams and
leagues (licensors) for the right to manufacture
products bearing team and school names,
nicknames, colors, and logos.
• Enables schools and teams to generate brand
recognition and interest and to increase revenues
with very little financial risk.
• Licensees assume the risk by manufacturing the
product and paying fee to the licensor (royalty)
for the use of trademarks on products.
Industry Structure: Collegiate Sport
• Some NCAA Division I-A schools administer
their own licensing programs.
– Schools can retain a greater portion of sales
revenues
• 1981: Collegiate Licensing Company (CLC) was
formed (recently bought by IMG)
– Acts on behalf of approx. 200 colleges,
universities, bowls, and conferences, the
Heisman Trophy, and the NCAA as their
independent licensing company
Career Opportunities
• Opportunities range from entrepreneurs with an
idea for a specific product or store to employment
with firms such as Callaway, Russell, Akademiks,
or New Balance, as well as sporting goods stores,
such as Champs Sports, Dick’s
• Licensing industry: Employment with league
licensing departments, collegiate licensing offices,
and licensees, as well as with retail sales outlets
and product manufacturers
Management
• Rapid change is the rule in sporting goods and
licensed products industries
• Intense competition and new performance
standards
– Quality, speed and flexibility, innovation, and
sustainable growth
• Innovation is a key performance standard affecting
sporting goods and licensed products
– Ex. Kevin Plank and James Smith Moore
Marketing
• Expert usage helps overcome the risk factors
customers assess when deciding on a purchase
• Sinking of huge investments into star athletes
• Endorsement relationships work for lower-profile
players
– Examples can be seen in niche sports, like
snowboarding
Challenges of Creating Brand
• Brands image is the cumulative impact of all the
associations with a particular brand
• Includes logos, players, traditions, facilities,
rivalries and ownerships
• Difficult when in an industry with established
brands, like Nike or Adidas
Ethics
• One of the most basic forms of global involvement
occurs when a business turns to a foreign company
to manufacture one or more of its products, called
global sourcing
– Takes advantage of manufacturing expertise or
lower wage rates in foreign countries
• Sport apparel and shoe manufacturers have come
under fire for paying unfair low wages and
supplying unsafe working conditions in their
overseas operations.
Finance – Reviving Flagging
Segment
• Topps began as tobacco company
• Changed to bubble gum and used
baseball cards to sell gum
• Signed with MLBPA in 1968
• Ruled until 1981 when court broke
up its stranglehold on grounds of
antitrust.
• Card bubble lasted until 1991
• Sharp decline over next two
decades
• Bought by Eisner in 2007 to try
and regain power
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Legal
• 2000: American Needle sued NFL on antitrust
grounds after NFL signed exclusive deal with
Reebok and immediately raised prices
• 2008: court found in favor of NFL as single
entity but both sides appealed to Supreme
Court
• 2010: Supreme Court ruled NFL was not single
entity and to be remanded