Transcript Chapter 3- Sports Entertainment Means Business- 4e

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3.1 Sports and Entertainment Economics
3.2 Financial Analysis
3.3 Risk Management
3.4 Business Ethics
Sports and Entertainment Marketing Class – Mr. Sherpinsky
Council Rock School District
Essential Question
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Why do investors chance losing money,
and what do they need to know to profit?
Goals
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Explain the importance of the profit motive.
Summarize the impact of limited resources
on business
Describe types of economic utility.
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profit
profit motive
revenue stream
economics
economic impact
economic utility
loss
scarcity
How Much Did
They Make?

Rush
Look up how much
they made:
 1. Domestic
 2. Globally
 Professional sports & entertainment event are
expensive to produce:
 Pirates of the Caribbean: At World’s End- $300 Million
 Avatar: $237 Million
▪ Two of the most expensive movies ever made!
▪ Almost 50% of the cost can be expanded and related to
marketing the movie
 Profit
 the amount of money remaining from
revenues after all expenses are paid
 profit motive
 making decisions to use
resources in ways that result
in the greatest profit
 The greatest reason for
being in business!
 The reason why people
are willing to risk their
money!
 revenue stream
 An activity that will produce
money
 Example: Ticket sales
 Used to pay all expenses
 After paying all expense
any leftover money is profit
 revenue stream
 Sports: NFL revenue stream is over
$8.8 billion in 2013
 Sources:
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Ticket sales
Licensed merchandise
Concession sales
Sponsorship deals
 Allstate, Pepsi, Nike, etc…
 Under Player’s Association agreement
owners MUST spend 47% of revenue
salaries for players
 Before committing millions owners
need information
 Will the event make profit:
 Ticket sales & Merchandise
 Full price vs. Discount pricing
 Promotional value must be
established
 True costing
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Economics
 the study of how goods and
services are produced,
distributed, and consumed

Scarcity
 Occurs when there is a limited amount of
resources needed to produce and distribute
goods and services.
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 Macroeconomics
 the study of the economics of the entire
society (big picture or global)
 Microeconomics
 the study of the relationships between
individual consumers and producers
(relationships with consumers)
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Sports and entertainment marketers
are focused on microeconomics.
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Economic Impact
 the effect produced by decisions
made by consumers and
businesses
 Example: Jobs, revenue
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Loss
 Not producing enough revenue to
cover expenses
 Many business operate at a loss
in the first few years of operation
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Economic Utility
 the amount of satisfaction a
person receives from the
consumption of a particular
product or service
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What is it?
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Adding value to goods and
services
Increasing customer
benefits from their
purchases of goods and
services
Making goods and services
more useful
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Form Utility
 Improving the physical characteristics of
a product or service
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Time Utility
 Making the product or service available
when the customer wants it
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Place Utility
 Ensuring the product is available where
it is wanted
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Possession Utility
 Making sure the product or service is
available at an affordable price
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List four types of
economic utility for
a motion picture.
1.
2.
3.
4.
Form
Time
Place
Possession
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How do we add value to sports &
entertainment marketing?
 Make the event an “experience”
 Do more than just play the game or
put on the show –
▪ Have contests,
▪ Have activities for fans to be involved in,
▪ Give them more than just the “show”
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Increase Sales to Increase
Profit
 Why increase profit? The purpose
of business is to MAKE MONEY!
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Remember:
 The profit motive is what drives
our economy.
 Form
Utility
 Production
 Place
Utility
 Marketing
 Time
Utility
 When U Market
 Possession
Utility
 Marketing to access or own
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What is form utility in S&E
Marketing?
 The production
▪ The sports event (the game)
▪ The entertainment event (the show)
▪ Production process of the memorabilia
▪ Production process of the clothing lines (t-shirt,
jersey, hat, costume, etc.)
 Can you think of any other form
utilities in S&E?
▪ Formats? DVD HD BlueRay, Imax, 3D
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What is place utility in S&E
Marketing?
 Convenient location for customers to
attend
 Held at a “cool” location for
customers to attend
 Location that is large enough
 Location that is comfortable
Can you think of any other place
utilities in S&E?
Online, On-Demand,???
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What is time utility in S&E Marketing?
 Convenient time
 Right time of year for the type of event
 Promoting the event during the right time of year
for the event (ex. light display during the holidays,
haunted house during October, baseball games
during the spring & summer)
Can you think of any other time utilities in S&E?
 24-7 availability, Global impacts like seasons
Challenge:
When do we need to advertise our new movie?
Lay out a spending Plan!
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What is possession utility in S&E
marketing?
 Making it easy for the customer to possess
 Allowing to pay with various types of payment
(PayPal,Credit Cards, Debit Cards, etc.)
 Running promotional packages for easier
purchasing
 Making tickets available a long time in advance
Can you think of any other possession utilities
in S&E?
 Matinee pricing, Senior Discounts, Coupons
WORKING WITH A PARTNER:
 Brainstorm ways your favorite sports team
can use each of the four utilities.
 Find 2 Sporting & 1 Entertainment Event
▪ 1 Must be the 2016 Superbowl,
▪ Identify each utility and how its applied to the
event
▪
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▪
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Form
Time
Place
Possession
▪ Using MS Word, type out you ideas
Goals
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Discuss sources of
funding and
revenue for sports
and entertainment
businesses.
Describe four tools
for financial
analysis.
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Crowdfunding
ROI- return on investment
forecast/forecasting
budget
capital
venture capital
balance sheet
income statement
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Traditional funding vs. Crowd funding
 What is the difference?
▪ Be ready to discuss with class.
Return On Investment
 ROI- return on investment
 the income from a
venture that is
distributed to investors
 Calculated by
percentage of the
money invested
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Funds to repay investors are raised
through
 ticket sales
 broadcast rights
 licensing
 facilities
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Bootstrapping:
Building a company
without outside help or
assistance
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Investors generally provide
the funding for an event to
cover all the costs that must
be incurred before tickets are
ever sold.
Venture Capital is financing
provided to start a company in
return for owning a part of the
venture
 Help fund startup costs
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Angel Investors (also known as a
business angel or is an affluent
individual who provides capital for a
business start-up, usually in
exchange for convertible debt or
ownership equity.
Start Up Cost are cost only found
at the initial starting of the business
Typically, a team is owned by
one person, partnership, or
corporate entity; thus, a
"team owner."
 The Green Bay Packers are
owned by locals that live in
the city
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 It has been speculated that this is one of
the reasons the Green Bay Packers have
never been moved from the city of Green
Bay, a city of only 102,313 people as of
the 2000 census
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Held as of 2015 by
360,584 stockholders
(representing 5,011,557
shares) can lay claim to a
franchise ownership
interest.
 No one can own over 2,000 shares
 There have been five stock sales, in
1923, 1935, 1950, 1997, and 2012.
 Shares in 1923 sold for $5 apiece,
which in 2012 the shares were issued at
$250 each.
Name three sources of revenue from
sports and entertainment.
Food/Concessions
Tickets
Merchandise
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Forecast
 a report that predicts the expenses to be
incurred and the revenues to be received
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Los Angeles Dodgers Network
 Purchased by Magic Johnson and
Guggenheim Partners for more than twice
as much as any other MLB
 To get ROI they had a plan to expand
into TV to earn more revenue
▪ Signed with Time Warner Cable to create a
new TV channel
▪ Pays $7 billion over 25 years
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Budget
 a planning tool for how
available funds will be spent
▪ purpose of a budget is to
control costs so they do not
exceed the funds available.
▪ Very-one sided
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Balance Sheet (A = L+OE)
 net worth = assets – liabilities
 shows net worth only at a specific
point in time (Usually monthly)
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Income Statement
 shows revenues and expenses for
a specific period of time
 reveals company’s profit or loss
Phil Mickelson
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UK Taxes in British Pounds
Calculate Bottom line!
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Page 73 Textbook
Complete
Your
Work
Packets
Essential Question
 What are the sources and categories of
business risk, and how are they managed?
Goals
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Categorize 4 main business risks
Explain methods a business uses to
manage risks
Conduct a risk assessment and
develop a contingency plan for safety
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Media Rights Capital (MRC)
 Independent film and TV studio
 Produces creative premium
entertainment content
▪ House of Cards
▪ Originally produced for Netflix
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What risks do people
assume when they board a
ride at a theme park?
 What responsibility does the
theme park have to the riders?
Have you ever read the back of
a Sports Event ticket?
Gatorland
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risk
risk management
liable
contingency planning
risk assessment
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Risk
 the possibility of financial
gain or loss or personal injury
▪ Financial loss occurs when
revenues don’t cover expenses
resulting in a loss of assets (cash)
of owner or investors
▪ Personal injury can occur if a
business doesn’t take necessary
safety and security precautions
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Natural Risk: Can’t be avoided!
 occurs from unavoidable things like:
weather conditions (hurricanes,
tornados, blizzards, wind, flooding,
etc…)
 Cannot be avoided!
 Postponed games due to weather
 People stay home
▪ Pre-purchased food already made so no
game food goes bad…
▪ Or, less people buy food, lose money
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Human Risk
 Dishonest customers
 Employee theft
 Inadequately trained employees
▪ Movie goers sneak into a second movie after
only paying for one
▪ Bad attitudes cause financial and safety risks
▪
▪
▪
▪
Improperly cook food
Washing hands
Fans become ill reputations suffer
Lawsuits over medical bills
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Economic Risk
 occurs due to changes in the business
environment and economy
 Economy affects consumer’s lifestyle
 Good economy = More money to
spend on sports and entertainment
 Opposite is true in bad economy
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Gain or Loss Risk
 speculative risk
▪ gain or loss could result
▪ Playing football for a career is
risky. If the player gets hurt and
cut no income
 pure risk
▪ No possibility of gain from an
incident
▪ Example: Football player is
injured and cut from team
 controllable risk
 if a loss can be prevented or the likelihood of
its occurrence reduced
 NFL stopped head butting with new rules
 New designed helmet to prevent concussions
 uncontrollable risk
 nothing can be done to prevent the risk
▪ Example: Tornado hits stadium
 insurable risk
 If the chances of loss are predictable and the amount
of the loss can be estimated, it can be insured
▪ Fire insurance/likelihood/average dollar loss can be
calculated
 uninsurable risk
 If the chance that a dollar loss could occur
▪ But the amount of the loss cannot be estimated, then it is
uninsurable
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Risk Management
 preventing, reducing, or lessening the
negative impacts of risk by using the
strategies of risk avoidance, risk
insurance, risk transfer, and/or risk
retention
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List two (2) human risks faced by
sports businesses and describe
strategies to overcome those
risks!
Human Risk
 Dishonest customers
 Employee theft
 Inadequately trained employees
Four (4) Ways to Manage Risk
 Avoid
 Insure
 Transfer
 Retention
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Some risks can be avoidable through
careful planning, attention to details,
and adherence to legal safety
standards
 Crowd control requires planned flow analysis of
people going in and out of games
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Being prepared means
 Handling aggressive or unruly fans to
emergencies
 Extensive training
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Some risks can be avoidable through
careful planning, attention to details,
and adherence to legal safety
standards
 Being liable means the business legally
responsible for damages and possibly medical
costs and other losses suffered by the injured
person
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Some risks can be transferred to
another company or even to the
consumer.
 contracting with third parties for services
 including releases from liability on event back
of tickets
▪ Assumption of risk clause
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Risk Insurance
 pays for predictable losses
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Premium
 cost of insurance
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Risk Retention
 assuming the cost of an uninsurable
risk regardless
 Movie producer understand the
movie may flop and lose money
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Risk Retention Groups
 similar businesses facing similar risks
pool resources
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Preparation for an
unexpected emergency
 Involves organizing people and
equipment needed to handle
various situation, such as outof-control fans, accidents,
illness and injuries, and/or acts
of violence
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ESA: Event Safety Alliance
 Organization that promotes safety
within the event industry
 Members include: managers, event
producers, engineers, riggers,
equipment owners, roadies, safety
specialists, and other involved with
events
 Safety: NFL search policies for
entering stadium
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Risk Assessment
 A step-by-step process by which
knowledgeable safety and security staff
identify and prepare to manage risks
Frequency & Severity Table
Likelihood: Severity: Risk Level Matrix: Key
1
Improbable
1
No or trivial
injury/illness
2
Unlikely
2
Minor
Injury/Illness
3
Even Chance
3
3+ Days Lost
Time
Injury/Illness
4
Likely
4
Major
Injury/Severe
Incapacity
5
Almost Certain
5
Death(s)
L
i
k
e
l
i
h
o
o
d
5
5
10
15
20
25
Insignificant
4
4
8
12
16
20
Low
3
3
6
9
12
15
Moderate
2
2
4
6
8
10
High
1
1
2
3
4
5
Intolerable
1
2
3
4
5
Severity
Team Activity
Amusement Park Challenge
for 2 Problems/2 Solutions
Answer in writing on the worksheet
or write/type out the answers!
Team Activity
Amusement Park
Management
Answer in writing or type out the answers!
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People
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Special needs persons
Violence to staff
Smoking
Fear/Anxiety
Lost Persons
Staffing Risks
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Minor injures
 Area Access
 Poor Training
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Venue
Restrictions/Riders
 Weather
 Food/Concessions
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Response
Response
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Accessibility/user friendly/guides/pref. parking/seating
Security force/relationship w/police/communication
devices/cameras/enact policies/minimize likelihood
Designated areas/restrictions/signage
Ride rating system/signage/personnel/variety of rides
Multiple security stations/police poles/cameras/patrols/signage
Medical Station/Skilled/Professionally trained
staff/policies/procedures
Mechanical devices/access passes/cards Special clothing/signage
Formal training/assessments/regular training/updates/ licensing
Response
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Ratings/Signage/training/enforcement
Rules/Procedures/enforcement/signage
Positioning/signage/procedures/formal training/cameras/security
www.saferparks.org
Browse the Saferparks
web site
Answer the research
questions, and be careful
to use your skills to
research, find, and
support your answers in
detail.
2. Complete the visual
assessment on the back.
1.
Mr. Sherpinsky
Sports and Entertainment Marketing Class
Essential Question
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Goals
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What does ethics
means in sports and
entertainment
marketing, and what
impact does unethical
behavior have?
Define ethics in sports and entertainment.
Analyze the impacts of unethical behavior.
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ethics
ethical dilemma
principles
integrity
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Group Discussion:
 Why does Mariano Rivera
has such an admirable
reputation?
 Why is he so marketable
and respected by fans
and other players?
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Ethics
 a system of deciding what is
right or wrong in a reasoned
and impartial manner
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Business should be
conducted with integrity,
trustworthiness, and
fairness.
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Ethical Dilemma
 A individual faces a challenge
when he or she has to choose
between two equal moral
principles
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Often you’ll find this
between what you want
and someone else wants, if
there are no consequences
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Statements like “Its only
cheating if you get caught”
 Football and the NFL scandals
▪ Players arrested
▪ Real World Stats:
 Only 2% of NFL players ever get
involved with the law
 Compared to general population
of 10.8% (Males 22 to 34)
Teams don’t sign
players who will
damage the
team’s
reputation and
marketability
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Integrity
 A strong, voluntary
adherence to honesty and
morality
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Character Development
 a progression in behavior
where people advance from
childish behavior to mature
behavior based on principles
People need good role
models.
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Principles
 high standards of rules and
guidelines
▪ “Don’t Kill” or “Don’t Steal”
or “Don’t Cheat”
People need good role
models.
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People and businesses should act
ethically while pursuing a profit by
acting in a mature, responsible
manner.
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Sometimes it is hard to
continue to act ethically
when you observe people
who receive a benefit
from acting unethically.
 Negative behavior can
destroy the best marketing
plans!
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Only fans can really
influence the
behavior of ethically
challenged athletes
and celebrities.
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The public
perception exists
that celebrities no
longer value ethics
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Good decisions
are both ethical
and effective.
Good decisions
are the right
choices for the
long term.
THE BIG
ETHICAL
QUESTION
SLAM
An Ethics Improv Competition
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NFL sends a message
OPENING TALK
Class Discussion
You are managers of a major league baseball team.
How can the bad behavior
of sports celebrities be
controlled?
Name some ways to control your players,
on-and-off the field…
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Get Lines….. Can you guess the movie?
I see dead people….
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Get Lines….. Can you guess the movie?
You’re Gonna Need a Bigger Boat!
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Get Lines….. Can you guess the movie?
Here’s Johnny…. The Shinning!
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Get Lines….. Can you guess the movie?
“A census taker once tried to test me. I ate his
liver with some fava beans and a nice chianti.”
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"Frankly, my dear, I don't give a damn.“
"I'm going to make him an offer he can't
refuse.“
"Go ahead, make my day.“
"May the Force be with you.“
"Mama always said life was like a box of
chocolates. You never know what you're gonna
get.“
"There's no crying in baseball!“
“I love the smell of napalm in the morning…”
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Research Famous Quotes in Movies
 Find your Top 10 Best Quotes from any motion pictures you know.
 Using MS PPT, find an image for the quote, add the youtube link, type
the movie name, the year of the movie, the character using the quote,
the actual actor/actress name who used the quote, and recite the
actual quote “word for word.”….
Try to find something that impacted
the movie’s marketing & popularity…
Due Monday, End of Class
Use PowerPoint, printout 6 slides per sheet, B&W
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Case Study, pages 56
 Write out answers!
 Due at end of class today!