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Sports League Economic Structure And Fiscal Focus: Page One - by Sarah Adams
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I. Sport History
The important development of the professional sports industry during the past decades has been extraordinary. Prior to 1960, there were only a few independent sports leagues whose members could accurately claim "major league" status. However, today, the situation is significantly different. As professional sports have grown in recent decades, they have gained recognition as a vital part of the developing mass-entertainment industry.
In the world of professional sports, the National Football League Organization is the most popular spectator sport. The National Football League was founded as the American Professional Football Association in 1920. Today, the league consists of two structured conferences, the AFC and the NFC. Despite the reorganization, the NFL continues to act as a trade association for thirty-two franchise owners. Each team functions as a separate business but operates under shared revenue generated through broadcasting, merchandising, and licensing. Shared revenue creates a socialist environment where owners can be comfortable to not risk or be aggressive when recruiting and forming contracts and still make money. The NFL breaks even through stadium, sponsors, and broadcasting deals rather than actual gate receipts for the athletic event.
Major League Baseball is also a big business which runs the games of professional baseball and oversees thirty franchises in twenty-eight cities. The MLB was formed when the rival National and American Leagues were joined together in 1903. Like the NFL, each team within the MLB operates as a separate business with the league setting official rules and regulating team ownership. The league also collects licensing fees for merchandise, sells national broadcasting rights, and distributes fees to the teams; however, MLB revenue is not shared. In order to reach and maintain a successful MLB club, money must be spent.
II. Economic Values of Sports
The sports business is one of the largest and fastest growing industries in the United States. Annual surveys concerning the size of the sports business industry reach an estimated value of $213 billion, twice the size of the United States' auto industry and seven times the size of the movie industry.
Overall logics of professional sports are grounded in the business principles of buying and selling goods, services, and labor. The strength of the sports business industry is exposed as it crosses state lines, product lines, and legal lines, to embrace almost every aspect of the economy.
Sport franchises are valued on their revenues which closely measure the quality of a team's venue and track athletic performance. The revenues of major professional sports leagues are divided among league members in varying╩ percentages. For example, depending on the individual contracts, the stadium owner or outside contractor may keep the revenues, or there may be a split with the franchise tenant. The teams within the NFL split ticket sales with sixty╩ percent to the home team and forty╩ percent to the visiting team. MLB teams splits eighty to ninety╩ percent to the home team and ten to twenty╩ percent with the visiting team.
The profits of professional sports teams are dominated by media revenue, game receipts, and luxury seating. Media revenue has increased to outrageous positions due to the consolidation for media and entertainment companies and the insatiable appetite these companies have for sports programming. Luxury boxes and club seating for professional franchises trail media revenue and are strong sources of a team's private revenue.╩
III. Sports Business Industry and the Distribution of Money
Money within the sports business industry varies in distribution among involved industries of advertising, endorsements, sporting goods, facility construction, internet, licensing, media broadcasting rights, professional services, spectator spending, sponsorships, medical spending, travel, multimedia, gambling, and operating expenses.╩ percentages representing monetary distribution range from advertising with $27.43 billion at 14.1 percent and spectator spending with $26.17 billion at 13.4 percent to media broadcasting rights with $6.99 billion at 3.6╩ percent and endorsements with $897 million at .5 percent.╩
Advertising's ludicrous value of $27.43 billion estimates to 14.1 percent of the sports business industry and includes earnings from billboards, arena/stadium signage, national network TV, radio, national cable TV, sports magazines, regional TV, and national syndicated TV. Spectator spending also holds a large monetary value of $26.17 billion and represents 13.4 percent of the sports business industry. Spectator spending includes ticket sales, concessions, parking, on-site merchandise sales, and premium seating revenue.
Sporting goods represent 13.2 percent of the sports business industry and estimates to a value of $25.62 billion. Sporting goods include the equipment, sportswear, and footwear used in competition. At 11.8 percent, operating expenses generate $22.98 billion. Operating expenses consist of player payrolls and payments by teams, leagues, and other governing bodies in organized sports.╩
Gambling holds 9.7╩ percent of the sports business industry and produces $18.90 billion, while travel generates $16.06 billion and represents 8.3 percent. Professional services estimate to the value of $15.25 billion and hold 7.8 percent of the sports business industry. Professional services include facility and event management, financial, legal, and insurance services, marketing and consulting services, and athlete representation.
At 6.5 percent of the sports business industry, medical spending produces $12.60 billion. Following medical spending, licensed goods represents 5.4 percent of the sports business industry and generates the monetary value of $10.50 billion. Licensed goods include the sales of merchandise officially licensed by leagues, teams, and other sports properties. The NFL leads revenue values by producing $2.5 billion; MLB follows at $2.3 billion. Colleges, NASCAR, NBA, NHL, and other leagues, teams, and sports generate the remaining $5.6 billion.
Media broadcasting rights represent 3.6 percent of the sports business industry and produce $6.99 billion. Sponsorships generate $6.40 billion and hold 3.3 percent of the sports business industry. Sponsorships consist of the money spent on sponsorships of leagues, teams, broadcasts, and events. NFL sponsors' include Coca Cola and Reebok as the official drink and equipment of the NFL.
Facility construction represents 1.3╩ percent of the sports business industry. The United States' stadiums, arenas, and motor speedways reach the total value of $2.48 billion.
Multimedia generates $2.12 billion and holds 1.1 percent of the sports business industry. Multimedia includes magazines, computer and video games, videos and DVDs, and books.
Endorsements hold .5 percent of the sports business industry and total to the monetary value of $897 million. The endorsement values represent the top seventy-five athletes, coaches, and sports personalities. The Internet represents only .1 percent and estimates to the smallest value of $239.1 million. The Internet industry includes ad spending and subscriber fees.
NFL Draft Part One
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| NFL Draft Part Three
| NFL Draft Part Four
| NFL Draft Part Five
| NFL Draft Part Six
| NFL Draft Part Seven