SSA 2302 Looking Ahead 109 Tuesday Lecture Chapter
- Slides: 25
SSA 2302 – Looking Ahead • 10/9 – Tuesday • Lecture (Chapter 9) • Discussion • Extra Credit assigned (DUE Friday 10/12) • 10/11 – Thursday • Lecture (Chapter 10) • Discussion EXAM #2 – Tuesday 10/16
CHAPTER 9 Professional Sport Jacqueline Mc. Dowell, Amy Chan Hyung Kim, and Natasha T. Brison
Nature of Professional Sport • Professional sport – any sport activity or skill for which the athlete is compensated (e. g. salary, reimbursements, bonuses, other direct payment) • Occupies powerful role in society • • Profound economic effect Creates a lot of job opportunities Among all sports it generates the most media coverage Major source of entertainment
Nature of Professional Sport • Three principles that form the professional sport industry • Labor: a unionized collection of athletes who bargain collectively with league owners; typically represented by a union head during negotiations • Management: in the collective bargaining process, this is the group of owners that are negotiating with the labor (athletes); the league commissioner acts as the agent for owners during negotiations • Governance: the exercise of authority; involves leadership that oversees rules and regulations, rights and responsibilities, sports and events, ethics, strategic decisionmaking; goal is to assure both internal and external stakeholders that objectives are being met while taking into account internal weaknesses and strengths and external threats and opportunities.
History of Major Professional Sport • Ancient history – mercenary army men recruited for physical/brutal competition; winners earned prizes and money • American sport – boxing, horse racing, runners earliest paid athletes (mid- 19 th century); 1869 Cincinnati becomes first pro baseball team; 1917 = NHL; 1921 = NFL; 1949 = NBA • Inclusion and exclusion • Segregated professional sports • Professional sport outlets for women
History of Major Professional Sport • Inclusion (and exclusion) – • 100+ years of pro sports • Only within past 80 years pro sports have become more inclusive of minority groups in American society • 1920 = Negro American League formed • 1947 Jackie Robinson/Brooklyn Dodgers entered into white-centric pro sports • Women lacked opportunities = 1940’s first opportunities in baseball; Semi-pro forms; LPGA (1950) and WTA (1973) • Past 20 years saw greater increase in women’s leagues (i. e. pro football, WNBA, NPF, NWSL)
History of Major Professional Sport • Factors affecting growth • Financial stability • Management ability • Market interest Tangential activities in support of the on-field/court activities also help to drive growth and sustainability, including: • • Promotions/Marketing Fan engagement Business networking Media opportunities
Unique Aspects of Professional Sport • Interdependence and Luxury Tax • Structure and Governance • Labor-Management Relations • Role of the Electronic and New Media • Emerging Sources of Media Coverage
Unique Aspects of Professional Sport • Interdependence – • Teams need to compete and cooperate simultaneously; Teams function together and are dependent upon one another • Pool some revenues and disperse among teams (e. g. National vs. Local media) • Members make sacrifices and concessions for the longterm benefit and growth of the league • League Think = the idea that teams must recognize the importance of their competition and share revenues to ensure that their competitors remain strong
Unique Aspects of Professional Sport Luxury Tax = Ø Disparities in local media contracts (primarily due to market size) and the highly lucrative nature of some markets over others has created significant discrepancies in the amount of the money some teams are able to pay their athletes Ø Tax placed upon teams that spend the most money on player payroll Ø Tax is then shared among teams that don’t have high payrolls (e. g. market size and media contracts contribute to this) to increase their payroll capabilities, or the money is designated to the league for other purposes Ø No salary cap in place, but there is a tax threshold regarding the level that salaries may amount to before the luxury tax is enforced Purpose is to prevent teams in major markets with high incomes from cornering the market on talent and potentially destroying the competitive balance necessary for a sport to maintain fan interest.
Unique Aspects of Professional Sport • Structure and governance • League office (i. e. commissioner, board, administration); Very different than other businesses • Commissioner is typically the role that represents the interests of all parties • Differs from league to league • Central administrative unit that handles contracts, scheduling, licensing, etc. on behalf of the league • May include “minor” or “developmental” league opportunities
Unique Aspects of Professional Sport • Structure and governance of the MLB • 30 teams | 2 leagues | 3 divisions/each league • MLB Commissioner (Rob Manfred; 2015 -present) is responsible for representing the interests of all parties associated with the league (e. g. players, owners, fans, media, sponsors, etc. ) • The Office of the Commissioner of Baseball hires and maintains the sport’s umpiring crews, and negotiates marketing, labor, and t. v. contracts. The commissioner is chosen by a vote of the owners of the teams. • Extensive minor league system to help cultivate and develop talent (NBA = “D League”; NHL = AHL)
Structure of the MLB
Unique Aspects of Professional Sport • Labor–management relations • Five unique conditions in American pro sports, essential for preserving financial stability: 1. Baseball’s anti-trust exemption = league exemption from the Sherman Antitrust Act which was created to prohibit companies from creating a monopoly within their market; Baseball is considered non-tangible and local in nature; Allows MLB to strategize against other leagues forming and gives owners great leverage over their host cities 2. Collective bargaining = negotiations between labor and management; all players form a bargaining unit (labor) will negotiate with league reps/team owners (management); covered by the National Labor Relations Act (NLRA), which provides basic rights regarding labor relations policy (e. g. right to self-organize; right to bargain collectively; right to engage in concerted activities to protect employees)
Unique Aspects of Professional Sport • Labor–management relations • Five unique conditions in American pro sports, essential for preserving financial stability: 3. Free agency = freedom of pro athletes to move from one team to another upon fulfilling an agreed-upon contract regarding terms/years of service 4. Salary caps = collectively bargained agreements that establishes a league-wide team payroll threshold that cannot be exceeded in most cases (soft cap vs. hard cap); MLB the only league that does not have a salary cap; salary caps are in place to ensure parity across the league based upon market size and owner resources 5. Player draft = an equitable system for distributing talent to league members/teams
Unique Aspects of Professional Sport • MLB Players’ Strike – Salary cap issues • The 1994– 95 Major League Baseball strike was the eighth work stoppage in baseball history, as well as the fourth in-season work stoppage in 22 years. • The strike began on August 12, 1994 and resulted in the remainder of that season being cancelled, including the postseason and, for the first time since 1904, the World Series. • The strike was suspended on April 2, 1995 after 232 days, making it the longest such stoppage in MLB history. • 948 games were cancelled in all, and MLB became the first major professional sports league to lose an entire postseason due to labor struggles. • Due to the strike, both the 1994 and 1995 seasons were not played to a complete 162 games
Unique Aspects of Professional Sport • Role of electronic and new media • TV most influential and impactful; transformed sport into entertainment • TV is needed because: • It is revenue teams can earn • Enhances the consumer experience • Creates leverage over sponsorship dollars and exposure • New media: satellite, internet/streaming, devices • In-venue experience
Revenue Sources for Professional Sport Teams • Media contracts – (e. g. local television contracts) • Gate receipts – once accounted for 92% of team revenue; still important to leagues with less air/t. v. time (NHL, MLS, WNBA, minor league baseball); home team often shares with league and visiting team; premium seating in more recent stadiums • Licensing and merchandising revenues – leagues/teams gain royalties from apparel/merchandise companies that have been granted rights to use logos/names; leveled off as a source of revenue as the market has become saturated
League Attendance Information
Revenue Sources for Professional Sport Teams • Sponsorship – the acquisition of rights to affiliate or associate directly with a product or event for the purpose of deriving benefits related to that affiliation or association • Teams often have several sponsor partners in place • Deemed a big benefit to the sponsor company/organization to attach their name/brand to a team, league or event.
Future Challenges Facing Professional Sport 1) Maintaining labor–management harmony • Labor disputes occur mostly when players are seeking an increase in the share of growing revenues, while team owners continue to try to manage costs/salaries 2) Developing new revenue streams • Owners continue to look for new revenue opportunities due to player salaries rising • Technology has and will continue to impact opportunity
Future Challenges Facing Professional Sport 3) Meeting the technology challenges • Impacts every aspect of business practice and objectives • Consumers have immediate information, which is now the norm • Will potentially challenge revenue-sharing concepts 4) Dealing with globalization • Increasing global popularity and demand • Several challenges include: cultural differences, financial systems/exchange; teams outside of the US; capitalizing on global talent pool
Career Opportunities in Professional Sport • Executive positions (CEO, CFO, CMO, General Manager, General Counsel, President) • Player personnel positions (e. g. player personnel, medical/training, coaching, player education, video support) • Business positions (e. g. ticket sales, corporate sales, operations, marketing, promotions, community relations, media relations, hospitality)
In-Class Discussion What responsibilities should owners have to fans? Should fans and public opinion whose tax and entertainment dollars support sports teams have a voice in how teams operate? Why or why not? If so, in what way? “One report on Watchdog. org said that over the past two decades, the NFL has raked in about $7 billion of taxpayer money to spend on stadium renovation and building. Another study from the Brookings Institution showed that federal taxpayers have subsidized the construction of 36 stadiums at a cost of over $3. 2 billion since 2000. ” (Stepman, 2017)
Extra Credit • Read this article regarding the unique structure of the Green Bay Packers ownership. • Write a 1 -2 page reflection regarding your thoughts on this ownership structure as compared to traditional ownership in American professional sport. Discuss why this format is positive and/or negative? Additionally, explain what you think would happen (i. e. economically, organizationally, etc. ) if all NFL teams were publicly owned. • DUE electronically (on Canvas) by Friday 10/12 at 5 pm. Look for the link to submit the assignment. Upload your typed document. Format = 12 pt. Times font, double-spaced. A total of 10 E. C. points are possible based upon the strength of your discussion. (See the writing rubric on Canvas. )
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