coursera sports business course module 1

7/30/2019 Coursera Sports Business Course Module 1

1/60

Sports Leagues and Teams I:

Structure and Economics

Prof. Kenneth L. Shropshire

The Global Business of Sports

Module 1.0


2/60

Begin with the end in mind. Stephen Covey, The 7 Habits of Highly

Effective People, Habit #2


3/60

The Global Business of (team)

Sports: 7 Modules

1. Sports Leagues and Teams I: Structure and

Economics

2. Sports Leagues and Teams II: Globalization,

Leadership and Ownership

3. Economic Drivers I: Media Rights

4. Economic Drivers II: Stadiums and Arenas5. Athlete Compensation, Agents and Unions

6. The Olympics and FIFA World Cup

7. Global Success Strategies


4/60

What we will cover Goal: to analyze the multibillion dollar global team sports business

and contemplate: a truly global, successful sports league.

Initial Focus:

1. Module 1:

History and structure of leagues

Leagues and teams: focus on revenues

League models

NFL examples

Revenue and sharing

Manchester United revenues

Valuation

Delivery throughout?:

Multiple segments per lecture (1.1, 1.2, etc.)

check-in quizzes intermittently

Discussion forums throughout


5/60

My Background

Professor, Legal Studies Department,

Wharton School, University of Pennsylvania Director, Wharton Sports Business Initiative

Special Counsel, Duane Morris LLP

Executive, Los Angeles Olympic OrganizingCommittee, 1984 Olympics

Law Degree, Columbia University Economics Degree, Stanford University

(American Football Scholarship)


6/60


7/60

Lecture 1.1

History ofSports

Business

CurrentLeagues

LeagueStructures


8/60

The History of Sports Business

Ancient Greek Athletics Cincinnati Red Stockings


9/60

776BC

Athletai of Ancient Greece compete in Ancient Olympic Games

until 393 AD (this was revived in 1896 as the Modern Olympics)

1883 Home Nations (currently the RBS 6 Nations)

1888 The Football League (currently Barclays Premier League)

1903 Tour de France

1963 Fuball-Bundesliga

Timeline: International League Examples


10/60

1869 Cincinnati Red Stockings

1871

National Association of ProfessionalBaseball Players

1876 National League

1901 American League

Timeline: U.S. Leagues


11/60

1917 National Hockey League

1920 National Football League

1937 National Basketball League

1946 - BAA

1949 NBA; merger of NBL/BAA

Timeline: U.S. Leagues


12/60

Beyond Merger


13/60

How did they avoid this fate?


14/60

Global Sports Business Size

Source Size ($ billion) Description

Sports Business Journal

(SBJ)

213 + Size of industry in

2007

A.T. Kearney 480-620 Size of industry in

2011

PricewaterhouseCoopers

(PwC)

145.3 Annual revenue by

2015


15/60

Overview of International Leagues The following are some leagues in the

international scene:

Football:

English Premier League (20 teams); La Liga(20 teams); Bundesliga (18 teams); Serie A (20teams); Ligue 1 (20 teams); Dutch Eredivisie(18 teams); Russian Premier League (16teams); Portuguese Liga (16 teams); ScottishPremier League (12 teams); BrasileiroPetrobras (20 teams) Primera Division de

Argentina (20 teams); Liga MX (18); J. League(18 teams); K-League Classic (14 teams)

Basketball:

Euroleague Basketball (16 teams) + manydomestic leagues

Basketball (16 teams) + many domestic

leagues


16/60

Overview of International LeaguesBaseball:

Nippon Professional Baseball (Japan), 12

teams 2 minor professional leagues: Eastern, 7

teams, Western, 5 teams

Korean Professional Baseball (9 teams)

Plus leagues in Australia (6 teams), Mexico(16 teams), D.R. (6 winter teams + 28 MLB-

affiliated summer teams), Puerto Rico (5teams), China (7 teams), Venezuela (8teams)

Others:

Super rugby (15 teams 5 each from AU,

NZ, SA)

Indian Premier League (9 city teams)


17/60

Overview of Current U.S. Status

Number of teams in Big Four team sports:

32 NFL, 30 NHL/MLB/NBA

NASCAR, WTA, LPGA, PGA, ATP in individual sports
http://en.wikipedia.org/wiki/File:ATP_World_Tour.pnghttp://en.wikipedia.org/wiki/File:PGA_Tour_logo.svghttp://en.wikipedia.org/wiki/File:Ladies_Professional_Golf_Association.svghttp://en.wikipedia.org/wiki/File:WTA_Tour.pnghttp://en.wikipedia.org/wiki/File:NASCAR.svg


18/60

Plus the following 62 start-up leagues and nichesports: 22 affiliated (17) and independent (5) Baseball

Minor Leagues, 237 teams 11 Basketball Leagues, 141 teams 9 Football Leagues, 81 teams 6 Hockey Leagues, 121 teams 9 Soccer Leagues, 139 teams 3 Lacrosse Leagues, 21 teams

Team Tennis (WTT), 8 teams Softball (NPFL),4 teams 6 Motorsport series 3 Volleyball leagues/tours 3 Golf tours Action sports tours/events, horse racing,

rodeo (PBR, PRCA), fishing, billiards, bowling,boxing, MMA (UFC, Bellator)

Overview of Current U.S. Status


19/60

How to get to the next level?


20/60

Four Successful League Structures

Closed

Open

Superleague

Single-entity


21/60

Overview of Global League Structures

and Revenue Sharing Information

Closed sports leagues as socialist cartels Cooperation across leagues

Higher degree of socialist behavior

(mainly redistribution of wealth)

appears to create stronger leagues


22/60


Open, promotion and relegation model

(e.g. EPL) Teams ascend or descend league

hierarchy based on performance

Facilitates competition, but unlikely to

be adopted in US because of $$


23/60


Superleague structure, as in Union of

European Football Associations,Champions League

Highly profitable, but decidedly

capitalistic (rich teams get richer)

Media Break: Podcast:

What if your favorite team gets

relegated to the minors?


24/60


Single-entity structure, MLS model

Control by a single operating company

protects against reckless behavior especially

in the startup phase

As leagues mature, they move away from

this model


25/60

Recap

Weve discussed the history of the sportsbusiness industry, the emergence of some

leagues, their structures and overall size.

Next well take a look at some of the major

revenue sources and methods of sharing


26/60

Lecture 1.2

Leaguerevenues

EPL &NFL

Teamrevenues

ManchesterUnited Case


27/60

League revenues (U.S. and others)

0

1

2

3

4

5

6

7

8

9

10

Revenue ($bn)


28/60

Global Leagues Revenue Sources

Ticket sales

Sponsorship, licensing andmerchandising

Media (Module 3)

Stadium or Arena Revenues (Module 4)

Case: Green Bay Packers Financials 2012


29/60

Case: Green Bay Packers Financials, 2012

Line Items Figure

Revenues

National Revenue (National TV revenue,

Road-game share, Other national NFL

revenue)

$171.6 M

Local revenue $130.4 M

Total revenue $302.0 M

Expenses

Player Costs $155.4 M

Operating expenses (excl. Play cost above) $103.9 M

Operating profit $42.7 M


30/60

Case: Measuring Financial Success

Amount (

millions_2011)

Total Revenues 13,169

Total Expenses 14,835

Operating Loss 1,666

Financial Success:

Difficult to determine because of data collection and analysis

The simple way to think about it is:

Revenues = Tickets Sales + Broadcast + Sponsors/ Commercial +Stadium related rev. etc.

Expenses = Player Salaries + Operating Exp. + Non-operating exp. +

Transfer costs, etc.

Profits = Revenues - Expenses

Example: European Soccer Leagues


31/60

Case: National Football League (NFL)

In order to understand the revenues and

expenses of this type of business, we willanalyze some of the categories we have

from the Green Bay Packers in more depth

from both a team and league perspective

Sponsorships

Team expenses

Revenue sharing

NFL L S hi 2012


32/60

NFL League Sponsorships, 2012SPONSOR CATEGORY

Gatorade Isotonic Beverage

Pepsi Soft Drink

Anheuser-Busch Official Beer

Papa Johns Official Pizza

Campbells Soup Soup

Dairy Management Inc. Dairy, Milk, Yogurt, Cheese

Quaker Hot Cereal

Mars Snackfood Chocolate & Non-chocolate Confectionery

Frito-Lay Salted Snack/Popcorn/Peanuts/Dips

NFL League Sponsorships 2012


33/60

NFL League Sponsorships, 2012


34/60

Team Structure

Lets take a step back to the team level:

How do teams generate revenues? Where do teams spend?

What makes some teams in some leagues

successful and others not?


35/60

Team Revenues, Expenses and Success?

-Licensing

-Sponsorship/Advertising

-Concessions/Parking

-Ticket sales

National vs. local

-Merchandising

-Revenue sharing model

-Player salaries & development

-Staff compensation

-Team and game related

-General and Admin

-Marketing

-Facility

-Debt Service

-Championship

-Revenues

-Fan base

-Player comm

-Brand Equity:culture

Revenue Sources?


36/60

Revenue Sources? Luxury suites & Club seats

Advertising

Sponsorships

Naming rights

Stadium club

Other game/ non-game related

Local TV and radio

Broadcast/ cable television

Satellite television

League Network

Radio (e.g., satellite, broad

Digital Media (e.g. League

Gate

Club seats

Concessions Novelties and programs

Parking

Merchandise

Consumer products/ licens

Sponsorship

International Postseason gate

Hospitality (e.g. Superbow

Events (e.g. Draft, Kickoff)

Youth

Local National

Individua

l

Corporations


37/60

The Worlds 5 Most Valuable Sports Teams?

Team Value ($ billion) Owner

Manchester United 2.23 Glazer familyReal Madrid 1.88 Club Members

New York Yankees 1.85 Steinbrenner family

Dallas Cowboys 1.85 Jerry Jones

Washington Redskins 1.56 Daniel Snyder

Forbes 2012 Estimates

Relevant news article

Forbes The Worlds 50 Most Valuable Sports Teams

Case: Green Bay Packers Financials, 2012


38/60

y ,

Line Items Figure

Revenues

National Revenue (National TV revenue,

Road-game share, Other national NFL

revenue)

$171.6 M

Local revenue $130.4 M

Total revenue $302.0 M

Expenses

Player Costs $155.4 M

Operating expenses (excl. Play cost above) $103.9 M

Operating profit $42.7 M


39/60

Source

Average Team Revenues, 2010-11

0 50 100 150 200 250

NFL (2010)

MLB (2010)

NBA (2010-11)

NHL (2010-11)

Revenue ($ million)


40/60

Ticket prices compared: U.S. Leagues

League Average Ticket Price ($)Highest ranked (Team

abbreviation - $)

Lowest

abbrevi

NFL 2011 77.36 NYJ-121 CLE-54

MLB 2011 26.91 BoSox-53 PIT-15

NBA 2010-2011 47.66 LAL-95 MEM-23

NHL 2011-2012 57.10 TOR-124 DAL-30


41/60

Recap

We discussed revenue sources,

expenses, and various measures

of success. Next we will focus on

revenue sharing.


42/60

What is Revenue Sharing?

Best overall example is League Thinkwe all do

better together as opposed to separately. But

how this is executed varies across leagues.if it

exists at all

Central Issues in Revenue


43/60

Central Issues in Revenue

Sharing Revenue pool composition

Central revenues (paid directly to league)

Local revenue pools (paid directly to clubs)

Alternative allocation rules used to distribute sharedrevenues

1. Larger allocations to teams with low localrevenue generating capability

o MLB

2. Equal allocation to all teams in league

3. Larger allocation to teams with high revenues or

most winso EPL allocates national television revenues via

a formula that better-performing team on thefield receive the highest allocations, whichincreases the absolute revenue differencesbetween clubs


44/60

Oth L l R ?


45/60

Other Local Revenues?

Other local revenues (luxury box premiums,

local media contracts, local advertising and

sponsorship/signage revenues, naming rights,

etc.) are generally not shared on a line-item

basis in the NBA, NFL, or NHL.

MLB same 34% local calculation noted

When new revenues emerge


46/60

When new revenues emerge

NBA Jersey sponsorships?

Revenue division? Likely to be collectively

bargained by the business

Would be added to basketball-related income

50% of which NBA players would receive as

their salaries

Case: Jerry Jones vs. the NFL


47/60

Case: Jerry Jones vs. the NFL

In 95, Jones entered into local contracts

with Pepsi and Nike, despite the Leagues

deals with competing companies

The NFL sued Jones for $300 million

Jones countersued for $700 million,

claiming the NFL prevented teams

from marketing themselves

Jones and the NFL settled, allowing Jones

and other owners to pursue localsponsorship deals

For example, Coors and Pepsi are the

official beer and soft drink of the

NFL, but individual teams may have

deals with Budweiser and Coke

Goal: Competitive Balance


48/60

Goal: Competitive Balance

More in Module 5

Player allocation draft

free agency

Spending limits

Salary caps

Luxury taxes

Financial Fair Play

Comparison: Team focus in the EPL


49/60

Comparison: Team focus in the EPL

Lets focus on the principal revenues of a top

team in the English Premier League (EPL) Manchester United Sponsor Deals

Case: Manchester United


50/60

Case: Manchester United

Manchester United Sponsor Deals


51/60

p

Man. Utd. Commercial Revenue 2012-13


52/60

Man. Utd. Commercial Revenue, 2012 13Sponsor Category Annual V

Nike Kit supplier

Aon Shirt sponsor

Chevrolet * to be shirt sponsor- 2014 Auto $18.9 (

DHL Logistics

Hublot Timekeeper

Bwin Online game and betting

Singha Beer

Casillero Del Diablo Wine

Thomas Cook TravelSmirnoff Responsible drinking partner

Toshiba Medical Systems Medical

STC Integrated telecomm. (Saudi Arabia)

PCCW Integrated telecomm. (Hong Kong)

Turkish Airlines Airline

Man. Utd. Commercial Revenue, 2012-13


53/60

Sponsor Category Annual ValuEpson Office equipment $2Mister Potato Savory snack $2Yanmar Global $2

TM Integrated telecomm. (Malaysia) $2

Globacom Integrated telecomm. (Nigeria, Ghana, Benin) $2

Viva Kuwait Integrated telecomm. (Kuwait) $2

MTNIntegrated telecomm. (South Africa, Zambia, Rwanda,

Uganda, Swaziland, Botswana)$2

AirtelIntegrated telecomm.

$2(India, Sri Lanka, Seychelles, Bangladesh)

Zong Integrated telecomm. (Pakistan) $2

Globul Integrated telecomm. (Bulgaria) $2

Mamee Noodles (Asia, Oceania, Middle East regions) $2

Viva Integrated telecomm. (Bahrain) $2

Turk Telekom Integrated telecomm. (Turnkey) $2

,

(Turkey)

Case: Valuation?


54/60

Los Angeles Dodgers and Manchester Un$2.15 billion: purchase price $3.09 billion: mark

Purchased by group of investors led

by Magic Johnson under Guggenheim

Baseball Management

Potential Regional Sports Network like

Yankees (YES Network) Real Estate development

Glazer family took compan

2005 with an LBO of $1.47

now done an IPO on NYSE

Raised $100 million which

compared to the likes of Fawhich raised $16 billion on

Media Break: News Article

Manchester Utd IPO

Dodgers Acquisition: Magic Johnson and Stan Kasten (CEO Guggenheim) spe

Dodgers Stadium

Recap


55/60

Recap

Weve analyzed the revenuesources of leagues and teams, had

our initial focus on how revenues

are shared drawing examples from

the U.S. and Europe

For more information


56/60


A few interesting documents*:

Bundesliga Report 2013

Financial analysis of the league and its successes

PwC: Changing the game. Outlook for the global sports

market to 2015

Brand Finance: The worlds most valuable football brands

2013

W.R. Hambrecht & Co Professional Sports Market and

Franchise Value report

* Reports available in PDF form on the course site



57/60


Relevant news articles

Premier League finances: the full club-by-clubbreakdown and verdict

'The lowest of lows': Wigan's relegation after

years of escapes "heartbreaking" says boss

Martinez



58/60


Relevant video clips

Top 20 Richest Football Clubs in Europe Forbes The Worlds 50 Most Valuable Sports

Teams

NFL and the Superbowl Revenues

Manchester Utd IPO

Dodgers Acquisition: Magic Johnson and StanKasten (CEO Guggenheim) speak at Dodgers

Stadium

Inside Sports TV Deals and overall revenues for

2012 forecasts



59/60

Textbook Reading (recommended)


The Business of Sports Chapters 2, 3 and 6

Next Module


60/60

Next Module

Continue our examination of

teams and leagues focusing onglobal popularity and presence (as

opposed to revenues), leadership

and ownership. Also continuing

the bigger question regarding

achieving success globally.

coursera sports business course module 1

Documents