Distribution of Sports

Getting the Experience to the Fans

Written by: Memory ReedGeorgia CTAE Resource Network 2010

Distributing the Game

• Individual teams within a professional league are separately operated businesses, but they are not in competition with each other as they would be in a free open market.

• Each team is a member of a cartel.• A cartel is a combination of

independent businesses formed to regulate production, pricing, and marketing of a product.

• The professional leagues (NFL, NBA, MLB, NHL) are all sports cartels

• Pro leagues are independent sports teams grouped together and governed by a league agreement

• The league controls the marketing mix of the team – including distribution

• In most cases cartels are prohibited by federal anti-trust law.

• Pro leagues are allowed to have cartels because of special legislation which exempts them from anti-trust laws.

Cartels

Deciding Distribution

•Regions with a large potential customer base are considered favorable for a team

•Owners try to get public funds to subsidize the team

•Tax paid subsidies have to be approved by the voters – often called corporate welfare

Attracting A Sports Team• There are fewer teams than the

NFL can support• The lack of teams forces the cities

to compete• Offering the best facilities at the

best price helps the cities compete for teams

• Until 1960, teams were responsible for their own playing facility

• Now cities help support facilities through taxes

• Some franchises sell the naming rights to their facilities - for large amounts of money (EX: Phillips Arena, The Staples Center)

• In the 1990’s tax payers began showing resistance to helping pay the bills for athletic facilities

• The money a team makes from attendance, broadcasting rights, and concessions pay the salaries for the players

• Player salaries continue to rise dramatically

It’s All About the Money

It Takes Money

• The economics of pro sports involves huge amounts of money and risk on the part of the owners

• Few are willing to jeopardize their fortunes without the opportunity to profit from the venture

• New stadiums offer luxury suites and upscale restaurants that increase the chances of profits, but these things do not guarantee attracting a team

• 1989- the Astrodome - $156 million publicly financed • New stadiums cost around $500 million plus approx.

$100 million per year

• The biggest profit center is television revenue

• TV revenue is generated through the sale of advertising time

• Networks sell ad time and buy the right to air games

• TBS & CBS have just made a deal with the NBA for rights for the next 15 years

The Big Ticket – TV

• The cost per minute of TV advertising is based on the number of viewers

• TV ratings are important in deciding which city gets a professional team

• When 3 of the 14 biggest TV markets lost their professional football teams the ratings dropped considerably

Ratings – Getting Viewers

Other Options• An alternative to the high cost of

public financing is community ownership

• The local government or the fans own the team – the Green Bay Packers sell stock for the support of their team

• Currently public ownership is forbidden in most cases

• Rule changes are being made because of the high cost of franchises and the aging of owners

• The NFL has more rules and controls than the other leagues

• The MLB & NBA have syndicate ownership in some cases – something the NFL has tried to avoid

Changes in Rules

Vertical Integration in Sports• Sports teams vertically

integrate by owning all levels– Minor league teams– Major league teams

• Groups own different teams-– Atlanta Spirit – runs

Phillips Arena– Manages Hawks &

Thrashers– Manages

Entertainment Events

BALL GAME!!!