Distribution of Sports

1. Distribution of Sports Getting the Experience to the Fans Written by: Memory Reed Georgia CTAE Resource Network 2010

2. 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.

3. Cartels • 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.

4. 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

5. 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

6. It’s All About the Money • 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

7. 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

8. The Big Ticket – TV • 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

9. Ratings – Getting Viewers • 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

10. 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

11. Changes in Rules • 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

12. 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

13. BALL GAME!!!