sports and entertainment marketing © thomson/south-western chapterchapter sports and entertainment...
TRANSCRIPT
Sports and Entertainment Marketing© Thomson/South-Western
Chapter Chapter
Sports and Entertainment Means Business 2.1 Sports and Entertainment
Economics
2.2 Risk Management
2.3 Financial Analysis
2
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Lesson 2.1
Sports and Entertainment EconomicsGoals Define profit and explain the profit
motive. Describe types of economic utility.
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Terms profit profit motive economics economic utility
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THE PROFIT MAKERS
profit the amount of money remaining from
revenues after all expenses are paid
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the money a business receives from the sales of goods and services
profit motive making decisions to use resources in ways
that result in the greatest profit
revenue
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Cultural Opportunities for Profits Worldwide distribution revenue is
critical for movie profits.
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China has a tremendous movie market. the government censors movies for
content pirated movies diminish theater sales
Marketers must understand the markets in which sales occur.
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All time (domestic)
All time (international)
All time (adjusted for inflation)
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Profit Calculations In 2008, the average feature film
cost the major studios $72 million to produce and $37 million to promote.
$2,788,000,000 (Avatar Revenue -Domestic and International)
- $ 109,000,000 (average movie expenses in 08’)
$ 2,679,000,000 (Avatar’s Profit)
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In addition to U.S. ticket sales, name two other large sources of revenue for U.S. film studios.
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ECONOMICS
economics the study of how goods and services are
produced, distributed, and consumed
--
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the study of the economics of the entire society
microeconomics the study of the relationships between
individual consumers and producers Sports and entertainment marketers are
focused on microeconomics. relationships with consumers
macroeconomics
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Sports and Entertainment Economics economic utility
the amount of satisfaction a person receives from the consumption of a particular product or service
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Types of Utility form utility
when the physical characteristics of a product or service are improved
time utility making the product or service available when the
customer wants it place utility
the product is available where it is wanted possession utility
the product or service is available at an affordable price
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Movie Business form utility
time utility
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Movie Business
place utility
possession utility
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Only $8.99 a month $20
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Go to page 35 in your book and read the example there of Types of Utility and Three Ring Utilities.
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Lesson 2.2
Risk Management
Goals Define risk and describe the categories
and classifications of risk. Name and describe four strategies for
risk management.
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Terms risk risk management liable
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RISKING IT ALL
risk the possibility of financial gain or loss or
personal injury
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Categories of Risk
natural risk occurs from unavoidable weather
conditions human risk
dishonest customers and employees inadequately trained employees
economic risk occurs due to changes in the economy
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Natural
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Human
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Economic Changes in the business environment,
such as the economy
Peak =
Trough =
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Risk in Disasters
Top 10 Disasters that Affected Sports
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Additional Classification of RiskExample: Theater Controllable Risk
If a loss can be prevented or the likelihood of its occurrence reduced.
Theater manager made sure fire exits were available and well lit, sprinkler systems working, and employees were trained for fire emergencies.
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Additional Classification of RiskExample: Theater uncontrollable risk
nothing can be done to prevent the risk
Tornado blows theater away, weather can not be controlled.
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What steps could a venue like The Times Union Center take to reduce or prevent loss or risk (controllable risk)?
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Can someone have too much risk? Along Came Polly
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MANAGING RISK risk management
preventing, reducing, or lessening the negative impacts of risk by using the strategies of
1. risk avoidance
2. risk insurance
3. risk transfer
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1. Risk Avoidance Sports and entertainment marketers need to
plan to avoid risky situations. liable
the business is legally responsible for damages that occur.
A business does not want to be held liable, so they take extra steps to reduce liability through controllable risks, such as ____________, ______________, and ____________.
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2. Risk Insurance
risk insurance pays for predictable losses
premium cost of insurance
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3. Risk Transfer
Transferring risk to another company or to the consumer Ex: Statement on the back of event tickets
Statement says promoter is not responsible for any harm to ticket holder.
By accepting ticket attendee agrees to accept liability for possible risks.
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Briefly describe the 3 strategies for managing risk.
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Lesson 2.3
Financial Analysis
Goals Discuss sources of funding and
revenue for sports and entertainment businesses.
Describe four tools for financial analysis.
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Terms return on investment forecast budget balance sheet income statement
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IT TAKES MONEY
Profit is the primary purpose of sports and entertainment marketing.
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Finding Funding
Investors generally provide the funding for an event to cover all the costs that must be incurred before tickets are ever sold.
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Costs that must be incurred before tickets are ever sold Salaries for cast and crew (play or
concert) Facilities maintenance costs Promotion/marketing costs
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the income from a venture that is distributed to investors
In return for taking a chance(investing $$) to cover costs of a business the investor seeks return on investment (ROI).
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Money Sources Funds to repay investors are raised through
ticket sales broadcast rights - television contracts are
increasing, therefore advertising (commercial) fees are increasing
Licensing - Legal right to reproduce a team’s logo in exchange for payment
Facilities - sponsor advertisers(signage), rental of concession stands and % of sales, rental of luxury boxes, and parking fees.
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Name three sources of revenue from sports and entertainment.
Read Money Source paragraph on pg.49 in textbook.
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Assets and Liabilities
Assets =Items of value Cash Property Equipment
Liabilities= amounts owed for purchases made on credit or loans
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WHERE IS THE MONEY?
forecast a plan that predicts the expenses to be
incurred and the revenues to be received
In 2008, the average feature film cost the major studios $72 million to produce and $37 million to promote. A forecast would help a movie studio predict ahead of time the expenses of the movie in comparison to their compared (believed earnings the film will make).
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BUDGETS
Forecast helps plan the budget!! budget
a plan for how available funds will be spent The purpose of a budget is to control
costs so they do not exceed the funds available.
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Financial Statements
balance sheet net worth = assets – liabilities shows net worth at a specific point in time
income statement shows revenues and expenses for a
specific period of time reveals company’s profit or loss
Difference between assets and
liabilities…ideal to have more assets
Investors will want to look at a forecast, budget, and the
financial statements before making a
decision.