Welcome to The Financial aspects of Games!.

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Welcome to The Financial matters of Games!. Why study sports financial matters?. Games and entertainment industry is a major business. . PRE: Plunkett Research, Ltd. Why study sports financial aspects?. Games and diversion industry is a major business. Sports face one of a kind industry/firm particular issues
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Welcome to The Economics of Sports!

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Why study sports financial aspects? Games and entertainment industry is a major business.

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PRE: Plunkett Research, Ltd.

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Why study sports financial aspects? Games and entertainment industry is a major business. Games face exceptional industry/firm particular issues Sports is prominent and summons feeling/intensity. Games is brimming with myths and mixed up instinct. Frequently individuals mistake connection for causation, which financial aspects would like to help right. It is regularly a valuable vehicle for backhanded derivation in different commercial ventures.

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Overview of Course Review of Basic Economics Will to a great extent accept you know this Industrial Organization Do Teams/Leagues Maximize Profits? Do/Should Antitrust Laws Apply? Open Finance Why/how do urban communities money offices? Work Why Do Athletes Make So Much? Unions & Discrimination The NCAA, the Olympics, and Amateur Sports

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Economics Review Economics is the investigation of decisions under imperatives Who settles on decisions? Families Firms Governments We attempt to model choices in improved systems to segregate the issues that impact choice making.

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Market Model Demand shifters Income Price of related products Consumer tastes Market size Price desires Supply shifters Input costs Technology Taxes Price desires Number of firms $ S 1 P 1 D 1 Q 1 amount

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Price Elasticity Measure of value affectability Elastic interest: |E| > 1 Inelastic interest: |E| < 1 More substitutes Big spending plan things Longer time skylines

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Elasticity… TR = $50,000 $ E = ? 50 TR = $48,000 40 D 1 tickets 1000 1200

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Price Controls Price Ceilings make deficiencies make bootleg trades S 1 P 1 P roof D 1 Q 1 Q d tickets lack

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Price Controls Price Floors Create surpluses S 1 P floor P 1 D 1 Q d Q 1 tickets overflow

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Maximizing Profit Profits = p = TR - TC Profit-max guideline: MR = MC What do the NY Yankees offer? What sort of expense is Alex Rodriguez’s pay?

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Perfect Competition Assumptions Many little dealers/purchasers Homogeneous item Free passage/way out Perfect data  firms are value takers

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Perfect Competition MC $ S ATC MR = P 1 D q 1 Q 1 Quantity Market Firm

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Monopoly Relevant Market Any nearby substitutes? Passage Barriers Economies of scale Control over key info Government confinements

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Monopoly Profits are expanded where MR = MC Price is set off of interest bend $ MC ATC P 1 ATC 1 D Quantity Q 1 MR

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Pricing Strategy: Phillies versus Flyers Each is an imposing business model MC a retrogressive “L” Does it pay to offer out? $ MC 2 MC 1 P 2 P 1 Q 1 D MR Citizens Bank Park 43,500 Wachovia Center 19,500

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2006 Ticket Prices Source: philadelphia.phillies.mlb.com and philadelphiaflyers.com

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The Role of Uncertainty Are the Yankees awful for baseball? Are traditions an awful thought? How regularly ought to the home group win? Why do groups offer season tickets? Exchanges hazard from group to fans Why do fans purchase them?

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Attendance versus Winning Pct. NFL MLB

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Can Losing be Good? Cleveland Browns won all the time in AAFC Fans of AAFC lost intrigue Even Browns fans Attendance fell Attendance fell in MLB in 1950s NY groups in each World Series (kind of) Why go see Pittsburgh play Cincinnati? Study took a gander at participation in MLB Controlled for day, time, climate, nature of rival Attendance most elevated when home group won 60% of time

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Regression Analysis Regression is a type of measurable examination of monetary conduct and hypothesis. Relapse examination endeavors to clarify the difference of a specific variable of hobby. Participation Function A = f(X 1 , X 2 , X 3 , …)

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Regression Example Consider a model of baseball participation. We imagine that the accompanying things may impact general group participation in the accompanying ways A = β 0 + β 1 P + β 2 POP + β 3 C + β 4 I + β 5 QH + β 6 QV + β 7 W

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Here are some real relapse results from Depken (2000, Journal of Sports Economics )

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Franchise Economics and Owner Objectives

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Franchise Objectives Maximize benefits? Benefit = TR – TC Championships? Awful things can happen if primary concern is overlooked Case in point: Ottawa Senators Best record in NHL: 2002-2003 Declared liquidation: 2003 Ego premium? City mindedness?

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Franchise Revenues TR = R G + R B + R L + R S Where: R G = Gate Revenue R B = Broadcast Revenue R L = Licensing Revenue R S = Stadium Revenue

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Gate Revenues: R G NFL:  = 60% MLB:  = 66% NBA, NHL:  = 100% R G =  R h + (1- )R p  = home team’s offer R h = home group door R p = pooled entryway from every single other group Impact of Revenue Sharing Financial solidness (early NFL attempted to look after association); "luxury tax" in MLB Competitive equalization Shifts reserves from groups that spend a ton on great players to groups that don\'t; has a tendency to discourage what groups are WTP for players (“tax on quality”)

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Broadcast Revenue: R B National income is shared just as Local income is not shared similarly KC: A little market for MLB however not NFL Green Bay would have vanished Tradeoff: R B versus R G ?  power outages What decides telecast rights installments? Request by Advertisers Super Bowl XLIII: NBC got $206m for 69 spots ($3m per 30 seconds)

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Broadcast Money Trail

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Source: different sources

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Stadium Revenue: R S Concessions Parking Naming rights: aces; universities; people Luxury seats don\'t consider entryway, in this way, don\'t need to share Example : extravagance suite rents for $500,000 every year 20 seats assert every seat is worth $50  group must share $3200 = 0.4 * 20 * $50 * 8 amusements

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Why have we seen a move to little markets by NFL groups? Rams: LA  St. Louis Raiders: LA  Oakland Oilers: Houston  Nashville Browns: Cleveland  Baltimore Revenue Sharing is the key!

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Licensing Revenue: R L Generally imparted to all groups Cowboys softened positions with NFL up 1995 by marking Pepsi for stadium sponsorship

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Franchise Costs + OC TC = C P + C A + C T + C S Player Salaries Over half of group incomes Deferred pay Bonuses Workers’ comp Pension commitments Player Development MLB and NHL Administrative Coaches and administration Marketing Travel Stadium Opportunity Costs: Profit that could be earned in another city

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Average expenses and incomes (in millions) over the significant games in 2006

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Accounting Games Book Profit and Depreciation Profit = TR – TC Corporate charges rely on upon book benefit Paying high authoritative expenses lessens book benefit Interest is assessment deductible (profits are not) Player contracts are dealt with as depreciable resources Bill Veeck San Antonio Spurs illustration Costs incorporate premium costs and deterioration of capital

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Table C San Antonio Spurs Depreciation and Tax Savings 1993-4/1994-5 (All figures in $millions)

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Accounting Games Vertical Integration Media outlet purchases games group AOL Time Warner  Atlanta Braves Tribune Company  Chicago Cubs Disney  Anaheim Angels/Anaheim Ducks FOX  LA Dodgers Double syndication?

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Downstream Firm (Network) Upstream Firm (Team) P down Vertically coordinated firm sets exchange cost to allot benefit crosswise over consolidated substance Set low telecast rights expense to diminish group benefits keeping in mind the end goal to argue neediness amid campaigning for open endowment MC P up MC D MR Q up Q down

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League Decisions Cincinnati Red Stockings (1869) “barnstorming” National League (1876) $0.50 tickets No Sunday amusements No brew American Association (1882) $0.25 tickets on Sunday with lager!

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League Decisions Setting the Rules # amusements, diversion design, gear Limiting Entry Teams Benefits: Entry expense More income sources Costs: Sharing of class incomes Reduced topographical restraining infrastructure Reduces danger of moving New groups: ABA, WHA, AFL, USFL vast Marketing Free-rider issue Competitive Balance and Revenue Sharing

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If a group dependably offers out its home recreations, financial specialists would say it is likely that: A surplus exists There is overabundance supply There is abundance interest Prices are too high

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If an industry is a syndication, yield is _____ and costs are _____ than if it were flawlessly focused. Lower, lower Higher, Lower, Higher, higher

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If interest for tickets to see the LA Lakers is inelastic, Fans will react to a cost increment with a relative lessening in amount requested. fans will react to a cost increment with a not as much as relative diminishing in amount requested. fans will react to a cost increment with a boundlessly huge lessening in amount requested. fans will react to a cost increment with a more than corresponding abatement in amount requested.

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If pay expands and tickets to see a Notre Dame football game are a typical decent then the interest for tickets will diminish. supply of tickets will increment. interest for tickets will increment. supply of tickets will diminish.

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The way that participation ascends at baseball stadiums amid “bobblehead” days proposes ball games and bobbleheads are supplements. ball games and bobbleheads are substitutes. ball games and bobbleheads are typical merchandise. No data about ball games and bobbleheads can be resolved from this.

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A negative part of hostile to scalping laws is they counteract offer outs. they make individuals pay more than they are willing to

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