SPORT BUSINESS PRACTICES FINAL
EXAM
What does the business of sport have in common with traditional businesses and what
is different? - Correct Answers --both are competitors that want to sell a product
-both have rules and regulations
-social issues similar
-in sports, the competitors must cooperate in order to be profitable and successful
-sports industry has found a way to avoud oayinf for labor
-in sport, businesses go beyond the competition
4 categories of major changes in the business of sport - Correct Answers -1. Ownership
Structure - entertainment complexes, "disneyfication"
2. A new media world
3. Real Estate Management issues with stadium changes ex: Braves new park leading
to new community
4. League Policies- the way revenue is distributed between players & teams has
changed drastically
Disneyfication - what is the goal? - Correct Answers --Sports team owners expanding
their facilities to capture pre and post game spending by fans, as well as sports teams
serving as anchors for larger real estate developments
-more amenities/entertainment (monopolize revenue streams around the stadium)
Media changes - Correct Answers -expanded broadcasting of sport and sharp revenue
increases
*sports have become more than just selling tickets
ex: the increasing NFL broadcasting revenue
what does it mean that sports are "appointment-viewing" product? - Correct Answers -
nobody is watching the Super Bowl on Monday, they watch in the moment
Stadium changes - Correct Answers --focus on single-purpose stadiums
-rise in luxury seating (rise in this has led to reduction in suites to create more options at
various prices)
-entertainment emphasis
,How do changes in sports league policies & player rights impact competition and
distribution of revenue? - Correct Answers --drafts, salary caps, luxury taxes
-revenue sharing between owners and with players
Giants & A's Case Study - Territorial Rights - Correct Answers --A's want to move to a
stadium to be built in San Jose which is part of GIANTS territory
-Giants paid for the stadium without public funding so they feel they established
themselves
What functions do sport leagues serve for their clubs? - Correct Answers -1.
Structure/Ownership
2. Rules & regulations
3. Revenue sharing & Competitive balance
4. Draft order
5. Territorial Rights/Boundaries
Territorial Rights - Correct Answers -where a team is established
-leagues control location of teams to maximize the product
-helps teams avoid competition for local fans, media broadcasting, advertising revenue
-gives teams greater leverage when negotiating
Single-Entity Ownership Model , how does it work? - Correct Answers --the league and
all the teams in the league are owned by a single ownership group
-the league employee paid by the league
*revenue is distributed EQUALLY
Distributed club ownership model - Correct Answers --opposite of single entity
-each team has individual ownership
-individual club owners each possess independent property rights in their team
BUT agree to contractually share some rights
*most common structure in American Pro sports
How do league maintain competitive balance? - Correct Answers --revenue sharing
-payroll caps (salary caps and luxury taxes)
-player draft (reverse order, lottery, draft compensation)
-promotion and relegation
-expanded playoff pool
-ownership type
-schedule
revenue sharing - Correct Answers --varies from league to league
-provides teams with an increased ability to spend more on player salaries and thus
remain more competitive
, What is a salary cap? (aka payroll cap) - Correct Answers -a limit on what teams are
allowed to spend on team payroll
Hard cap - Correct Answers --there are NO exceptions, teams are LIMITED to what cap
allows them to spend
ex: NFL
Soft cap - Correct Answers --teams MAY spend over the limit only if they satisfy
CERTAIN exceptions
-the rules limit the ability of teams to exceed the cap
ex: NBA
luxury tax - Correct Answers -luxury tax is a penalty used to deter spending above a
certain amount on team payroll
-teams are allowed to go over the amount as long as they are willing to pay the tax
what kind of cap does the MLB have? - Correct Answers --No salary cap
-luxury tax system
*teams can reset the tax schedule by dropping below the luxury tax threshold for one
season
4 key habits of thought that everyone can adapt to improve their negotiation results -
Correct Answers -1. A willingness to prepare
2. High expectations
3. The patience to listen
4. A commitment to personal integrity
are competitive people more effective negotiators than cooperative people? - Correct
Answers -No. studies show that many cooperative people are effective negotiators.
-cooperative styles avoid blame or disclaiming fault, thus gaining an effective and good
reputation more easily
bottom line - Correct Answers -the minimum acceptable level you require to say yes in a
negotiation.
aka "walkaway" or "reservation price"
*prepare your bottom line then set it aside while you formulate your goals
positive bargaining zone - Correct Answers -when two parties have bottom lines that
permit an agreement at some point between them
negative bargaining zone - Correct Answers -when the two bottom lines do not overlap
with each other. For example, when a buyer does not have enough money in his or her
budget to meet a seller's minimum acceptable price
EXAM
What does the business of sport have in common with traditional businesses and what
is different? - Correct Answers --both are competitors that want to sell a product
-both have rules and regulations
-social issues similar
-in sports, the competitors must cooperate in order to be profitable and successful
-sports industry has found a way to avoud oayinf for labor
-in sport, businesses go beyond the competition
4 categories of major changes in the business of sport - Correct Answers -1. Ownership
Structure - entertainment complexes, "disneyfication"
2. A new media world
3. Real Estate Management issues with stadium changes ex: Braves new park leading
to new community
4. League Policies- the way revenue is distributed between players & teams has
changed drastically
Disneyfication - what is the goal? - Correct Answers --Sports team owners expanding
their facilities to capture pre and post game spending by fans, as well as sports teams
serving as anchors for larger real estate developments
-more amenities/entertainment (monopolize revenue streams around the stadium)
Media changes - Correct Answers -expanded broadcasting of sport and sharp revenue
increases
*sports have become more than just selling tickets
ex: the increasing NFL broadcasting revenue
what does it mean that sports are "appointment-viewing" product? - Correct Answers -
nobody is watching the Super Bowl on Monday, they watch in the moment
Stadium changes - Correct Answers --focus on single-purpose stadiums
-rise in luxury seating (rise in this has led to reduction in suites to create more options at
various prices)
-entertainment emphasis
,How do changes in sports league policies & player rights impact competition and
distribution of revenue? - Correct Answers --drafts, salary caps, luxury taxes
-revenue sharing between owners and with players
Giants & A's Case Study - Territorial Rights - Correct Answers --A's want to move to a
stadium to be built in San Jose which is part of GIANTS territory
-Giants paid for the stadium without public funding so they feel they established
themselves
What functions do sport leagues serve for their clubs? - Correct Answers -1.
Structure/Ownership
2. Rules & regulations
3. Revenue sharing & Competitive balance
4. Draft order
5. Territorial Rights/Boundaries
Territorial Rights - Correct Answers -where a team is established
-leagues control location of teams to maximize the product
-helps teams avoid competition for local fans, media broadcasting, advertising revenue
-gives teams greater leverage when negotiating
Single-Entity Ownership Model , how does it work? - Correct Answers --the league and
all the teams in the league are owned by a single ownership group
-the league employee paid by the league
*revenue is distributed EQUALLY
Distributed club ownership model - Correct Answers --opposite of single entity
-each team has individual ownership
-individual club owners each possess independent property rights in their team
BUT agree to contractually share some rights
*most common structure in American Pro sports
How do league maintain competitive balance? - Correct Answers --revenue sharing
-payroll caps (salary caps and luxury taxes)
-player draft (reverse order, lottery, draft compensation)
-promotion and relegation
-expanded playoff pool
-ownership type
-schedule
revenue sharing - Correct Answers --varies from league to league
-provides teams with an increased ability to spend more on player salaries and thus
remain more competitive
, What is a salary cap? (aka payroll cap) - Correct Answers -a limit on what teams are
allowed to spend on team payroll
Hard cap - Correct Answers --there are NO exceptions, teams are LIMITED to what cap
allows them to spend
ex: NFL
Soft cap - Correct Answers --teams MAY spend over the limit only if they satisfy
CERTAIN exceptions
-the rules limit the ability of teams to exceed the cap
ex: NBA
luxury tax - Correct Answers -luxury tax is a penalty used to deter spending above a
certain amount on team payroll
-teams are allowed to go over the amount as long as they are willing to pay the tax
what kind of cap does the MLB have? - Correct Answers --No salary cap
-luxury tax system
*teams can reset the tax schedule by dropping below the luxury tax threshold for one
season
4 key habits of thought that everyone can adapt to improve their negotiation results -
Correct Answers -1. A willingness to prepare
2. High expectations
3. The patience to listen
4. A commitment to personal integrity
are competitive people more effective negotiators than cooperative people? - Correct
Answers -No. studies show that many cooperative people are effective negotiators.
-cooperative styles avoid blame or disclaiming fault, thus gaining an effective and good
reputation more easily
bottom line - Correct Answers -the minimum acceptable level you require to say yes in a
negotiation.
aka "walkaway" or "reservation price"
*prepare your bottom line then set it aside while you formulate your goals
positive bargaining zone - Correct Answers -when two parties have bottom lines that
permit an agreement at some point between them
negative bargaining zone - Correct Answers -when the two bottom lines do not overlap
with each other. For example, when a buyer does not have enough money in his or her
budget to meet a seller's minimum acceptable price
