FINANCIAL ADMINISTRATION OF SPORT subtitle

FACTS ABOUT THE SPORT INDUSTRY The sport industry is large and diverse. The majority of the sport industry are grouped within the Arts, Entertainment, and Recreation segment. This segment employs the largest seasonal and part-time workers. It is estimated that sport industry grew from 47 billion in 1986 to over 200 billion currently. See: Sports fast facts Football (soccer) is the most attended or watched sport in the world. Fishing is the biggest participant sports in the world. Sports command the biggest television audiences, led by the summer Olympics, World Cup Football and Formula One racing.

WHAT IS FINANCE Finance is the science of fund management including application of concepts like: A. Accounting B. Economics C. Statistics There are (3) interrelated concepts: A. Money & capital markets B. Investments C. Financial management

Key Terms: 1. capital markets are markets for intermediate or long term debt including stocks. 2. money markets are markets that are high liquid, short term securities. 3. financial management are decision within firms regarding acquisition of funds or use of funds. 4. investments are choices made by individuals or institution. Examples of capital and money market are the New York Stock Exchange, Chicago Mercantile Markets, and Insurance and Mutual Funds. Examples of investments are Merrill Lynch, and Edward Jones.

WHAT ARE SOME OF THE RESPONSIBILITIES OF FINANCIAL Managers in sports? 1. To calculate cash flow increase 2. Build a new facility. 3. Increase player payroll. 4. Decide debt financing to be used for what , when, or who. 5. Pursue efficiency of operation and resource utilization. Commonalities in the business sector: 1. Value creation. 2. Increase value of the firm overtime 3. Revenue growth.

A PROFESSIONAL Sport ORGANIZATION GREEN BAY PACKERS

FINANCING THE OPERATIONS OF A SPORT ORGANIZATION. There (5) methods to finance a sport organization operation: A. Debt B. Equity C. Retaining earning D. Government E. Gift

DEBT Debt financing is when an organization borrows money that must be repaid over a period of time, most time with interest. This either short or long term. EXAMPLE: (AR)* The New York Yankees financed a new Yankee Stadium this way. The team borrowed 105 million from a group of bank. The sport organization’s obligation is limited to repayment of the debt.

A PROFESSIONAL Sport ORGANIZATION New York Yankees

EQUITY Equity financing is when the owners exchange a share or portion of their ownership for money. The owners obtain funds with incurring debt and without repaying back the funds. Disadvantage are: 1. the owners interest will be decrease. 2. the owner may lose control if the more investors are added. EXAMPLES: (RA)* Stephen Ross used equity financing to raise capital after buying the Miami Dolphins in 2009. He sold minority share to entertainers (Mark Anthony & Gloria Estefan). Green Bay Packers used 20.6 million of stock proceeds to help finance renovation of Lambeau Fields

A PROFESSIONAL Sport ORGANIZATION MIAMI DOLPHINS

RETAINED EARNINGS Retained earnings is when the earnings that a firm saves in order to fund operations or acquire assets. RA* EXAMPLE: The Green Bay Packers reinvested retained earning to maintain a competitive and successful football operations.

THE GREEN BAY PACKERS ORGANIZATION

GOVERNMENT FUNDING Most high schools, universities, and professional sport teams receive funding from governmental sources. Those sources could be either: 1. federal 2. state 3. municipal 4. land use 5. taxes 6. direct stadium 7. infrastructure 8. state & municipal appropriations

GOVERNMENT FUNDING (continued) EXAMPLES: Giant stadium New Jersey Sport Exposition state appropriation Camden Yards Maryland Stadium Authority state appropriation Soldier Field Illinois Sport Facility Authority state appropriation

The building of high school stadiums

GOVERNMENT FUNDING State Appropriations

Gift financing are contributions made to an organization Gift financing are contributions made to an organization. It is the primary source of operation and investing income for major collegiate sport programs. There are two types: 1. charitable donation 2. cash or in-kind Gifts are used to: 1. offset rising cost of collegiate sports 2. build or renovate facilities 3. increase endowment of the athletic departments GIFT FINANCING

Examples of gift use

THE BUSINESS OF SPORTS

North American Industry Classification System Industry is large and diverse. Classification and measurement of size and scope is difficult. Large number of young, seasonal, and part-time workers Wages are relatively low Subsectors Live performances or events Historical, cultural, or educational exhibits Recreation or leisure activities

NAICS CODES

SPORT INDUSTRY’S WORTH

True/False Questions 1.______T or F The sport industry relies on the discretionary income of spectators and participants.   2.______T or F Distributed club ownership model leagues are usually structured as non-profit organizations. 3. ______T or F Yankee Stadium was financed by the team using a form of equity financing. 4.______T or F Gift financing is a minor source of operating income for major collegiate sports programs. 5.______T or F The sport industry is classified as an industry by the U.S. Census Bureau. 6. ______T or F The largest grouping of sport businesses is within NAICS 71, the Arts, Entertainment, and Recreation segment. 7.______T or F Finance is a science of the management of money. 8.______T or F The New York Stock Exchange is an example of investments. 9. _____ T OR F The Green Bay Packers reinvested retained earning to maintain a competitive and successful football operations. 10. T OR F

quiz 1. T 2.F 3. F 4. F 5.F 6.T 7. T 8. F 9. T 10. F

DISCUSSION QUESTIONS: What were the fastest growth area in professional sports? And why ? What trends do you see in the future for professional sport based on your answer? What were the fastest growth area in collegiate sports? And why ? What trends do you see in the future for collegiate sports based on your answer?