Sports and Entertainment Means Business 2 Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics 2.2 Risk Management

Lesson 2.1 Sports and Entertainment Economics Goals Define profit and explain profit motive Describe types of economic utility Chapter 2

CHAPTER 19 2/18/2019 Do Now Discuss with the person next to you the reasons to run a business (this includes sports teams and concerts). Chapter 2

THE PROFIT MAKERS profit profit motive CHAPTER 19 THE PROFIT MAKERS 2/18/2019 profit the amount of money remaining from revenues after all expenses are paid revenue 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 Profit is the motive for taking risks needed to start and operate a business. Chapter 2

Cultural Opportunities for Profits CHAPTER 19 2/18/2019 Cultural Opportunities for Profits Worldwide distribution revenue is critical for movie profits. China has a tremendous movie market. The government censors movies for content Pirated movies diminish theater sales Movie profits – international ticket sales increases revenue by 50% to 100% over domestic ticket sales = INTERNATIONAL MARKET IS HUGE Marketers must understand the markets in which sales occur. Chapter 2

ECONOMICS economics the study of how goods and services are produced, distributed, and consumed Chapter 2

Sports and entertainment marketers are focused on microeconomics. macroeconomics 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 Chapter 2

Sports and Entertainment Economics economic utility the amount of satisfaction a person receives from the consumption of a particular product or service Chapter 2

Types of Utility form utility time utility place utility CHAPTER 19 2/18/2019 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 Examples applied to movie industry: Form: 16-mm full length film to DVD, Time: several diff showings of same movie throughout the day, Place: available for purchase or rental for home viewing, Possession: affordable with convenient options – renting vs buying the movie with more than 1 payment option Chapter 2

List the four types of economic utility Chapter 2

CHAPTER 19 2/18/2019 Do Now What is risk? What does Harbor Yard or Bluefish Stadium do to reduces the risk of injury to an attendee during a concert or game? Everyone knows the strategy and what needs to be done in case of an emergency. Well marked paths for students to follow. What is risk? Chapter 2

Lesson 2.2 Risk Management CHAPTER 19 2/18/2019 Lesson 2.2 Risk Management Goals Define risk and describe the categories and classifications of risk. Name and describe four strategies for risk management. Chapter 2

CHAPTER 19 2/18/2019 RISKING IT ALL risk the possibility of financial gain or loss or personal injury What are some risks you take on a daily basis? Chapter 2

Three Categories of Risk CHAPTER 19 2/18/2019 Three 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 Examples: 1. storms: Hurricane Katrina, 2. theft: Cheating on a test or stealing from your employer, 3. business: Banking crisis that turned into the housing crisis Each of these can be further classified into the following three. **Pass out Categories of Risk WS** Chapter 2

Three Additional Classification of Risk CHAPTER 19 2/18/2019 Three Additional Classification of Risk gain or loss risk speculative risk either a gain or loss could result pure risk a chance of an event occurring that could only result in a loss Examples: Speculative: investing in the start up of a sports team – the team will either be successful and make the investor a lot of money or not enough fans the team will no longer exist. Pure: your house will be destroyed due to natural disaster – unlikely there is any potential benefit from this risk. Chapter 2

Three Additional Classification of Risk CHAPTER 19 2/18/2019 Three Additional Classification of Risk controllable or uncontrollable risk controllable risk if a loss can be prevented or the likelihood of its occurrence reduced uncontrollable risk nothing can be done to prevent the risk Examples: Controllable: Proper fire exits & strategies in this school. Uncontrollable: A hurricane demolishing the school. Chapter 2

Three Additional Classification of Risk CHAPTER 19 2/18/2019 Three Additional Classification of Risk Insurable or Uninsurable risk insurable risk a pure risk for which the chances of loss are predictable and the amount of the loss can be estimated uninsurable risk the chance that a dollar loss could occur the amount of the loss cannot be estimated Examples: Insurable: Car accidents. Uninsurable: Loss of revenue for a sports team whose ticket sales drop. Chapter 2

CHAPTER 19 2/18/2019 What are four steps a sports venue could take to avoid risk of injury to fans attending games? Well-lit, Fire exits, Security personnel, EE’s trained in emergency procedures, Video surveillance, Controlled access to public and private areas Chapter 2

MANAGING RISK risk management CHAPTER 19 2/18/2019 MANAGING RISK risk management preventing, reducing, or lessening the negative impacts of risk by using the strategies of risk avoidance, risk insurance, risk transfer, and/or risk retention Managing risk = taking action to prevent, reduce, or lesson the negative impacts of risk Chapter 2

Strategies to Manage Risk CHAPTER 19 2/18/2019 Strategies to Manage Risk Risk Avoidance – precautions to avoid risky situations Risk Insurance – buy insurance for predictable risk Risk Transfer – put the liability on another company or even the customer Risk Retention – retain money to cover the cost of a given risk Examples = Avoidance – security cameras, Insurance – fire insurance, Transfer – signing a contract before going bungee jumping, Retention – having a large deductible on insurance policy. Chapter 2

Sports and Entertainment Means Business 2 Sports and Entertainment Means Business 2.3 Business Ethics 2.4 Financial Analysis

Lesson 2.3 Business Ethics Goals Define ethics. Discuss the impacts of unethical behavior. Chapter 2

DO ETHICS COUNT? ethics a system of deciding what is right or wrong in a reasoned and impartial manner Business should be conducted with integrity, trust, and fairness. Chapter 2

Ethics and Character Matter CHAPTER 19 2/18/2019 Ethics and Character Matter principles high standards of rules and guidelines character development a progression in behavior where people advance from childish behavior to mature behavior based on principles Young people need good role models. Why are athletes and celebrities held to a higher standard than other people? Because young people look up to them. Chapter 2

Prepare a 3 minute skit to show what ethics is. be sure you can explain the relevance make sure it is appropriate Chapter 2

BUSINESS BEHAVIOR People and businesses should act ethically while pursuing a profit. Chapter 2

Seeking an Advantage Sometimes it is hard to continue to act ethically when you observe people who receive a benefit from acting unethically. Chapter 2

When Being Bad Profits Only fans can really influence the behavior of ethically challenged athletes and celebrities. Chapter 2

Effective and Ethical Good decisions are both ethical and effective. Good decisions are the right choices for the long term. Chapter 2

How can the bad behavior of celebrities be controlled? Chapter 2

Lesson 2.4 Financial Analysis Goals Discuss sources of funding and revenue for sports and entertainment businesses. Describe four tools for financial analysis. Chapter 2

IT TAKES MONEY Profit is the primary purpose of sports and entertainment marketing. Chapter 2

Finding Funding Investors generally provide the funding for an event to cover all the costs that must be incurred before tickets are ever sold. Would you be willing to provide funding to boost someone’s career? Why or Why not? Chapter 2

CHAPTER 19 2/18/2019 return on investment the income from a venture that is distributed to investors You need money to make money Chapter 2

Money Sources Funds to repay investors are raised through ticket sales broadcast rights licensing facilities Chapter 2

Name three sources of revenue from sports and entertainment. Chapter 2

WHERE IS THE MONEY? forecast a plan that predicts the expenses to be incurred and the revenues to be received Chapter 2

BUDGETS 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. Chapter 2

Financial Statements balance sheet income statement 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 Chapter 2

What is the purpose of a forecast? Chapter 2