Sports and Entertainment Means Business 2 Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics 2.2 Risk Management 2.3 Business Ethics 2.4 Financial Analysis

Winning Strategies EMI one of the largest music content providers cost savings achieved through outsourcing of manufacturing in 2005, income grew due to legitimate sales of digital music the music industry embraces ever-changing technology and helps drive the economy Chapter 2

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

Terms profit profit motive economics economic utility Chapter 2

THE PROFIT MAKERS profit the amount of money remaining from revenues after all expenses are paid Chapter 2

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 Chapter 2

Cultural Opportunities for Profits Worldwide distribution revenue is critical for movie profits. Chapter 2

Marketers must understand the markets in which sales occur. China has a tremendous movie market. the government censors movies for content pirated movies diminish theater sales Chapter 2

In addition to U.S. ticket sales, name two other large sources of revenue for U.S. film studios. International Ticket Sales DVD sales DVD Rentals Sale of Movie Themed Merchandise 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 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 Chapter 2

List four types of economic utility. Chapter 2

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

Terms risk risk management liable Chapter 2

RISKING IT ALL risk the possibility of financial gain or loss or personal injury Chapter 2

Categories of Risk natural risk human risk economic risk occurs from unavoidable weather conditions human risk dishonest customers and employees inadequately trained employees economic risk occurs due to changes in the economy Chapter 2

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 Chapter 2

controllable risk uncontrollable risk if a loss can be prevented or the likelihood of its occurrence reduced uncontrollable risk nothing can be done to prevent the risk Chapter 2

insurable risk uninsurable 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 Chapter 2

What is meant by a controllable risk? Chapter 2

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 Chapter 2

Risk Avoidance Sports and entertainment marketers need to plan to avoid risky situations. liable the business is legally responsible for damages that occur Chapter 2

Risk Insurance risk insurance premium pays for predictable losses cost of insurance Chapter 2

Risk Transfer Some risks can be transferred to another company or even to the consumer. contracting with third parties for services including releases from liability on event tickets Chapter 2

Risk Retention risk retention risk retention groups assuming the cost of an uninsurable risk risk retention groups similar businesses facing similar risks pool resources resources are distributed to members that have a loss Chapter 2

Briefly describe four strategies for managing risk. Chapter 2

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

Terms ethics principles 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 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. Chapter 2

How does a person’s character develop? 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

Terms return on investment forecast budget balance sheet income statement 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. Chapter 2

return on investment the income from a venture that is distributed to investors 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

PERFORMANCE INDICATORS EVALUATED Communicate pricing strategies for supply and demand. Analyze relevant data to determine varying ticket prices for home games. Explain the need for and use of additional revenue from higher-priced tickets. Chapter 2

Demonstrate knowledge of appropriate pricing strategies. Explain the benefits of increased revenue for consumers of foot-ball tickets. Chapter 2

THINK CRITICALLY Why have an increasing number of universities varied ticket prices to games based upon the opponent? Why must universities consider the consumer before raising ticket prices? If games become to expensive to attend, what other options do consumers have to watch the games? How much revenue would be generated from the seven games if ticket prices were $40 all season long? Chapter 2