Professional Sports Big League Sports

Professional Athletes Are defined by the NCAA ® as, “individuals who receive any kind of payment, directly or indirectly, for athletic participation except as permitted by the governing legislation of the association” Are individuals who earn their living playing sports Receive payment for playing sports as well as by advertising a company’s products through endorsements 2 From the Playbook: An endorsement is a public figure’s personal approval or support for a product or service. Tiger Woods is one of the highest paid athletes due to his endorsements.

Financial Impact- Big League Planning and Pricing Financial Impact : –“Big League” refers to revenue potential of the industry. Ticket prices & associated stadium income(food & memorabilia) Corporations buy groups of tickets to entertain clients Corporate/Individual sky boxes Income from Television Broadcasting (Networks pay) Expenses Cost of obtaining the best professional athletes must be considered Cost from Advertising and Events

Professional Sports Leagues Divide franchises into conferences and divisions to regulate game play and simplify scheduling. League is a group of sports team or individual athletes that compete against each other in a specific sport Include the following leagues –National Football League ® –National Basketball Association ® –Major League Baseball ® –National Hockey League ® –Major League Soccer ® –Arena Football League ® 4

Attracting a Professional Team –Independent sport teams grouped together and governed by a league agreement. (CBA) Leagues Govern: –Distribution of teams –Locations of teams –Number of franchise teams allowed to operate

Franchise Success Success Measured : Owners generally find success in making money Managers or coaches measure success in winning Players find success in winning and reaching certain statistical milestones paying them bonuses –for example, a soccer player may have incentives, or motivators, in his contract to score more goals Front office personnel such as marketing or public relations might measure success based on fan attendance 6 From the Playbook: Franchises are specific teams within a league

Why would a city want a team? Financial Advantages The stadium/arena can be used for multiple events or functions. Can be franchise-owned, sponsored or community owned The team attracts other business such as restaurants, hotels, etc. Create employment within the community. Sense of pride in a winning team –Raise morale of city –Pride for the people of the city “Image enhancement”

Attracting a Sports Team –Stadium will attract a team –Attractions within a city will attract a team –A wealthy city will attract a team –Population of town will attract team –Available infrastructure like hotels and parking

Financial Impact: Leave a city Low level of fan loyalty is a motivating factor in relocating a franchise

Sources of Revenue for Team Owners Ticket sales –NFL shares 34% with other teams Concessions Parking TV contracts –NFL gets $85 million/team League merchandise League advertising/sponsors –Pepsi and Coors official NFL Local sponsors/advertisers –Owners can strike local deals –On-field advertisement –League Signage Luxury suites Stadium Naming Rights

Record Breaking Deals In December 2011, the NFL signed a record setting television rights deal with the three major networks, Fox, NBC,and CBS that will result in the networks paying approximately ____ _____ in fees over a nine year period

Revenue Split: League Media (including TV and Radio) 55% for players vs. 45% for owners

Chapter 3 Lesson 3.2

Sports Agency Is an organization which specializes in marketing and managing sports events, sports teams and professional athletes Are composed of sports agents Help companies coordinate sports-related or sport- sponsored events Provide professionals to help athletes, coaches and teams negotiate pay, endorsements, sponsorships, etc. 15 Notable Sports Agencies- Wasserman Media Group, Creative Artist Agency, International Management Group and Octagon Notable Sports Agencies- Wasserman Media Group, Creative Artist Agency, International Management Group and Octagon

Sports Agents Handle contract negotiations with an athlete, team and corporate sponsors –these negotiations can include the following:  endorsements, licensing agreements, films, speaking engagements and personal appearances Are responsible for meeting with team owners, managers, coaches and other individuals to promote a client. Agent Video 16

Sports Agents Need to be knowledgeable regarding investments, business management, financial and risk analysis and sport trends Should have excellent communication and negotiation skills Are in constant contact with clients 17

Common Activities for a Sports Agent Meet with athletes, coaches, team owners and managers Draw up contracts and negotiate settlement offers Travel to represent clients in contract negotiations Recruit and market his or her services in various sports Coordinate photo shoots, sponsorships and endorsements 18

Benefits of a Sports Agent Help keep clients focused on the sport rather than the business Have an extensive network of contacts Knowledge of the laws and regulations of contracts, sponsorships and endorsements Serve as a guide for clients’ long-term financial success 19

Legally Speaking Places player in contact with teams and media Must know and follow NCAA and other collegiate rules. Registered with Select Sports Groups(SSG) database of agents

Agents, Managers, Ethics Sports & Entertainment celebrities earn millions from endorsing products. The spokesperson has to have perceived value. Who would you want to endorse your product? Agents promote their clients to firms with endorsement opportunities.

Handlers/ Advisors Handlers are like mentors who work closely with athletes who have trouble policing themselves Reebok (sponsor) paid a handler to help Allen Iverson behave. Nike paid a handler to help Rodman behave. Advisors are financial and business counselors

Top Schools Xavier University in Cincinnati, OH University of Oregon in Eugene Agents and business managers of athletes earned an average of $97,760 Highest-earning agents are found in Los Angeles and New York Illinois, Tennessee, Connecticut and New Jersey also fall into the highest paid category.

Elite professional athletes Sports agents usually make 4% – 15% of their athlete or client’s contract. NFL Agent averages from : $11,250 – $600,000 per client NBA Agent averages from : $9,460 – $1,120,000 per client MLB Agent averages from : $16,000 – $1,280,000 per client NHL Agent averages from : $21,000 – $480,000 per client MLS Agent averages from : $1,304 – $260,000 per client UFC Agent averages from : $250 – $75,000 per client

Player Unions Are unions joined by players Sign Collective Bargaining Agreements with governing bodies of sports leagues Offer services such as salary negotiation and player grievances –a player grievance is a dispute a player has with the league Strive for better player contracts with the league –try to get more money for the players For example the Major League Baseball ® Players Association ® (MLBPA) is a union for MLB ® players 25

Legality of It All Are contracts existing between the owners of a sport’s league and the player’s association Contain rules for player salaries Also contain requirements for salary caps Free agency is the process by which players are assigned a team; when a player is a “free agent” they are free to negotiate with any team with whom they wish to sign Defines the rules for free agency Contracts –Agreements enforceable by law and details your agreements. –Noncompete Clause- Agreement that prohibits a person from working in a business for a specific time

Lockouts Are stoppages of league play due to disagreements between players unions and the governing bodies of sports leagues Are defined by the governing bodies not agreeing to the players association demands –the governing bodies do not let the players “work” For example, the NFL ® lockout of 2011 and NBA ® lockout of 2011 occurred when the players and owners could not agree on Collective Bargaining Agreements. Even the NFL ® referees experienced a lockout in 2012 when they could not agree with NFL ® owners on a Collective Bargaining Agreement. 27

Strikes Are also stoppages of league play due to disagreements between players unions and the governing bodies of sports leagues Are defined by the players association not agreeing to the governing bodies demands –the players refuse to work under the agreement For example, Major League Baseball ® underwent a strike in 1994, and cancelled the World Series™ due to continued disagreements between the MLBPA and MLB ® for a new Collective Bargaining Agreement 28

Positive Image Is a major factor for an athletes who endorse products –an athlete’s image is one of their most valuable assets –negative publicity can severely damage an athlete’s image –most endorsement contracts include clauses or statements releasing the company from the contract if the athlete’s image changes 29 Negative publicity- anything which places the athlete in a negative light

Ethical Behavior

Ethics – system of what is right and wrong Lack of ethics can result in publicity that can undo a players entire career. Head-butted his newlywed wife during an arguments and arrested. The six-time Pro Bowl receiver was released by the Dolphins later that evening.

Performance Enhancing Drugs Are substances such as steroids or steroid based compound which are taken to increase performance Are a prominent issue in all of sports Have been taken by many professional athletes Will be an especially large issue in future years as money and media coverage of professional sports increase 32 From the Playbook: Athletes who have been accused of using performance enhancing drugs are Barry Bonds, Jason Giambi, Gary Sheffield, Marion Jones, Justin Gatlin, Shawne Merriman and many others.

Prime Example- Kobe Bryant McDonald's dropped Bryant -$10 million endorsement deal. Coca-Cola pulled Bryant Sprite ads and replaced him with LeBron James. LeBron James Lost $4 million and $6 million in endorsement income because of the sexual assault case.

Latrell Sprewell Lost sponsorship because: Choked his coach Lost his endorsement deal with Converse contract was worth between $500,000 and $700,000 a year.

Earvin "Magic" Johnson Sponsor: Pepsi & Converse Lost sponsorship because: Contracted HIV because he cheated on his wife Lost estimated $12 million in endorsement

Tiger Woods $100 million dollars a year – endorsement deals. “We no longer see a role for Tiger in our marketing efforts and have ended our relationship," a Gatorade spokeswoman said. "We wish him all the best.“ Current Endorsements Nike: $30million deal --Accenture: $20-million deal --Gillette: $15-million deal --Electronic Arts : $8-million deal

Highest Paid Athletic endorserrs Maria Sharpova (22 million ( Avon, mike Samsung, tag heuer, Evian, head) Usain Bolt (23million Puma, Gatorade, Hubolt, Nissan) Christiano Ronaldo (28 million Nike, Toyota, Samsung, Tag Heuer, Herbalife, Emirate) Rafael Nadal 30 million Nike, Kia, Babolat Kobe Bryant 32 million Nike, Panini, Levovo, turkish Airlines Lionel Messi Futball Club Barcelona (43 million Adidas, PepsiCo Ea Sports, Turkish Airlines, Gillette) Phil Mickelson 48 million Callaway, KPMG, Rolex, ExxonMobil, Amgen, Barclays Roger Federer (52 million – Rolex, Credit Suisse, Wilson, Gillette, Nike, Mercedes – Benz) Lebron James (53 million Nike, Upper Deck, Mcdonalds, Samsung, Dunkin Brand, Coca-Cola, Beats by Dre) Tiger Woods 55 Million Nike, Rolex, Upper Deck NetJet