1. Sports and Entertainment Means Business2
Sports and Entertainment Means Business
2.1 Sports and Entertainment Economics
2.2 Risk Management

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

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

4. THE PROFIT MAKERS profit profit motive
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THE PROFIT MAKERS
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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

5. Cultural Opportunities for Profits
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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

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

7. 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

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

9. Types of Utility form utility time utility place utility
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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

10. List the four types of economic utility
Chapter 2

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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

12. Lesson 2.2 Risk Management
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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

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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

14. Three Categories of Risk
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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

15. Three Additional Classification of Risk
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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.
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16. Three Additional Classification of Risk
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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.
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17. Three Additional Classification of Risk
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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

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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

19. MANAGING RISK risk management
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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

20. Strategies to Manage Risk
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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

21. Sports and Entertainment Means Business2
Sports and Entertainment Means Business
2.3 Business Ethics
2.4 Financial Analysis

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

23. 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

24. Ethics and Character Matter
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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

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

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

27. 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

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

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

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

31. 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

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

33. 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

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return on investment
the income from a venture that is distributed to investors
You need money to make money
Chapter 2

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

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

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

38. 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

39. 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

40. What is the purpose of a forecast?
Chapter 2