1. Sports and Entertainment Marketing © Thomson/South-Western ChapterChapter Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics 2.2 Risk Management 2.3 Financial Analysis 2

2. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 2 Lesson 2.1 Sports and Entertainment Economics Goals Define profit and explain the profit motive. Describe types of economic utility.

3. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 3 Terms profit profit motive economics economic utility

4. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 4 THE PROFIT MAKERS profit the amount of money remaining from revenues after all expenses are paid

5. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 5 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 revenue

6. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 6 Cultural Opportunities for Profits Worldwide distribution revenue is critical for movie profits.

7. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 7 China has a tremendous movie market. the government censors movies for content pirated movies diminish theater sales Marketers must understand the markets in which sales occur.

8. Sports and Entertainment Marketing © Thomson/South-Western All time (domestic) All time (international) All time (adjusted for inflation) Chapter 2 Slide 8

9. Sports and Entertainment Marketing © Thomson/South-Western Profit Calculations In 2008, the average feature film cost the major studios $72 million to produce and $37 million to promote. $2,788,000,000 (Avatar Revenue -Domestic and International) - $ 109,000,000 (average movie expenses in 08’) $ 2,679,000,000 (Avatar’s Profit) Chapter 2 Slide 9

10. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 10 In addition to U.S. ticket sales, name two other large sources of revenue for U.S. film studios.

11. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 11 ECONOMICS economics the study of how goods and services are produced, distributed, and consumed

12. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 12 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 macroeconomics

13. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 13 Sports and Entertainment Economics economic utility the amount of satisfaction a person receives from the consumption of a particular product or service

14. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 14 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

15. Sports and Entertainment Marketing © Thomson/South-Western Movie Business form utility time utility Chapter 2 Slide 15

16. Sports and Entertainment Marketing © Thomson/South-Western Movie Business place utility possession utility Chapter 2 Slide 16 Only $8.99 a month $20

17. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 17 Go to page 35 in your book and read the example there of Types of Utility and Three Ring Utilities.

18. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 18 Lesson 2.2 Risk Management Goals Define risk and describe the categories and classifications of risk. Name and describe four strategies for risk management.

19. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 19 Terms risk risk management liable

20. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 20 RISKING IT ALL risk the possibility of financial gain or loss or personal injury

21. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 21 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

22. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 22 Natural

23. Sports and Entertainment Marketing © Thomson/South-Western Human Chapter 2 Slide 23

24. Sports and Entertainment Marketing © Thomson/South-Western Economic Changes in the business environment, such as the economy Peak = Trough = Chapter 2 Slide 24

25. Sports and Entertainment Marketing © Thomson/South-Western Risk in Disasters Top 10 Disasters that Affected Sports Chapter 2 Slide 25

26. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 26 Additional Classification of Risk Example: Theater Controllable Risk If a loss can be prevented or the likelihood of its occurrence reduced. Theater manager made sure fire exits were available and well lit, sprinkler systems working, and employees were trained for fire emergencies.

27. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 27 Additional Classification of Risk Example: Theater uncontrollable risk nothing can be done to prevent the risk Tornado blows theater away, weather can not be controlled.

28. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 28 What steps could a venue like The Times Union Center take to reduce or prevent loss or risk (controllable risk)?

29. Sports and Entertainment Marketing © Thomson/South-Western Can someone have too much risk? Along Came Polly Chapter 2 Slide 29

30. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 30 MANAGING RISK risk management preventing, reducing, or lessening the negative impacts of risk by using the strategies of 1.risk avoidance 2.risk insurance 3.risk transfer

31. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 31 1. Risk Avoidance Sports and entertainment marketers need to plan to avoid risky situations. liable the business is legally responsible for damages that occur. A business does not want to be held liable, so they take extra steps to reduce liability through controllable risks, such as ____________, ______________, and ____________.

32. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 32 2. Risk Insurance risk insurance pays for predictable losses premium cost of insurance

33. Sports and Entertainment Marketing © Thomson/South-Western 3. Risk Transfer Transferring risk to another company or to the consumer Ex: Statement on the back of event tickets Statement says promoter is not responsible for any harm to ticket holder. By accepting ticket attendee agrees to accept liability for possible risks. Chapter 2 Slide 33

34. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 34 Briefly describe the 3 strategies for managing risk.

35. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 35 Lesson 2.3 Financial Analysis Goals Discuss sources of funding and revenue for sports and entertainment businesses. Describe four tools for financial analysis.

36. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 36 Terms return on investment forecast budget balance sheet income statement

37. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 37 IT TAKES MONEY Profit is the primary purpose of sports and entertainment marketing.

38. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 38 Finding Funding Investors generally provide the funding for an event to cover all the costs that must be incurred before tickets are ever sold.

39. Sports and Entertainment Marketing © Thomson/South-Western Costs that must be incurred before tickets are ever sold Salaries for cast and crew (play or concert) Facilities maintenance costs Promotion/marketing costs Chapter 2 Slide 39

40. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 40 the income from a venture that is distributed to investors In return for taking a chance(investing $$) to cover costs of a business the investor seeks return on investment (ROI).

41. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 41 Money Sources Funds to repay investors are raised through ticket sales broadcast rights - television contracts are increasing, therefore advertising (commercial) fees are increasing Licensing - Legal right to reproduce a team’s logo in exchange for payment Facilities - sponsor advertisers(signage), rental of concession stands and % of sales, rental of luxury boxes, and parking fees.

42. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 42 Name three sources of revenue from sports and entertainment. Read Money Source paragraph on pg.49 in textbook.

43. Sports and Entertainment Marketing © Thomson/South-Western Assets and Liabilities Assets =Items of value Cash Property Equipment Liabilities= amounts owed for purchases made on credit or loans Chapter 2 Slide 43

44. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 44 WHERE IS THE MONEY? forecast a plan that predicts the expenses to be incurred and the revenues to be received In 2008, the average feature film cost the major studios $72 million to produce and $37 million to promote. A forecast would help a movie studio predict ahead of time the expenses of the movie in comparison to their compared (believed earnings the film will make).

45. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 45 BUDGETS Forecast helps plan the budget!! 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.

46. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 46 Financial Statements balance sheet 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 Difference between assets and liabilities…ideal to have more assets Investors will want to look at a forecast, budget, and the financial statements before making a decision.

47. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 47 What is the purpose of a forecast? Forecast helps plan the budget!!

48. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 48 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.

49. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 49 Explain the benefits of increased revenue for consumers of foot-ball tickets. Demonstrate knowledge of appropriate pricing strategies.

50. Sports and Entertainment Marketing © Thomson/South-Western Chapter 2 Slide 50 THINK CRITICALLY 1.Why have an increasing number of universities varied ticket prices to games based upon the opponent? 2.Why must universities consider the consumer before raising ticket prices? 3.If games become to expensive to attend, what other options do consumers have to watch the games? 4.How much revenue would be generated from the seven games if ticket prices were $40 all season long?