Financial status of professional sport Flashcards
labor stability, controlling cost, brand image, rising ticket prices, franchise movement, continued growth
challenges facing pro leagues
getting young millennials to games, in-venue affordability, competition between venue and watching at home, finding more uses for sports facilities, design/building efficient venues
challenges facing pro leagues
Why is parity important?
Maintain fan’s interest
Make all teams in the league viable
Affect overall income of the league in the long terms
Things to provide parity
luxury tax, salary cap, reverse draft, revenue sharing
Drivers of Franchise Values
local market conditions
league-wise economics
venue economics
lease agreement
lease agreement
How generous? Stadium revenues?
venue economics
New stadium? # of luxury seats?
league-wise economics
Generous revenue sharing?
local market conditions
Market size
Competitors
Sponsorship/advertising/ Naming Right contracts
VS. variable revenue
Give financial stability
Bigger portion of ____ more financial stability
Have a positive impact on team value
Contractually Obligated Income (COI)
E.g.) MLS, Arena Football League
All players and coaches are considered employees of the league
Centralized control over payroll (league-imposed salary limit)
Individual team operators own a stake in the league, and share the profits or losses of the org. on a league-wide basis
Benefit?
Shared risk / greater cost certainty
Disadvantage?
Possible Power struggle
Magic Jack vs WPS
Free Rider
Single entity structure
4 legal accounting maneuvers used by owners
A. Owners may pay themselves salaries.
B. Shifting revenues among different entities the owner has.
Owners might have team, stadium, TV outlet etc.
C. Player depreciation
Roster Depreciation Allowance (RDA)
50/5 rule or 100/15 rule (since 2004)
D. Owners declare an annual operating loss for the team and then apply that loss to income gained from other sources, thus decreasing amount of income tax paid.
