SPORTS BUSINESS PRACTICES FINAL EXAM QUESTIONS ANSWERED CORRECTLY
What does the business of sport have in common with traditional businesses and what is
different? - Answers -both are competitors that want to sell a product
-both have rules and regulations
-social issues similar
-in sports, the competitors must cooperate in order to be profitable and successful
-sports industry has found a way to avoud oayinf for labor
-in sport, businesses go beyond the competition
4 categories of major changes in the business of sport - Answers 1. Ownership Structure -
entertainment complexes, "disneyfication"
2. A new media world
3. Real Estate Management issues with stadium changes ex: Braves new park leading to new
community
4. League Policies- the way revenue is distributed between players & teams has changed
drastically
Disneyfication - what is the goal? - Answers -Sports team owners expanding their facilities to
capture pre and post game spending by fans, as well as sports teams serving as anchors for
larger real estate developments
-more amenities/entertainment (monopolize revenue streams around the stadium)
Media changes - Answers expanded broadcasting of sport and sharp revenue increases
*sports have become more than just selling tickets
ex: the increasing NFL broadcasting revenue
what does it mean that sports are "appointment-viewing" product? - Answers nobody is
watching the Super Bowl on Monday, they watch in the moment
,Stadium changes - Answers -focus on single-purpose stadiums
-rise in luxury seating (rise in this has led to reduction in suites to create more options at various
prices)
-entertainment emphasis
How do changes in sports league policies & player rights impact competition and distribution of
revenue? - Answers -drafts, salary caps, luxury taxes
-revenue sharing between owners and with players
Giants & A's Case Study - Territorial Rights - Answers -A's want to move to a stadium to be built
in San Jose which is part of GIANTS territory
-Giants paid for the stadium without public funding so they feel they established themselves
What functions do sport leagues serve for their clubs? - Answers 1. Structure/Ownership
2. Rules & regulations
3. Revenue sharing & Competitive balance
4. Draft order
5. Territorial Rights/Boundaries
Territorial Rights - Answers where a team is established
-leagues control location of teams to maximize the product
-helps teams avoid competition for local fans, media broadcasting, advertising revenue
-gives teams greater leverage when negotiating
Single-Entity Ownership Model , how does it work? - Answers -the league and all the teams in the
league are owned by a single ownership group
-the league employee paid by the league
*revenue is distributed EQUALLY
Distributed club ownership model - Answers -opposite of single entity
-each team has individual ownership
-individual club owners each possess independent property rights in their team
BUT agree to contractually share some rights
, *most common structure in American Pro sports
How do league maintain competitive balance? - Answers -revenue sharing
-payroll caps (salary caps and luxury taxes)
-player draft (reverse order, lottery, draft compensation)
-promotion and relegation
-expanded playoff pool
-ownership type
-schedule
revenue sharing - Answers -varies from league to league
-provides teams with an increased ability to spend more on player salaries and thus remain
more competitive
What is a salary cap? (aka payroll cap) - Answers a limit on what teams are allowed to spend on
team payroll
Hard cap - Answers -there are NO exceptions, teams are LIMITED to what cap allows them to
spend
ex: NFL
Soft cap - Answers -teams MAY spend over the limit only if they satisfy CERTAIN exceptions
-the rules limit the ability of teams to exceed the cap
ex: NBA
luxury tax - Answers luxury tax is a penalty used to deter spending above a certain amount on
team payroll
-teams are allowed to go over the amount as long as they are willing to pay the tax
what kind of cap does the MLB have? - Answers -No salary cap
-luxury tax system
*teams can reset the tax schedule by dropping below the luxury tax threshold for one season
4 key habits of thought that everyone can adapt to improve their negotiation results - Answers 1.
What does the business of sport have in common with traditional businesses and what is
different? - Answers -both are competitors that want to sell a product
-both have rules and regulations
-social issues similar
-in sports, the competitors must cooperate in order to be profitable and successful
-sports industry has found a way to avoud oayinf for labor
-in sport, businesses go beyond the competition
4 categories of major changes in the business of sport - Answers 1. Ownership Structure -
entertainment complexes, "disneyfication"
2. A new media world
3. Real Estate Management issues with stadium changes ex: Braves new park leading to new
community
4. League Policies- the way revenue is distributed between players & teams has changed
drastically
Disneyfication - what is the goal? - Answers -Sports team owners expanding their facilities to
capture pre and post game spending by fans, as well as sports teams serving as anchors for
larger real estate developments
-more amenities/entertainment (monopolize revenue streams around the stadium)
Media changes - Answers expanded broadcasting of sport and sharp revenue increases
*sports have become more than just selling tickets
ex: the increasing NFL broadcasting revenue
what does it mean that sports are "appointment-viewing" product? - Answers nobody is
watching the Super Bowl on Monday, they watch in the moment
,Stadium changes - Answers -focus on single-purpose stadiums
-rise in luxury seating (rise in this has led to reduction in suites to create more options at various
prices)
-entertainment emphasis
How do changes in sports league policies & player rights impact competition and distribution of
revenue? - Answers -drafts, salary caps, luxury taxes
-revenue sharing between owners and with players
Giants & A's Case Study - Territorial Rights - Answers -A's want to move to a stadium to be built
in San Jose which is part of GIANTS territory
-Giants paid for the stadium without public funding so they feel they established themselves
What functions do sport leagues serve for their clubs? - Answers 1. Structure/Ownership
2. Rules & regulations
3. Revenue sharing & Competitive balance
4. Draft order
5. Territorial Rights/Boundaries
Territorial Rights - Answers where a team is established
-leagues control location of teams to maximize the product
-helps teams avoid competition for local fans, media broadcasting, advertising revenue
-gives teams greater leverage when negotiating
Single-Entity Ownership Model , how does it work? - Answers -the league and all the teams in the
league are owned by a single ownership group
-the league employee paid by the league
*revenue is distributed EQUALLY
Distributed club ownership model - Answers -opposite of single entity
-each team has individual ownership
-individual club owners each possess independent property rights in their team
BUT agree to contractually share some rights
, *most common structure in American Pro sports
How do league maintain competitive balance? - Answers -revenue sharing
-payroll caps (salary caps and luxury taxes)
-player draft (reverse order, lottery, draft compensation)
-promotion and relegation
-expanded playoff pool
-ownership type
-schedule
revenue sharing - Answers -varies from league to league
-provides teams with an increased ability to spend more on player salaries and thus remain
more competitive
What is a salary cap? (aka payroll cap) - Answers a limit on what teams are allowed to spend on
team payroll
Hard cap - Answers -there are NO exceptions, teams are LIMITED to what cap allows them to
spend
ex: NFL
Soft cap - Answers -teams MAY spend over the limit only if they satisfy CERTAIN exceptions
-the rules limit the ability of teams to exceed the cap
ex: NBA
luxury tax - Answers luxury tax is a penalty used to deter spending above a certain amount on
team payroll
-teams are allowed to go over the amount as long as they are willing to pay the tax
what kind of cap does the MLB have? - Answers -No salary cap
-luxury tax system
*teams can reset the tax schedule by dropping below the luxury tax threshold for one season
4 key habits of thought that everyone can adapt to improve their negotiation results - Answers 1.
