Sports and the Economy

March 11, 2015PHED 1007

Objectives• Explore how the economic interest in sports

effects how sports are played and the athletes who play it

• This chapter focuses on professional male sports in the United States.

“Sports is not simply another big business. It is one of the fastest growing industries…and it is intertwined with virtually every aspect of the economy….Sports are everywhere, accompanied by the sound of a cash register ringing…”

~ Editor at Financial World magazine

Brainstorm ways that sports are related to the

economy• E.g., what parts of it can generate income?

Emergence and Growth of Commercial Sports

• Commercial sports: organized and played to make money as _____________________

• Grow and prosper best under these conditions:1. Most prevalent where _____________ ____________are

highly valued by athletes, team owners, event sponsors and spectators

2. Usually exist in _____________________________________3. Luxury, so standard of living has to be high enough that

people have ________________________________________

Emergence and Growth of Commercial Sports

• Grow and prosper best under these conditions (cont.):4. Require large amounts _________________________________

5. _______________ sports (e.g., NHL) prosper with a favourable exchange rate

6. Most likely to _______________where lifestyles involve high rates of consumption.

Commercial Sports and Class

• Why do some sports become commercialized?

• Think about golf…is this really a sport that lends itself well to commercial presentation? o (e.g., it is difficult to stage for a live audience or televise,

difficult to arrange camera placements, no vigorous action)

Why are People Interested in

Spectator Sport?

Economic Motives and the Globalization of Commercial Sports

• Commercial sports have become global for two reasons:

• 1. Those individuals who control, sponsor and promote these sports ___________________________

__________________________________

• 2. Transnational corporation with production and distribution operations in many countries use sport to________________________________________________

Sport Organizations Look for Global

Market• Sport organizations, like any other business, looks

to expand worldwide- the NHL, NBA, MLB and NFL would be thrilled if they could sell broadcasting rights worldwide as well as their licensed merchandise.

• While this does occur on occasion, success depends on using the media to export a combination of game knowledge and athlete identification

Sport Organizations Look for Global

MarketThis is why the NBA and NHL has allowed its players to represent their own countries in the Olympic games

We have seen a significant increase in the number of international players playing in the NHL, NBA, MLB and to a lesser extent, the NFLWe also see the professional teams playing exhibition games outside North America

Corporations Use Sport as Vehicles for

Global Expansion• Certain sports capture the attention of people

world-wide. Corporations need to have symbols of success so ______________________________________

• Examples?

• Half of the world’s 100 largest economies (in terms of revenues) are corporations and not nations

• Example: _______________________

Branding• ____________________ have “branded” sports

o Many stadiums/arenas have sold naming rights to various corporations (e.g., Air Canada Centre)

o Sports events branded (e.g., Rogers Cup (tennis), RBC Canadian Open (golf)

o Teams are branded (e.g., Manchester United has sponsorship by Vodaphone, Nike, Anheuser Busch, Pepsi)

o TV commercials (e.g., Superbowl commercials)

• Is this okay? Good?• What about branding of Olympics? (McDonalds as

the “official restaurant”), schools (Pepsi or Coke)?

Commercialization and Changes in Sports• What happens when sports shift from activities

being organized for players to being activities organized for paying spectators and sponsors?

o Success depends on _____________________

How Commercial Sports are

Organized to Maximize Spectator

Interest

• __________________ is usually tied to:

o Attachment to those involved (do I know/like the teams/athletes?)

o Uncertainty of an event (will it be a close contest?)o Risk or financial rewards (how much money or personal

safety is at risk?)o Anticipated display of excellence, heroics or dramatic

expression (is it entertaining?)

How Commercial Sports are Organized to Maximize Spectator

InterestWhen spectators say they saw a “good game”, what do they mean?

1. They were attached _______________________to the people involved

2. The outcome was ___________________________3. The stakes were very high4. There were skilled, dramatic or heroic

performances.Successful commercial sports are organized to maximize the probability of the above factors

How Commercial Sports are

Organized to Maximize Spectator

Interest• ________________________:

o New sports: entertainment is the primary issue that influences internal structure and goals, less influential on old sports. E.g., beach volleyball, commercial action sports

o Old sports: • Changes to:

o Speed up actiono Increase scoringo Balance competitiono Maximize dramao Heighten attachment to teams/athleteso Provide strategic breaks (commercial time outs)

How Commercial Sports are

Organized to Maximize Spectator

Interest

• Mass audience __________________:o Many/most people lack technical knowledgeo Shift in commercial sports to emphasize hype/drama (more

universally entertaining)• E.g., figure skating – spectators less likely to see/appreciate

the technical aspects, but are wowed by the big jumps

Implications of Commercialization

• With more commercialization, athletes have less power in what the rules/conditions of sports are

• What are implications of this?

Professional Sports in North America

• Professional sports are _________________________- smaller franchises are owned by ___________or small partnerships-larger franchises are owned by _________________________

• Entertainment companies own franchises so they can control ________________________of the entertainment market

• Sport sponsorship enables companies that sell tobacco, alcohol and foods with questionable nutritional value to link their products with various sports. However, things are changing

• Example: Bill c-71 The Tobacco Act-phasing out and finally elimination of tobacco sponsorship of sports and cultural events – tennis, golf, auto racing

Amateur Sports in North America

• Amateur sports do not have _____________ but they do have commercial sponsors and governing bodies that control events and athletes.

• __________________________________(Sports Canada, CIS, Canadian Olympic Committee) work with National Sport Organizations

• Sport Canada _______________________________to its NSO’s. However, the NSO’s need to rely on __________________________to help fund their respective athletes

• Universities in Canada are looking for __________________sources of funding for its athletes as well.

Legal Status and Incomes of Athletes in

Commercial Sports• When sports are commercialized, the athletes are

____________________- professional athletes are paid while amateur athletes receive _____________within limits set by the organization that governs them

• Many people do not think of athletes as workers. They associate sports with play in their own lives and see it as fun rather than work.

Legal Status and Incomes of Athletes in

Commercial SportsLegal Status: Team sports-Initially, the team that drafted you had control over you (___________________)

-The _____________________was considered legal in sports and owners used it for many years-1976- US Federal Court rules professional athletes could become free agents-the labour disputes that have occurred usually deal with issues of players gaining more control over their careers

Legal Status and Incomes of Athletes in

Commercial Sports• Legal Status: Individual sports-varies from sport to sport-few athletes can pay for their training or equipment so they must find sponsors

Legal Status and Incomes of Athletes in

Commercial Sports• Income: Team Sports-Much publicity about the “super contracts” of the NBA, NFL, NHL and MLB, EPL Some stats-3500 minor league baseball players make between 150.00/game to 70 000/year (similar for minor league hockey players- CFL rookie running back- 35 000-WNBA-50 000/season

It is the big salaries that drive up the average for the league

Legal Status and Incomes of Athletes in

Commercial Sports• The

_____________________________________________is why so many fans no longer see players as “workers” and why they may not side with the players during a strike or lockout (Siding with owners is not always easy as well).

• We have seen a tremendous increase in salaries because of: ______________________________________

____________________________________________________

Legal Status and Incomes of Athletes in

Commercial SportsIncome: Individual Sports

Although much publicity is given to the highest paid athletes, others in individual sports have to manage their money carefullyThe vast majority of these athletes have to pay for all their expenses so they rely on corporate sponsorship

Example: BoxingSponsor or investor will cover during the “lean” years but when money is won, they will take their percentage. Many boxers do not live comfortably. “For every big-name boxer who becomes rich, there are 1000 you never hear of who end up with slurred speech, failing memory and an empty bank account” (Newfield, 2001, p. 14).

Amateur Athletes in Commercial Sports

Legal Status• Formation of AthletesCAN in 1994• Difficult for amateur athletes to gain __________over

their participation as their sporting lives are considerably shorter than their professional counterparts

IncomeThese athletes face another challenge: they generate income through their performance but do not directly benefit. Question: Will there come a time where amateur athletes go on strike to get their share of the revenue?

Conclusions• Sports are big business• Many sports are highly commercialized• Commercialization carries heavy implications for

what the sport is like and what is expected of athletes