FINANCIAL ADMINISTRATION OF SPORTSUBTITLE

FACTS ABOUT THE SPORT INDUSTRY The sport industry is large and diverse.

▪The majority of the sport industry are grouped within the Arts, Entertainment, and Recreation segment.

▪This segment employs the largest seasonal and part-time workers.

▪It is estimated that sport industry grew from 47 billion in 1986 to over 200 billion currently.

▪See: Sports fast facts

▪ Football (soccer) is the most attended or watched sport in the world.

▪ Fishing is the biggest participant sports in the world.

▪ Sports command the biggest television audiences, led by the summer Olympics, World Cup Football and Formula One racing.

▪

WHAT IS FINANCE▪ Finance is the science of fund management including application of concepts like:

▪ A. Accounting

▪ B. Economics

▪ C. Statistics

▪ There are (3) interrelated concepts:

▪ A. Money & capital markets

▪ B. Investments

▪ C. Financial management

▪ Key Terms:

▪ 1. capital markets are markets for intermediate or long term debt including stocks.

▪ 2. money markets are markets that are high liquid, short term securities.

▪ 3. financial management are decision within firms regarding acquisition of funds or use of funds.

▪ 4. investments are choices made by individuals or institution.

▪ Examples of capital and money market are the New York Stock Exchange, Chicago Mercantile Markets, and Insurance and Mutual Funds.

▪ Examples of investments are Merrill Lynch, and Edward Jones.

WHAT ARE SOME OF THE RESPONSIBILITIES OF FINANCIAL MANAGERS IN SPORTS?

▪ 1. To calculate cash flow increase

▪ 2. Build a new facility.

▪ 3. Increase player payroll.

▪ 4. Decide debt financing to be used for what , when, or who.

▪ 5. Pursue efficiency of operation and resource utilization.

▪ Commonalities in the business sector:

▪ 1. Value creation.

▪ 2. increase value of the firm overtime

▪ 3. Revenue growth.

A PROFESSIONAL SPORT ORGANIZATION

GREEN BAY PACKERS

FINANCING THE OPERATIONS OF A SPORT ORGANIZATION.

FINANCING THE OPERATIONS OF A SPORT ORGANIZATION.

▪ There (5) methods to finance a sport organization operation:

▪ A. Debt

▪ B. Equity

▪ C. Retaining earning

▪ D. Government

▪ E. Gift

▪ There (5) methods to finance a sport organization operation:

▪ A. Debt

▪ B. Equity

▪ C. Retaining earning

▪ D. Government

▪ E. Gift

DEBT▪ Debt financing is when an organization borrows money that must be repaid over a

period of time, most time with interest. This either short or long term.

▪ EXAMPLE:

▪ (AR)*

▪ The New York Yankees financed a new Yankee Stadium this way.

▪ The team borrowed 105 million from a group of bank.

▪ The sport organization’s obligation is limited to repayment of the debt.

NEW YORK YANKEES

A PROFESSIONAL SPORT ORGANIZATION

EQUITY▪ Equity financing is when the owners exchange a share or portion of their ownership

for money.

▪ The owners obtain funds with incurring debt and without repaying back the funds.

▪ Disadvantage are:

▪ 1. the owners interest will be decrease.

▪ 2. the owner may lose control if the more investors are added.

▪ EXAMPLES: (RA)*

▪ Stephen Ross used equity financing to raise capital after buying the Miami Dolphins in 2009. He sold minority share to entertainers (Mark Anthony & Gloria Estefan).

▪ Green Bay Packers used 20.6 million of stock proceeds to help finance renovation of Lambeau Fields

A PROFESSIONAL SPORT ORGANIZATION

MIAMI DOLPHINS

RETAINED EARNINGSRetained earnings is when the earnings that a firm saves in order to fund operations or acquire assets.

RA*

EXAMPLE:

The Green Bay Packers reinvested retained earning to maintain a competitive and successful football operations.

GOVERNMENT FUNDING▪ Most high schools, universities, and professional sport teams receive funding from

governmental sources. Those sources could be either:

▪ 1. federal

▪ 2. state

▪ 3. municipal

▪ 4. land use

▪ 5. taxes

▪ 6. direct stadium

▪ 7. infrastructure

▪ 8. state & municipal appropriations

GOVERNMENT FUNDING (CONTINUED)▪ EXAMPLES:

▪ Giant stadium New Jersey Sport Exposition state appropriation

▪ Camden Yards Maryland Stadium Authority state appropriation

▪ Soldier Field Illinois Sport Facility Authority state appropriation

GOVERNMENT FUNDINGSTATE APPROPRIATIONS

GIFT FINANCING

▪ Gift financing are contributions made to an organization. It is the primary source of operation and investing income for major collegiate sport programs.

▪ There are two types:

▪ 1. charitable donation

▪ 2. cash or in-kind

▪ Gifts are used to:

▪ 1. offset rising cost of collegiate sports

▪ 2. build or renovate facilities

▪ 3. increase endowment of the athletic departments

EXAMPLES OF GIFT USE

THE BUSINESS OF SPORTS

DISCUSSION▪ QUESTIONS:

▪ What were the fastest growth area in professional sports? And why ?

▪ What trends do you see in the future for professional sport based on your answer?

▪ What were the fastest growth area in collegiate sports? And why ?

▪ What trends do you see in the future for collegiate sports based on your answer?

▪ Remember we are requiring research of related topic of the class. This is due next Wednesday.