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2. SPORTS SYSTEMS
• Sport has the:– Universality of economy– Specificities of cultures
and national histories several systems of
organization
1. Comparative study
2. Focus on US sports
3. Conclusion
I. Comparative study :2 opposed philosophies
SPORTS MOVIES
CULTURAL
ACTIVITY
NON-PROFIT
SOCIAL EDUCATION
BUSINESS
ACTIVITY
PROFIT
ENTERTAINMENT INDUSTRY
SHOW
ACTIVITY FORTHE BODY (TRAINING)
ACTIVITY FORTHE MIND (ART)
The « strict » state sport system« State management, state funding »
(ex: formerly in Communist countries)
GovernmentalAuthorities
State SportFederations
AmateurAthletes (officially)
StateClubs
Arrow = power relationship
UniversitiesSchools
Youngsters
The « welfare » state sport system« More independent management, but mostly state funding »
(ex: formerly in France)
GovernmentalAuthorities
Nat. SportFederations
Non-profitAssociations
Arrow = power relationship
UniversitiesSchools
Internationalfederation/league
Other countries’systems..
Amateurathletes
ProfessionalAthletes
« Grey »athletes
« The Club »
(Affiliation Number)
The « sport club » system (ex: France ) « Amateur are mostly state-ruled. Professional are mostly private »
GovernmentalAuthorities
Nat. SportFederations
Amateurathletes
Non-profitAssociations
National SportLeagues
PrivateCompanies
Internationalfederation/league
ProfessionalAthletes / Unions
NB: important influence of public stadia on private sport business in this system
UniversitiesSchools
EuropeanUnion
Professional sport Public sphere
7
Sport Institutions in France
City Council
General Concil
Regional Council
Association
D.O.S
R.O.C
N.O.C.
Regional Committees
District Committee
Federations
Territories Sport Organizations State
D.R.J.S
D.D.J.S
MinisteryStaffSubsidies INSEP
Primary SchoolsCity premisesLocal events
High SchoolAides aux équipements
High SchoolSubsidies to high-level athletesOwnership of big premises
CompetitionsEducation of trainersTechnical supervision
ContractFunding/services
Selection of athletes
subsidies
subsidies
FeesHigh-level
Staff
Staff
Arrows : mostly subsidies in exchanges of services and goals
IOC + SPONSORS LOTTERY & NATIONAL TAXESLOCAL TAXES
The « liberal » sport system (ex: GB, Italy)« Amateur are purely state-ruled, Professional are purely private »
GovernmentalAuthorities
Nat. SportFederations
Amateurathletes
Non-profitAssociations
National SportLeagues (assoc.)
IndependentCompanies
ProfessionalAthletes / Unions
Professional sport Public sphere
UniversitiesSchools
Internationalfederation/league
EuropeanUnion
The « closed » sport system« Common rules with mostly private funding »
(ex: USA)
GovernmentalAuthorities
NCAA
Non-profitAssociations
Major & MinorLeagues (franchisers)
PrivateFranchisees
Internationalfederation/league
ProfessionalAthletes / Unions
Universityclubs
UniversityAmateur athletes
Amateurathletes
Schools
Collegiate SportProfessional sport Public sphere
II. Focus on US Sport system• Professional sport
1. US sport's rich list2. The franchise system
a. Franchise ownership & value
b. Premises ownership, naming and permanent seat licences
c. The Commissionerd. The “Franchise Free
Agency” 3. Professional athlete
employmenta. The defunct reserve clause
and the “athletes free agency system”
b. The draft systemc. Salary caps
General considerations
• 4 Major Leagues : NFL, NBL, NBA, NHL– Conference system– Subdivided in divisions
• Minor Leagues :– 7 divisions AAA, AA , A (high & low), 3 short season leagues.
• Collegiate sports : 5 divisions
• Some marginal semi-pro leagues
• Pro-tours in individual sports organized by private companies (PGA Tour, PGA of America, …)
NCAA Organization
« Principle of Sport Management »
Team revenues
0
10
20
30
40
50
60
70
80
MLB NFL NBA NHL
Gates receipts
Media rights
Venuerevenues
Miscellaneous
Salaries
USSports Teams – income comparisons (Top 10)
Position Club Income (€m)
1 New YorkYankees MLB 243.8
2 WashingtonRedskins NFL 197.7
3 BostonRed Sox MLB 184.6
4 SeattleMariners MLB 181.1
5 DallasCowboys NFL 172.4
6= San Fransisco Giants MLB 168.1
6= Houston Texans NFL 168.1
8 New England Patriots NFL 164.6
9 Cleveland Browns NFL 151.5
10 New York Mets MLB 150.6
Source: FooballBusiness International
1) US sport's rich list
Summary of the Deloitte Football Rich List, published in conjunction with FootballBusiness International
Position(Prior year position)
Club Income(€m)
1 (1) Manchester United 251.4
2 (2) Juventus 218.3
3 (4) AC Milan 200.2
4 (6) Real Madrid (#1 in 2005 with 312 M$) 192.6
5 (3) Bayern Munich 162.7
6 (12) Internazionale Milan 162.4
7 (8) Arsenal 149.6
8 (5) Liverpool 149.4
9 (13) NewcastleUnited 138.9
10 (7) Chelsea 133.8
11 (10) AS Roma 132.4
12 (15) Borussia Dortmund 124.0
13 (9) Barcelona 123.4
14 (n/a) Schalke 04 118.6
15 (16) Tottenham Hotspur 95.6
16 (11) LeedsUnited 92.0
17 (14) SS Lazio 88.9
18 (17) Celtic 87.0
19 (20) Olympique Lyonnais 84.3
20 (n/a) Valencia 80.5
Source: Sport Business Group at Deloitte 2004
2) The franchise system
FRANCHISER(League)
FRANCHISEE(Team)
Redistributionto handicap big teams
and to maintain winning chancesof smaller teams
RoyaltiesPart of ticket fees
Part of local TV rights
National Media contractsNational Sponsorship
Local Media contractsLocal SponsorshipStadia revenues
Money Prizes
Franchise solidarity
• The most egalitarist: field sports
– MLB • splits national
broadcasting and licensing revenues equally among its 30 teams
• Local rights are also redistributed from 20-34% especially from big cities to smaller areas
– NFL : • 62% of the revenues are
equally shared. • Only stadium earnings are
differenciating teams
• The most inegalitarist: arena sports
– NBA• Shares only 1/3 of its
revenue– NHL
• Shares only 12% of its revenues
2a) Franchise ownership and brand value
• Washington Redskins NFL– Daniel Snyder $952 M
• Dallas Cowboys NFL – Jerry Jones $851 M
• Houston Texas NFL– Robert McNair $791 M
• New England Patriots NFL – Robert Kraft $756 M
• New York Yankees MLB – George Steinbrenner $730 M
• Cleveland Browns NFL
– Randy Lerner $695 M
• Denver Broncos NFL
– Pat Bowlen $683 M
• Tampa Bay Buccaneers NFL– Malcolm Glazer $671 M
(Deloitte 2003)
FORBES FRANCHISE VALUES
Team League Owner ValueWashington Redskins NFL Daniel Snyder $952 million Dallas Cowboys NFL Jerry Jones $851 million Houston Texas NFL Robert McNair $791 million New England Patriots NFL Robert Kraft $756 million
New York Yankees MLB George Steinbrenner $730 million Cleveland Browns NFL Randy Lerner $695 million Denver Broncos NFL Pat Bowlen $683 million Tampa Bay Buccaneers NFL Malcolm Glazer $671 million Baltimore Ravens NFL Steve Bisciotti $649 million Carolina Panthers NFL Jerry Richardson $642 million Miami Dolphins NFL Wayne Huizenga $638 million Detroit Lions NFL William Ford $635 million Chicago Bears NFL McCaskey Family $621 million Tennessee Titans NFL Bud Adams $620 million Philadelphia Eagles NFL Jeffrey Lurie $617 million Seattle Seahawks NFL Paul Allen $610 million Green Bay Packers NFL Public $609 million Pittsburgh Steelers NFL Dan Rooney $608 million St. Louis Rams NFL Georgia Frontiere $602 million Kansas City Chiefs NFL Lamar Hunt $601 million New Orleans Saints NFL Tom Benson $585 million Oakland Raiders NFL Al Davis $576 million New York Giants NFL W. Mara/P. Tisch $573 million Jacksonville Jaguars NFL Wayne Weaver $569 million San Francisco 49ers NFL Denise DeBartolo York $568 million New York Jets NFL Woody Johnson $567 million Buffalo Bills NFL Ralph Wilson $564 million Cincinnati Bengals NFL Mike Brown $562 million San Diego Chargers NFL Alex Spanos $561 million Indianapolis Colts NFL Jim Irsay $547 million Minnesota Vikings NFL Red McCombs $542 million Atlanta Falcons NFL Arthur Blank $534 million Arizona Cardinals NFL Bill Bidwell $505 million New York Mets MLB Fred Wilpon $482 million Los Angeles Lakers NBA Jerry Buss $447 million Los Angeles Dodgers MLB News Corp. $435 million Boston Red Sox MLB John Henry $426 million Atlanta Braves MLB AOL/Time Warner $424 million New York Knicks NBA C. Dolan/J. Dolan $401 million Seattle Mariners MLB Hiroshi Yamaguchi $373 million Cleveland Indians MLB Larry Dolan $360 million Texas Rangers MLB Tom Hicks $356 million Chicago Bulls NBA Jerry Reinsdorf $356 million San Francisco Giants MLB Peter Magowan $355 million Colorado Rockies MLB Jerry McMorris $347 million Dallas Mavericks NBA Mark Cuban $338 million Houston Astros MLB Drayton McLane $337 million Philadelphia 76ers NBA Comcast Corp. $328 million Baltimore Orioles MLB Peter Angelos $319 million
Qualitative assessmentby BRAND-value
• New York Yankees (334 m$)• Dallas Cowboys (300m$)• Los Angeles Lakers (272 m$)• New York Knicks• Washington Redskins• New York Giants• Chicago Bulls• New York Rangers• Green Bay Packers• Detroit Red Wings
Source: Future Brand 2002
2b) Premises ownership
• Private :– Indianapolis Speedway :
• World’s #1 : 250,000 sp.
• The Hulman Family– Owners since 1945
Premises ownership
• Public – Michigan
Stadium– US #1 in the
Majors (107,501 seats)
– University of Michigan (State of Michigan)
Premises ownership
• Private– Stadia + franchise– The 1st to be entirely
privately financed– Dolphins stadium
• H. Wayne Huizega• Also owner of the Miami
Dolphins, Miami Marlins, …
Naming• Naming rights
– the right to name a piece of property, either tangible property or an event, usually granted in exchange for financial considerations (wikipedia.com)
– Pionneer in sport : Anheuser-Bush Stadium, in St-Louis (1966-2005)
– Average price : $ 2 M/13y.– Other examples :
• Fedex, Qualcomm, Gillette, Bank of America…
PSLs & club/luxury suites/seats
• Personal/permanent seat licences– One time payment that gives a sports fan the right to buy season
tickets for a particular seat in a sporting venue for a pre-determined length of time.
• Club seats & luxury suites/boxes– Club Seating is a special section of seating in modern sports
stadiums. They are exposed to the elements, as opposed to luxury boxes. Club seating allows access to special restaurants and resting areas of the stadium that are off limits to regular ticket holders.
• 1960 : Houston Astrodome• Texas Stadium (Dallas Cowboys)• $5,000 – $1M /year
2c) The Commissionner• The highest executive position. The exact powers of the commissioner
depend on the constitution and/or rules of the league in question. Commissioners are elected by the owners of the league's clubs, and are generally expected to handle such matters as discipline, arbitration of disputes between the clubs, etc.
– Bud Selig in the NLB– Paul Tagliabue in the NFL– Gary Bettman in the NHL– David Stern in the NBA
2d) Franchise free agency
National Football League Franchise Relocation, 1990 to present
Team Moved From Moved To Year
Cardinals St. Louis Phoenix 1990
Rams Los Angeles St. Louis 1995
Raiders Los Angeles Oakland 1995
Browns Cleveland Baltimore 1996
Oilers Houston Nashville 1999
Other examples :1947 : Detroit Gems Minneapolis Lakers 1960 : LA Lakers2002 : Charlotte Hornets New-Orleans Hornets & Charlotte Bobcats
Oklahoma Hornets
Franchises can move from city to city to get better premises and revenues
Problem : sometimes low local-fan identification, requires strong national fan-base
3a) Free agency system
• The defunct « reserve clause »– Invented in Base-ball franchises– NFL : « The Rozelle rule »
• Towards the free agency system (restricted/unrestricted)– Example : NHL Lock-out (2004-2005)
PROBLEM : fan identification to team or to star players? Possible conflicts when a « hated » player join a former « enemy » team!
3b) The draft system• Process by which professional sports teams
select players not contracted to any team, often from colleges or amateur ranks.
• National Football League, Major League Soccer, Major League Baseball
– determined in a reverse-record order (the previous season's worst team picking first, the best team picking last).
– Problems :• Trading draft choices between teams is
common practice.• Teams can play deliberately to have a better
draft the next season
• The National Basketball Association and National Hockey League :
– draft lottery whereby the first several draft positions are ordered by random selection.
• The draft system expanded also in Australia since 1986
NCAAML
Best team
Last team
Best player
Last player
3c) The salary cap system• Limit on the amount of money a team can spend on player salaries,
– either as a per-player limit – or a total limit for the team's roster (or both).
Method of keeping overall costs down, and in order to balance the league so a wealthy team cannot become dominant simply by buying all the top players.
Salary caps are often the major issue in negotiations between management and players' unions.
• MLB has the uncapped salary as continental soccer
• The salary cap system expanded in English soccer, English Rugby and Australian Football
Problems : - many ways to by-pass salary caps (http://members.cox.net/lmcoon/salarycap.htm)- « Luxury tax » unefficient in MLB.
III. Conclusion
Comparison of sport systemsEuropean American
Common points
Merchandising and Sponsoring are increasing incomes
Internationalization of athletes
Centralization and sharing of TV rights by the leagues to the clubs
Stadia and structures are often owned by city governments
Differences
-Dominance of soccer-1 league / sport-Clubs sometimes don’t own any asset. Their name does not necessarily belong to them.-Finance : Stock market or governemt sponsored-Sponsorship & salaries still lower than US ones.
-Leisure centers, content providers (TV channels, restaurants, tourism…)
-Cartel of leagues (the big 4(5) : NBA, NFL, NHL, MLB, (MLS))-Clubs = « franchisees » with assets, capital and brand.-Can be several leagues / sport-College level-Finance : Private millionaires-Earn revenues from stadia & arenas-More familial audience-Rules are adapted for TV-Salary Cap -Draft (1st College=> Last Pro)
Comparison of sport systems
Egalitarist
State-owned(France)
Liberal
Private-owned(UK, Italy)
Egalitarist
Private-owned(USA)
Spirit
« Sport is not a market nor a business, but a public good that must remain free and social, as education. »
Clubs are associations.
« Sports is a service as another, and the rules of economics must apply to them »
Clubs are independent firms.
« Sport must be in a protected and regulated market, to maintain fairness of plays, at still some financial profit. »
Club are franchises.
Troubles
Inefficiency.
Rigidity.
Lack of managerial control.
Bankrupcies.
High pressure on players.
Monopoly.
Huge salaries and risks.
