Sports & Entertainment Management

Management
The process of accomplishing the goals of an organization through the effective use of people and other resources
Profit
Typically the goal for sports and entertainment events as they’re businesses.
Profit = revenue – expenses
4 functions of management
Planning, organizing, implementing, and controlling
Planning
Involves analyzing information and making decisions about what needs to be done.
Factors to consider for sports/entertainment planning:
Date and time
Target markets
Customer potential
Competition
Marketing strategies
Sponsorships
Security
Facilities
Community support
???
Organizing
Concerned with accomplishing tasks most effectively and arranging resources to complete all necessary work.
Factors to consider sports/entertainment organizing:
Event specialists / Committees
Security
Concessions
Parking lot management
Maintenance
Attendance optimization
Event planning
Schedules
???
Implementing
Involves carrying out plans and making sure that adequate personnel are available to accomplish all the necessary tasks.
Factors to consider for sports/entertainment implementing:
Taking care of details
Extra police for traffic
Ingress/egress capacity
Sufficient number of bathrooms
???
Controlling
Involves evaluating results to determine if objectives have been accomplished as planned.
Factors to consider for sports/entertainment controlling:
Was the event a success?
What worked / what didn’t?
Is competition too fierce to run an event again?
If we run it again, how can we improve the plan?
???
Business Management Principles
Business information management
Management responsibilities
Financial management
Production management
Marketing management
Human resources management
Management Responsibilities
Managers accomplish an organization’s goals through the effective use of people and other resources. Unplanned interruptions, events, and problems will always occur, but regular duties must still be preformed. Mangers gather, review, and process information to make decisions and revise plans to improve performance.
Business Information Management
All managers need information about target markets, the economy, competition, and business operations to make sound decisions. Information comes in many forms and from many sources. Business information management uses technology to effectively gather, organize, protect, and make information available to people in a form they can use.
Financial Management
Good financial management is crucial for business successes. Financial management involves obtaining funds to finance the business, manage the funds carefully, and keeping financial records accurately. All managers must understand finance and financial record to use them for both day-to-day planning and long-term planning.
Production Management
Production is all the activities involved in creating products for sale. In sports and entertainment, the products are the events as well as the many related products such as posters, CDs/mp3s, and apparel sold at the even or used in event promotion. Production management works with others to determine the products to be produced, obtains needed resources, organizes production facilities and personnel, and develops and maintains a production schedule and quality control.
Marketing Management
Marketing involves all the activities used to plan, price, promote, and sell the event. These activities include customer and competitor research, event development, scheduling, pricing, and managing all the marketing activities prior to, during, and after the event.
Human Resources Management
Managing human resources involves determining the number and type of employees needed, recruiting, and hiring the best people, offering needed training, and providing adequate compensation and benefits as well as a motivational work environment. Personnel is often the most important resource for the successful sports and entertainment organization.
Managers
Responsible for making things happen
Higher-level managers
Usually complete planning and organizing activities
Lower-level managers
Preform implementing and controlling tasks.
Authority
The right to make decisions about assigned work and to delegate assignments to others.
Who is Responsible for what?
Well-managed organizations possess a sense of teamwork in which all individuals work together for the benefit of the entire team.
Employee empowerment
Individuals have the authority to solve problems with available resources or to develop new strategies for the betterment of the organizations.
Making the Tough Decisons
When managers identify the problem, such as declining attendance, business research provides the information needed to correct the problem. Managers commonly follow the five steps of the decision-making process.
The decision-making process
1. Identify the problem
2. List possible solutions
3. Analyze possible solutions
4. Select and implement the plan
5. Evaluate the plan.
Price
The amount of money charged for one unit. Ticket prices should reflect what customers are willing to pay.
Revenue
The money collected in sales. Revenue is equal to (number of unit sales) × (price of each unit). A sports franchise has a number of revenue sources, including ticket sales, concessions, licensing, and sponsorships.
Demand
The amount of goods or services that customers want to buy. Ticket prices for a sporting event should be determined by the demand that exists for that event.
Yield management pricing
Setting different prices for goods or services in an effort to maximize revenue when limited capacity is a factor.
Dynamic pricing
A system of fluid not fixed ticket prices that increase or decrease due to small and/or short-term changes in supply and demand. Dynamic pricing is facilitated by the Internet and mobile technology.
Marginal cost
The cost of producing one additional good or making one more of a commodity (like a seat at a stadium) available.
Ticket brokers
Individuals or companies who purchase tickets in bulk to artificially constrict demand and drive up prices.
Ticket agencies
Companies that stadium owners use to manage their ticket sales.
If it costs $85,000 to put on an event and total revenue is $110,000, what is the profit as a percentage of revenue? (Round to the nearest percent.)
SOLUTION:
$110,000 – $85,000 / $110,000 = .227 = 23 percent
A stadium sells 500 tickets at $20 and 1,000 tickets at $10. What is the average ticket price for the event?
SOLUTION:
Because more tickets are sold at $10 than at $20, you cannot just average $10 and $20
Average ticket price = total revenue / tickets sold
= 500 x $20 + 1,000 x $10 / 500 + 1,000
= $10,000 + $10,000 / 1,500 = $13.33
Grounds crew
The team that maintains a property’s grounds, especially the athletic field. Proper field maintenance is important because improper maintenance can lead to player injuries and league fines.
Security
Personnel responsible for the security and well-being of the fans, stadium property, and workers. A security shortage can lead to unruly crowds.
Usher
Personnel responsible for making sure fans sit in and stay in their assigned seats. Fans will move to better seats if they are available and there is no one to stop them.
Gate greeter
Staff members who check tickets of customers entering the stadium. They play the vital role of ensuring that only paying customers enter.
Information specialist
Information specialists walk around the stadium before, during, and after an event to direct customers to facilities and serve as the first line of support to customers with medical emergencies.
Concession staff
Team members who prepare and serve food and drinks (often alcoholic) to customers.
Stage crew
The crew that helps set up and test a band’s staging and equipment. They are either part of the band’s road crew or local contractors hired by the tour promoter.
Sound crew
The crew that runs a venue’s sound system. They are either part of the band’s road crew or local contractors hired by the tour promoter.
Cleaning crew
The crew responsible for stadium cleanliness before, during, and after events.
Ticket takers
Staffers who check tickets at stadium entrances.
Ticket sellers
Staffers who sell tickets to fans at the stadium.
Parking cashiers
Personnel who man booths at stadium parking lots and garages to take money from fans before or after an event.
Parking attendants
Personnel who help fans find parking spots and navigate through parking areas.
Parking security
Staffers who make sure that fans’ vehicles, and the personal belongings in them, are safe. They work with law enforcement to address cases of larceny and other unruly behavior.
Crowd control
A term for the various techniques used by security personnel to ensure a peaceful event for ticketholders.
Spectator violence
Violence perpetrated by spectators against fans of the opposing team or even opposing players.
Jim hires parking attendants. They work an average of 40 hours per month. If twenty parking attendants are hired at $10/hour, what is the monthly labor cost for parking attendants?
SOLUTION:
20 attendants x $10/hour/attendant x 40 hours/month = $8,000/month
If the total yearly labor cost is $735,000 and $57,000 is for parking attendants, what percentage of the yearly labor cost is for the parking attendants? (Round to the nearest percent.)
SOLUTION:
$57,000 / $735,000 = .078 = 8%
If staff salaries were $42,000/month last year and $57,000/month this year, what is the percentage labor cost increase? (Round to the nearest percent.)
SOLUTION:
$57,000 – $42,000 / $42,000 = .357 = 36%
If the labor costs were $1,300,000 last year and $1,000,000 this year, what percentage decrease was achieved? (Round to the nearest percent.)
SOLUTION:
Use the beginning cost as the basis
$1,300,000 – $1,000,000 / $1,300,000 = .231 = 23%
Ingress
The flow of fans into a venue.
Egress
The flow of fans out of or away from a venue.
Bottlenecks
A restriction of optimal traffic throughput. In Virtual Business—Sports, you may see bottlenecks occur in the parking lot because of overloaded traffic situations due to the inability of the parking and security staff to support the traffic load.
Satellite Parking
Any parking lot that is offsite from the stadium. Shuttle buses are often required to transport fans to and from the stadium.
Ticket sellers
Those who sell tickets to the general public, often at the stadium itself.
Ticket takers
Those who take the tickets from patrons wishing to enter the stadium.
Public transportation
Methods of transport other than driving, such as the subway and the commuter rail.
Americans with Disabilities Act (ADA)
A federal law requiring, in part, that new stadiums be handicapped accessible.
Five roads lead into a stadium’s parking areas. Each road has four lanes (two in each direction) with a capacity of 1,500 vehicles/lane/hour. If 12,000 vehicles are expected for a game, how long will it take for all of them to enter the parking areas?
SOLUTION:
Inbound capacity = 5 roads x 2 inbound lanes/road x 1,500 vehicles/lane/hour = 15,000 vehicles/hour
12,000 vehicles / 15,000 vehicles/hour = 0.8 hours = 48 minutes
If the roads leading to an arena can together handle 2,500 vehicles/hour of arena-only traffic, at what time should the roads be closed to other vehicles to ensure that the projected 7,500 vehicles can get to the arena for the 8 p.m. start?
SOLUTION:
Time needed to enter = 7,500 vehicles / 2,500 vehicles per hour = 3 hours
8 p. m. – 3 hours = 5 p.m.
Tiger Stadium is an older venue and has only three gates with four ticket booths at each gate. The stadium recommends that fans arrive at least two hours before games to ensure they can get to their seats by the start of the game. If each ticket booth can process 400 fans/hour, what is the stadium’s maximum ingress throughput?
SOLUTION:
3 gates x 4 booths/gate x 400 fans/hour/booth = 4,800 fans/hour
Based upon statistical studies, it takes about one-third less time for fans to exit a game as it does for them to enter and find their seats. If the ingress for the stadium is 6,000 fans per hour, what is the egress?
SOLUTION:
Ingress rate = 1 – 1/3 x Egress rate = 2/3 Egress rate
Egress rate = 3/2 ingress rate = 3/2 x 6,000 = 9,000 fans per hour
On-street parking
Parking along the street, as opposed to in a parking lot.
Tailgating
The practice of grilling food, drinking, and socializing around cars and trucks in a stadium parking lot. Lots of sports fans enjoy arriving early to games, parking, and then partying before the game.
Dynamic pricing
Fluid, not fixed, parking prices that can increase or decrease due to small and/or short- term changes in supply and demand. Dynamic pricing for parking is facilitated by the Internet and mobile technology.
Fixed costs
Costs incurred by a business regardless of how much goods and services are produced. These might include, for example, salaries. These costs are not connected to profit and loss but must be paid on a regular basis, as stipulated in a contract.
Variable costs
Costs incurred by a business that vary from month to month or year to year. These might include the cost of food, snow removal, and so on.
Tonight’s game is expected to draw 100,000 fans. Of these, 60 percent will drive. Each car will bring two fans. How many vehicles need to be parked?
SOLUTION:
100,000 fans x 0.60 = 60,000 fans driving
60,000 / 2 fans/car = 30,000 cars
A stadium must have 10 attendants at the stadium parking lot and three each at the satellite lots. Each attendant makes $12/hour. If the stadium lot and all five satellite lots open two hours before the game, which lasts three hours, and close two hours after the game, what is the labor cost for parking?
SOLUTION:
Hours per attendant = 2 + 3 + 2 = 7
Pay per attendant = $12/hour x 7 hours = $84 per attendant
Attendants = 10 + 3 attendants/satellite lot x 5 satellite lots = 25 attendants
Total labor cost = 25 attendants x $84 per attendant = $2,100
A stadium buses fans to the game from satellite lots. Three buses shuttle between each of the four satellite lots. Each bus is leased for $150/hour, and each bus driver is paid $18/hour. What is the cost for busing if the drivers work for six hours each?
SOLUTION:
Cost = 3 buses/lot x 4 lots x 6 hours x $150 lease cost/hour + $18 driver pay/hour = $12,096
If a stadium’s revenue is $460,000 and its costs are $100,000, what is the stadium’s profit as a percentage of its revenue? (Round to the nearest percent.)
SOLUTION:
Profit = $460,000 – $100,000 = $360,000
Profit as percentage of revenue = $360,000 / $460,000 = 0.782 = 78%
Concessions
Areas on stadium property, both inside and outside, where food and drink are available for fans to purchase and enjoy while they’re at a game or a music event.
Concessionaire
The owner or operator of a concession stand.
Game-day experience
The quality of the fan experience during an event, including the concession experience.
Concession pricing
The various methods stadium owners and managers use to price concessions, including all-you-can-eat seats and discounts for season ticket holders.
Concession price
The amount a concessionaire charges for food and drink items.
Concession cost
The amount a food item costs the concession owner plus the amount paid to workers to prepare and serve the item.
Profit margin
The total cost of the item including labor, etc. subtracted from the price charged.
Concession Inventory
The on-hand supplies of food and drink a concession stand has.
Ordering
The process by which concessionaires purchase raw materials for their concession stands from food suppliers, often wholesalers.
A crowd of 70,000 fans is expected to attend the homecoming football game. If the typical vendor can serve 2,500 customers per hour and the game will last for four hours, how many vendors are needed to ensure that each fan can be served during the game? (Round to the nearest whole number.)
SOLUTION:
Capacity = 2,500 fans/hour/vendor x 4 hours = 10,000 fans/vendor
70,000 fans / 10,000 fans/vendor = 7 vendors
Five vendors are selling at an event, and an attendance of 34,000 is projected. It is anticipated that 75 percent of the attendees will make purchases. Assuming that each vendor has an equal chance of having an attendee prefer their products, what is the average number of customers each will serve?
SOLUTION:
34,000 fans x 0.75 purchasing customers / 5 vendors = 5,100 purchasing customers/vendor
Bob sells cookies only in packages of 5. It costs him $2.50 in materials per package. Additionally, he has overhead costs of $1,000 per month. In order to pay himself a monthly salary of $4,000, how many packages of cookies does Bob need to sell per month at $5.00 per package?
SOLUTION:
Bob’s goal = $4,000/month = $5 – $2.50 x cookies – $1,000/month
Solving for cookies C, we get:
4000 = 5 – 2.5 C – 1000
5000 = 5 – 2.5 C
5000 = 2.5C
C = 5000/ 2.5 = 2000 cookies
Four concession stands are selling snacks at the game. Total projected concession sales are $25,000. One vendor needs to recoup supply costs of $2,000 and pay her three employees $10/hour for the three-hour event before she makes a profit. If she captures 20 percent of the total sales, what will her profit be?
SOLUTION:
Revenue = $25,000 x 0.20 = $5,000
Profit = Revenue – Expenses
$5,000 – $2,000 (supply costs) – (3 employees x 3 hours x $10/employee/hour) = $2,910
Sponsors
Organizations, firms, or individuals that give teams money in exchange for naming rights and advertising rights on stadium signage.
Signage
The collective use of signs, symbols, or design. Stadiums may reserve areas where sponsors can use signage for advertising purposes.
Naming rights
The exclusive right of a sponsor to have its name and logo on a stadium.
Negotiation
The process through which two or more parties with competing interests reach an agreement.
Brand
An image, logo, or name that consumers associate with a particular company.
Association principle
A principle holding that people simplify decision making by relying on visceral responses to questions related to topics such as peer acceptance or rejection.
Passion transference
A term used to describe the process by which fans of a sports team strengthen their allegiance to brands associated with that team.
Product promotions/ endorsements
When a celebrity recommends that consumers buy a product or service provided by a sponsor.
Bidding war
When two or more companies try to outbid the other for something, such as a sponsorship opportunity.
Profit margin
The income a team is left with after paying operating and administrative expenses.
TV broadcast rights
The rights to broadcast a team’s games on TV (and often the Internet).
Perceived value
The value attached to something—such as a sports sponsorship—by the person seeking to acquire it.
A company is offering to pay a stadium $850,000 per year for naming rights. If the administrative costs for this sponsorship are $85,000, what are the costs as a percentage of the revenue for the stadium-naming sponsorship? (Round to the nearest percent.)
SOLUTION:
$85,000 / $850,000 = 0.10 = 10%
A stadium has two sponsorship deals. Deal A has revenue of $200,000 and expenses of $40,000. Deal B has revenue of $70,000 and expenses of $25,000. What is the stadium’s average profit as a percentage of revenue?
SOLUTION:
Average profit percentage = (total revenue – total expenses) / total revenue
(($200,000 + $70,000) – ($40,000 + $25,000)) / ($200,000 + $70,000) = 0.759 = 76%
Market research
Market research is the function that links the consumer, customer, and public to the marketer through information. This information is used to identify and define marketing opportunities and problems; to generate, refine, and evaluate marketing actions; to monitor marketing performance; and to improve understanding of marketing as a process.
Media planner
People who plot marketing strategies for events or products
Cost per reach
The cost of an advertising campaign divided by the number of people reached.
Media
In advertising, media describes avenues for communicating a message. The most common forms of media are TV, newspapers, radio, and the Internet.
Traditional media
The different avenues through which a business can reach its potential customers, excluding the Internet. Examples include broadcast TV, cable TV, radio, and newspapers.
New media
The Internet and mobile devices such as smartphones.
Social media
A subset of new media that facilitates two-way interactions between a band or team and its fans. Popular social media websites and mobile apps include Twitter and Facebook. Websites and services that allow users to interact with one another through creating and sharing photos, videos, and text-based communication.
Awareness
Awareness is measured as the percentage of potential customers in a specific target audience that is aware of a product’s existence.
Demographics
The basic characteristics of a population segment, such as gender, age, and income.
A stadium manager spends $40,000 on TV ads and $33,000 on cable TV ads. What percentage of his advertising expenditures is spent on cable TV?
SOLUTION:
$33,000 / $40,000 + $33,000 = .452 = 45%
A $5,000 TV ad will cause 200 people to attend a show, while a $3,000 newspaper ad will cause 130 people to attend. Bob wants to use the most effective method to get 500 people to attend a show. Which advertising method should he use?
SOLUTION:
Cost per attendee for TV ad = $5,000 / 200 = $25
Cost per attendee for newspaper ad = $3,000 / 130 = $23.08
Newspaper is more cost effective
Memorial Stadium has worked with the same advertising company for 10 years. According to the company’s data the stadium has spent approximately $3.5 million on advertising over that period for 100 events. If the patrons to all of these events numbered 28 million, what is the ratio of patrons to advertising dollars?
SOLUTION:
28 million / 3.5 million = 8
Ratio is 8:1
Last week Tess spent $14,500 on advertising. This week she plans to spend twice as much. Next week she wants to spend half of what she spent the previous two weeks. How much should she plan to spend on advertising next week?
SOLUTION:
$14,500 + 2 x $14,500 / 2 = $21,750
Social media marketer
Someone who uses the power of social media to converse with actual and prospective customers, all with the goal of bolstering a company’s brand and selling more product.
Spam
Unwanted email solicitations from companies.
Marketing campaign
The methods and strategies a company uses to promote a product, service, or event.
Brand recognition
The general awareness of a particular brand among the general population.
Brand reputation
How a brand is perceived in the marketplace.
Contextual advertising
Advertising targeted to online users based upon their self-reported preferences.
Viral marketing
In the context of social media marketing, viral marketing is using consumers to share an organization’s message with their friends and family using social media. A band’s music video that is shared widely on Facebook is an example.
Authenticity.
An attribute of a brand, band, company, etc. that conveys that it is primarily interested in understanding and meeting the real needs of customers rather than making a one-size-fits-all type of sales pitch.
Jen’s band’s Facebook page has 26,000 likes. If each of her fans has friends that number 10 percent of the likes that Jen has, how many people can Jen’s fan page potentially reach if all her fans share her page? (Do not include Jen’s direct fans.)
SOLUTION:
26,000 x 26,000 x 0.1 = 67,600,000
Based upon previous success, Chris posts two products on Facebook. Each of them costs $5. If 2,000 of his friends buy both products and another 1,500 buy one product, how much will Carl make?
SOLUTION:
Total products bought = 2,000 friends x 2 products/friend + 1,500 friends x 1 product/friend = 5,500 products
5,500 products x $5/product = $27,500 total sales
Lynn, who has 150,000 friends on Facebook, posts two products. If 10,000 of her friends buy one and 3,000 of her friends buy the other, what percentage of Lynn’s friends purchased products? (Round to the nearest percent.)
SOLUTION:
10,000 + 3,000 / 150,000 = 0.086 = 9%
A Facebook ad targets an audience of 500,000. Narrowing the audience to women reduces the audience by 40%. What is the resulting audience?
SOLUTION:
500,000 x 1 – 0.40 = 300,000
Opening act
The first band to perform at a venue on a given night. This band is usually newer and less known than the headlining band.
Headliner
The main band to perform at a stadium on a given night.
Stadium Manager
The individual who manages the stadium and works with promoters and others to bring profitable events to the stadium.
Promoter
The individual or company who brings acts to major stadiums.
If a stadium increases its profit margin from $200,000 to $500,000, what is the percentage increase in profit margin?
SOLUTION:
$500,000 – $200,000 / $200,000 = 1.50 = 150% increase
If the stadium made $2,000,000 last year for sports events but only made $1,750,000 this year, what is the percentage decrease in profit? (Round to the nearest percent.)
SOLUTION:
Use last year as the base
2,000,000 – 1,750,000 / 2,000,000 = .125 = 13%
Backup
A player who plays a position but often doesn’t get into a game until the starter at that position is injured.
Small-market team
A professional sports team that does not earn much annual revenue compared to a big-market team.
Big-market team
A professional sports team that earns more annual revenue than a small-market team.
Draft
A formal process by which professional teams select amateur athletes to join their team.
Luxury tax
A penalty that a team, especially in Major League Baseball, must pay if they pay out a certain amount of money in player salaries in a given season.
Contract
A legal agreement between a team and a player in which the player is paid money in exchange for playing on the team.
Scouts
Talent evaluators for professional sports teams who scout, or research, amateur players who might one day become professionals.
Free agency
When a player has completed his present contract and is free to sign either with his existing team or a new team under a new contract.
Hometown discount
A savings that occurs when a star professional athlete signs a new contract with his existing team for less than his expected value in the free agent market.
Retirement
When a professional athlete decides he does not want to play any longer.
Trade
When players on two or more teams switch teams
Roster
A list of players on a team
Salary cap
The annual dollar limit that a single team may pay all its players. The main purpose of a salary cap is to maintain competitiveness within a league.
Devon has started all season at linebacker. Last season he was a backup and is still making a backup’s salary. Typically, backups make 70 percent of what starters make. If Devon is able to renegotiate his contract to the starter rate from the $250,000 he is currently making, what will his new salary be?
SOLUTION:
Backup salary = $250,000 = starter salary x 0.7
starter salary = $250,000 / 0.7 = $357,143
A primary job of team management is to manage player salaries so that productive players make more than others. This serves the purpose of rewarding players and providing incentives. For defensive backs, bonuses are given for interceptions. Each interception earns a player $10,000. If Ken makes $400,000 in salary and gets eight interceptions per year, what is the percentage increase in his overall pay? (Round to the nearest percentage.)
SOLUTION:
$10,000/interception x 8 interceptions. / $400,000 = 0.20 = 20%
The Lynx star middle linebacker, Nigel, is paid $800,000. He is guaranteed a 35% raise for each of the next three years. What will his salary be three years from now?
SOLUTION:
$800,000 x 1.35^3 = $1,968,300
The Lynx pay their three quarterbacks $950,000, $850,000, and $400,000. If the team salary is $23 million a year, what percentage of the total salary is paid to quarterbacks? (Round to the nearest percent.)
SOLUTION:
$950,000 + $850,000 + $400,000 / $23 million = 0.956 = 10%