Contents

Acknowledgments  •  xvii Introduction  •  1

SECTION I: SPORT FINANCE TRENDS AND CHALLENGES

Chapter 1...... •  Operating in the New Economic Reality............................. 21

Chapter 2...... •  Challenges Facing College Sports........................................ 49

Chapter 3...... •  Challenges Facing Professional Sports.................................. 79

Chapter 4...... •  Trends in Sport Facility Financing..................................... 131

SECTION II: ECONOMIC RATIONALES FOR PUBLIC INVESTMENTS IN SPORT VENUES AND EVENTS

Chapter 5...... •  Principles of Economic Impact Analysis............................ 183

Chapter 6...... •  Costs: The Rest of the Economic Impact Story                   235

Chapter 7    •   Alternate Justifications for Public Subsidy:

Structural Capital............................................................. 267

Chapter 8    •   Alternate Justifications for Public Subsidy:

Social Capital................................................................... 287

SECTION III: PRIMARY SOURCES OF CAPITAL FUNDING

Chapter 9...... •  Sources of Public Sector Funding...................................... 329

Chapter 10  •  Implementation of Public-Private Partnerships                   391

SECTION IV: REVENUE FROM ENTERPRISE SOURCES

Chapter 11  •  Revenue Sources From Sports Venues................................ 447

Chapter 12 •  Ticket Sales and Operation............................................... 499

by Gregg Olson

Chapter 13 •  Commercializing Media Rights......................................... 525

by Lee H. Berke

Chapter 14 •  The Sale of Licensed Merchandise..................................... 557

by Rick Van Brimmer

Index  •  585

About the Authors  •  601

Detailed Contents

INTRODUCTION......................................................................................... 1

The Boom Years: The 1990s and Early Millennium Years.................................. 1

The Great Recession......................................................................................... 5

Grim Consequences for Many American Families........................................... 6

Still Digging Out......................................................................................... 7

Sports: No Longer Recession Proof.................................................................... 8

Looking Ahead................................................................................................ 13

Organization of the Book................................................................................ 13

References...................................................................................................... 16

CHAPTER 1: Operating in the New Economic Reality................................. 21

Introduction................................................................................................... 21

Operating in a New Economic Reality............................................................. 22

Ferocious Competition for Consumers’ Time and Money................................. 24

The Impact of Television on Live Attendance.................................................... 25

TV Ratings Up, Attendance Down.............................................................. 28

Emergence of Regional Sports Networks...................................................... 28

TV’s Complex Relationship with Sport........................................................ 29

Cutting Through the Clutter.......................................................................... 30

Growing Dependence on Affluent Households: $100k and Up......................... 31

Thinning Fan Base..................................................................................... 32

Can’t go Back to the “Good Old Days”............................................................. 33

Doing More With Less................................................................................... 34

The Emergence of Mixed Martial Arts............................................................. 35

Globalization.................................................................................................. 40

Summary....................................................................................................... 46

References...................................................................................................... 47

CHAPTER 2: Challenges Facing College Sports............................................. 49

The Financial Status of Intercollegiate Atheltics............................................... 49

The Organization of College Sports............................................................. 49

Participation Patterns for Men and Women................................................. 52

Grim Financial Realities.................................................................................. 55

The Cost Control Struggle.......................................................................... 64

Television to the Rescue.............................................................................. 69

The Impact of Title IX.................................................................................... 71

Summary....................................................................................................... 73

References...................................................................................................... 76

CHAPTER 3: Challenges Facing Professional Sports................................... 79

Growth of Professional Sports.......................................................................... 79

Major Leagues............................................................................................. 79

Minor Leagues............................................................................................ 81

The Status of Women’s Professional Sports Leagues........................................ 86

Other Successful Sports Properties............................................................... 90

The Economic Reality of Professional Sports..................................................... 91

Team Financial Statements........................................................................... 93

Controlling Player Costs.............................................................................. 98

National Football League....................................................................... 101

National Basketball Association.............................................................. 104

Major League Baseball............................................................................ 111

National Hockey League........................................................................ 114

Creative Accounting....................................................................................... 116

Roster Depreciation Allowance................................................................... 117

Franchise Appreciation................................................................................... 119

Drivers of Franchise Values............................................................................ 121

Summary...................................................................................................... 126

References..................................................................................................... 128

CHAPTER 4: Trends in Sport Facility Financing....................................... 131

The Sports Facility Boom.............................................................................. 131

Measurement Challenges........................................................................... 134

Description of the Trend Tables.................................................................. 137

The Evolution of Facility Funding............................................................. 140

Who Pays and How Much?............................................................................ 148

Cost Sharing Trends for Arenas............................................................... 148

Cost Sharing Trends for Stadiums........................................................... 150

Factors Contributing to Increased Team/

Owner Investment in Major League Facilities..................................... 153

The Equity Issue....................................................................................... 156

Factors Contributing to Continuing Public Subsidies...................................... 160

Owner Leverage......................................................................................... 161

The Community Power Structure.............................................................. 165

The Shift From General to Selective Taxes.................................................. 172

The Rational for Public Subsidy..................................................................... 172

Trends in the Minor Leagues.......................................................................... 174

Trend in Colleges.......................................................................................... 175

Summary...................................................................................................... 177

References..................................................................................................... 179

CHAPTER 5: Principles of Economic Impact Analysis................................ 183

The Rationale for Economic Impact Analysis................................................. 184

A Study’s Sponsors Expect to Get What They Pay For.................................... 187

The Fundamental Principles of Economic Impact Studies............................... 190

Accurate Participation Numbers................................................................ 192

Exclusion of Local Residents and Local Sources of Funds............................ 192

Spurious Rationales.................................................................................. 196

Two Caveats.............................................................................................. 198

Exclusion of Time Switchers and Casuals................................................... 200

Use and Abuse of Multipliers........................................................................ 202

The Multiplier Concept............................................................................ 204

Constituent Elements of a Multiplier........................................................ 206

Operationalization of the Multiplier.......................................................... 207

Influence of a Community’s Size and Business Structure on Multipliers...... 208

Interpreting Sales and Income Multipliers.................................................. 211

Interpreting Employment Multipliers....................................................... 213

Illustrations of the Implications of Abusing

the Fundamental Principles of Economic Impact Analysis................... 215

Mischievously Expanding the Project Scope................................................... 222

The Magnitude of Economic Impact From Sport Projects............................... 223

Professional Sport Franchises..................................................................... 223

Mega Sports Events.................................................................................. 227

Community Sports Tournaments............................................................... 229

Summary..................................................................................................... 230

References.................................................................................................... 232

CHAPTER 6: Costs: The Rest of the Economic Impact Story.................... 235

Costs: The Rest of the Ecomic Story............................................................. 235

Society-Wide Costs....................................................................................... 238

Strategic Underestimation of Capital Costs

and Overestimation of Revenue Streams............................................. 240

Omission of Interest Costs............................................................................ 241

Land and Infrastructure Costs....................................................................... 242

Forgone Property Taxes................................................................................. 244

Operation and Maintenance Costs................................................................. 245

Event Costs.................................................................................................. 247

Displacement Costs...................................................................................... 250

Leavers..................................................................................................... 251

Avoiders................................................................................................... 252

Place Switchers......................................................................................... 254

Replacement Costs................................................................................... 255

Opportunity Costs....................................................................................... 256

Distribution Issues................................................................................... 260

Summary..................................................................................................... 261

References.................................................................................................... 263

CHAPTER 7: Alternate Justifications for Public Subsidy:

Structural Capital.................................................................................... 267

Introduction................................................................................................. 267

The Concept of Structural Capital................................................................. 268

The Principle of Cumulative Attraction......................................................... 270

Clostering.................................................................................................... 274

Rejunation Through Mega Events................................................................. 276

Integration: A Key to Effective Rejuvention.................................................... 280

The Conflicting Goals of Public and Private Interests................................. 282

Summary..................................................................................................... 284

References.................................................................................................... 285

CHAPTER 8: The Alternate Justifications for Public Subsidy:

Social Capital.......................................................................................... 287

Social Capital............................................................................................... 287

Enhancing a Community’s Brand Equity....................................................... 287

Awareness................................................................................................. 287

Image....................................................................................................... 289

The Role of Major League Status in Image Creation................................... 291

Competency and Excellence Transfer.......................................................... 293

The Mediating Role of the Media............................................................. 296

Attracting Businesses.................................................................................... 298

Attraction From Increased Awareness......................................................... 298

Attracting Talent....................................................................................... 298

Facilitated Networking at Sport Facilities................................................... 299

Facilitated Networking at Mega Events...................................................... 300

Attracting Tourists........................................................................................ 301

Community Pride......................................................................................... 303

Social Cohesion............................................................................................ 309

Measuring Social Capital Benefits.................................................................. 312

The Contingent Valuation Method........................................................... 314

Results From CVM Studies....................................................................... 315

Direct Payment: An Alternate Approach to Paying for Social Capital........... 319

Summary..................................................................................................... 320

References.................................................................................................... 323

CHAPTER 9: Sources of Public Sector Funding.......................................... 329

General Taxes............................................................................................... 330

General Property Tax............................................................................................................ 330

General Sales Tax.................................................................................................................... 337

Selective Taxes.............................................................................................. 338

Tourist Taxes............................................................................................. 339

Sin Taxes.................................................................................................. 340

Jersey Tax.................................................................................................................................. 342

Player Income Tax.................................................................................................................. 342

Ticket Surcharges..................................................................................... 345

Debt Financing............................................................................................ 346

The Use of Tax-exempt Bonds................................................................... 349

Full-faith and Credit Obligations.............................................................. 356

General Obligation Bonds..................................................................... 356

Conducting a Bond Campaign.............................................................. 358

Certificates of Obligation...................................................................... 361

Nonguaranteed Debt................................................................................ 361

Revenue Bonds..................................................................................... 362

Certificates of Participation................................................................... 367

The Public Trust Model........................................................................ 369

The Public-Private Partnership Model................................................... 370

Tax Increment Financing (TIF) Bonds................................................... 370

Taxable Private Activity Bonds............................................................... 379

Asset-backed Revenue Bonds................................................................. 380

Mechanics of Selling Bonds........................................................................... 383

Bond Ratings........................................................................................... 383

Financial and Legal Advisors...................................................................... 385

Summary..................................................................................................... 386

References.................................................................................................... 389

CHAPTER 10: Implementation of Public-Private Partnerships.................. 391

Introduction................................................................................................. 391

Challenges in Facilitating Public Private Partnerships..................................... 391

Reconciling Value Systems........................................................................ 392

The Unfair Competition Issue................................................................... 395

Legal Principles Relating to Unfair Competition by the Public Sector..... 400

Legal Principles Relating to Unfair Competition

by Nonprofit Organizations.............................................................. 401

The Complementary Assets of Public Agencies

and Private Sports Enterprises........................................................... 405

Public Sector Assets.................................................................................. 406

Land Bank............................................................................................ 406

Low-cost Capital................................................................................... 410

Tax Waivers........................................................................................... 411

Control Over Permit and Zoning Processes............................................. 411

Private Sector Assets.................................................................................. 414

Management Expertise.......................................................................... 414

Reduced Labor Costs............................................................................ 418

Adaptability to Scale of Service.............................................................. 419

Reduced Liability Risks........................................................................ 420

Public-Private Partnership Models................................................................. 421

Public Sector Leasing................................................................................ 421

Leaseback From the Private Sector............................................................. 423

Public Sector Takeovers............................................................................. 429

Private-sector Takeovers............................................................................. 430

Private-sector Pump Priming..................................................................... 431

Expansion of Existing Public Facilities....................................................... 433

Multiparty Arrangements.......................................................................... 435

Summary..................................................................................................... 440

References.................................................................................................... 442

CHAPTER 11: Revenue Sources From Sports Venues................................. 447

Introduction................................................................................................. 447

Premium Seating.......................................................................................... 448

High-yield Inventory................................................................................ 450

Illustrations of the Most Recent Premium Seating Options......................... 453

Challenges in Premium Seating................................................................. 458

Person Seating Licenses (PSLS)...................................................................... 462

The Growth and Magnitude of Seat License Programs................................ 462

How PSLs Work....................................................................................... 465

Naming Rights............................................................................................. 470

Professional Sports Venues........................................................................ 470

The Growing Value of Naming Rights Agreements.................................... 471

Challenges Ahead..................................................................................... 475

Shirt and Team Naming Rights.................................................................. 479

College Sports Venue Naming Rights........................................................ 482

High School Venue Naming Rights........................................................... 485

Why Companies Buy Naming Rights........................................................ 485

The Potential for Controversy.................................................................... 488

Key Elements of Naming Rights Agreements............................................. 489

Method of Payment.............................................................................. 490

Length of Agreement............................................................................ 492

The Impact of Naming Rights’ Partner Failings......................................... 493

Summary..................................................................................................... 494

References.................................................................................................... 497

CHAPTER 12: Ticket Sales and Operation................................................. 499

Introduction................................................................................................. 499

The Challenge.............................................................................................. 501

The Evoulution of Ticketing......................................................................... 502

Ticketing Moves Into the Electronics Age...................................................... 505

Ticket Sales Department Organization.......................................................... 509

The Ticket Sales Process................................................................................. 511

Season Tickets........................................................................................... 511

Mini-season Ticket Plans........................................................................... 512

Group Tickets.......................................................................................... 514

Single Tickets........................................................................................... 515

Pricing Tactics: Moving From Cost Recovery to Demand-Oriented Focus........ 516

Ticket Services.............................................................................................. 521

The Sales Escaltor......................................................................................... 521

Customer Relationship Management............................................................. 522

Summary..................................................................................................... 523

References.................................................................................................... 524

CHAPTER 13: Commercializing Media Rights............................................ 525

Introduction................................................................................................. 525

The Business of Television and Media............................................................ 527

Television Ratings and Shares.................................................................... 528

Total Return............................................................................................. 532

Sports Media Outlet..................................................................................... 533

National Broadcast and Cable Networks.................................................... 533

Regional Sports Networks......................................................................... 535

Digital Media: Broadband, Wireless, and Tablets....................................... 537

Syndicators............................................................................................... 539

Local Television and Radio........................................................................ 539

Marketing and Managing Broadcast Rights.................................................... 540

Direct Sales of Rights................................................................................ 541

In-house Production................................................................................. 542

Revenue Sharing....................................................................................... 543

Sports Television and Media Contracts........................................................... 545

National Football League.......................................................................... 545

Major League Baseball.............................................................................. 546

National Basketball Association................................................................. 547

National Hockey League........................................................................... 548

NASCAR................................................................................................. 548

National Collegiate Athletic Association...................................................549

The Olympic Games................................................................................ 550

Gold and Tennis....................................................................................... 552

Boxing and Mixed Martial Arts................................................................. 552

International Sports.................................................................................. 553

Summary..................................................................................................... 553

References.................................................................................................... 555

CHAPTER 14: The Sale of Licensed Merchandise...................................557

Introduction................................................................................................. 557

Licensing Basics........................................................................................ 559

The Licensing Process............................................................................... 561

Collegiate Licensing...................................................................................... 562

Professional Sports League Licensing...........................................................563

Licensing Administration Models.................................................................. 566

Professional Leagues.................................................................................. 566

Collegiate Licensing.................................................................................. 566

Agency Representation.......................................................................... 566

In-house Management.......................................................................... 567

Choosing a Model................................................................................ 567

Administration and Oversight................................................................... 568

Contracts.................................................................................................... 570

Enforcement...............................................................................................570

Labeling................................................................................................... 572

Customs................................................................................................... 572

Retail v. Swap Meet.................................................................................. 572

Online Counterfeiting.............................................................................. 573

Corporate Social Responsibility..................................................................... 573

Growth and Trends....................................................................................... 574

Summary..................................................................................................... 576

References.................................................................................................... 577

APPENDIX: Sample Provisions of a License Agreement........................578

Consideration............................................................................................... 578

Audit........................................................................................................... 579

Marketing.................................................................................................... 580

Approval of Products and Promotional Materials........................................580

Termination................................................................................................. 581

Infringements............................................................................................... 583

Indemnification............................................................................................ 583

Insurance..................................................................................................... 583