Chapter 1. Building a Business
The sports world, like much of the mainstream business world, has its stories of organizations and
What business executive hasn't gotten the nudge from a marketing manager just before giving an important presentation and leaned close to hear a whispered, "Try not to use any sports metaphors." Yet, sports provides a sound metaphors not only for life, but for business as well. Given the
You might differentiate your experience as a sports fan from your career and your responsibilities as a decision maker, but by understanding precisely how and why sports and business have
Like most business executives, sports industry leaders wrestle with how best to segment domestic markets and
They struggle to establish
These leaders worry about financial and human resource management. How many free
They obsess over customer service and crisis management in an effort to stave off
Sports industry leaders also concern themselves with employee relations and improving their own corporate standing. Are sports agents happy at a particular sports management firm or are they likely to defect and start up their own agency as soon as they make a
They make it their business to understand government relations and regulatory issues. How much does the organization have to know about the country to
In essence, the sports industry mirrors most others and faces similar trials and tribulations, but with a few insightful and different approaches. As the sports business industry continues to
Don't Try This at Home
Before reading about how to build successful sports business models, consider a couple of examples that, although they hardly hold up as sound models for business, are worth mentioning.
Long before we were intrigued by the NFL and MLB -and the antics of successful yet
Ozzie and Dan Silna, arguably among the shrewdest and most opportune owners in the history of big-time sports, purchased the Carolina Cougars of the American Basketball Association (ABA) for $1.5 million in 1973. When the brothers bought the team, which they ultimately held for only three
Hoping to be one of the
When the NBA Board of Governors met in 1976 to broker the ABA-NBA merger, they only wanted four of the six ABA teams -the Denver Nuggets, Indiana Pacers, New Jersey Nets, the San Antonio Spurs. The NBA agreed to buy out the remaining two franchises. The Kentucky Colonels owner John Y. Brown, accepted a $3 million
At the time, it wasn't
It turned out to be one of the most
The Silnas made an estimated $8 million throughout the 1980s and, as broadcast rights fees swelled, so too did their share. They received checks annually
Thanks to the NBA's current six-year, $4.6 billion TV deal with ABC/ESPN and AOL Time Warner's Turner Network, which runs through the 2007-2008 season, the Silnas could receive more than $20 million a year from the four teams combined. Although the affected teams have spent more than $250,000 trying to find a way out of the deal, the brothers have no inclination to accept an offer.
Just because the Silnas weren't aware of the future impact of TV on the NBA, that doesn't discredit their business decision. Plenty of high-
If that example doesn't leave you shaking your head about the sports industry's decision-making ability, try this one.
In 1995, the city of San Diego, to ensure that the NFL's Chargers would
If attendance were
The Chargers' annual rent to the city, not including what the team generates from the ticket guarantee, is approximately $5.7 million. Under the guarantee, the Chargers have paid an average rent of $1.5 million when enjoying strong attendance. In the team's lean years, the city has actually paid the Chargers through the purchase of unsold tickets for using the stadium.
From 1992 to 1996, the Chargers were a competitive team, never posting a losing record. From the 1997 through the 2001 season, however, the Chargers won fewer than one in three of their
For the 2002-2003 season, ticket prices to Chargers games - whose six-year playoff drought was the second-longest in the league -increased $5 to $10. The taxpayers of San Diego remain understandably squeamish. Even though they had new coach Marty Schottenheimer at the helm and league newcomer Drew Brees calling the plays in 2002, enough damage was done from years of losing that the city had to buy over 30,000 tickets at a cost of $1.6 million for a preseason game against the Arizona Cardinals.
For the Chargers, however, the ticket guarantee is not unlike the tax breaks major corporations seek from cities in return for their commitment to the community and the scores of local residents they will