Sports Finance and Management As the sport business continues to evolve, so too does sport finance and management The first version of this book took an in-depth look at changes in the sport industry, including interconnecting financial issues between teams and their associated businesses, the nature of fan loyalty influences, and the impact of sponsorship on team revenues This second edition updates each of these elements, introduces relevant case study examples in new chapters, and examines the impact of changes in facility design, media opportunities, and league and conference policies on the economic success of teams, the salaries earned by professional players, and the finances of collegiate athletics Jason A Winfree, PhD, is an Associate Professor at the University of Idaho, Moscow, USA Mark S Rosentraub, PhD, is the Bruce and Joan Bickner Endowed Professor of Sport Management in the School of Kinesiology at the University of Michigan, Ann Arbor, USA Brian M Mills, PhD, is an Assistant Professor in the Department of Tourism, Recreation, and Sport Management at the University of Florida, Gainsville, USA Mackenzie P Zondlak is the Manager of the Center for Sport and Policy in the School of Kinesiology at the University of Michigan, Ann Arbor, USA Sports Finance and Management Real Estate, Media, and the New Business of Sport Second Edition Jason A Winfree, Mark S Rosentraub, Brian M Mills, and Mackenzie P Zondlak First published 2019 by Routledge 711 Third Avenue, New York, NY 10017 and by Routledge Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 Jason A Winfree, Mark S Rosentraub, Brian M Mills, and Mackenzie P Zondlak The right of Jason A Winfree, Mark S Rosentraub, Brian M Mills, and Mackenzie P. Zondlak to be identified as authors of this work has been asserted by him/her/them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-4987-0526-4 (hbk) ISBN: 978-1-138-34181-4 (pbk) ISBN: 978-1-315-11966-3 (ebk) Typeset in Sabon by Deanta Global Publishing Services, Chennai, India Dedication While this book was written, Mila Rae Glimcher, my 10th grandchild, grew to be a toddler This book is for her, and the nine other grandchildren who, each day, give me faith in the future This book is also dedicated to my wife, Karen, and our four children and their spouses I am not sure what we did “right,” but our days are bright because of the contributions to society each makes every day This one is for Sabrina (Danny), Natalie (Jason), Alexa (John), and David (Jenny) Karen and I are so very proud of each of you On behalf of the two of us, I hope this book gives you percent of the pride we feel when we look into each of your eyes Mark S Rosentraub, Ann Arbor, Michigan, August 2018 To my family, who should certainly receive some of the credit for this book Without their dedication and support, I would not have been able to contribute to this second edition My wife, Nikki, has always provided encouragement and any help that was needed, while Max and Grace provided the motivation Jason A Winfree, Moscow, Idaho, August 2018 To Caitlin, who has been a bedrock of support every step of the way Brian M Mills, Gainesville, Florida, August 2018 To my family Mom, Dad, Allyse, Brendan, Harper, and Josie – thank you for your love and support Mackenzie P Zondlak, Ann Arbor, Michigan, August 2018 Contents List of Figures List of Tables Preface Redefining the Sport Business Industry ix xi xv Ownership and the Emergence of Team Sports 35 Financial Statements, Revenues, and Costs 72 Placemaking, Sport Venues, and the Fan Experience 96 Financing Sport Venues 129 Teams, Venues, and Real Estate Development 161 Media, Entertainment, and Sport Management 211 What Are Teams Worth? Team Valuation 236 Demand and the Sport Business: Customers’ Changing Expectations 270 10 Pricing Strategies 313 11 Capital Budgeting and Team Investments 343 12 League/Conference Policies and Taxes 375 viii Contents 13 Facility Management: Public Authorities/Corporations and Real Estate Development 412 MICHAEL B CANTOR AND SIERRA R BAIN 14 From Theory to Practice: Case Studies Index 428 469 Figures 2.1 Personal Consumption Expenditures by Year, 1929–2016 ($billions)36 3.1 Estimates of NFL Teams’ In-Stadium Revenue, 2016 91 3.2 Estimates of NBA Teams’ In-Arena Revenue, 2016 92 3.3 Per Team Revenues from National Media Contracts, 1960–201793 3.4 Payroll Costs 94 3.5 NCAA Football Bowl Payouts 95 4.1 Minneapolis’ U.S Bank Stadium 118 4.2 Edmonton Oilers’ Former Venue, Rexall Place 119 4.3 Monumental Design: AT&T Stadium 120 4.4 Monumental Design: Yankee Stadium 121 4.5 Neighborhood Design: Little Caesars Arena and The District Detroit 121 4.6 Neighborhood Design: Petco Park 122 5.1 Synecdochic Venues: Boston’s “Green Monster” 151 6.1 Revenues Earned by Select MLB Teams During the Last Season in an Older Facility and the Years After in a New Facility (millions of $2017) 165 6.2 Visual Pollution at the Gila River Arena 196 6.3 Visual Pollution at the Gila River Arena Entertainment Zone 197 6.4 Scoreboard Usage at Target Field, Minneapolis 198 6.5 The Rose Bowl Stadium with Vizio Sponsorship Affixed 200 7.1 The Three Phases of the Media’s Relationship with Teams and Sports 212 7.2 Future Media Issues and Revenue Potential from Phase III 212 8.1 Average Franchise Values, All Leagues 262 8.2 Real Growth Rates of Average Franchise Values 262 8.3 Coefficient of Variation of Franchise Values 263 8.4 Multiples of Earnings 264 9.1 The Supply of Tickets and Per Capita Sales Required to Sell Out All NFL, MLB, NBA, NHL, and MLS Tickets in Selected Metropolitan Areas 275 474 Index revenues; statement of cash flows 78–80; statements of retained earnings 77–78 Financial World, team valuation data 257–263 financing teams and venues: bonds, 132–135; college sports venues 52–54, 154–155; Little Caesars Arena 452–453; as public goods 130–131; public sector investments 140–146; team financing, public bonds 138–140; teams as financing tools 131–138; who really pays? 146–154 Finley, Charles 18 Florida Marlins 337 Florida Panthers, pay what you want 335 flotation costs 371 food and beverage taxes 146 food service, luxury seating 183 football, college football see college football football Sundays 90 Forbes, team valuation data 257–263 Ford Field 450 foreign fans 305 foreign investors 11–12 Forest City Enterprises 464 Fort, R 245 Fort Wayne, Indiana 37 Fort Wayne Zollner Pistons 100 Fox, media rights 217 Fox Entertainment 68: BTN (Big Ten Network) 231 Fox Sports 227 Fox Sports Net (FSN) 16 franchises 102–107: coefficient of variation of franchise values 263; value of (all leagues) 262 free cash flow model 244 Frick, Ford 199 front-loading contracts 362 FSN (Fox Sports Net) 16 Funk, J P 309 future of media and sports 232–234 futures options, pricing strategies 332–334 G-4 plan (NFL) 382 game-day experiences, luxury seating 191–192 game-day promotions 306 gaming revenue, Las Vegas 441 gaming taxes 146 Garza, Matt 337 Gateway District 144 GEDC (Gateway Economic Development Corporation of Greater Cleveland) 418–421 Giants 103 Gila River Arena 195–197 Gilbert, Dan 451 Gillette Stadium 88, 446, 464 Gilmore, James 191 globalization of sports 28–29 Golden State Warriors 337 Goldman Sachs 226 golf courses 50 gondola seating 183–184 goodwill, low ticket prices 323 Great Western Forum 460 Green Bay Packers 12, 217: balance sheets 74; income statements 75, 77; operating profit 348–349; ownership 11; public ownership 47; shares 132; ticket prices 322 Green Monster 151 Gretzky, Wayne 306 gross profit margin 84 group discounts 325 growth rates: from actual sales 257; for all leagues 262 Hakes, J K 291–292 Halladay, Roy 337 Harris County-Houston Sport Authority 418 Hausman, J A 309 head injuries 228–229 hedge funds 11 Heinz Field 155 Hendrick Motorsports 266 history of: public authorities 415–416; sport and media 212–213 hockey, problems with multi-use venues 192–194 honeymoon effects for new facilities 291 Hoosier Dome 104 horizontal integration 65–67 hosting non-sport activities 88–89 hotel occupancy 440–441: Las Vegas 431–432 Index household spending for sports and entertainment 281 Ice District 112 iconic design of facilities 117–119 Ilitch Family 112, 449 Ilitch Holdings, Inc (IH) 449– 450: financing Little Caesars Arena 452–453 immigrants 39 incentive contracts 363–364 income statements 75–77: Nike Inc 78; Texas Rangers 87 income taxes 144–145 independent investments 365 Indiana Pacers 12, 153 Indianapolis, IN 207: CIB (Capital Improvements Board) 421–423; financing teams and venues 153; Indianapolis Colts 153 Indianapolis Colts 153 individual sports 49–50 inelastic pricing, ticket prices 320–324 in-facility real estate 164–166: concourses and entrances 197–198; luxury seating 165–192; naming rights 198–200, 200–203; playing surfaces 196–197; scoreboards and electronic displays 195–196; seating deck 192–195; uniforms 205–206 in-facility revenue, NBA 90, 92 in-facility sales 141 Inner Harbor, Baltimore 207–208 in-stadium revenue 89–90: NFL 91 integration 64–65: horizontal integration 65–67; vertical integration 68–70 interest rate risk 347 internal rate of return (IRR) 353 International Olympic Committee (IOC) 28: advertising 203–205 investments: facility investments 352–356; independent investments 365; mutually exclusive investments 365; player investments see player investments; public sector investments 140–146; team investments see team investments; IOC (International Olympic Committee) 28 advertising 203–205 475 IRR (internal rate of return) 353: Oriole Park at Camden Yards 356 Irsay, Robert 33n2, 45 Isgar, Charles 460 Islanders 25, 192–194 Jacksonville Jaguars 381 Jacobs, Richard 166, 419 James, LeBron 26, 378, 379, 398 Japanese teams 47 jewel boxes 99 JMI Realty 454–459 job changes, Michigan 451–452 The Joe 450 Joe Louis Arena 450 Jones, Jerry 13, 381, 463 Jordan, Michael 305, 358 Judge, Aaron 378 Kanazawa, M T 309 Kansas City 284–285, 296 Kansas City Chiefs 18: attendance 296 Kansas City Royals 18, 284, 308: attendance 296 Kaufmann Stadium 18 Kelly, Brian 55 Kern, W 239 Kinney, Greg 135 kits, in-facility real estate 205–206 Kraft, Robert 464 Kroc, Ray 455 Kroenke, Stan 58, 67 L.A LIVE 6, 7, 62, 238, 459–465 labor disputes, NFL 228 Lambeau, Curly 41 Lambeau Field 199 Lankford, Senator James 413 Las Vegas, Nevada 5: relocation of Raiders 428–430, 439–449; tourist taxes 145 Las Vegas Golden Knights 440 Las Vegas Visitors and Convention Authority (LVCVA) 434 Leadley, J C 291–294 league policies 25–28, 375–378: collective bargaining 385–386; competitive balance 388–393; luxury taxes 382–383; player drafts 376–377, 378–380; promotion and relegation 384–385; revenue sharing 377, 380–382; salary caps 383–384 476 Index leagues 102–104: average franchise values (all leagues) 262 legalized gambling 428–430 Leonard, G K 309 leverage 400–403 Levine, Marc 207 Levi's Stadium 418 Levitt, Arthur 399–400 Lewis, M 364 limited partnerships 44 limiting ownership 56 Lipsyte, Robert liquidity risk 347 Little Caesars Arena 25, 109, 120, 122: financing 452–453; luxury seating 184 local contracts: media revenue 90; media rights 335 lockouts 307 loge seating 183 long-term demand factors: economic competition 288–293; market penetration 282–285; population size and regional wealth 273–281; sport venue age 291–296 Los Angeles, California: L.A LIVE 459–465; wealth 280 Los Angeles Chargers 38 Los Angeles Clippers 17 Los Angeles Dodgers 103, 227, 246, 326–327 Los Angeles Galaxy 266 Los Angeles Kings 62, 238 Los Angeles Lakers 62, 238, 388 Los Angeles Raiders 288 Los Angeles Rams 288, 309 lotteries 146 lottery systems, player drafts, NBA 347 Louisville, KY 154 loyalties 14 loyalty, winning 304 Lucas Oil Stadium 109, 153, 417, 422 Lucchino, Larry 21, 161 lump sums 156 luxury seating 21, 23, 165–192, 325: Cleveland Indians 166–167; collegiate sports 174–182; MLB 186; MLS 188; naming rights 184; NBA 187–188; NCAA Division I-A 189–190; NFL 185; NHL 187–188; product exclusivity 186, 191; suites 166–174 luxury taxes 382–383, 410–411: MLB 387–388 LVCVA (Las Vegas Visitors and Convention Authority) 434 Madison Square Garden 88 Madison Square Garden Corporation (MSG), 12, 62 Major League Baseball see MLB (Major League Baseball) Major League Soccer see MLS (Major League Soccer) Manchester United 205: team valuation 266 Mansfield Town, pay what you want 334 March Madness 229, 308, 377–378 marginal revenue product (MRP) 54: value of players 357 marginal tax rate 393 marginal value of winning games 358 Marion County Convention and Recreational Facilities Authority (MCCRFA) 422 market penetration 282–285: MLB 282–285 market power, NCAA 230 market risk 346 market saturation 121–122 marketing, demand 306 Maryland, lotteries 146 Mason, D 140 Massport, Boston 415–416 maximizing revenue 339–341 McCourt, Frank 45 MCCRFA (Marion County Convention and Recreational Facilities Authority) 422 McGwire, Mark 306, 358 media 14–17: college conference networks 229–230; future of 232–234; history of media and sports 212–213; networks 226; Phase 1: media and team relationships 213– 214; Phase 2: large-scale revenue from the sale of media rights 214– 217; Phase 3: vertical integration of teams and the media 225–229; phases of media's relationships with teams and sports 212; relationship with sports 211–212; streaming 233–234; television 216–217 Index media corporations 227 media prices 335–336 media revenue 90–93, 217–225 media rights, NFL 217–225 Memorial Stadium 353 Mercedes-Benz Stadium 109 merchandise pricing 336–337 mergers 38, 64–65: horizontal integration 65–67; vertical integration 68–70 MetLife Stadium 25, 88, 446: in-facility real estate 164 metropolitan statistical areas (MSAs) 282 Miami, Florida 285 Miami Marlins 18, 387: revenue sharing 380–381 Michigan, job changes 451–452 Michigan Stadium 136 Michigan State University 54 Michigan Strategic Fund (MSF) 423, 452 MiLB (Minor League Baseball) 11 Miller Field 199 Mills, Edwin 151 Milwaukee Braves, roster depreciation allowance 395–396 Milwaukee Brewers, futures options 333 Minnesota Timberwolves 388 Minnesota Twins 296 Minor League Baseball 11: communitybased ownership 47–48 minor league baseball teams 69–70 mixed streams 156 MLB (Major League Baseball) 6, 40–41: attendance 296, 300, 303; competitive balance 390, 391; concession sales 321; constrained franchises 106; economic competition 285–288; exemption from antitrust laws 40; expansions 59; futures options 332–334; league specifics 387–388; luxury seating 186; luxury taxes 382–383; market penetration 282–285; media rights 215–216, 221–222; networks 16–17; relocations 41; revenue sharing 380; revenues from internal real estate 165; salaries 223; team owners and business interests 63; team sale prices 246, 249–250; team valuation 246, 477 258, 259; team value 224–225; ticket prices 314–315, 317; venues 291; vertical integration 69–70; work stoppages 376; World Series 41 MLBAM (Major League Baseball Advanced Media) 17, 221–222 MLS (Major League Soccer) 1: emergence of 43; luxury seating 188; single-entity ownership model 45–46; team valuation 267; uniforms 206 Modell, Art 58, 104, 146 models, valuation models see valuation models Molson Centre 114 monopsony 54 Montreal Expos 246 monumental design: AT&T Stadium 120; Yankee Stadium 121 Moores, John 6, 45, 455, 456–458 Moses, Robert 103 motion pictures, media rights 215 Mountain West Conference 232 MRP (marginal revenue product) 54: value of players 357 MSAs (metropolitan statistical areas) 282 MSF (Michigan Strategic Fund) 423, 452 MSG (Madison Square Garden Corporation) 12, 62 multiple earnings model 240, 263–264 multiple revenue streams, pricing strategies 341–342 multi-use venues 192–195 municipal bonds 139 Musburger, Brent 229 Musgrave, Peggy 130 Musgrave, Richard 130 mutually exclusive investments 365 “My Football Club” 48 Nagel, Mark naming rights 198–200: luxury seating 185; NCAA 200–203; revenues 87–88 narrowcasting 232 National Basketball Association see NBA (National Basketball Association) National Collegiate Athletic Association see NCAA (National Collegiate Athletic Association) 478 Index national contracts: media revenue 90; media rights 335 National Football League see NFL (National Football League) National Hockey League see NHL (National Hockey League) National Invitational Tournament (NIT) 229–230 National League of Professional Baseball 103 Nationwide Arena 144 Nationwide Insurance 144 NBA (National Basketball Association): competitive balance 390, 391; expansions 59; in-facility revenue 90, 92; history of 42; league specifics 388; luxury seating 187–188; player drafts 378; team owners and business interests 65; team sale prices 246, 251–252; team valuation 258, 260; ticket prices 316–317; uniforms 206; value of 1; venues 291; weighted lottery system 347 NBC (National Broadcasting Company) 233: media rights 217 NCAA (National Collegiate Athletic Association) 15, 30–32, 40: bowl games 94–95; broadcast rights 336; college conference networks 229–232; March Madness 308, 377–378; market power 230; naming rights 200–203; salaries 54; venue guidelines 202 NCAA Division I-A, luxury seating 189–190 negative stories 228–229 neighborhood design: Little Caesars Arena 122; Petco Park 123 NESN (New England Sports Network) 226–227 net present value (NPV) 352, 367 net profit margin 84 networks 68–69: ABC (American Broadcasting Company) 233; Big Ten Network (BTN) 231–232; CBS 233; college conference networks 229–232; ESPN (Entertainment and Sports Programming Network) 8, 16, 233; L.A LIVE 238; NBC (National Broadcasting Company) 233; NESN (New England Sports Network) 226–227; YES (Yankee Entertainment and Sports Network) 226, 238 Nevada 2.0 442 New, Jack, Empty Seats, Fewer Donors? 8–10 New England Patriots 464 New England Sports Network (NESN) 226–227 new facilities 291–296 New Jersey Nets 226, 464 New York City 273–274 New York Giants 217: PSLs (personal seat licenses) 329, 331 New York Highlanders 103 New York Islanders 25 New York Jets: attendance 296; PSLs (personal seat licenses) 329, 331 New York Knicks 62, 388 New York Mets 113: attendance 291, 294; ballpark naming rights 87–88 New York Rangers 62 New York Yankees 38, 103, 226, 238, 246, 378: futures options 332; luxury taxes 382–383; ticket prices 315, 323 NFL (National Football League): antiblackout policy 15; attendance 296; blackout rule 15; competitive balance 390; expansions 59; futures options 332; history of 41–42; horizontal ownership 67; labor disputes 228; league specifics 386; luxury seating 185; media 17; nonprofits 48–49; ownership models 11; player drafts 378; PSLs (personal seat licenses) 330–331; revenue sharing 381–382; salaries 223–224; salaries of coaches 55; in-stadium revenue 89–91; sustained dominance 27; team owners and business interests 64; team sale prices 245–248; team valuation 257–258; television and revenue sharing 217–225; ticket prices 314–315, 317–319; value of 1; work stoppages 376 NFLPA (NFL Players Association) 228, 386 NHL (National Hockey League): collective bargaining 386; competitive balance 391–392; expansions 59; history of 43; league specifics 388; luxury seating Index 187–188; networks 17; Olympics 28; player drafts 378; profits 399; revenues and cost 86; salary caps 26–27, 389; sale prices 254–256; summary of operations 88; team owners and business interests 66; team valuation 258, 261; ticket prices 316, 317; value of 1; venues 291; work stoppages 307, 375–376 Nike Inc 75: balance sheets 75–76; financial ratios 85; income statements 78; statement of cash flows 80–81 NIT (National Invitational Tournament) 229–230 Noll, R 30 nonprofits 48–49 non-rival consumption 130 North Carolina State University 155 Northwestern Mutual 200 Northwestern University, auction pricing 329 Notre Dame 31, 51 NPV (net present value) 352, 367 Oakland Athletics 364 O’Brien, Ken 363 OE (Olympia Entertainment) 62 Ohio State University 229: BTN (Big Ten Network) 231 Oiler Entertainment Group 62 Olympia Development 424, 450 Olympia Entertainment (OE) 62, 450 Olympics, NHL 28 O’Malley, Walter 5, 108 on-base percentage 369 open leagues 385 operating leverage 400–403 operating profit margin 84: Green Bay Packers 348–349 opportunity costs, player investments 364–365 option value for players 359–360 Oriole Park at Camden Yards 6, 18, 20–21, 161, 207–208: facility investments 353–356; IRR (internal rate of return) 356; luxury seating 182; NPV (net present value) 352–353 Orioles 103: Baltimore Orioles, day of game pricing 328 Orlando, Florida, per capita sales 276 Ostrom, Vincent 130–131 479 Outdoor Life Network 17 overbuilding facilities 121–122 ownership: expansion and 56–59; limiting 56 ownership models 11–13, 43–44, 48–49: college sports ownership 50–52; community-based ownership 47–48; corporate ownership 46–47; golf courses 50; limited partnerships 44; nonprofits 48–49; partnerships 45–46; public ownership 47–48; single-entity ownership model 45–46; sole proprietorships 44–45; syndicates 45–46 Ozanian, M K 263 Pac 12 31 Pac-10 232 Pacers 12, 153 Pack, Phil 136 Palace of Auburn Hills 184, 453 Palace Sports and Entertainment (PSE) 62 panel data analysis 83 parking taxes 141 partnerships 45–46: public/private partnerships 29–30 Paterno, Joe 31 PATH (Port Authority TransHudson) 415–416 Patriot Place 464 pay what you want, pricing strategies 334–335 payback period 366–367 payroll costs 93–94 Penn State University 31, 53 per capita sales 276 perpetuities 158–159 personal consumption 36 personal seat licenses (PSLs) 329–331 Petco Park 6, 123, 458 Phase 1: media and team relationships 213–214 Phase 2: large-scale revenue from the sale of media rights 214–217: NFL, television, and revenue sharing 217–225 Phase 3: vertical integration of teams and the media 225–229: college conference networks 229–232 phases of media’s relationships with teams and sports 212 480 Index Philadelphia, PA 154 Philadelphia Eagles 217 Pine, Joseph 191 Pitino, Rick 31 Pittsburgh Pirates 28: revenue sharing 380–381 Pittsburgh Steelers 155, 246 placemaking 97: fan experience and 107–110 player contracts 361–363 player costs 93–94 player drafts 27–28, 376–377, 378–380: NBA 347 player investments: capital budgeting 365–369: contracts 361–363; correlation of players 358–359; incentives 363–364; market for players 369–370; opportunity costs 364–365; option value for players 359–360; risk 360–361; sunk costs 365; value of players 357–358 player taxes 397–398 players: replacement players 376; value of 357–358 playing surfaces 196–197 policies, league policies 25– 28, 375–378 population changes in metropolitan regions 279 population size, long-term demand factors 273–281 Port Authority of New York 415–417 Port Authority Trans-Hudson (PATH) 415–416 Portsmouth Spartans 42 Power Five Conferences, payoff from bowl games 94–95 Premier League (England) 221 price discrimination 324–325 price elasticity 339 pricing strategies 313–314: auction pricing 329; bulk and group discounts 325; condominium seats 331; day of game pricing 328; dynamic pricing 328–329; futures options 332–334; maximizing revenue 339–341; media prices 335– 336; merchandise pricing 336–337; multiple revenue streams 341–342; pay what you want 334–335; price discrimination 324–325; product bundling 325–327; PSLs (personal seat licenses) 329–331; ticket prices 314–318; two-part pricing 342; variable ticket pricing 327 principal-agent problem 363 private goods 130 private suites problems with multi-use venues 192–194 product bundling 325–327 product exclusivity, luxury seating 186, 191 Professional Golf Association 49 Professional Sports Development Area (PSDA) 422–423 profit function 406 profit maximizers 59–60 profitability ratios 84 profits 399–400: luxury taxes 411; revenue sharing 409–410 Progressive Field, luxury seating 166–167 Prokhorov, Mikhail 12 promotion, league policies 384–385 promotions, demand 306 property taxes 142, 414 property values, TIF (tax increment financing) 143 PSDA (Professional Sports Development Area) 422–423 PSE (Palace Sports and Entertainment) 62 PSLs (personal seat licenses) 329–331 public authorities: CIB (Capital Improvements Board), Indianapolis 421–423; CRA (Community Redevelopment Authority) 462; creating for sport venues 417–418; DDA (Downtown Development Authority), Detroit 423–425, 453; GEDC (Gateway Economic Development Corporation of Greater Cleveland) 418–421; history of 415–416; LVCVA (Las Vegas Visitors and Convention Authority) 434; revenue streams 417; for sport venues 412–415 public bonds 138–140 public choice theory 130–131 public corporations see public authorities public goods, financing teams and venues 130–131 Index public ownership 44, 47–48 public school systems, TIF (tax increment financing) 144 public sector investments, financing teams and venues 140–146 public/private partnerships 29–30: public authorities for sport venues 412–415 purchasing power risk 347 Putnam, R D 149 puts 359 Qualcomm Stadium 454–455 quarterback ratings 363 quick ratio 84 Quirk, J 245 radio broadcasts 215 Raiders 288: Los Angeles Raiders 288; relocation to Las Vegas 428–430, 439–449 Raleigh, North Carolina, per capita sales 276 Rams 154, 288: Los Angeles Rams 288, 309; St Louis Rams 58–59 ranking method 366 Rascher, Dan rate of return 344–345 ratio analysis 83–86 Ratner, Bruce 226 real estate 6, 13–14 real estate development 161–162: Ballpark District 456–458; in-facility real estate see in-facility real estate; L.A LIVE 462–463; sports venues 206–209; value of downtown locations for venues 162–163 real estate management, issues with venues 18–25 record-breaking performances, demand 306 regional or single city participation, financing teams and venues 152–154 regional wealth, long-term demand factors 273–281 relegation, league policies 384–385 relocation 37–38, 57–59, 102–104: MLB 41; NFL 42; NHL 43; Raiders’ relocation to Las Vegas 428– 430, 439–449 renovations to venues 111 replacement players 376 481 reputations of teams, ticket prices 322–323 responsibilities, public authorities 417 retained earnings, statements of retained earnings 77–78 revenue: from college football 54–55; NFL 55 revenue function 406 revenue sharing 26, 27–28, 377, 407–408: collegiate sports 54; league policies 380–382; NFL (National Football League) 217–225; player salaries 409; profits 409–410 revenue streams 343: concession sales, ticket prices 320–321; Las Vegas, gaming revenue 441; for public authorities 417 revenues 86: expected increase from ticket revenue from new facilities 294; from internal real estate 164–165; maximizing revenue 339–341; media revenue 90–93; naming rights 87–88; payoff from bowl games 94–95; sale of media rights 214–217; stadium revenues see stadium revenues revenues sharing, competitive balance 382 Rexall Place 112, 118–119 ribbon boards 195 Right Field Pavilion 327 Riordan, Richard 459–462 risk: event risk 346; exchange rate risk 346–347; financial risk 346; interest rate risk 347; liquidity risk 347; market risk 346; player investments 360–361; purchasing power risk 347; tax risk 346; team investments 345–349; uncertainty 347 risk-adjusted discount rate 367 risk-adjusted net present value 367 Rochester Royals 37 Rodriguez, Alex 362 Rogers Place, 62, 112 Rooney family 62 Roosevelt, Theodore 40 Rose Bowl 199–200 Rosentraub, M S 30, 107, 140, 142, 153 roster depreciation allowance 395–396 roster limits 366 482 Index Royals, 18: Kansas City Royals 18, 284, 308 Rozelle, Pete 217 Sacrament River Cats 266 Sacramento Kings 114 salaries 222: for coaches of collegiate sports 54–55; luxury taxes 411; MLB 223; NFL 223–224; for NFL coaches 55; player drafts 379–380; revenue sharing 409 salary caps 26–27, 366, 407: league policies 383–384; NFL 386 NHL 389 sale prices: growth rates 257; MLB 246, 249–250; NBA 246, 251–252; NFL 245–248; NHL 254–256 sales taxes 141–142 Sam Boyd Stadium 444 San Diego, California 280 San Diego Chargers 454–455 San Diego Padres 111, 246, 454–459: accommodating families Sanderson, Allen 191 Sandoval, Governor Brian 439, 442 Santa Clara Stadium Authority 418 Santee, Earl 119 scale, monumental and neighborhood design scales 120–121 scandals 53–54 scoreboards 195–196 seating seating capacity 113–117 seating deck 192–195 Seattle Seahawks 326 Seattle Sounders 206 SEC Network 68–69 Selig, Bud 263 Settimi, C 263 shareholders 46 Shea Stadium 18, 103: attendance 291 short-term demand factors: attendance 294–296, 304–306; competitive balance 307–309; sports marketing 306; winning 296–304; work stoppages 307 sight lines 100, 192 signage 96 Simon Property Group (SPG) 12 sin taxes 146 single-entity ownership model 45–46 Sloane, Peter 59 small-market teams, revenue sharing 381 Smith, Janet Marie 21, 161 SNTIC (Southern Nevada Tourism Infrastructure Committee) 439 Soboroff, Steve 460 social capital 149–150 social media networks 17 social seating socialization 39–40 Soldier Field 447 sole proprietorships 44–45 Sosa, Sammy 306, 358 Souhan, Jim 119 Southall, Richard 9, 10 Southeastern Conference (SEC), networks 68–69 Southern Methodist University 31, 51 Southern Nevada Tourism Infrastructure Committee (SNTIC) 439 special districts 425 spectator sport 35–38 SPG (Simon Property Group) 12 sponsorship sales, ticket prices 321 sport district taxes 143–144 sport districts sport venue age, demand 291–296 sport venues see venues Sports Broadcasting Rights Act of 1961 335 sports managers, challenges for 7–8 sports marketing 307 SSA (Stipulation and Settlement Agreement) 227–228 St Louis Browns 38 St Louis Cardinals 199, 285 St Louis Rams 58–59 stadium revenues 86–89: NBA in-facility revenue 90, 92; NFL in-stadium revenue 89–91 standard deviation 352 Stanton, Giancarlo 378 Staples Center 62, 459–465 “The Star” 155 star players 343: demand 304 state taxes 398 statement of cash flows 78–80: Nike Inc 80–81 statements of retained earnings 77–78 Steinbrenner, George 62, 246 Steinbrenner family 226 Index strategic investments, financing teams and venues 130–131 streaming 233–234 student sections, college venues 123–127 student-consumers 8–10 suites 24–25: Progressive Field 166–174 Sullivan Post of the American Legion 12 Sun Life Stadium 18 sunk costs, player investments 365 Super Bowl tickets, futures options 332 superstar players 309: demand 304 supply of tickets per capita sales required to sell out events 275, 277, 278 sustained dominance 27 Suzuki, Ichiro 305 Swindell, D 153 syndicates 45–46 synecdochic effect 150–151 tables: Actual Sale Prices of MLB Teams, 1990-2017 249–250; Actual Sale Prices of NHL Teams, 19902018 254–256; American League MLB Teams' Market Penetration Rate and Attendance 286–287; Annual Attendance at NCAA FBS and FCS Football Games, 2003-2017 231; Annual Incremental Visitor Expenditures; Direct Economic Value of Export-Based Events to the Las Vegas Regional Economy and the Region's Resorts 436; Annual Incremental Visitor Tax Revenues; Direct Economic Value of Export-Based Events to the Las Vegas Regional Economy and the Region's Resorts 437; Assumptions for Annual Direct Economic Value of Export-Based Events to the Las Vegas Regional Economy and the Region's Resorts 435; Attendance and Win/Loss Records of Baseball and Football Teams in the Same Market 297–299; Attendance at Baltimore Orioles games, 1954-2006 22–23; Attendance Effects When an Additional Team Enters a Market (1950-2016) 289–290; Attendance Effects When Competitors in a 483 Different League Enter a Market (2000-2016) 289; Attendance Effects When Competitors in a Different League Leave a Market (2000-2016) 293; Attendance Effects When Economic Competitors in the Same League Leave a Market (1950-2016) 292–293; Available Demand for Luxury Sport Products in Selected Markets (NFL, MLB, NBA, and NHL) 168–173; Available Demand for Luxury Sport Products in Selected Markets (NFL, MLB, NBA, and NHL, MLS, and Division I-A Power Five Conference Teams in NCAAF and NCAAB) 175–181; Average EBITDA Ranges 266; Average MLB Salaries, 1989-2017 223; Basic Financial Ratios for Nike from Balance Sheets 85; Breakdown of Projected Annual Incremental Tax Revenue 448; Cash Flows from a $1000 Bond 133; Cash Flows from the Loan 138; CIB State and Local Tax Collections, 2005 Legislative Changes 2008-2012 423; Cleveland's Population 419; Cleveland's Tax Revenues, Selected Years 420; Cumulative Historic Default Rates 139; Current Sam Boyd Stadium Events 444; Detroit Pistons and Detroit Red Wings Attendance, 2000-2017 351; Era of Shared Professional Baseball and Football Facilities 19; Estimated Franchise Value Growth Rates from Actual Sales 257; Event Days in NFL Stadia, 2016 125; Event Days in Selected Arenas, 2016 123–124; Example of Roster Depreciation Allowance 394; Expected Increase in Ticket Revenues for a New Facility 295; Financial Values of Players 368; Financial World/Forbes Valuation for MLB 259; Financial World/ Forbes Valuation for the NBA 260; Financial World/Forbes Valuation for the NFL 257; Financial World/ Forbes Valuation for the NHL 261; Forbes’ 2008 Valuations of Major League Soccer Teams 267; Green Bay Packers' Balance Sheet, 2016 and 484 Index 2017 74; Green Bay Packers' Income Statement, 2016-2017 77; Green Bay Packers' Operating Profit, 19972003 349; Impact of Oriole Park at Camden Yards on Attendance 354–355; Increments in Attendance and Ticket Revenues from an Additional Win 303; Indianapolis Population Trends: Percentage Change by Decade 421; Las Vegas Metropolitan Area Job Market 443; Luxury Seating at Division I-A, Power Five Conference NCAA FBS Stadia 189–190; Luxury Seating at MLB Ballparks 186; Luxury Seating at MLS Stadia 188; Luxury Seating at NBA and NHL Arenas 187–188; Luxury Seating at NFL Stadia 185; Media Revenue and the NFL, 1960-2017, 218–220; Michigan Job Changes Before and During the Great Recession 452; MLB Team Owners and Related Business Interests 63; Naming Rights Deals for Selected Facilities 201; National League MLB Teams’ Market Penetration Rates and Attendance) 286–287; NBA Team Owners and Related Business Interests 65; NFL Salary Cap 387; NFL Team Owners and Related Business Interests 64; NFL Team Value Growth 224; NHL Salary Cap and Floor 389; NHL Team Owners and Related Business Interests 66; Nike’s Balance Sheet, 2013-2017 76–77; Nike’s Income Statement, 2013-2017 78; Nike’s Statement of Cash Flows, 20132017 81; Option Value of a Player 360; Population Changes in Selected Metropolitan Regions 279; Present Value of the Cash Flows from the Bond (6 Percent Depreciation Rate) 134; Projected Annual Incremental Direct Visitor Expenditures 447; Projected New Competitive Bid Events 446; Projected New Events for Las Vegas Stadium 445; Proportion of U.S Households with Televisions 216; Ratios from Nike's Income Statements 85; Revenues and Expenses of the Ten Largest Athletic Departments 2016, 79; The Rising Presence of Television in the United States, 1939-1959 216; Sale Prices of NBA Teams, 1991-2017 251–252; Sale Prices of NFL Teams, 19912016 247–248; Seating Capacity at MLB Ballparks 115; Seating Capacity at NBA and NHL Arenas 116–117; Short-Term Effects of League Policies 384; Smaller Is often Better: Creating a Sense of Scarcity and Urgency in Buying Baseball Tickets 114; Summary of Operations, Combined League-Wide Tabulations for the 2002-2003 Season for all NHL Franchises 88; Texas Rangers’ Income Statement, 2008 and 2009 87; Texas Rangers’ Statement of Cash Flows, 2008 and 2009 82; Tickets Sold for Entertainment Events at Selected Venues, 2016 89; Various Assessment Techniques 368; Various Contracts for Hypothetical Players 368; Year Old and New MBL Ballparks Built 24 Tainsky, S 309 talent 406 talent investment: luxury taxes 410–411; revenue sharing 408–410; salary caps 407 Tampa Bay Rays 69–70, 97, 337 Target Field 119 tax disincentives 397 tax exempt status, universities 398–399 tax exporting 145–146 tax incentives 397 tax increment financing (TIF) 143–144, 424 tax revenues, Las Vegas 437 tax risk 346 taxes: amusement taxes 141; earnings tax 145; exporting 145–146; food and beverage taxes 146; gaming taxes 146; income taxes 144–145; league policies 393–395; luxury taxes 382–383, 410–411; parking taxes 141; player taxes 397–398; property taxes 142; roster depreciation allowance 395–396; sales taxes 141–142; sin (excise) taxes 146; sport district taxes 143–144; state taxes 398; ticket tax 140, 398; TIF Index (tax increment financing) 143–144; tourist taxes 145–146 tax-exempt status 413 TBS (Turner Broadcasting Network) 13 team financing, public bonds 138–140 team investments 344–345: diversification and correlation 349–352; risk 345–349 Team Marketing Report 314 team mergers 38 team owners: MLB 63; NBA 65; NFL 64; NHL 66 team relocations see relocation team sports, emergence of 35–40 team valuation 244–245: college sports 267–268; considerations for 237–239; constant growth model 264–266; Financial World/Forbes data 257–263; MLB 224–225, 258, 259; MLS 267; multiple earnings model 263–264; NBA 258, 260; NFL 223–224, 257–258; NHL 258, 261; sale prices 245–256; valuation models 239–244; value of all leagues 262 teams: depreciation 133; financing see financing teams and venues; as financing tools 131–138; relocation 57–59, 102–104; value of television 14–15: demand 309; NFL 217–225; sports 216–217; ticket prices increase television audiences 322 Texas Rangers: income statements 87; player investments 362; revenues 86; statement of cash flows 82 Texas Stadium 109 the deck 325 theatre boxes 183 Thomas & Mack Center (TMC) 445 Thorpe, Jim 41 ticket futures 332–334 ticket prices 314–320: bulk and group discounts 325; increases due to new facilities 140; reasons for inelastic prices 320–324 ticket purchases, advanced purchases 113 ticket revenue, from new facilities 294 ticket tax 140, 398 Tiebout, Charles 130–131 485 TIF (tax increment financing) 143–144, 424 time value of money 156–160 Time Warner 227 Timeless Tickets 333, 337n3 times interest earned ratio 84 time-series analysis 83 Titletown 75, 207 TMC (Thomas & Mack Center) 445 T-Mobile Arena 440 Top Tier Initiative, UNLV (University of Nevada Las Vegas) 430–431 Toronto Blue Jays 68 Toronto Maple Leafs, ticket prices 322 tourist taxes 145–146 transportation, value of downtown locations for venues 162 Tsvetkova, S 153 Tuberville, Tommy 55 Turner, Ted 12–13, 226 Twitter 234 two-part pricing 342 UCF (University of Central Florida), beachfront seating uncertainty, risk 347 unified report of operations (UROs) 400 uniforms, in-facility real estate 205–206 unions 385–386 unit elastic 320 United Kingdom, player taxes 397 United States Tennis Association 49 universities, tax exempt status 398–399 University of Central Florida (UCF), beachfront seating University of Chicago 53, 268 University of Georgia 335 University of Louisville 31, 154 University of Michigan 229, 231, 327 University of Nevada Las Vegas (UNLV), quest for a new stadium 429–448 University of North Carolina 54 University of Oklahoma 335 University of Pittsburgh 155 University of Texas 232: team valuation 268 University of Utah 232 University Village, UNLV (University of Nevada Las Vegas) 432–433 486 Index UNLV (University of Nevada Las Vegas), quest for a new stadium 429–448 urban neighborhoods 14 UROs (unified report of operations) 400 U.S Bank Stadium 109, 118 U.S Department of Commerce 274 U.S Federal funds interest rate 135 USOC (United States Olympic Committee) 48–49 valuation 236–237: team valuation see team valuation valuation models 239–240: CAPM (capital asset pricing model) 242– 244; constant growth model 242; free cash flow model 244; multiple earnings model 240; zero growth model 240–241 value, discount rates and 241–242 value of downtown locations for venues 162–163 value of players 357–358 value of sports teams value of teams see team valuation variable ticket pricing 327 Veeck, Bill 48, 307, 395 venue guidelines, NCAA 202 venues: AT&T Stadium 25, 88, 109, 120, 164, 207, 447, 463; age of venues, demand 291–296; as anchors for development 206–209; Arrowhead Stadium 18, 100; Ballpark District 207, 454–455; Barclays Center 25, 88, 119, 193; Budweiser Stadium 199; Candlestick Park 103; catering to fan segments 61; Citi Field 88, 109, 182, 199, 291; college venues and student sections 123–127; Columbia Street 450–451; Comerica Park 450; Coors Field 199; creating public authorities for 417–418; deciding where to build 110–112; Dodgers Stadium 326–327; financing see financing teams and venues; Ford Field 450; Gila River Arena 195–197; Gillette Stadium 88, 446, 464; Great Western Forum 460; Heinz Field 155; Hoosier Dome 104; hosting non-sport activities 88–89; iconic designs 117–119; Joe Louis Arena 450; Kaufmann Stadium 18; L.A LIVE 459–465; Lambeau Field 199; Levi’s Stadium 418; Little Caesars Arena 25, 109, 120, 122, 452–453; Lucas Oil Stadium 109, 153, 417, 422; luxury seating 21, 23; Madison Square Garden 88; Memorial Stadium 353; Mercedes-Benz Stadium 109; Met Life Stadium 25; MetLife Stadium 88, 164, 446; Michigan Stadium 136; Miller Field 199; Molson Centre 114; monumental and neighborhood design scales 120–121; multi-use venues 192–195; Nationwide Arena 144; new venues 291–296; Oriole Park at Camden Yards 20–21, 182, 353–356; Palace of Auburn Hills 184, 453; Patriot Place 464; Petco Park 123, 458; Progressive Field 166–167; public authorities for sport venues 412–415; Qualcomm Stadium 454–455; real estate management 18–25; renovations to 111; Rexall Place 118–119; Right Field Pavilion 327; Rogers Place 62; Sam Boyd Stadium 444; Shea Stadium 18, 103, 291; Soldier Field 447; Staples Center 62, 459–465; suites 24–25; Sun Life Stadium 18; Target Field 119; Texas Stadium 109; T-Mobile Arena 440; UNLV, quest for a new stadium 431– 448; U.S Bank Stadium 109, 118; Wachovia Center 114; War Memorial Coliseum 100; Wrigley Field 272; Yankee Stadium 61, 108–109, 113, 121, 164, 182, 183, 199, 291 Verizon 233–234 Vero Beach Dodgers 69–70 vertical integration 68–70: of teams and the media 225–229 video displays 13 Vincent, Fay 397–398 visual pollution 195 Vizio, Rose Bowl 200 Wachovia Center 114 Walt Disney World Resort WAR (wins above replacement) 60, 357 War Memorial Coliseum 100 Warren, Robert 130–131 Index Washington Nationals 246 Washington Redskins 245–246 Washington Wizards 305 wealth measurements 274: regional wealth 273–281 weighted lottery system 347 welfare maximizers 59–60 Western Union 214–215 White Sox 104 White Stipulation and Settlement Agreement (SSA) 227–228 Winfree, J A 142 winning 309: demand 300–304; fan loyalty 304; MLB 303; welfare maximizers 60 wins above replacement (WAR) 60, 357 work stoppages 263, 307, 375–376 World Hockey Association 43 World Series 41: media rights 215 487 Wrigley, William 198 Wrigley Field 272 Yamauchi, Hiroshi 11–12 Yankee Entertainment and Sports (YES) Network 226, 238 Yankee Global Enterprises, LLC 226 Yankee Stadium 61, 108–109, 121, 199: attendance 291; in-facility real estate 164; luxury seating 182, 183; seating capacity 113 YES (Yankee Entertainment and Sports Network) 226, 238 Yost, Fielding 135–137 zero growth model 240–241 Zimbalist, A 30, 106 Zollner, Fred 37, 100 Zollner Pistons 37 Zygmont, Z 291–294 ... Michigan, Ann Arbor, USA Sports Finance and Management Real Estate, Media, and the New Business of Sport Second Edition Jason A Winfree, Mark S Rosentraub, Brian M Mills, and Mackenzie P Zondlak... 14.10 Michigan Job Changes Before and During the Great Recession (thousands) 436 437 443 444 445 446 447 448 452 Preface This second edition of Sport Management and Finance benefitted from the research... xvi Preface This second edition brings two new authors to Sports Finance and Management Professor Brian Mills – who worked at the University of Michigan Center for Sport and Policy as a doctoral