Chapter 10

1. Revenue and Expense Management in Professional Sport

Revenue Sources

  • Teams:

    • Media rights.

    • Premium seating (luxury boxes, club seating).

    • Sponsorship deals.

    • Gate receipts (ticket sales).

    • Food, beverage, and merchandise sales.

    • Additional sources like parking fees.

  • Leagues:

    • National TV and radio contracts.

    • Licensing and sponsorship deals (league-wide).

Expense Management

  • Player salaries (often the largest expense).

  • Stadium and facility maintenance.

  • Travel and operational costs.

  • Marketing and promotional efforts.

2. Ownership Structures and Governance

Governance Models

  • Corporate Governance:

    • Owners act as a board of directors.

    • Commissioner serves as CEO, overseeing:

      • Player contract approvals.

      • Disciplinary actions.

      • Dispute resolution.

      • Rule-making authority.

  • Single-Entity Model:

    • Used by leagues like MLS.

    • Centralized fiscal control to avoid antitrust issues.

    • Central decision-making for player compensation and personnel.

What do leagues look for when considering a new franchisee?

  • Financial resources

  • Community commitment

  • Commitment to the sport

  • Government relations

  • Character of potential owners/Conflicts of interest

Franchise Ownership Rules

  • NFL:

    • Requires a controlling executive with 30% equity.

    • Prohibits corporate ownership (except Green Bay Packers).

    • Cross-ownership was prohibited until 1997.

  • NBA:

    • Owners must hold at least 15% equity.

    • Jay-Z rule: Ownership groups capped at 25 individuals, each holding at least 1%.

  • MLB & NHL:

    • No minimum equity requirements.

    • No cap on limited partners.

    • Ownership structures subject to league approval.

3. The History and Role of the Commissioner

  • First Commissioner: Judge Kennesaw Mountain Landis (MLB, 1920), appointed during the Black Sox Scandal.

  • Modern Responsibilities:

    • Ensuring league stability and financial health.

    • Expanding league revenues (e.g., global markets, TV contracts).

    • Addressing labor relations and enforcing collective bargaining agreements.

    • Handling player discipline and upholding league integrity.

4. Cross-Ownership and the NFL

  • Cross-ownership (owning multiple franchises) was banned until 1997.

  • Now allowed under specific market conditions.

5. Collective Bargaining Agreements (CBAs)

  • Definition: Contracts negotiated between players’ unions and league management.

  • Key Issues:

    • Free agency rules.

    • Salary caps and luxury taxes.

    • Minimum player salaries and benefits.

    • Dispute resolution mechanisms.

  • When Negotiations Fail:

    • Players can strike.

    • Owners can lock out players.

6. Franchise Valuations

  • Key Factors:

    • Degree of revenue sharing.

    • Stability of the league's labor relations.

  • Additional Influences:

    • Market size and fan base loyalty.

    • Success of team branding and merchandising.

    • Value of media rights deals.

7. Labor Relations

  • 1960s: Rise of player unions.

  • 1970s: Transformation into a traditional business model.

  • CBAs became the framework for labor conditions and team-player agreements.

Integrated Topics for Notes

  • Revenue and expenses tie directly to franchise valuation and league stability.

  • Ownership rules vary by league but emphasize financial commitment, equity stakes, and approval from governing bodies.

  • The commissioner plays a critical role in league governance, ensuring balance among franchises and maintaining league integrity.

  • Collective bargaining agreements are central to labor peace but often lead to strikes or lockouts when impasses occur.

  • Cross-ownership remains a unique element, especially in leagues like the NFL, which restricts it more than others.

People

  1. William Hulbert (MLB): Established the National League of Professional Baseball Clubs in 1876. Introduced rules to ensure team stability and honest competition.

  2. Judge Kennesaw Mountain Landis (MLB): First commissioner of baseball (1920). Restore the sport's integrity.

  3. Marvin Miller (MLB): First executive director of the Major League Baseball Players Association (MLBPA). Played a crucial role in collective bargaining, free agency, and player rights.

  4. Pete Rozelle (NFL): NFL commissioner (1960-1989). Creating the Super Bowl and negotiating massive TV contracts.

  1. Roger Goodell (NFL): Current NFL commissioner. Focuses on player safety, global expansion, and revenue growth.

  2. Adam Silver (NBA): NBA commissioner. Progressive policies on social issues, global expansion, and league innovations.

  3. Gary Bettman (NHL): NHL commissioner since 1993. Key in expanding the NHL to new markets.

  4. Rob Manfred (MLB): MLB commissioner since 2015. Focused on modernizing baseball and addressing issues.

  5. Don Garber (MLS): MLS commissioner since 1999. Oversaw significant growth in Major League Soccer, including expansion teams and better international recognition.

  6. Cathy Engelbert (WNBA): WNBA commissioner since 2019. Advocates for women's sports, league growth, and player empowerment.