CMN 140 Lecture 8: CMN 140 - Lecture 8

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8 Mar 2017
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Lecture 8 - 2/9/17 - Sports - Chapter 19
Issue: the money cycle drives sports
- some ppl think the money cycle is destroying sports while other ppl think that it
is improving sports
- Big 4: NFL, NBA, NHL, MLB
The Money Cycle
- media provide the means for advertisers to invest hella money into the cycle and
continuous exposure for professional/college events to make sport an essential ritual in
life; transformed hundreds of athletes into celebrities who make lots of money
1) Players “Athletic Talent”
- athletic talent demands higher salaries plus bonuses each year (short supply of athletic
talent, takes advantage of asking for higher salary/bonuses)
- MBL: ~1950’s Ted Williams thought he was paid too much; he demanded a pay
cut from his $125,000 contract
- NBA: Michael Jordan earned $4 million in 1995 compared to 2012 Kobe
Bryant’s $23.5 million contract today salaries are escalating dramatically
- to help control the rise of salaries & to try to create parity (equal pay) among teams,
several professional sports have established salary caps for teams in their leagues
- these caps are often ignored because they find loopholes to invest in star
players who increase the value of franchise (win, attract fans/TV viewers)
- athletes also command large fees for endorsing products
Ex: Chart - Top Earning Athletes in 2012
- top 2 were golf: phil mickelson - $60.8million, tiger woods - $56.4 mil
- most dominant players are basketball
- top basketball players: kobe bryant, lebron james 45.9m, kevin durant 26.5m
2) Owners and Leagues
- owners of teams are willing to bid high for athletic talent so that they can field a
competitive team that will attract fans to their games as well as fans to telecasts of their
games - owners of others teams feel pressure to improve their own team, so all owners
continually drive up salaries to pay to attract best players & coaches
- NBA actually lost money one year, but NFL is strongest out of Big 4 (lowest payroll in
NFL is still larger than other 3 major sports)
- the NFL controls all TV rights to its games and distributes the money equally
among all teams so that teams in the smaller TV markets can afford to be competitive
(preserving parity)
- the NBA/MBL allows its teams to negotiate their own regional TV deals
- naming rights to major league sports stadiums range from a low of $620,000 to a high
of $20 million a year
- college sports can generate huge revenues at major universities
3) Television Networks = tv drives sports league
- television networks compete against one another to attract fans so they drive up the
fees they pay for the right to telecast the game
- network programmers know their right to telecast sports, so they generate higher
revenue + become stronger a network gets weaker when a competing network
outbids its telecasting rights
- there has been a shift from focusing on sports to an entertainment formula
(commentary, stats, replays, slomos, shots of audience/cheerleaders)
- over the years, the professional sports leagues have changed the rules of their
games to make them more exciting for fans (Ex: NVA 3-point basket; players shoot the
ball at least every 24 seconds)
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