Overall analysis of valuing franchises

What determines the Value of NFL Athletes and Franchises?

Overall, there are many contributing factors that correlate to a franchise’s success. A franchise seems to be like a seed that grows from the ground up. It starts under wealthy ownership and ends with the fans and publicity the team gets through social media. Within the process of building a successful franchise, what seems to be the most important key factors in deciphering their value?

            The value of NFL athletes and franchises has many contributing factors which allows them to be successful. The three main factors that ultimately affect the value of professional teams and franchises is the size of a franchise’s market, the ability to give players and contracts through marginal product and marginal revenue, and sponsorships granted to teams. 

Sponsors for Sport's Teams Add Popularity and Success to Sport's Franchises

How do sponsors signed by a team expand the popularity of the team’s franchise?

http://brandchannel.com/2013/07/03/nike-celebrates-25-years-of-just-do-it/

Main Factors: Sponsors and teams have a collective way of benefiting from each other, ultimately boosting the team’s popularity, adding on to a team’s success.  

        There are many professional sports teams that are fortunate to have been around for many years due to the team’s history, success, and originality. These fortunate franchises are often given sponsorships, which enables large companies to express their brands to millions of fans. These brands signed by franchises expand the team’s popularity due to fans interests in their brands.

      The article “Ethical Sponsorship and Advertising in Sport” talks about the impacts sponsorships have on teams and sport franchises. Ralph Richards develops the relationship between the team and the sponsorship, explaining that it is a mutually beneficial business arrangement. Within a competitive sponsorship environment of a sport, a company that is wishing to align their brands does so to gain a host of economic, public relations and product placement advantages. Sponsors hope to leverage their association with certain popular athletes, teams, leagues, or an entire sport itself in order for the sponsorship to gain alignment and popularity with the perceived image a sport has created or acquired. For example, one of the most popular soccer teams in the world, Real Madrid, has “Emirates” airlines on the cover of their jersey. The jersey says “Fly Emirates” on it, entertaining their fans with their airline deal with the team. Since there is an astonishing 450 million people that watch Real Madrid play every game, those who work or are interested in Emirates airlines will begin to take interest in the soccer team, increasing the number of fans the team has, contributing to their dominance at the world stage. It also works the other way around. Those who watch Real Madrid play will begin to take an interest in Emirates Airlines, which helps Emirates financially by gaining popularity through watching their soccer games. Ralph Richards also states that when sponsorship advertising is linked by a single corporate message, the net exposure of the company or product is optimal.

      Large corporations that sponsor popular teams benefit largely to a team’s popularity, acting beneficial to both the sponsor and the team. Since there are mutual benefits between the team and the sponsor, many large companies and corporations like to sponsor popular sport’s teams, ultimately increasing the popularity of a team, and adding on to its success.

https://www.clearinghouseforsport.gov.au/knowledge_base/organised_sport/sports_administration_and_management/ethical_sponsorship_and_advertising_in_sport

Media Contributions to Sport's teams success

How does Professional Sports team’s success rely on media contributions?

 

https://www.boucherco.com/social-media-audit-major-league-baseball/

          

              Main Factors: the media plays a large role in contributing to a team’s success because of its ability to inform people on upcoming games.

                               

                Every day when we turn on the T.V. whether it’s to watch our favorite show, Espn Sports, or the Food channel, we always run across commercials where the media is working their best to show news or important announcements. In sports, especially when watching popular sport’s show like “ESPN First Take”, “Pardon the Interruption”, or “Around the horn”, there are always commercials on upcoming games for so-called “Primetime” games, which are games that are nationally broadcasted. There are some teams that are more fortunate to others that are granted more nationally viewed games, which allows those teams to be nationally recognized through commercials about the upcoming game and the game itself.

         In the article "http://www.teachpe.com/gcse_society/media.php" , the positive affects media has on sports is determined through key variables. In order for the media to be involved within the promotion of the sports teams and popular, nationally broadcasted games, it must take in part by showing and announcing to people the game in every way possible. One of the most popular ways the media views sport’s teams is through the T.V. and radio. Through the T.V. and Radio, people are able to watch mostly all games and competitions. Other popular ways the media is able to promote sports to people is through the internet, including popular websites like “ESPN.com” or “Fox Sports”, magazines, including popular subscriptions like “Sports Illustrated” or “Golf”, and newspapers, including popular columns like “Chicago Tribune Sports” or “Atlanta Sports”. Through these key ways of promotion, the media is able to help sports teams make large amounts of money through media companies paying the rights to show a sporting event. 

Ultimately, the most valuable effect the media has on different sport’s teams is inspiration. The media is able to bring sports to people that may not normally have a chance to experience a sports game. Once people are introduced to watching a sport’s team, they are usually inspired then to become a fan and follow their favorite team. Fan support is crucial in helping all ends of a franchise organization. The more fans a team has, the better it is for their organization which helps their team out financially and on a success rate, and it all starts with the media’s ability to contribute and promote sport’s teams and games to people.

The media is shown to affect all sides of team’s success. Without the media to promote and portray news regarding a sport’s game for a team, people would not be informed, leading to less fans in a team’s organization. Ultimately, a team’s success relies on media contributions.

                                Future Research: In what ways do Sponsorships acquired to teams expand the popularity of a team’s Franchise?

http://www.teachpe.com/gcse_society/media.php

Sports Franchise's Market Sizes

Does a Sports Franchise with a bigger market have an advantage over one with a smaller market?

http://www.nrg.com/images/renew/projects/metlife-stadium-gallery-blue.jpg

Main Factors: Sports franchise with larger markets having possible advantages over franchises with smaller markets.

Every Sunday Night during football season, football fans from all across the nation get to witness some of the brightest NFL stars on the biggest stage in Sunday Night Football. People are always used to watching big name teams like the New York Giants, Dallas Cowboys, and the Seattle Seahawks. Whenever people turn on their tv’s to watch baseball, it always seems to be the New York Yankees or the Boston Red Sox on national television. Although all three of these teams are usually post-season contenders, they always seem to be played on national television. A large part of the reason why certain  Sports teams are advertized more than others is because of the size of the market they attain.

In the article “Valuing Professional Sports Franchises: An Econometric Approach”, Kelly Smith uses econometric analysis to model team values. Kelly smith states that “the value of any business is based on its potential for future earnings”. “First is the cost or asset-based approach, centering on the principle that an investor will be unwilling to pay more for an asset that produce the same future during cash flow”. Based off of potential earnings, sports franchises are able to maximize in size and worth. For example, the New York Giants NFL football team is located in the biggest city in the United States. Though they share the city with another NFL team, the New York Jets, they still remain the cities most popular NFL Team. Since they are the most popular NFL team in the largest city, their potential income is through the roof, renovating millions of dollars with merchandise, season ticket holding, and broadcasting rights for people to watch the game. Kelly Smith also states that “The market/sales comparison uses principles of competition in a free market and relies on the assumption that, in an equilibrium, the price of an investment will apply to similiar investments, with some modifications”. Looking at the data certain transactions like sales, it seems as though an anylist is able to make comparisons by distinguishing the difference between the franchise that is set to be valued and other recent traded franchises. It is also very important to take into consideration the market size, location, and local television agreements when comparing sales transactions. For example, most NFL primetime game are in big cities with big name teams like the Chicago Bears or the Dallas Cowboys. We usually don’t see the Jacksonville Jaguars in night games because they are a smaller city with a smaller team. The Dallas Cowboys on the other hand are a big city with a lot more fans. When they nationally broadcast a football game, there is more in revenue and profit that the team makes as well as the NFL due to the fact that the size of their franchise in their city is large with a large amount of fans, increasing their value. A team with a larger value will increase net-worth and profit, making their team a popular choice for a free-agent player to sign with.

Many sport’s leagues all spend a lot of money on their organization with players, stadiums, ect. to take the best possible franchise they can. Although the margins are slim in professional sport’s, it is shown that a team with a big market has an advantage from a team with a small market due to populatity, size and marketing tactics.

Future Research: Does a Professional Sport’s team’s success rely on media contibutions?

http://economics.about.com/library/weekly/aa043004g.htm

http://economics.about.com/library/weekly/aa043004g.htm

What Factors determine the maximum length and value of an athlete's contract?

David Swank-Determining the Value of Sports Franchises

How we determine an Athlete’s Money Tree

 

                   Main Idea: Factors determining the maximum length and value of an athlete's contract.

When we watch these fantastic Athletes perform, whether it is a prime time NFL football game on Sunday Night, or just an evening MLB baseball game, these players are really something else, expressing their talents to their sport. As Republican Candidates spend millions of dollars expanding their campaign to the public, Sports Franchises spend millions of dollars on their players and coaches in order to build the best possible team they have. In order to fulfill those limits to the best of the Sports Franchise’s capability, many factors go into determining an athlete’s contract length and value.

The article “Wage determination in professional sports” by Sports and Public Policy discusses how an athlete’s value is recognized through what it must cost a team to pay an athlete compared to what the athlete is contributing to the team. This value is know as the product of marginal product and marginal revenue, or “MRP”. MRP represents the athletes value as a whole and is split up between MR and MP. MP, or marginal product, is the measure of how productive a worker is in terms of his or her output. MR, or marginal revenue, is a measure of additional revenue generated by each new unit of output. According to the article “An athlete’s value, or MRP, can be thought of as the number of wins that he or she generates for his team multiplied by the value of each victory”. Many athletes have different strengths and weaknesses that might dictate their chances of making the maximum amount of money they would demand from the team. In a perfectly competitive market where an athlete’s wages, or income through their contract, are equal to their marginal revenue products, there are only two factors that decipher increasing a player’s salary: either in an increase in marginal product or an increase in marginal revenue. A player that is able to improve over the course of a season and has a large contribution has a very good chance of receiving a larger contract worth more money when it comes time to renew his or her contract. Also, the willingness for fans to pay for ticket depending on the team’s success, networks like Fox or NBC to pay for broadcasting rights, and advertising through commercials all determine the team’s net worth and capability to pay players large amounts of money. For example, Josh McCown, who was a backup quarterback for the Chicago Bears from 2011 to 2013, finally got a chance to play in the regular season in 2013, when starting quarterback Jay Cutler went out due to injury. Josh McCown played in 8 games, starting in 5 of them for the Bears. He put up impressive numbers, tallying up 1,829 yards passing, averaging 228.6 yards per game with 13 touchdowns and only 1 interception with a 66.5% completion rating. Along with his flawless performance, he showed great leadership to his teammates and coaches, making him a valuable player in the locker room. At the end of the year, Josh McCown’s contract with the Chicago Bears ended, and the Chicago Bears were interested in re-signing the 13 year veteran as a possible starting quarterback. Unfortunately for the Bears, due to his wonderful success, McCown had 4 other teams looking to sign him for even larger amounts of money and benefits. Josh McCown ended up turning the Chicago Bears down and signed a 2-year, 10 million dollar contract with the Tampa Bay Buccaneers, with 6.5 million dollars guaranteed, and more money due to incentives.

It does not all rely on what a player does on game day to determine the millions of dollars he or she makes. It seems as though some aspects of marginal revenue are difficult to picture having an impact on a player’s contract, a team’s success within their franchise depend the sources it attains as well as the athletes it has. The Chicago Cubs have been able to have had a very successful season, not just because of the roster of talent they have, but also revenue the cubs have, being one of Chicago’s most popular teams and advertising the team all throughout the nation through WGN News. With the author discussing the extent value of an athlete’s contract, it seems there is more than what meets the eye when determining and evaluation a player to play on a team for the next couple of years.

Future Research: Are Some Franchises Worth More than others due to size, popularity, and location?

Image Source

https://lh5.googleusercontent.com/gaNVaRl8LDABpqnzJ1fSWUH0TtEqgn-giVLRj54CPe98fYwKJ-oUOA73Nqy_hQjlTxZZIfKSCSlUISAyOi-bdtVz0jjrOjjMRoRB9ZZlFZ0i4UDBkFKEKrPh2hDmKshj=s1600

Information source

http://www.humankinetics.com/excerpts/excerpts/wage-determination-in-professional-sports

    

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