George Steinbrenner – New York Yankees

In baseball, everyone hates the New York Yankees. There are many reasons why the yankees are so hated, mainly because the Yankees Always win. But how did the New York Yankees become a team notoriously known as winners? The answers is George Steinbrenner, the team’s owner.

George Steinbrenner is legendary in the business world. Applying his foundational knowledge of marketing, and use of the 4 Ps (profit, price, place, promotion) Steinbrenner was able to brand The Yankees into a baseball powerhouse attracting winning athletes and diehard fans. At the very core of his work branding The Yankees was publicity. Steinbrenner actively engaged in questionable player changes, often times considered unethical. In the wake of statistics used to evaluate performance on the baseball field Steinbrenner was an under-the-radar advocate, trading favorite players off of The Yankee roster overnight. These acts put New York in the spotlight, but when they began to win, New Yorkers and others became greater fans than they were before.

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The player switches and success of the team were not the only contributors to George Steinbrenner’s legacy. Steinbrenner focused his efforts onto things like promotion of the Yankee logo, and seating prices and accommodations at the Yankee Stadium. More broadly, he engaged fans into baseball as a way of spending leisure time and money. At such a crucial juncture in the history of the sport, Steinbrenner enhanced every aspect of the game. Suddenly in mainstream society, baseball was leading entertainment. The Yankees were winning, and their fans were ecstatic.

It seems that, in America, branding the organization is one of the many contributors to success of the organization. Other key brands are the Los Angeles Lakers in basketball, and the New England Patriots in football. These organizations took a step back from the game itself and looked outward into what the organization could grow to represent. For these clubs, more than any other, the game itself is just a tiny fragment of the entire spectrum of what sports are.

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Knowing these things, it may be easier to like the Yankees. But the bottom line message is that using fundamental principles we learn in business school, we can make the historical changes we wish to see.

Similarly, risk taking can be a valuable asset in business.

The 2004-05 NHL Lockout and its Effects

On September 16, 2004, owners of all 30 National Hockey League franchises called a work stoppage, beginning a lockout that resulted in the cancellation of the 2004-05 NHL season. This lockout was the first in the 4 major North American sports leagues (NHL, NFL, NBA, MLB) to cancel an entire season, and it’s the first time since 1919 that no team was awarded Lord Stanley’s Cup, the championship trophy in the NHL

The two sides in the lockout dispute were the NHL Players Association and the owners of all franchises, represented in negotiations by Gary Bettman. There were a few issues that were dealt with, but there was one issue that stood above the rest. This issue was the cost of player salaries.

Prior to the lockout, teams spent roughly 76% of their or their revenues on player salaries, far higher than all other major North American leagues. This resulted in many teams losing money, including a net loss of $273 million in the 2002-03 season. The league wanted to achieve “cost certainty,” where teams pay players an amount proportional to the team’s revenues. To accomplish this, the league proposed various changes to salaries such as a salary cap.

Since the issue was over players’ salaries, there was no easy fix. The league and the NHLPA had much trouble with this, which was exacerbated further by low television revenues and low stadium attendance in some places. It is hard to dispute the owners’ complaints, since some franchises had declared bankruptcy.

The lockout devastated the league in terms of television revenue. ESPN, a major sports broadcaster, declined to broadcast NHL games, which has hurt television revenues. However, ESPN’s Canadian affiliate TSN continues to broadcast games in Canada where hockey remains the most popular sport.

http://savedbythegoog.appspot.com/?id=c12fff838fbe06e899e9ebb602ed17dbd67b6ef9

League revenues did recover. In 2012, the NHL posted its highest-earning season to date, earning $3.3 billion. While player salaries decreased after the lockout, they quickly recovered, rising at roughly the same rate as league growth. Payroll disparities among teams also decreased. The owners were ultimately successful in implementing a soft salary cap, meaning that each team had a salary limit and would be penalized for exceeding the limit.

Further Reading

What’s Lurking in your Stadium Food?

This is an article from ESPN that talks about the health department inspection reports done to sporting arenas used by the NBA, MLB, NHL and NFL. This article shows the differences between how food is being prepared in different stadiums and how a large percentage of them use unsanitary practices.

Exploring the saturation levels for sponsorship logos on professional sports shirts: a cross-cultural study

This is a research that was done to find out the effects of sponsorship saturation on sports shirts. The research found that a saturated amount of advertisement can affect the team’s image and also is wasteful for sponsors.

Kick4Life:

This is a charitable organization with a vast amount of projects to help and generate awareness on HIV in developing country. In their website you will find information about the organization, their projects, their partnerships and how to volunteer or become part of the organization.

The NFL’s Most Valuable Teams:

In this article from Forbes you will find the value and revenues from the average NFL team and the management, contracts and investments from specific teams and owners. You will also find a link of the full list of the NFL’s most valuable teams.

Week 2 Recap

During this week we wrote about diverse topics regarding the business side of sports. Our first post of the week focused on how different organizations are contributing to society. We wrote about Kick4Life, a charitable organization that has used soccer to generate awareness of health and HIV in Lesotho, Africa. We mentioned the implementation of different projects from this organization and how these projects are helping this community.

On Tuesday we talked about how sports can generate economic growth and development, and how the government has intervened in sports. We mentioned that governments help building stadiums and we gave the example of London 2012. We also mentioned how stadiums are being built to give a better costumer experience.

Our post on Wednesday was focused on team ownership. Private and public ownership were compared and we concluded that private-owned teams are financially more successful than public-owned. We gave the example of NFL teams, which are the most profitable teams around the world and are mostly private-owned.

On Thursday we talked about corporate social responsibility and how this is being implemented in the food services provided by sporting arenas. We introduced the topic by showing the percentage of unsanitary vendors in sporting arenas in the U.S. We wrote about how operations management and corporate social responsibility can be a solution to this unsanitary food in sporting arenas.

Finally, we concluded this week with a post regarding what are some negatives effects of sponsorship when it is managed incorrectly. We stated that an excessive amount of sponsorship can have a negative effect both on sponsors and sport organizations because of the negative attitudes it generates on sport fans.

We hope you enjoyed reading the topics covered during this week.

Sponsorships: a double edged-sword

One of the things I enjoy the most from soccer is purchasing and wearing different teams’ jerseys. I purchase jerseys almost every year and my purchase decision depends both on the team and the esthetic of the jersey itself. There have been even situations when a jersey has influenced my attitude towards a team. I initially became a “Roma” fan because I loved this team’s jersey. But as most European soccer jerseys are very appealing, during the past years I have been dissatisfied with my hometown team’s jerseys which have made me reluctant to buy them even though it is my favorite team.

In the past years there has been a trend by Ecuadorian soccer teams to use a tremendous amount of logos and sponsors in their jerseys. In opposition to European teams that use only one sponsor, all Ecuadorian teams use at least 5 different logos and some of them use even 10 logos in their jerseys.

This trend was initially only seen on small teams who really need a large number of sponsors to generate income. But abruptly larger teams, with no real financial needs but with ambition, began to implement this strategy and increase the number of sponsors in their jerseys. This increasing amount of sponsorship is not only a thing from my country; it is a thing I see in various sports and regions of the world.

I believe that, even though sponsorships are an important source of income, sport organizations should stop focusing on how to generate the largest amount of income quickly, but instead implement a business model that takes into account the consumers (fans) needs and desires. This is because a business model strictly focused in generating income, through large amount of sponsorships, can lead to negative effects for both sports and sponsors.

Many people may argue that sponsors are what keep sports alive and that it is also the vehicle for sports to cover larger audiences and grow. I really believe that sponsorships are an essential part of sports, but I also believe that if sponsorships are not managed carefully they could harm a sports organization’s image or brand equity. A research published in the International Journal of Sports Marketing and Sponsorship regarding the effects of saturated levels of sponsorships in jerseys, showed that there is a significant negative effect on attitude towards the team and team related purchase intention by the number of logos in the shirt.

Therefore, sponsorships and the attitude towards a team are negatively correlated. As an organization increases its revenue by increasing the amount of sponsors, at the same time is generating a negative attitude towards it and harming its image. One example of this can be found in Keith Bolling’s article, Advertising Sponsor Destroying the Spirit of Sports. The author shows the negative effects that certain type of sponsorship has on extreme sports. Extreme sports are often perceived a vehicle for self-expression, self-awareness, done under an idea of breaking limits and rules, and are a connection with nature. But sponsorships are destroying the spirit and image of these sports as large amounts of companies, who don’t have any relationship with extreme sports, sponsor these types of sports.

The large amount of sponsorship has also a negative effect on sponsors. The same research mentioned above shows that the excessive amount of advertisement on jerseys is wasteful for sponsors. Another study done by scholars form the Chemnitz University of Technology explains why. This study shows that saturation levels of sponsorships generate confusion on consumers. The intensive use of sponsorship interfere with the information processing by consumers, which impedes consumers to select and interpret relevant stimuli. This sense of confusion, because of information overload, generates annoyance. This sense of annoyance decreases the recall rate (ability to identify and remember brands), produces negative attitudes and reactant behavioral intentions. Therefore, sponsorship saturation can not only become inefficient for sponsors but also affect them negatively making people feel annoyed by sponsors.

Sponsorships, strictly from a financial point of view, are a completely positive source of revenue for businesses. Nevertheless, sport organizations shouldn’t perceive sponsorship merely as a financial instrument, but should take into account consumers’ attitudes and brand equity at the moment of managing and forming contracts with sponsors. If sports organizations don’t manage sponsorships carefully and don’t implement a business model that takes into account their brand’s value, we will continue to see saturated levels of sponsorships which are something ineffective for sponsors and harmful for sport’s image.

 

Information taken from:

Mikhailitchenko, Andrey G., Dennis H. Tootelian, and Galina N. Mikhailitchenko. “Exploring saturation levels for sponsorship logos on professional sports shirts: a cross-cultural study. (English).” International Journal Of Sports Marketing & Sponsorship 13, no. 4 (July 2012): 267-281.

http://www.cies-uni.org/sites/default/files/january_2012_ijsms_volume13_number2.pdf

 

For further reading:

http://www.helium.com/items/2213177-negative-aspects-of-sports-sponsorship

http://www.bbc.co.uk/schools/gcsebitesize/pe/participation/1_participation_socialcultural_rev1.shtml

http://www.sportmarketingassociation.com/2010conference/2010conferencepresentations/P-78.pdf

 

 

How and Why Sporting Arenas Should Follow Corporate Social Responsibility in Their Food Services

It’s no new occurrence that, when we’re out seeing our favorite teams play, we tend to compromise a good deal and decent quality foods for a tray of greasy onion rings, and we don’t mind it at all. I’m personally a health freak, and once I found out how unsanitary vendors at sporting arenas are, I nearly swore off of seeing the Nuggets play for good, only because I knew I wouldn’t be able to resist the food at Colorado’s Pepsi Center.

I strongly find that it is in any venue’s best interest to avoid controversy, health misconduct, and legal repercussions by simply putting a higher emphasis on health and safety, as part of routine operations management. Yet, in nearly every state in the country, large sporting venues (including Colorado’s own Pepsi Center, and Invesco and Coors and Fields) have had anywhere from 10 to over 90% of their vendors filed for health risks, including animal droppings, pests in food, improper temperature for food being kept overnight, and a plethora of other health nightmares.

One very large part of being a vendor at any kind of sporting arena is that you will almost always have business on game day. This is both good and bad; I find that if you’re generating revenue, you’re never doing too poorly, but the more food you sell that is potentially dangerous, the more risk there is to harm someone and generate terrible publicity, or in some cases, a lawsuit.

Arguments could definitely be made that an element of consumer awareness and personal choice are necessary so that consumers can protect themselves from harm, but the point of CSR is to do the right thing for the sake of doing the right thing. 

As well as this, there has been a changing trend, since 2009 in the luxury of the sporting event atmosphere, which shows that, compared to the 1980s, the late 2000’s to present day has had a large shift in what constitutes “game day” for many. The world of peanuts and CrackerJacks has diminished, and the world of suites, club seating, and catered sports parties has flourished, for many. I’d argue that this high-brow world isn’t more prevailing than simple brand-equity, the same equity that made CrackerJacks a national icon and made us overlook McDonald’s glaring health concerns for a Happy Meal, back in the day.

Overall, I would argue that the customer is always right, even if we’ll eat whatever is edible, for nearly any price, so long as we don’t die of hunger while watching our teams represent our state. Companies have a vested interest in avoiding bad publicity due to disgusting and/or illegal practices that go on while serving food, but more importantly– it’s just not right to feed people, especially those who will buy your product with nearly perfectly inelastic demand, food that has been in disgusting, unhealthy, and germ-infested conditions, or that is prepared improperly. Whether you’re vending in a sporting arena, your own establishment, or an airport (which are typically just as bad), it is a vendor’s corporate social responsibility to look out for the customer.

Here is a list of some of the widest food chains and some of the health violations that investigators have discovered. Read at own risk, this is just the tip of the iceburg–bon appetit: http://www.healthinsurancequotes.org/7-disgusting-health-code-violations-made-in-major-chain-restaurants/.

Team Ownership: Private or Public?

With so much money on the line, the ownership and structure of a sports team is an incredibly important component. Some teams are privately owned by a single person, with varying degrees of direct control over their team. Other teams are publically owned and traded, and the shareholders are the owners of the team (many teams still retain a chairman to conduct inter-team affairs). While both structures have their pros and cons, it is ultimately the privately-owned teams who have the most success financially.

The National Football League is the world’s most profitable league. Each of the NFL’s 32 teams is among the top 50 most valuable sports franchises. 31 of these teams are privately owned. The only publically-traded team is the Green Bay Packers.

The Green Bay Packers are not only the sole public NFL franchise; they are the only publically owned team in any of the 4 major American sports leagues (NFL, NBA, MLB, and NHL). They also reside in the smallest city of any NFL team. The city, whose population is 104,057, is the effective owner of the Packers.

Despite being so different from other NFL teams, Green Bay boasts some of the most loyal fans in the NFL. Every game of theirs sells out, yet their season ticket waiting list has over 80,000 people on it. Their stadium is a reminder of the old days, before luxury boxes and endless advertisements. This is because the city itself funds the team, and therefore has little need for ads (or expensive tickets). No other team can be public because of rules and guidelines for ownership set by the NFL (Green Bay was grandfathered in).

Sounds good, right? To a fan, the Packers are the greatest organization in sports. No high ticket prices, no stifling ads, no megalomaniacal owner. From a business perspective though, there is a reason no other team is publically owned.

The Packers do fine financially. They have the reputation and fans to keep themselves comfortable with money for decades to come, not to mention a beneficial revenue-sharing system that keeps all NFL teams out of the red. However, the benefits of having a private owner are major. First, owners have massive amounts of capital to sink into the team. This capital goes to many things, including improved facilities (for players and fans) and, most importantly, salaries. Leagues that do not have a salary cap can spend an infinite amount to sign players. The MLB’s New York Yankees are routinely criticized for outspending every other team, yet they have more World Series titles than any other team.

Private owners are also more open to outside advertising. Once again, advertisements are a fan’s nightmare, but they also generate even more revenue for a team. Owners are commonly criticized for only caring about money instead of fans, but the wealthiest teams attract the best athletes. Of the five most valuable sports franchises, four of them are privately owned.

As a sports fan, I envy what the Green Bay Packers have. The game day experience in Green Bay is unparalleled due to its history, prestige, and unique ownership. However, the bottom line of any business is profit, even for sports teams. While the Packers are an example of a publically-owned team done right, the privately-owned teams exist today because they had the finances to survive through tough times. The fan in me would love to own stock in my beloved team, but ultimately the privately-owned teams are the financial juggernauts of the sports world.

Sources & Further Reading:

http://www.forbes.com/sites/kurtbadenhausen/2011/09/07/the-nfls-most-valuable-teams/

http://www.ilsr.org/rule/sports/2789-2/

http://www.niu.edu/law/organizations/law_review/pdfs/full_issues/31_1/Green%2069-93.pdf

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