Visions in Leisure and Business

Volume 14 Number 1 Article 4

1995

Factors in the Formation and Development of Professional Sports Leagues

Jack O. Gaylord Jr.

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Recommended Citation Gaylord, Jack O. Jr. (1995) "Factors in the Formation and Development of Professional Sports Leagues," Visions in Leisure and Business: Vol. 14 : No. 1 , Article 4. Available at: https://scholarworks.bgsu.edu/visions/vol14/iss1/4

This Article is brought to you for free and open access by the Journals at ScholarWorks@BGSU. It has been accepted for inclusion in Visions in Leisure and Business by an authorized editor of ScholarWorks@BGSU. FACTORS INTHE FORMATION AND DEVELOPMENT OF PROFESSIONAL SPORTS LEAGUES BY MR. JACK 0. GAYLORD, JR., PRESIDENT

JACK 0. GAYLORD EVENTS, INC. 13419QUAKER STREET COLLINS, NEW YORK 14034 52 DOWNS A VENUE WHARTON, NEW JERSEY 07885

ABSTRACT keting strategies, ownership instability, exhorbitant player salaries, and minimal The purpose of the study was to develop a corporate sponsorship. The World Football frameworkto isolate the important factors in League (WFL), the United States Football the formation and development of a pro­ League (USFL), and the American Lacrosse fessional sports league. The method of data League (ALL) have joined the graveyard collection for this qualitative study was a with other notables such as the World modified Delphi technique, which included Hockey League and the Major Indoor a panel of eighteen individuals who possess Soccer League, while other professional expertise in the area of sport. There are sports teams have enjoyed a period of three major sections of findings in this longevity since being established. Along study: 1) the focus of the individual and with this longevity, if television revenue and organization; 2) the formation of sub­ franchise value are a gauge to the stability categories; and 3) the defining operational and success of a professional league, the aspects of a league in the isolation of a National Football League (NFL), the framework for the formation and develop­ National Basketball Association (NBA), the ment process, as well as the management National Hockey League (NHL), and Major strategies, management principles, and/or League Baseball (MLB) are examples of decision-making processes associated with a leagues that have met this criteria (27, 67, 9, professionalsports league. 10).

The NFL, which was conceived in July, INTRODUCTION 1919 in Canton, Ohio (68), consists of 28 teams with an average franchise value of In the past two decades there have been a $160 million each, while boasting nearly number of professional sports leagues that $4.4 billion over 4 years in broadcast fees have started and since ceased operations. from three networks and two cable channels Some of the problems encountered causing (52, 6, 33, 48). their ultimate downfall have been a lack of national television coverage, weak mar- On June 6, 1946, professional basketball was born (31). The NBA continues to thrive

31 today as evident by the more than $1.1 input models and their importance to billion it receives over four years in management in sports enterprises. broadcast rights fees from NBC and two Turner cable channels, while the average franchise value for its 27 teams is $114 SPORT SPONSORSHIP million (52, 6, 61, 72). The Role of Sponsorship TheNHL, formed on November 22, 1917, is today receiving $235 million over five years Mescon and Tilson ( 45) discussed the from Fox and ESPN in rights fees (14). relationship between sport sponsorship and Average franchise value in the 26-team corporate philanthropy. They stated, league is $71 million (52). "Charitable contributions have been called the oldest formof corporatesocial behavior" The first professional baseball league, the (p. 49). Furthering this statement was C. C. National Association of Professional Garvin, Jr., chief executive officer (CEO) at Baseball Players, was formed in 1871. In Exxon who stated, "Business does best in 1994, Major League Baseball, consisting of communities that are healthy, alive, and 28 teams with an average franchise value of secure. To stay in business we have to make $111 million, was paid broadcast fees a profit. To succeed in business, we have to estimated at $85 million by the Baseball share some of that profit for the public Network (a joint venture between the MLB, good" (p. 49). Sport sponsorship has mutual ABC and NBC), and ESPN (52, 59, 23, 3). benefits for all parties; the newly formed sports league receives the monetary backing necessary to operate, and the corporation STATEMENT OF THE PROBLEM receives a bolster in public opinion for its contributionto the community. The question arises: what are the dif­ ferencesbetween the leagues that have come CEOs are taking a more thorough look at to rest in the graveyard and those still their social investments, to the extent some successfully entertaining audiences to this have developed a series of cost/benefit day? The purpose of this study was to give analyses to determine the long-term returns new insight to those leagues presently in on such _programs. "The philosophy of existence, to a framework to isolate the giving has evolved as many corporate principles for a sound foundation to success. executives have realized community When a literature review was done, the donations should be an integral part of a following variables were found to have a well-managed company rather than an ad significant impact on other studies. hoc activity" ( 45). While gaining a Therefore, these variables will be discussed competitive edge is a key concept to in the following section to identify their business' philosophy, many companies are potential implications in management and able to add to this by making contributions strategy techniques, i.e., sponsorship, media, to leagues and franchises as a marketing tool promotion, talent, marketing, planning, forsales promotion. capital, expansion. The common thread through these variables is they are resource Corporate philanthropists are looking at the factors which bring out the importance of many benefits of corporate sponsorship, 32 including a cost effective exposure for a sports events, and 3) the amount of money prcxluct, associating a company or product spent annually in the U.S. on sports is over name with a specific event, and providing $30 billion (74). companies with high visibility activities and scope, featuring athletic superstars (45). All As further evidence for sport as a of these contribute to a bottom line sponsorship vehicle, Wilkenson referred to performance, not only for the new league, 1983 Miller Lite Report on American but for the sponsor as well. Defined by AttitudesToward Sports, which found: Ukman (70), ". . . special event sponsorship or event marketinglinks a prcxluctor service - three-quartersof the public watch to a leisure pursuit--usually in sports" (p. sportson television at least once a 21). Sponsorship allows a company to week target demographic groups and com­ - almost 70% of the public watches, municate with them on common reads, or discusses sports news at ground--participation in the event. While least once a day communication through advertising tends to - almost half (46%) of the public be one-sided, events create opportunities for participatein at least one athletic two-way communication between con­ activity every day or almost every day sumers and sponsors--a powerful tool for - approximately 19% of the public (35 persuasion. Companies get into sponsor­ million people)are characterized as ships because they can expect a return on 'avid sportfans' the bottom line, especially in the form of a - 2 out of 3 teenagers (66%) are healthy tax break (70). If the event provides classified'avid sports participants' a tax break to the sponsor, and furthers the (74). league's credibility, while reaching the right audience, both parties gain mutual benefits. Ensor (19) believed in order to gain corporate sponsorship, administrators of Wilkenson (74) addressed why people and sports organizations need to understand the organizations buy into sport. The common criteria corporate marketers use in judging ties for all sponsorships provide whether a sponsorship proposal will help opportunities to: 1) demonstrate good them achieve their corporate goal�. Of citizenship, 2) demonstrate community essential concern to a company in selecting interest, 3) positive visibility for a product a sporting event to sponsor was the affinity or business on a continuing basis, thereby factor: being concerned the corporation's increasing sales, 4) generate favorable image and strategy mesh with the sports media interest and excellent publicity, and prcxluct. In effect, a corporation did not 5) compete with other companies and want to be associated with a losing team or corporations in an area other than the an unstable franchise (19). marketplace (74 ). A major brewing company, active in sports Supporting his view why sponsorship is a sponsorship, listed 13 main criteria for wise invesnnent, Wilkenson states 1) the selecting sponsorship candidates in its 1982 rise in attendance at sport events, 2) the Sports Media Merchandising Marketing enormous television rights paid to televise Plan. They were:

33 1) the organizationmust bewell brand, or associate their name with a organizedand properlystaffed, popular sport, without spending enormous with provenstability. amounts of money on "above-the-line 2) the events sponsoredshould be nationalmedia avenues" (p. 59). numerousto provide continuityfor brandsponsorship. Budweiser attributedits growth position in a 3) the activityshould have stagnant world beer market by spending community significance.to warrant hundreds of millions of dollars sponsoring in-storedisplays and other sport events. As Harry Drnec, marketing promotionalactivities. director for Anheuser Busch International, 4) presscoverage should be ongoing said, "We found that sport was the only andintense. place to be--the single best medium in the 5) there shouldbe proven growthin U.S. for reaching our target market" (24). numberof events, the revenues To confirm Anheuser Busch's allegiance to involved, and attendance. sport sponsorship, they now sponsor 26 out 6) the timingof the events should of 28 Major League Baseball teams, and take place duringa periodin which hold a similar monopoly over other popular extraadvertising and promotional American sports while investing over $300 effortis necessaryby the sponsor. million a year (24). 7) the sponsorship should filla void, not overlap with competitors. In Ojala and Edmundson's (51) article, 8) mutual cooperationfrom those corporate sponsor OceanSpray concurs with who own or manage the facilities. Anheuser Busch's philosophy on corporate 9) the lifestyleof the athletes sponsorship. John Moreton, business unit involved should behealthy and manager for Ocean Spray, said by productive. sponsoring the Ocean Spray Challenge of 10) the potentialfor establishing Champions Tennis Tournament, Ocean contact with those in a position to Spray received good media value for the influencethe advantage forthe money. The Ocean Spray name appeared sponsor'scompany and products. everywhere--around the community and on 11) there should beminimal potential television (receiving better than average forgovernment or legal ratings). The authors concluded: "Many restrictions. companies already know linking their name 12) there should beminimal potential. to a sport through sponsorship is a cost forpublic relations problemsor effective way to find new customers and criticism. ensure loyalty" (p. 35). 13) the concessionaires should be willing to cooperatein the sale of In the article by Miles (46), the author the sponsor's productand brand points out the overwhelming number of nameitems (19). corporations sponsoring sport events and the rise in the number of home-grown Gerrie (24) considered sports sponsorship consultancies. Alan Pascoe, of Alan Pascoe the sales promotion of the 1970s. Large Associates, a large consulting firm, is of the corporations such as Anheuser Busch found opinion companies need to put more effort sports sponsorship an effective way to into using sponsorship as a promotional tool

34 before and after, as well as during the sport and you'll have a vehicle to reach seven event, the total marketing aspects of the deal countries at one price. We call it one-stop should not be ignored ( 46). shopping" (p. 22). Corporations such as Anheuser Busch and American Airlines Authors Stotlar and Johnson (63) refer to a (who have been trying to crack the study on the benefits of stadium/arena European market) are looking into national signage. Questionnaires were given to 800 and global sponsorships for $300,000 and randomly selected subjects immediately $10 million respectively with the WLAF following the conclusion of football and (27). basketball games over a six month period. The results revealedthat 70% of the stadium According to Therrien ( 66), the Arena spectators recalled the scoreboard adver­ Football League, unlike some leagues that tising. Thesurvey also revealed that "nearly have come and gone, lined up their one-third of the products purchased at the corporate sponsorships before the first game stadium were bought as a direct result of was played. HardeesFood Systems signed a stadium advertising" (63). The survey's two-year deal with the league for $500,000, results coincided favorably with the including 12 television spots per game, logo potential for the sale of the sponsor's visibility throughout the stadium/arena, and product and brand name items (63 ). the right to use team athletes in promotions. The league also has its own official drink, USA WET, a facsimile of Gatorade (66). BENEFITS OF CORPORATE SPONSORSHIP TO LEAGUES In the article by Sullivan (64), Arena Football opened up opportunities for Kelly & Warnke (36) pointed out in the corporations to sponsor sporting events creation of the World League of American because many sponsors had been locked out Football (WLAF), which began play in of major sports by high costs or exclusive March of 1991, that Tex Schramm, former rights conflicts. As the television schedule commissioner of the WLAF, stated a WLAF enlarged, with the growth of the league, team costs at least $4 million a year to sponsorship packages also rose in price, operate. He looks to corporate sponsors for starting at $50,000-$250,000 in 1987, to help, and doesn't rule out naming teams $200,000 $900,000 today. Determined by after their business backers, common among the amount of the sponsorship deal, the European franchises (36). sponsors can receive television spots on ESPN, 15 televised games, along with logo In comparing the WLAF to the now defunct rights and full page ads in game programs USFL, Hackney (27) stated the WLAF has (64). much more corporate involvement than the USFL. With the WLAF, corporations can Some of the larger sponsors of Arena buy into a sponsorship package including Football are: Budget Rent-a-Car, "television airtime, field signage, and Panasonic, Stroh Brewery, United Airlines, innumerable perks" (p. 20). Corporate Holiday Inn, and Nike, Inc. Mike sponsorships are projected to make up as Milanovich, regional district manager for much as half the revenue for the new Strohs, said, "I think we got a lot of WLAF. Said Tex Schramm, "Tie in with us exposure from people who were curious and 35 tuned in ... it's really reaching our target Also, included in the media packet was a audience" ( 64). 'sponsor benefits sheet'. The promotional sheet states, ".. . as a sponsor of the MILL, By offering Panasonic a two-year deal, the your company will have the dynamic league's official supplier of office auto­ opportunity to be associated with an mation equipment, league founder Jim exciting, dynamic, young, professional Foster was provided with video equipment, sports league that is reaching thousands of copiers, word processors, and other office your potential customers in six of the finest products for use in operations of the league sport arenas in the Northeast" (44).Some of (64). the sponsor benefitsare:

Duffy (17), in referenceto the fact that most - opportunitiesto receive exclusivity in of the avid fans and players of lacrosse specific sponsor categories. come from the upper class, believes the - extensive pre-event television, radio, Major Indoor Lacrosse League (MILL) can and print advertising campaigns. benefit sponsors lookingfor an upscale sport - on-site league and team banners, as uncluttered by competing ads. Coors Light well as banners advertising individual Beer was the first to realize the prospects of products. sponsoring the MILL, and it is the leagues - sponsors receive mention throughout largest sponsor.The Adolph Coors Co.has each game over the public address found the indoor lacrosse game, which systems and scoreboard systems. predominantly draws "young, active, and - sponsors are included in the MILL upscale males", matches the brewers target program sold at all games. audience (p.42 ). - complimentary reserved ticketsto each game. Burns (8) furthers the benefits of corporate - in-arenapromotions coordinatedto sponsorship to the MILL; while the MILL match each sponsors marketingneeds. grossed approximately $1.2 million for its - major sponsors are given the 16 game schedule in 1988, 1989's figures opportunity to utilize television were bolstered even more by the $600,000 commercial time available during cash paid to the league by corporate MILLgames aired on sports cable sponsors (8). networks (44).

The MILL's Media Packet Information Corporate sponsorship has not only grown (1990) shows the growth of sponsors since in the United States, but in the United the young league's inception in 1987. In Kingdom (UK) as well. Miles ( 46) pointed 1988, the main advertisers were Coors Light out sport sponsorship in 1986 has found and USAir. By 1989, the league picked up many first-time users, with 178 testing the sponsorship by Brine and STX (lacrosse waters. Out of 1,753 major sponsors in equipment manufacturers). By 1990, 1986, 141 extended their involvement in Thrifty Rent-a-Car joined the MILL's list of sport, and entered into another 319 new sponsors, creating the backing needed to sponsorship activities across 27 different successfullyrun the league (44 ). sports ( 46).

36 Many companies in the UK have become Advertisers simply match the demographics more sophisticated in using the medium of of the target audience to a particular sport sponsorship. Mercantile Credit used its broadcast and a marketing mix is born (74). direct mailing technique to offer customers Either through the use of event sponsorship firstchoice tickets forsports they sponsored. or buying commercial time around They now have events bearing their name broadcast sport events, the advertiser has the running throughout the season and generate opportunity to generate name and product name awareness throughout the national awareness among millions of potential press at an otherwise barren promotional consumers. time for the company. In this way, sport sponsorship has moved on from total Hackney (27) furthered the importance of reliance on television coverage (46). It television to professional sports leagues in appears that corporate sponsorship aids in addressing the formation of the World the operation and success of professional League of American Football. The WLAF sports leagues. concept originated in the winter of 1989 when both Capital Cities/ABC and NBC approached the NFL about starting a new MEDIA spring league. Knowing they would have full support of television, the NFL needed Television no further coaxing and started the project full bore, ". . . that was the genesis for the According to Wilkenson (7 4 ), the whole thing," says Joe Bailey, chief importance of television to sporting events operating officer of the WLAF. "In fact, cannot be understated; it provides the Capital Cities/ABC and NBC wanted equity greatest amount of exposure and therefore in the league" (p. 20). increases sponsorship opportunities. In many cases, event organizers receive Upon discussion with two NFL owners sponsorship based upon the promise of (Phoenix' Bill Bidwell and Chicago's Mike television exposure of a sponsor's product or Mccaskey) who did not buy into the new signage at the event. As a result, league, Hackney stated both owners sponsorship funding is not committed until probably began having misgivings when the television coverage is secured (7 4 ). It is WLAF signed television contracts with clear to see sport and television are very ABC and ESPN for $25 million a year. The much dependent upon each other, and new move toward denationalizing television, leagues cannot survive financial burdens which has been picking up steam throughout without it. Television rights are a prime Europe, has not hurt the league's credibility source of revenue, and for major league either (27). sports as well as developing sports, it can often mean the difference between survival Andrew Wallach, a media analyst with or failure. Cumberland Associates, suggested that ". . . there has been a dramatic increase in the Advertisers find televised sports number of channels overseas in the past five programmingto be one of the most efficient years, practically doubling the number! methods to zero in on their targeted groups And much of that increased interest in because it reaches large numbers of viewers. sports" (27). The WLAF has a significant 37 advantage because sports are exempt from coverage the key. "ESPN has over 50% European laws limiting the amount of reach of households, and its audience fits so American programming that can be shown well with ours" (64). (27). According to the television syndication Although European networks pay 15% to history of the Major Indoor Lacrosse 50% of what American networks pay for League, the league's self-syndicated games sports rights, an unconcerned Dallas were produced by local sports cable Cowboys owner Jerry Jones responded, networks and then distributed nationally by "Exposure is the name of the game . . . the the MILL's front office. The MILL's reach more exposure,the more we will increase in has increased from 7.3 million households fanbase" (27). in 19 markets to over 30 million households and 40 markets and Canada during the four The article by Kelly & Warnke (36) years of development. Major affiliate contended the NFL owners are in great need networks forthe 1990 season included HSE, of television growth in their European Sunshine Network, NESN Home Team marketfor the WLAF. It is hoped European Sports, Madison Square Garden Network, growth will offset U.S. returns, which have KBL, and TSN ( 43). Up and coming new dropped. Domestic television revenues leagues and franchises can take full peaked in the U.S. in 1986 at $493 million, advantage of the fragmenting of television but dipped to $478 million in 1988. sport broadcasting to reach target markets Meanwhile, the average player contract in all across the U. S., Canada, and overseas the NFL has doubled to more than $200,000 markets as well. since 1982 (36). League co-owner Russ Cline of the MILL, Dave Nagle, spokesman for the New conversing with Rosa (55), stated future York-based ESPN, in Sullivan's (64) article league plans include divisions across the on Arena Football, states, "In the country, playing in the Midwest, West, and summertime we're always looking for live South. "Television and cable will play a event programming. When you bring in a very big role in the future and expansion of new product,you tryto expose it to as many the game" (p. 3). people as possible, and the small fields in the ·arenas are a good size for television" (p. According to Schlosberg ( 57) there are more Sl-2). ESPN is the national cable network games, matches, tournaments, meets, and broadcasting sports related programming 24 events on television than ever before. The hours a day, 7 days a week. · research firm of Paul Kagan Associates estimated the broadcast networks alone Mizlou, a sports information channel for increased their hours of sports programming broadcast and cable stations out of New some 63% between 1973 and 1983 (57). York. City, is putting together a national syndicated package to sell to independent Roger Werner, executive vice president of UHFoutlet stations. While airing non-cable ESPN, concluded, "... there's been a real games would help broaden awareness of the growth in the viewership of sports" (57). game, Brad Barton, Arena Football's ESPN has helped in this growth by director of marketing, considers ESPN televising sports that prior to its debut in

38 1979 had limited exposure. While the season from 16 to 18 week was discussed. market is growing, the audience for The proposal was just one idea put on the television sports is fragmenting. However, table as part of the NFL' s effort to maximize the opportunity to target specific groups is rights fees in the next round of NFL betterthan ever (57). television negotiations (39).

There will always be a large healthy market Welling (71) furthered the importance of for sports programming. Werner asserts ". . television money to professional sports . any argument made that there is too much referring to the National Hockey League. sports on television is an uninformed, From 1975 to 1983, the NHL accumulated aesthetic judgment" (57). After all, heavy losses with a major reason being their three-quarters (74%) of the American public failure to renew with NBC. This meant the watch sports on television at least once a league lost $3-4 million a year, as well as its week! (74) prestige. With the help of John Ziegler, president of the NHL, a focus was made on securing cable contracts. Said Charles H. TELEVISION AND MONEY McCabe, Jr., senior vice president for marketing at Manufacturers Hanover Corp., Television's investment in football shows no on New York hockey telecasts, "Hockey lets signs of leveling offin the 1990s, according us reach a very high net-worth audience" (p. to Lambert (39). Professional football on 110). television in 1990 will be more than a $900 million business, with 65% to 75% rights Gerald W. Scully, a professor of fee agreements reached in March 1990. management at the University of Texas, ABC, CBS, NBC, ESPN, and TNT together spoke on television and baseball. Television are expected to invest more that $910 has made baseball especially profitable,with million each season in the NFL through revenues from television rights growing 1993-94. Together, the 3 broadcast much faster than those from gate receipts. networks will pay $2,737 ,000,000 to the In 1988, the money from local and national NFL through the 1994 season (39). television represented from 35% to 40% of total club revenues (75). Under increased pressure to make up those expenditures, ABC declined comment on Scully sees positive and negative impacts of how well it's NFL ad sales were proceeding, television revenue on baseball. With while CBS described the ad sales market as national network revenues being shared strong. Kenneth Schanzer, executive vice equally among teams, competitive bidding president for NBC sports conceded, "It's a for players is more prevalent as more teams difficult marketplace... the NFL now costs now have the necessary money. This allows so much that one has to look at it in a teams to be more balanced. On the other critical way . . . the question before us is hand, expanded broadcasting makes the whether demand will catch up with supply?" game more accessible to home viewers and (39) cuts attendance. Also, more television broadcasts are keeping middle and lower In Broadcasting ( 1990), a proposal by the income fans away from the park. Half the NFL to the networks extending the regular tickets sold today are bought by businesses

39 for entertainment of clients, a trend which pay-per-view (PPV), as they are the only will accelerate if baseball taps more into ones who canafford it. Cable and PPV will cable and pay television, which usually be able to afford it as they have a dual service local markets and compete directly source of revenue: subscriptions and with ballparks (75). advertising.

ABC Sports' president Dennis Swanson However, Dodd suggested the scenario of contended in Martzke's (41) article, more sports events on cable and PPV will "Networks seeking answers to financial not totally leave the networks "out of the woes" (p. 3C), that due to the fact networks picture" (p. 12C). While the total number of are losing money on sports, " ... it's become hours will not decline, there may be a apparent there's simply too much sports different mix with a trend toward anthology inventory out there in the marketplace" (p. shows (e.g., Wide World of Sports), and 3C). CBS Sports' president Neal Pilson events where sponsors pay the bills (e.g., concurred, ". . . we're all going through a professional golf) ( 16). difficult time. Not just the networks, but all of sports. The projections used by the entire According to "Tyson-Ruddock," (69), there industry that the economy would be healthy are 19 million homes with pay-per-view into the 1990s were not net" (p. 3C). access. A 10% buy rate for a championship According to Pilson, the problem for sports, boxing match such as Mike Tyson-Razor as compared to the rest of television is due Ruddock would mean a showing in to the fact long-term contracts have been approximately 2 million homes. With signed, it takes longer to remedy the suggested retail price of $34.95 per home, situation. NBA Sports' president Dick between $65-70 million in revenue could be Ebersol stated the three major networks generated for one showing (69). have lost an estimated $450 million on their Professional sports leagues, seeing the current 4-year deal with the NFL. Ebersol tremendous revenues generated from one furthered the networks financial crisis, event, are exploring ways they too can reap "CBS, in tryingto help out its affiliates with the benefits. its prime-time entertainment schedule, overpaid for baseball by $400-500 million" While television rights continue to soar, (p. 3C). , Huff (32) feels the bidding wars among the broadcasters could lead to the formation of Kevin O'Malley, senior vice-president of new sports leagues partially funded by Turner Sports, disagreed with the idea that networks in an effort to avoid being left rights fees will decline in the future. "If the without major properties. One new baseball economy bounces back, you won't league has been formed and two new necessarily see rights fees go down--except football leagues have been discussed for baseball" (41). According to Kostyra, including talk that either a broadcast or vice-president/director of media services for cable network will emerge as a backer (32). the J. Walter Thompson advertising agency, Television can inform, educate, act as a "If the sports rights fees continue to escalate vehicle to give credit to any sponsor or or even remain the same, the networks supporter, promote a sport, increase public cannot afford them" (16). As a result, more awareness about sport, entertain, and sportsevents will go to cable and eventually

40 provide news coverage before and after an appears that the media may play an event. influential role in the formation and development of professionalsports leagues.

Radio PROMOTION Ensor (19) stated: . . . that while media costs differ significantly between large and Sutton (65) quotes Govoni, Eng, and Galper small markets, merchandising benefits in definingpromotion: "... all those means remain similar among all markets regardless by which marketers communicate with their of size. Because of the difference in radio target market" (p. 150). In general terms, and television advertising costs, television this communication involves attempts to sponsorships will rarely offer as big a inform, persuade, or remind the consumerof merchandising returnon investment as radio the benefits of the product. A key to an sponsorships (pp.42-43). effective promotion is knowing what you want to accomplish and designing a According to Lambert (39), " ...football on promotion to help you reach that goal. It radio is becoming big business" (p. 36). As requires a knowledge of organizational an example, Infinity's KVIL-FM Highland marketing efforts with regard to successes Park-Dallas station paid in excess of $17.5 and failures and their effect on future plans. million for a five year exclusive contract It also requires knowledge about your fan with the Cowboys. The scenario is being base, who attends, who doesn't, and why played out elsewhere across the country as (65). other NFL flagship stations are watching radio rights fees skyrocket in the face of Development of a creative component is a sluggish marketing growth and advertiser critical aspect of the marketing plan because resistanceto hyped rates (39). it is the part causing the greatest interaction with potential audiences and the media. The KVIL-FM's general manager Jerry Bobo creative component is a "theme"--it involves said he went into negotiations with the emphasizing unique attributes of a program Cowboys to make money, and was happy to that set it apart from similar enterprises. write whatever check it took to get the job The creative component not only provides done. They were very optimistic they could visibility and creates interest, but also gives make a profit(39). the potential audience something they can understand and identify with, and yet it is of Bruce Kamen, operations director for KOO enough substance to motivate the audience in San Francisco, said it gave them a big to become consumers (65). advantage in sports ratings that they tried to convertinto their standard ratings. The trick Wilkenson (74) stated no promotion will was audience conversion. The station work if the event is not worth attending, and needed more than the 49ers to do well in the promotional efforts must be well-integrated ratings, and if the station offered interesting, into the overall marketing plan. A informative, and entertaining programs, the marketing plan must consist of a good 49ers' listeners would stay with them as part product, adequate advertising, and a good of their regular listening habit (39). It price. All promotional efforts must be

41 tailored to the expected audience, yet walk into the stadium, you will experience maintain the image of the team or league an�!" (44) (74). Most promotional activities have two goals: to hold currentfans and to attract new ones. AVAILABILITYOF PROFESSIONAL-CALIBERTALENT Johnson & McKee (35) suggested fanstoday are more sophisticated in terms of their According to Havel of the Major Indoor entertainment than a few years ago. Lacrosse League (MILL), fans who attend Everyday sport fans are visually saturated professional sporting events want to see the with television, cable, stereo, in-home highest skill level available. People want to videos, music videos, and movies, so the leave a sporting event thinking, "I just saw trickto reachingand keeping those fans is to the world's greatest." Player identification is provide a greater level of entertainment crucial, as the fans need to be familiar with (35). the product. Where talent is lacking, many times the slack is picked up through Berg (4) contended that Bill Veeck, the late promotional "event marketing." However, a owner of the Chicago White Sox, Cleveland high caliberof talent will be the big drawing Indians, and St. Louis Browns, viewed the card (personal communication, October baseball park as the theater in which he 1990). operated and was considered the unrivaled king of attendance-building promotions (4). In reference to how the World League of American Football (WLAF) stocked its Rob Dlugozima, general manager, Durham rosters, the Media Information Packet ( 44) (NC) Bulls single A professional baseball stated the players were selected from a large team stated their marketing ploy is to pool of athletes consisting of present NFL promote having a good time, with a family players, new players entering for the first feeling. "It turns out to be more of a social time from college teams, and players who event than a baseball game" (4). did not make it at the first opportunity and were trying again. Also, there were local Suggested by Jim Foster, founder and players from participating communities who commissioner of Arena Football, "My demonstrated the competitive ability at personal opinion is that as the game of World Leaguelevel ( 44 ). Arena Football evolves, the game will become much more important than the hype In referenceto rostermix, the World League around it, . . . it is necessary in this day and has placed no restrictions on the number of age to sell the event" (personal commun­ American players on each team's roster, ication, October 1990). with the priority to field the most competitive teams possible (44). Thelatest movement, as stated in the WLAF Media InformationPacket ( 44 ), is to sell the Hackney (27) suggested that much of the concept of partaking in an "event", " ...we NFL' s confidence in the success of their plan to sell the American spectacle: the newly found league, the WLAF, is centered cheerleaders, the pre-game show, the around the 50,000 or so athletes who play half-time show, and the hotdogs When you American football in leagues from the U.S. 42 England, and Italy. From this wide pool of and communication, distribution, and/or players, the elite will be given the pricing strategies; 2) potential client groups opportunity to play (27). should also be measurable; it should be possible to qualify their size i.e., data regarding population of a city, age, etc.; 3) TARGET MARKETING each potential target market should be accessible, as senior citizen groups, minority Yiannakis (77) suggested, once sport groupswho do not speak English, those with marketers develop a clear picture of the key reading and hearing disabilities, and features of the product or service, every illiterate people may behard to reach (11). effort should be made to identify potential markets--groups of people most likely to be Crompton & Lamb (12) have determined interested in purchasing such a product or the following 14 target marketing strategies experience. Target market identification, or should be addressed in order to insure all market exploration, is a key element in the factors have been considered so the market enterprise. It requires a sound un­ foundation for a new league is solid: derstanding of marketing research techniques, especially the survey variety 1) Members of the program'starget (77). markets should be homogeneous or heterogeneous with respect to Yiannakis further states no business or geographic, sociodemographic and organization, including professional sports behavioralcharacteristics. leagues, operates in a vacuum. There are 2) Thesize, growth rate, and national competitors to contend with, the economy, and regional trendsfor each of the demographicshifts, and technological, legal, organization's market segments political, and sociocultural factors to should beconsidered. monitor (77). These environmental forces 3) The sizeof the marketsegment are part of the marketing environment and should besufficiently large or may pose both threats and opportunities for important to develop a unique a particularleague. marketingmix to service it. 4) Market segments should be Crompton ( 11) states selecting target measurable and accessible, with markets is a two-stage process. The first regardto distribution and involves dividing a market into potential communication efforts. target markets or segments (market seg­ 5) Theremust be awareness of high mentation) and the second stage is to select opportunity and low opportunity which segment(s) the agency, such as a segments. professional sports league, will endeavor to 6) Theremust be awareness of servewith a particularoffering (11). evolving needs and satisfactionsof each segment. Requirements for effective segmentation 7) There must beawareness of include: 1) each segment should be benefits offeredto each segment sufficiently large and/or sufficiently by the organization as comparedto important to be worth considering for the those offered by competitors. development of district programs or services

43 8) Benefits must be offered to calculated for the "prime market." The individuals who arenot satisfied in-house capability to analyze markets and by other organizations, especially attract broader, more intense fan bases, and competitors. population projections and shifts are 9) Theremust be awarenessof the important to the formationof a league (13). uniqueness of the product,and its necessity to the community. Another important factor is knowing the 10) Unresponsivemarkets, must be average income in the various franchise targeted,and constraints locations. The more discretionary income contributing to the (the income for spending or saving), the unresponsivenessmust be more likely people will attend professional considered. sporting events and support local teams 11) There must be awareness of repeat (13). business as opposedto new business, and categorizing Crompton & Lamb (12) listed demographic populationby percentage into criteria pertinent to formation of a new non-users, light users, and heavy professional league: 1) what impact will users. forecasted trends in the size, age, profile, 12) Theremust be awareness of the and distribution of population have on the organization's community standing franchises in the new league?; 2) how will with regardto reputation, program the changing nature of the family, increase quality, and price. in proportion of women in the work force, 13) Awareness of the organization's and changes in ethnic composition of the image with respectto the specific population affect the franchises in the new market segments it seeks to serve. league?; 3) what action will the new league 14) There must be the ability to take in response to these trends?; 4) will the efficientlyand effectivelymeet the new league reevaluate traditional service clientele's needs. and expand the range of specialized offerings in order to respond to the changes?; 5) what major developments and Demographic and Economic Elements trends in taxation and other income sources will have an impact on the franchises in the Dauer ( 13) stated a main factor in starting a new league and what action would the professional league is the franchises franchises take in response to these composing the league must be assured of developments and trends? (12) being in the mainstream of professional sports interest and patronage. A market should be of sufficient size and have certain MARKETING/PLANNING identifiable existing economic characteristics ensuring a solid fan base on Crompton & Lamb (12) stated various which live and media audiences can be built factors possibly affecting the formation of a (13). new league. The league and its franchises should review financing laws being The target market should have definable proposed at the federal, state, and local boundaries with a particular driving distance levels that could impact a new league.

44 Recent changes in regulations and court recently ended, they already have their decisions along with political changes at sights on expanding to other cities in each government level could provide Europe, as well as into the Far East and ramifications for a new league and its Russia (27). franchises(12). According to Forbes (22), despite labor problems and a recession, the National SOURCES OF CAPITAL Football League owners voted to add two teams for the 1994 season. The vote for According to Foster (1990), newly forming expansion was 24-4 in favor of expanding in leagues require sources of capital in order to 1994, with the four descending in favor of survive. Several options are: 1) sell to a expansion but not on that timetable. wealthy individual, giving him controlling Franchises are expected to cost $125 interest, 2) sell franchises, or, the most million, with the expansion fees offsetting viable option, 3) allow individuals any dilution of revenues in the next management contracts, or licensing television contract. With expansion, it is contracts. The money goes into the major predicted there may be a realignment of corporation ( the league) owning the team teams within divisions (22). through a limited partnership, and in return, these partners "run" the franchise, but do not White (73) quoted Steve Ehrhart, the have full ownership. Newly formed leagues commissioner of the newly created World such as the MILL and Arena Football have Basketball League (WBL) as saying, "That's gone this route allowing a degree of control exactly what the WBL has in mind. Our over the maverick owner (J.Foster, personal ultimate goal is to create a Soviet/European communication, October1990). division that will be part of the WBL" (p. 2C).

EXPANSION POSSIBILITIES Enright (18) stated Arena Football has plans to expand internationally also, but first they Rosa (55) suggested untapped markets are a must "sell" their product to areas that have viable source of income. The more teams never previously seen this novel idea. To do developed, the greater the source of revenue this, they played two games in the fall of coming into the league. Professional 1989 in Paris and London before large leagues today are continually looking crowds and national television. Last year, toward expansion (55). they returned to play five exhibition games throughout Europeand as for this year, " ... Hackney (27) referred to the World League there are initial negotiations underway for of American Football (WLAF) as a league several games in Japan" (p.36). with foresight to tap previously uncharted waters, by not only considering cities within Allen (1) stated the National HockeyLeague the boundaries of the U. S. but cities (NHL) will " ...plunge into expansion for overseas as well. The WLAF has located the first time since 1979" (p. 8C). The San seven teams in the U. S., as well in Jose Sharks will join the league for the Barcelona, Frankfurt, London, Montreal, 1991-92 season, while Tampa Bay and and Milan. While the league's pilot season Ottawa, Ontario, will also join in the 1992-

45 93 season as part of a sixth expansion plan founders of professional sports leagues, that will take the 21-team league to 28 teams commissioners or presidents of professional by the turnof the century ( 1 ). sports leagues, owners of professional sports leagues or professional franchises, and According to Bodley (5), a National attorneys who have perpetuated league Baseball League ownership committee and/ordevelopment. Individuals who are or recommended awarding franchise rights to were involved in professional sports leagues Miami and Denver. The two cities werethe are important people in their field with a winners among six finalists, paying $95 limited amount of time to devote to outside million each in franchise fees to join the activities (7). Therefore, the individuals for NationalLeague (5). this study not only had to be willing to share information pertinent to this study, but also had to be willing to share their time, which PROCEDURES is in very high demand.

The purpose of this study was to develop a Individuals who were chosen to participate frameworkto isolate the important factors in in this study met the above criteria. As the formation and development of veterans of the professional sports league professional sports leagues. One approach business, the selected individuals gave to develop the framework for collecting insight into the formation and development pertinent data is a modified Delphi of professional sports leagues that could not technique, using telephone interviews. This be formulated from any other source. There is a qualitative study and the modified is no greater source than those who are or Delphi was only a methodof data collection. were involved directly in this area. In The Delphi study generally consists of three essence, this study went directly to the rounds. However, based upon the diversity source. of information collected for this study, the six (6) content analysts deemed two rounds It can be said we learn from our mistakes or would be sufficient because sufficient from our misfortunes. Therefore, it is information was gathered on which to make important to get not only the opinion of a decision. these experts who have had a great deal of success, but also the opinion of those who were less fortunate. Many times in our lives METHOD we ask ourselves, "If I had the chance to do it all over again, what would I do Participants differently?" It is believed those who are or were successful gave their ingredients for According to Dietz ( 15) a sample selection success, while those who were not shared is one of the critical issues in a Delphi their shortcomings, hence, giving us a total experiment. This study included a panel of composite of the important factors in the eighteen (18) individuals who possess formation and development of professional expertise in the area of professional sports sports leagues. leagues (62). Selection criteria included present or former involvement in Panel experts were selected from a variety professional sports leagues including of sports leagues, including indoor and 46 outdoor sports. This was to ensure the concluded with a consent form. The consent resultswere not biased towardany particular form was signed by each panel expert and sport i.e., unequal measures, as the returned in a self-addressed stamped formation of a particular sport may have envelope. varied in characteristicsfrom others. Upon compilation of the transcribed telephone interviews, the results were Interview Protocol delivered to six (6) content analysts who analyzed and categorized the data. A Prospective panel experts were initially second-round of questions . was ·developed contacted via telephone to determine their from the answers to the first-round. The willingness to participate in this study. A second-round interview schedule asked for Leadership Identification technique was related information but also provided each used to identify potential panel experts (34). panel expert . with their previous response Since the nature of the modified Delphi and a brief summary of the reasons offered technique involves a small subject group, for each "forecast". Previous Delphi studies and the time of the individuals needed for indicated information feedback provided to this study was already very much in each member of the panel led to a demand, prior verification was necessary. It reevaluation of their original responses in should also be noted the lack of subject light of the new information concerning the mortality Jn using the Delphi technique was group decision-making process. Frequency critical. To reduce the possibility of subject response feedback may stimulate the panel mortality was farther reason to obtain prior experts to take into account considerations commitment from each chosen panel expert. previously neglected or dismissed as In this study, there was zero mortality unimportant (28). among the 18 panel experts. One panel expert, whose league required immediate Two weeks were scheduled for telephone attention, was still interested in participating interviews for each round. The participants in the second-round interview schedule, but chose an available day and time for their the study could not meet his timeline. telephone interview. Following the conclusion of the second-round telephone i A cover letter, first-round interview interviews, the transcrbed conversations schedule, and a consent form were sent to were analyzed and categorized for a final those panel experts who verbally consented time by the content analysts. The researcher to participate. The cover letter stated a brief met with the content analysts to verify description of the modified Delphi conclusions. technique.

Thefirst-round interview schedule consisted Data Analysis Inductive and of three questions. The first question Deductive Content Analysis involves a "what" question, the second question asking a "when" question, and the Six (6) content analysts analyzed the third involves a definition. The subjects transcribed telephone interviews. The were informed there were no right or wrong criteria for these content analysts were answers. The first round interview schedule specialists or authorities, who in this study 47 must understand/have management back­ and provideadditional inductive information ground, a background in sports league to help clarify the data. The six content management, and experience in analyzing analysts then deductively verified, clarified, and interpretingdata (7). and analyzed the new information, updating and reformattingthe data. Six (6) content analysts were selected based on the ratio of panel experts to content The six content analysts had to become analysts (3:1). These six (6) content highly familiar with the transcriptions from analysts formed three (3) diads, two (2) the telephone interviews. This included content analysts per each diad. For reading the documents numerous times, validating the study, this ratio allowed one becomingfamiliar with the responses. After (1) content analyst for every three (3) panel attaining this familiarity, the content experts. This eliminated the potential for analysts clearly defined the basic unit of bias using only 1 or 2 diads of content analysis. analysts, yet allowed enough diversity of opinion to remove inbred conclusions, while The six content analysts organized the raw retaining manageability to meet the required data into interpretable themes and categories timetable of the study. employing inductive and deductive procedures (53). In this study, an inductive Eighteen (18) panel experts were selected approach allowed themes and categories to based on the limited number of people who emerge from the information received from possessed the knowledge and expertise the 18 panel experts, while the deductive requiredfor this study. Originally, 21 panel approach utilized a predetermined set of experts were chosen but three were unable themes and categories to organize the to participate based on reasons of health, information, which was used by the six conflict of interest, and compilation of a content analysts (30). book. Any amount of panel experts beyond 20 would have been unmanageable for a To better understand the formation and telephone qualitative study. Using the development of professional sports leagues Leadership Identification method (34), there from the panel experts' perspective, the data was significant reiteration of these same 18 from this study was inductively analyzed. names, again confirming the experience and The inductive building process of expertise required to meet the criteria for identifying themes from quotes was similar this study as cited earlier. to a conceptual factor analysis. The process began with clustering quotes and underlying The eighteen ( 18) panel experts were uniformities (25). The underlying primarily the inductive stage because the uniformities (i.e., common threads) were the data was experiential-based and they were emergent themes. Clustering or stating their conclusions. Once a round was categorizing involved comparing and completed, six ( 6) content analysts contrasting each quote with all the other deductively analyzed, organized, and quotes and emergent themes unite quotes formatted the data. The second-round with similar meanings and separate quotes interview allowed the 18 panel experts to with different meanings (25, 53). react, clarify, and confirm the conclusions from the content analysis of the first round,

48 Two (2) of the six (6) content analysts met professionalsports leagues and met the three with each other to interpret, determine and criteria for delimiting a meaningful theme. develop consistencies from the data First, each individual theme, regardless of received. Once these consistencies were the level of analysis, was inclusive (26, 53). validated between the initial two content An inclusive theme adequately captured the analysts, these two content analysts each clustering of lower order themes comprising met individually with two additional content it. Secondly, all themes within a given level analys�s to interpret, determine, and develop of analysis were mutually exclusive, or consistencies validating the deductive distinct from each other (26, 38, 53). framework. Following this confirmation Thirdly, a higher level of analysis captured process among the six content experts, the most of the lower order themes, leaving few two initial content analysts met again to possible unclustered themes (38, 53). The verify, interpret,and recordthe data. few remaining unclustered themes were disregarded -if indistinguishable or retained The inductive process built upon itself. By if important. comparing and contrasting procedures new higher level themes arose. The analysis All aspects of the inductive content analysis, continued building upward until it was not starting with identifying the statements and possible to locate further underlying continuing upward with each theme level uniformities (30). Each higher level theme created, was consensually validated. was more than likely more analytic and Consensus validation was the mutual interpretive, requiring greater inference as agreement between the content analysts on the analysis moved conceptually upward the final form of each statement and theme. from the statements (56). Validation occurred after each content analyst independently identified statement The general induction procedure was altered or cluster themes. When finished with the slightly when quotes differed or varied in independent analyses, they presented both their level of descriptiveness, which their findings and rationale behind their happened from the panel experts' ability to results to the other ·content analysts. They articulate their answers. When less agreed upon common themes and debated description was involved, some themes did divergent themes. These debates produced not neatly progress through all inductive agreement in two ways: 1) when discussing levels but instead were carried directly into, rationales, one content analyst acquiesced and thus became a higher inductive level when the other analyst provided a more (56, 20, 2). convincing argument; 2) when neither content analyst acquiesced, they jointly As with a computer generated factor reclustered the themes, establishing refined analysis, the inductive building process was and agreed upon categories. By providing iterative. Many iterations of comparing and two views of the data, consensus validation contrasting statements and categories decreased the potential bias of either content occurred to create themes accurately analyst. Thus, the statements identified and reflecting the panel experts' perspectives the themes created were more accurate about the formation and development of representations of the panel experts' experience.

49 ANALYSIS OF DATA INDIVIDUAL AND ORGANIZATIONAL FOCI The crossroads of American sports are that this is a period of instability where such Initially, there were five (5) foci developed factors as labor costs are spiraling, costs of to describe individuals or organizations. owning and operating a franchise are The two initial dimensions used to increasing dramatically, and new leagues are characterize or form these five categories coming into competition to fractionate the were: 1) the love of a sport, and 2) money ever-shrinking market. These types of generated from the sport. It is the pressures are building on mature sports combination of the mix of these two factors leagues, reducing the profit margin, and that were utilized to form the initial five making it increasingly difficult to develop categories. The mix was based primarily any type of stable position over a period of uponthe priority attached or associated with time. For new leagues there are pressuresto one of thesetwo elements. This represents a be successful immediately in order to continuum and the categories are only competein an ever-sophisticated market and identifiable points on the continuum. the window of opportunity is much smaller than it was in times past. Five categories were identified and labeled by the six content analysts, by deductively This study was undertaken to help clarify analyzing the data collected from the 18 some of the common perceptions fromthose panel experts. The first category identified who know the formation and development was a Single-focus Purist, an individual who of sports leagues allowing a better loves one sport, at all costs. The second perceptual understanding of this process. category formed was the Sport Sometimes the apparent, simple process of Enthusiast/Multi-focus Purist, an individual the formation and development of sports who loves a number of sports and leagues seems to be well understood, but financially breaking even is an important when put under a microscope, analysis is factor in decision making. The only incomplete. It is an extremely complex circumstance that causes a shift in the process made up of many actors and many interest of a sport is crisis. The third different types of management styles. It was category identified was the Sport also apparent that many of the traditional Romanticist{fradesperson, an individual management principles and styles do not who loves sports and is willing to trade-off have a direct application (78). money decisions on the basis of - circumstance. The fourth category is an There arethree major sections of findings in Achiever, an individual whose primary this study: 1) the focusof the individual and concernis the achievement of goals. Sport is the organization; 2) the formation of a high energy activity and highly visible subcategories; and 3) the definitions defin­ element that adds excitement to the ing the operational aspects of a league in the achievement of the goal. The fifth category isolation of a framework for the formation is the Developer/Producer/Promoter, an and development process as well as the individual who uses sport as a tool to management strategies, management achieve personal gains. Only one out of the principles, and/or decision making processes eighteen panel experts slightly disagreed associatedwith a professional sports league. with the categories. 50 MANAGEMENT STRATEGIES leagues, either in terms of dollars or time, to MANAGEMENTPRINCIPLES make the process more realistic and to avoid AND/OR DECISION MAKING the idea ·of lucrative profits with little effort. PROCESSES Two of the most common definitions used Definitions for success were: 1) return on investment and profitability, and 2) increasing One of the primary problems in sports was popularity of the sport. Another infrequent developing common definitions or meanings theme for successful new league formation related to the following terms: success and related to stability and maturity of the stages of formation and development. league in relation to length of time. These were two important factors to define or delimit the dimensions of sports leagues. There were two major thrusts in regard to It was extremely important to understand or the stages. One was in the formationof new have a working definition of the perceptions sports leagues and the other was in the of success because it was like a goal or maturation process for leagues and their objective driving the organization or league ability to sustain popularity and profits. In and setting the underlying tone for the formation of new leagues, the stages operation. It was the foundation a franchise most leagues have gone through represented or league strived to achieve. It was only in a stabilizing and maturation process. The the achievement of this level the franchise common three phases represented in most or league recognized their earned definitions were: 1) an investment and accomplishments and began to feel a degree formation stage; 2) an operations stage; and of self-confidence or assurance of operation 3) a maturation or a popularity stage, and more focused to achieve a level of especially relating to the media or stability or maturity. Once this level of television. For mature leagues, the stability or maturity is reached, then new maturation stages may be similar to the goals and objectives can be set. "normal" business function cycle which represents a stabilization phase, a growth The other aspect of the foundations' question phase, a maturation phase, and then a is what growth stages does a league go continuous cycle of plateauing and growth through whether it is a new or mature in some combination depending upon the league. This was important because it developmental processes associated with the helped in the developmental process and, business function. once the nature of these stages were understood,· it enabled modification and One primary question was: did this control to better achieve the objectives. "normal" business function scenario Much of the development of the mature as describe the formation and development well as the new leagues was by chance. process? It was a consensus that sports Understanding these stages also helped leagues do not follow this particular cycle. reduce the number of mistakes and allowed The primary difference was rationality achievement of objectives more efficiently drove the "normal" business function cycle. and effectively. This also helped in the In sports it is ego, emotion, and locus of awareness and education process of control that caused radical deviations from individuals wanting to invest in sports this cycle. The deviations occurring in 51 "normal" business decisions were based manipulation/balanced interest). The major upon bottom line profits, and the decisions theme was the common dimension among in sports were based upon a combination of all the issues identified in this category. accomplishments or profits, and love of a These issues centered on league structure sport. What this caused was a lack of and development. Key themes were how to stability and predictability. This was not to achieve solidarity and blend the egos and suggest the basis of ego and emotion are not personalities of the owners with effective involved in all business decisions. They leadership force which positively developed were just more involved in sports than in the sport and yet maintained a good profit other business enterprises. In fact, it was a margin (minor theme= internal and external dominant element in sport causing a lack of relations). All of the issues identified in the understanding about the nature of the sports categories of popularity were classified into enterprise. The primary contribution the the minor themes. These strategies were sports enterprise made to the general one of two types: 1) exploitive, or 2) business field was in how to control or deal collaborative or cooperative. Theexploitive with ego and emotion and its associated strategies were self-focused and variables. It was this ego and emotion that self-motivated. Ego was the primary created lucrative profits in some aspects of driving force behind actions generated from the business and caused famine in other the top down. The style was manipulative parts of the business. The primary element and the focus was upon the franchise. The was learning to utilize ego and emotion and styles that were more collabora­ understand them in the business decisions tive/cooperative were driven by an interest related to the investors as well as the clients in the sport, the individual's contribution to and participants. how the sport develops, and its future. These strategies developed through league cooperation and collaboration and were not Management Areas focused fromthe top down on the individual franchise. The element here was on league The seven (7) management areas identified structure, how it will function in the future, were, listed in order of importance based and how it will respond to change as it upon the number of times they were moves through the phases of the business mentioned in conversations using a thematic cycle. Stability and maturation are the two analysis format: 1) organization, 2) pop­ key dimensions forthe future of any league. ularity, 3) television and media, 4) labor, 5) cost, 6) financing, and 7) ownership. For A major sub-theme in organization has been each of these areas, strategic planning the monopoly issue and the controversy sub-components or sub-issues were associated with this issue required a separate identified. discussion. Sports are one of the few areas with a legitimized monopoly in American business. Monopoly in sports raises Organi�tion questions about how this monopoly is used in pricing and its influence upon delivery of The primary issue identified was the a quality product to the public. The organization category focus upon league contention is that sport is unique because of formation and development (major theme = its limited talent base and special relation

52 with the public. Since there is not a were the amount of money generated from controlling agency, the primary question television contracts and exploring new becomes one of when is a monopoly abused ways, such as pay-per-view (PPV), to in relation to public interest. The sport has generate additional revenue and developing been self-regulating (de facto) and has had and sustaining popularity (minor theme = an honorable record of regulation. money and approvaVacceptance/ demand). Intermittently, there will be judicial action The primary themes for new leagues were with Congress holding hearings about how to negotiate new contracts to gain the selected issues to determine the status of a necessary exposure and revenues. New sport in relation to its position of monopoly leagues viewed these television contracts as in relation to public interest. a level · of maturity as well as recognition that their league had viability. Some of the strategies for new leagues were how to Popularity negotiate better contracts such as off-season rates, and purchasing air time for leagues, The second issue was popularity of the sport and then packaging it to potential sponsors. (major theme = motivation). The key or The controlling element was the power of central issue of bothnew and mature leagues television and its ability to make or break a was the popularity of the sport because new league. Another important dimension without support of the general public of a of television was its impact upon mature locality as well as the national audience, the leagues and their ability to sustain large profitability sought in a sport was almost television revenues. Leagues and the major nonexistent. The primary question was how networks are collaborating/cooperating to to achieve a high level of interest in a sport develop new ways to creatively finance and maintain it over a slow growth pattern? sports enterprises. The question in most of (minor theme = intrinsic and extrinsic) the league owners' and television network Popularity was a function of the executives' minds was what is the saturation institutionalization of the support in society. point of sport to the American public? If Institutionalization was the participation of there is a saturation point, sport will be in a youth at all age levels, including a valued severe depression because it is dependent high school and collegiate program. upon these large television revenues. The Popularity was not only the passive role but key to the future in this area may be the active participation in an activity valued pay-per-view because boxing and wrestling by a local, regional, state, and national have successfully proven large dollar audience. It was the recognition and glory amounts can be generated based upon a received from the participation that was the single event. Another unanswered question element institutionalizing the sport. was what will the impact be in terms of the general public's reactionof having to pay for events that have been televised on free Television and Media television in the past? A sub-theme underlying this whole category of television A third issue was television and media was the relationship between popularity of (major theme = interest/ratings). Concerns the sport and its exposure on television.

53 Labor the panel experts and content analysts. Unless costs are out of control, they are a The fourth issue was labor. Labor costs minor issue. This is an area needing have been increasing dramatically (major emphasis in professional sports because if theme= labor control). The reason is labor profit margins arenot large, an alternative to now wants their share of the dollars from producing profits is controlling costs. This television and the gate (minor theme = idea of costs is perceived as an area to labor/management/sharing). Laborhas been justify obtaining control of an organization. very successful in unionizing and gaining Even though the primary issue may seem to control on some issues central to players. be cost, the underlying motive is The only exception has been the NFL. The organizational control. Closely associated strikes by the unions have only severely with costs are different types of attitudes impacted the fan. How long fans will and these attitudes are associated closely support the increased costs as a result with organizational elements. Given that between struggle of labor and management the issue of costs is clouded with is yet to be determined. One of the elements organizational issues, the real concerns of shaping the future of this may be costs seem to be in one of three veins: 1) consumerism and the demand for increased controlling cost by finding additional benefits associated with high cost. The revenue (supply side philosophies), 2) primary question was one of risk in cutbacks, or the philosophy of limits and proportion to sharing of profits. Labor restrictions in terms of size and growth, and wanted to share in the profits, but they had · 3) the concept of sharing, recognizing to share in the risks proportionately. A resources are limited and attempting to find number of leagues have moved toward common interests to share costs and develop salary caps and revenue sharing. The one resources. element not shared with labor was that of risk as well as the ability to be able to control labor's destiny. New leagues were Financing able to control labor costs by the formation of a league structureinvolving the formation The sixth issue was financing. The of a corporation or a single entity. Owners financing concept was based upon a were willing to share profits but they were multi-revenue philosophy of generating as not willing to share control. much income from direct and indirect sources as possible (major theme = locating financingsources). Direct sources were gate Costs revenue, television, licensing, sponsorship, and concessions. There were revenues The fifth issue was cost which was very generated from the business of sport. closely related to the labor issue. It was Indirect sources included popularization of a recognized that labor was the primary cost product because of its associationwith sport, in professional sports. However, the the ability to obtain exclusive contracts in a discussion of this category will focus more sports franchise, and the ability to use the upon the processes of costs than specific "sky box" concept to obtain favorable content (major theme = control). The cost contract terms because of the prestige issue is probably the clearest in the minds of associated with ownership. These dollars

54 were generated from businesses being to understand the peculiarities and associated with sport (minor theme = deep uniqueness of the sport areas. Nothing was pockets/creating revenue and financing/cost more important to the success of a franchise control). The primary philosophy was or a league than the ability of the league increasing revenues. Owners with deep management to channel the egos of owners. pockets do not have financial problems. It was important to have the proper mix of Other franchises must use merchandising, owners focused in the right direction for a licensing, television, and other sources league to grow and the franchise to increase combined in a creative way to develop a in value. diversified funding base. This diversification of sponsorships and "sky A way of obtaining indications about boxes" was important in using sports to do relationships among the major issues business in an indirect manner. A financial identifiedwas by the relationships expressed plan for a league was necessary including in the statements provided by the panel both direct and indirect sources of revenue. experts. The following were most frequent Cost controls were implemented to some relationships expressed: 1) financing to extent through owners forcing new stadiums organization, 2) television to popularity, 3) to be built, then subletting these stadiums at owners to financing, and 4) labor to a nominal cost to help with financial financing. These relationships were arrangements. It was indirect incomes and expressed by the panel experts and verified the appreciation of the market value that by the content analysts. They have been were the salvation of most franchises and expressed in terms of direction but not leagues. Indirect incomes were dollars magnitude, but they give an assessment of made in the professional sports business, the relative importance of variables in the increasing the value of the franchise and formation and development process. It is in allowing owners to profit fromsports. defining these relationships that models begin to increase understanding and insight.

Ownership SUMMARY AND CONCLUSIONS The last major issue was ownership. There is nothing more critical than having quality History ownership, that is, someone who is a team player (major theme = quality ownership). The most recent trends in modern times in Owners are the most important influence on the formation and development of policies (minor theme = franchise professional sports leagues began after the [self]lleague[team concept]). The primary Civil War and many disagree on a starting focusof owners was on love of the sportand date for modern sports league development, the desire to succeed in a business that had circa 1870 (58). Modern baseball, which glamour and fame. The overriding was one of the first major league sports to dimensions were the high-energy emotion be institutionalized, had its roots and associated with sport and the desire to win beginnings in the Civil War, popularized (ego). There were two primary styles of because it was played in the camps. Even in management: 1) those involved in policy, the formation of these original leagues there and 2) those hiring competent management were three prime actors: promoters, 55 manufacturers, and purists. In addition to winning franchise. Even though a franchise baseball, two major sports also heavily may not win, there are opportunities solely promoted during this period were boxing because of the increased demand for and horse racing. Since its inception, ownership as compared to the number of baseball has gone through evolution, franchises available. The demand for changing with the times. The one element franchises in mature sports leagues escalates that has not changed through legislation or the price. legal decisions, is the monopoly that has been maintained as an appropriate status for The other positive aspect of economics in sports and doesnot come under the Sherman regard to the sports industry is the indirect Anti-Trust Act of 1890 (50). aspect of doing business associated with a sport. Each owner determines how to use their franchise to do business, either in Economics direct relation to the sports enterprise itself or outside interests of using their sports The primary factor shaping the evolution of image to enhance that additional business. sports leagues, especially baseball, has been The aspect of this indirect use of sports one of economics. The interaction of · becomes one of creating the environment economics and monopoly have been the and then the business is done within that elements shaping sports league formation environment based upon prestige. and development (54). The most important aspect of these economics has been the idea Other mature leagues, that is, basketball, of multiple revenue sources and the football, and hockey were patterned generation of dollars from these sources. It originally after the baseball model. League is important to understand the revenue development through the early 1950's was centers and how they have developed. an adoption process. Trial and error was the These revenue centers have responded based basic process and as successful management upon historical development and strategies were found, other leagues adopted opportunities within each sport. Even them based upon their perceptions of though the developments in the sport have success. been parallel, each sport has developed peculiarities or uniqueness' based upon the nature of the sport as well as the existing MANAGEMENT STRATEGIES differences. Each sport has its own MANAGEMENT PRINCIPLES uniqueness in terms of its business style AND/OR DECISION MAKING making it different from other sports, even PROCESSES though this is not being addressed within this particularmanuscript. There were seven (7) primary content areas influencing basic operation of sports league Another issue about finances has been the formation and development. They were: lack of operating profits. Primary money organization, popularity, television/media, made within the sports industry comes from labor, costs, financing, and ownership. Of the appreciation of the value of a franchise. these, popularity, television/media, and The value of a franchise may increase two labor were of primary importance in sports or three times if it has proven itself to be a league formation and development. Costs 56 were also an important factor, especially in continuing interests and disinterests in a operations, but it was very closely allied to particular sport. The other aspect of the labor category. Labor is a spiraling cost popularity is one of education and that cannot be controlled, which is institutionalization of the activity to have a especially true in leagues that have achieved continued, sustained interest so these cycles some type of maturity. Many new leagues recur but the number of individuals have implemented controls such as salary interested remains constant (76, 40). There caps as a way of controlling labor salaries. has to be some type of structure within a Costs are of less importance than the three league generating interest, such as previously mentioned factors because the tournaments or playoffs, because many owners of franchises or leagues are a supply people do not watch a sport during the side typeof operation. season but the enthusiasm generated from tournaments and playoffs is what builds interest in a particular sport. Organi7.ation Television/media has been one of the Organization is an important element yet primary influences popularizing many eachof the leagues have their own structural sports. The primary emphasis of set-up for developing and controlling television/media is not only the aspect of efficient management. The underlying popularity but also of pay-per-viewor other dimension to organization is the lack of creative opportunities to generate dollars. dollars to challenge in any way the nature The television revenues from mature sports and structure of the league. The courts have have allowed the league to pay larger supported the fact sports are unique and are salaries. The primary influence of a monopoly in regard to a single sport, and television/media is that new ways may be its only competition is other professional found to generate additional dollars to pay sports. larger salariesand to improve profitlines.

Sports such as boxing and wrestling have Popularity and Television/Media already created the need for this type of activity through cable television and The next two categories, popularity and pay-per-view, proving the generation of television/media, are closely related. largerevenues. Popularity is a key element because when new leagues are being formed, the question is how to create interest and if it is a mature Labor and Costs league, the primary question is how to sustain the interest. Popularity, · in any In terms of labor, the key element is not particular sport, follows a curve in which only increased costs, but it is also the there can be low initial interest, growth, question of control and the sharing of power plateauing, and then the dropping in interest and revenues. A struggle exists between based upon a cycle of every-so-many years management and labor, especially in terms of the popularity of an activity or a sport of players. The primary question frequently (37, 21). The primary question is how to raised concerns the profits and the ability to achieve stability given this cycle of sharethese with the players. The underlying 57 factor is one of not only sharing profits, but through each of these areas is the ability to of sharingpower and decision making. This create and be innovative, to be successful. It may be an element of contention once there is this creative element that is a constant is a sharingof money or revenues. theme through the content areas.

Financing RECOMMENDATIONS

Financing is locating owners willing to In recent times, there has been a change in spend money or owners with deep pockets professional sports league formation and and can indeed sustain a franchise through development. The mature, dominant good and bad times. There is a controversy leagues have seen new professional sports of whether sports actually make money or leagues evolve. The new sports leagues not. In the day-to-day operations, they may have caused increased fractionation within lose money or break even, but in the the overall competitive market, especially long-run, · they are a good investment among themselves. because of the appreciation of the franchise through the years and how owners have The factor shaping league formation and indirectly used their sports franchise to development in modem times in both generate dollars for themselves through mature as well as new leagues has been additionalbusiness. financing; without adequate financing, formation· and development of new sports leagues is impossible. Also, in recent times, Ownership there has been a period of instability for the formation and development of new sports Ownership is very closely allied to leagues because the popularity of sports has organization. The primary thread running risen and waned based upon a change in the through the league is whether the ownership attitudes and preferences of the general is oriented toward the league or toward the population. franchise. This is a very critical dimension in the organizational structure of the league Sports have had a greater impact upon (60, 29). The types of owners selected to society, as society has been more form the league are critical to the sports-aware. The 1950's and 1960's were a development of the league. If an owner time of popularization of sport, while the does not have the proper perspective (i.e., 1960's and 1970's, were periods of maturity. team player), they must be educated .which During the 1980's, the sports product had can bea difficult process. become increasingly sophisticated. The1990's seem to be a period of trying to The primary competency that is very achieve and maintain stability. The primary important is the insight a league or a problem of achieving this stability is franch�se has in being able to develop new financing because labor is increasingly opportunities (64, 29, 42). The key demanding a greater share of the revenues dimension is the ability to be able to make generated. While the economy may be very something new and seize upon unstable, other forces within the league opportunities. The one common element itself, especially labor, (i.e., players) are

58 demanding increased control and influence study; 3) why sports have been treated in the development of sport. The 1990's differently than other businesses by courts may be a period in which control of the and legislature in terms of the questions · of leagues will have to be shared to achieve monopoly; 4) the relationship between stability in regard to both management and media and ownership to determine if there is labor. a conflict of interest; 5) sports need to be understood from the perspective of the In addition to certain limitations of this consumer, what impact public perception study, questions have arisen and need to be has, and how sports are popularized; 6) the investigated to answer the underlying impact of sports on society and how sports assumptions made in this study. Additional will impact society in the future; 7) the studies to further answer these questions motives for investing in sport, especially need to be addressed in the future: 1) the how sports are used in terms of indirect parameters identified in this study in terms business processes; and 8) involvement of of a quantitative mode; 2) the history, in minorities in sports and how the influx of terms of time and evolution of the leagues, minorities will influence sports development in relation to the factors identified in this in the future.

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