2005 presentation on professional sport management

1. Professional Sports

2. Leagues
 Restrict entry
 Assign exclusive franchise territory
 Collude on revenue sharing formulas

3. League Resources
 Revenue Sharing
 Help’s league’s overall economic health
 Network TV contacts are divided equally
 Ticket sales are divided with visiting team
 NFL: 40% of regular season; 50% of preseason
 MLB: 20%
 NBA & NHL: Don’t share gate receipts
 NBA: Share licensing sales

4. Competitive Balance
 Without it fan interest would decrease causing
team revenues to decrease
 Rules for:
 Player allocations to new teams
 Drafts of available players
 Restriction of player movement to new clubs
 Compensation to old clubs for lost players

5. Sport Industry Labor Relations
COMMISSIONER
AGENTS
GOVERNMENT AS
REGULATORS
Legislative, executive, and
judicial
LABOR
Players and
Unions
MANAGEMENT
Leagues and
Teams
COLLECTIVE
BARGAINING
PROCESS
MEDIATORS ARBITRATORS

6. Sport Industry Labor Relations
 Management
 The league itself, and the individual member clubs, it
includes non-player employees
 Labor
 Players
 Agents
 Player Unions

7. Management: League Operations
 Negotiate collective bargaining agreements
 The process of employer-union negotiation for the
purpose of reaching agreement as the terms and
conditions of employment for a specified period
 Players join together and team owners join together
 National TV contracts
 Setting rules

8. Management: Member Clubs
 Independent legal entities
 Free to make/lose money depending on how
they operate
 Abide by league agreements
 Want the best team as a means to make $$$
 Negotiate individual player contracts
 Establish rules for player movement
 Hire front office employees and coaches

9. Labor/Players
 Direct producers of the main product
 Players are also the product
 Certain athletes can be considered independent
contractors as result of free agency
 Free agency: Ability of players, after fulfilling an
agreed-upon number of years of service with a team,
to sell their services to another team with limited or
no compensation to the team losing the players.

10. Player Perspectives
 Fans pay to see them perform
 Compensation should be based on the revenues
they generate
 Careers are short, so salaries should be high
 Oppose rules that suppress salary levels

11. Player Associations/Unions
 1954-NBA & MLB Players Associations
 1956-NFL Players Association
 1966-MLB became union
 1967-NHL Player Association

12. Player Associations/Unions
 Promote collective bargaining
 Establish minimum player salaries
 Pension payments
 Rookie salary structure
 Player’s can use agents to negotiate individual
contracts
 Salary, contract length, guaranteed payments, and
bonuses

13. Collective Bargaining Agreements
 Standard player contracts
 Contract length- usually 3-5 years
 Compensation
 Payment for expected performance
 Incentives for performance
 Mediation and arbitration v. Litigation
 Mediation: Neutral parties who become involved with
grievance procedures
 Arbitration: Process where an independent arbitrator will
determine the players salary
 Free agency

14. Free Agency: MLB
 Veteran players: After 6 seasons
 3 years or more (not on multi-year contracts) are
eligible for salary arbitration

15. Free Agency: NBA
 Complete free agency after 4 years or expiration
of 2nd contract
 Right of first refusal: Allows old team to resign
player by matching any offer proposed by a
prospective team

16. Free Agency: NFL
 If player salaries reach 67% of designated league revenues, a
salary cap is imposed
 Unrestricted free agent: In a capped year, a player is eligible for
free agency after 4 years, rather than 5 in an uncapped year.
 Restricted free agent: A player with 3 but less than 4 years (but 5
in an uncapped year) can seek offers after their contract expires,
for 60 days
 Old club can match offer to keep the player
 Release the player in return for a draft pick
 Exclusive Rights: Player with less than 3 years can sign with their
old club
 If old club does not want to sign the player, they become an unrestricted
free agent

17. Free Agency: NHL
 Unrestricted free agent: Must be at least 32 years old,
new team does not have to pay compensation to the
team he is leaving
 Restricted free agent-3 different categories
 Old team may make a qualifying offer/match offers
 Old team has first right of refusal and can re-sign by
matching the offers
 Less experienced players may only negotiate with their old
team
 Salary arbitrator can set a fair salary regardless of proposals,
owner can set contract’s length and refuse to enter into it

18. Commissioner
 Serve both management and labor
 Spokesperson on league matters
 Guardian of “integrity of the game”
 Reality: Selected and paid by, and serves at the
discretion of management

19. Agents
 Responsible for marketing individual players
 Assist players with maximizing contracts and
protecting finances
 Few requirements to become an agent
 Their roles can affect an entire team and the
labor-management relations structure