Business And Economics Of Sports

BUSINESS AND ECONOMICS OF SPORTS 1

Business and Economics of Sports

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BUSINESS AND ECONOMICS OF SPORTS 2

Business and Economics of Sports

Part 1

The New York sports club is one of the institutions in the United States that serve as an

athletic club hence participating in many sports. This club is a private social club, which is based

on invites only and is located in New York City. This club offers many sports including;

swimming, soccer, tennis, rugby, wrestling and even boxing (Mills and Fort, 2014, p.207). This

club was initially started as a gymnasium after an increase in organized athletics in England. The

main goal for its development was to keep official records of the different sports and to sponsor

athletic competition in New York (Mills and Fort, 2014, p.211). It offers training opportunities

across eight states and other neighboring countries.

New York sports club provides and maintains the largest gym network in the world and

therefore providing services to people with fitness needs (Andreff, 2014, p.20). For a very long

time the club has been competitively giving its members exemplary services therefore making it

one of the best clubs in New York. The club therefore has created the perfect training

environment for its members making them feel more at home.

This club has been chosen because it’s among the largest sports club in New York

therefore provides a perfect overview of all the other clubs in the city .It has also been chosen

because it accommodates most of the sports in New York therefore most probably has and ,can

provide accurate financial information of all this sports. This club can also be able to explain the

different sources of finances for all this sports and how these funds are spent.

BUSINESS AND ECONOMICS OF SPORTS 3

Financial status

The financial status of the company has been positive over the years. This is occasioned

by firstly, the progressive increase in member count since it was opened. The increase in

members creates more income for the club due to the membership fee that is charged to every

new person joining the club (Andreff, 2014, p.20). The members also pay for other services that

are available at the club such as body massages, food and drinks, space to host events among

others therefore enabling the club to generate more income to be used in its own maintenance.

Secondly, the club has not experienced many debts over the years. Following the

financial records it has been seen that the club debts have not increased this is because borrowing

has not been done due to the nature of the services offered at the club. For example, gym

equipment have been bought once and maintenance is what has been required to keep the

equipments safe and useable. Moreover, sports equipment such as tennis and badminton rackets

are personal in that members carry their own thus reliving the club expenses associated with

buying sports equipments. We can therefore conclude that this club experiences minimal debts

over the years thus financial status of the club can be said to be healthy.

Owing to the continuous increase in membership numbers, the club also sees to it that

more people are employed to help in delivering quality services to their customers. This is shown

by the increased payroll expenditure in the financial reports of the club. Factors such as

employee motivation and incentives for the employees also contribute to slightly higher payroll

expenditure as compared to recent years. Moreover, the company gives medical insurance covers

to all its employees that in handy incase an employee falls ill or gets injured accidentally while

on duty for example when a cook gets burnt in the kitchen while cooking. Allowances such as

BUSINESS AND ECONOMICS OF SPORTS 4

transport and housing are awarded to employees thus increasing the clubs general expenditure on

its personnel.

Thirdly, finances on club operations have been experienced positively. These club

operations include events organized for the members such as team building on different

companies and also the members also competition galas among others. For the team building

activities the club receives payment for the facilitator of the team building experience, catering

services offered to them alongside the grounds provided to them for the activities. During the

competition galas the club receives funding from sponsors and government that they use to

renovate and refurbish the club facilities. In case club members participate in the sporting

activities the club receives payments if they emerge among the top or simply for participating in

the competitions.

Administrative costs include cost incurred for training of the administrative staff and

dinners attended by directors and founders for networking purposes (Cavagnac, 2009, pp.299-

313). This has a positive effect for the club since they are able to equip them with necessary

knowledge to operate the club at very high standards and also to get more insights as to how to

expand the club.

Other expenses incurred may include payment of tenders awarded to various companies

for supplying the club with various requirements for example the training equipment used in the

club, sports materials and food items (Peeters, 2015, p.1277). These companies may also be

involved in offering services to the club such as cleaning services and security which are integral

to the running of the club

BUSINESS AND ECONOMICS OF SPORTS 5

Part 2

The English premier league is one of the most popular professional team sports league

known all over the world. It is the top most ranked league with the highest number of high end

clubs, has a high transfer fee, high attendance and is the most exciting league to follow. It

consists of 20 clubs and at the end of each season the three poorly performed clubs are relegated

to the first division and three teams that were initially in the first division are promoted to the

premier league (Martinez and Willner, 2017, pp. 49-60). This shows there is a high rate of

competition in the league. The league’s season come about every year from mid-August to May

the following year. Team plays a total of 3 matches, that is to say two matches against each team.

The two matches involve one at home ground and one away from home. The premier league

timetable is set such that most games fall on weekends and in some cases on the weekdays

evening (Martinez and Willner, 2017, pp. 49-60).

English premier league started in 1992. Since it was founded, a total of 47 teams have

participated in the league but only six have been able to win the ultimate price. This basically

shows existence of tough competition which has enabled the league to thrive and acquire a large

fan page. Also the fact that the players that participate in English premier league come from 67

different nations has increased the popularity of the league.

The soccer statistics

Manchester City was the first team to start using the statistics from football to start

analyzing games. From then different teams started analyzing their performance in order to be

able to predict future games and rate their level of performance. Historically, soccer suffers from

lack of public data since it was not analyzed in the past.

BUSINESS AND ECONOMICS OF SPORTS 6

Analysis of competitiveness

The competitiveness of teams in the premier league can be measured by looking at the

number of wins that occur each season (Denaux Z., Denaux, D., and Yalcin, pp.117-127). It is

also important to look at the win margin and put into considerations the large win margins.

Normally a win by 4 goals and above is considered to be a better win than any other.

Competitive balance in sports is often used to justify the revenue sharing agreements.

This is explained that competitive balance leads to high attendance in a league and high

attendance leads to a high generation of revenue. The sharing of revenue enables small teams to

afford high quality talent, which is to mean they can buy players with high skills. This ensures

equal distribution of the talent in all teams hence a fair competition.

Data: The number of goals scored by different teams in English premier league

Team

2011-12

2012-13

2013-14

2014-15

2015-16

Bournemouth

Arsenal

Burnley

Chelsea

Cristal Palace

Everton

Hull

Leicester

Liverpool

101

BUSINESS AND ECONOMICS OF SPORTS 7

Man City

102

0Man united

Middlesbough

Southampton

Stoke

Sunderland

Swansea

Tottenham

Watford

West Brom

West Ham

(Source: Martinez and Willner, 2017, p.53)

This clearly shows the number of teams that attended the English premier league and the

way they performed in regards to the number of goals they scored. There areas where several

teams show zero goals, this is a clear indication that in that season they were absent (Martinez

and Willner, 2017, pp.49-60). Proving from the data, the teams that were absent are not so many

and they were not absent in the whole period the data was taken. This clearly shows that English

premier league has a good attendance and also there is a competitive balance in their

performance.

BUSINESS AND ECONOMICS OF SPORTS 8

Attendance of English premier League

(Source: Denaux et al., 2011, pp.117-127)

Season attendance of the English premier league

The attendance started at a low rate in 1975 but rose steadily to date. This can be

explained because of the increasing rate of birthrate after the world war as at 2015, the

attendance grew to almost 800,000 (Denaux et al., 2011, pp.117-127). This shows that the

premier league has many fans and it’s a competitive league.

Analysis

Measures of competitive balance

They include dynamic competitive balance ratio and competitive balance ratio.

Competitive balance ratio does not capture season-to-season changes in relative standings. It

BUSINESS AND ECONOMICS OF SPORTS 9

reflects team specific team specific variation and league specific variation, which is determined

by identification of annual attendance in professional sports (Owen, 2010, pp.38-41). Like in the

graph above, the attendance grows every year from the year 2015. It is a more of observation

method therefore considered useful in metric.

Dynamic competitive ratio is developed from other metrics and allows each team to be

measured differently in different periods (Sloane, 2015, p.4). Its length can be increased to suite

the different times. This makes it to improve the competitive balance method in order to correct

different issues in current competitive balance. The teams can be measured in accordance with

the number of goals they score and the number of cards they receive. This research determines

the importance of competitive balance in the different sport league (Sloane, 2015, p.6). That is

by checking the teams that score the highest number of goals per game and the team with the

highest point. In a nutshell, dynamic competition provides knowledge, understanding and an

application of competitive balance thus leading to an improvement of sports. This improvement

is an advantage to the fans, managers and other stakeholders.

Structural changes

The competitive advantage may bring about structural changes in the English Premier

League structure such as how to treat the best team and the bottom teams. As at now, the top

teams in the premier league are given a monetary reward and in addition the best team goes

home with a trophy (Martinez and Willner, 2017, pp. 49-60). The bottom three teams are

degraded to the upper division so that they don’t participate in the next season of the EPL.

BUSINESS AND ECONOMICS OF SPORTS 10

Ownership changes

When a club performs well in the EPL games, they gain sponsors and by new skilled

players from the clubs that do not perform well (Lee and Fort, 2012, p.271). This means that,

competitive advantage can influence how the players move from one club to another. Also,

players of the teams in first division can be bought with other teams since they will be no longer

participating in the league.

Intervention policies

Policies are asset of rules that people should follow. Some of the policies developed in

the sport sector are; doping policies of how crowds can be controlled in events, policies on how

junior will be treated in sports, policies on financial management, policies on how the conduct of

each and every participant in the sports (Alavy, Gaskell, Leach, and Szymanski, 2010, p.75). For

instance, an athlete found guilty of using some substance in order to enhance his or her

performance should be banned from ever taking place in the sporting activities.

BUSINESS AND ECONOMICS OF SPORTS 11

References

Alavy, K., Gaskell, A., Leach, S. and Szymanski, S., 2010. On the edge of your seat: Demand for

football on television and the uncertainty of outcome hypothesis. International Journal of

Sport Finance, 5(2), p.75.

Andreff, W., 2014. Building blocks for a disequilibrium model of a European team sports league.

International Journal of Sport Finance, 9(1), p.20.

Cavagnac, M., 2009. Revenue sharing and competitive balance when teams are not wage takers.

Review of Industrial Organization, 35(3), pp.299-313.

Denaux, Z.S., Denaux, D.A. and Yalcin, Y., 2011. Factors affecting attendance of major league

baseball: revisited. Atlantic Economic Journal, 39(2), pp.117-127.

Lee, Y.H. and Fort, R., 2012. Competitive balance: Time series lessons from the English Premier

League. Scottish Journal of Political Economy, 59(3), pp.266-282.

Martinez, M. and Willner, J., 2017. Competitive Balance and Consumer Demand in the English

Football League. Applied Finance and Accounting, 3(2), pp.49-60.

Mills, B. and Fort, R., 2014. League‐level attendance and outcome uncertainty in US pro sports

leagues. Economic Inquiry, 52(1), pp.205-218.

Owen, P.D., 2010. Limitations of the relative standard deviation of win percentages for

measuring competitive balance in sports leagues. Economics Letters, 109(1), pp.38-41.

Peeters, T., 2015. Profit‐Maximizing Gate Revenue Sharing in Sports Leagues. Economic

Inquiry, 53(2), pp.1275-1291.

Sloane, P.J., 2015. The economics of professional football revisited. Scottish Journal of Political

Economy, 62(1), pp.1-7.

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