Sports Franchise Ownership and Management, Exams of Sports Law

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professional sports - correct answer ✅are events and exhibitions where athletes compete individually or on terms and perform for pay. Major international business grossing billions of dollars each year through media rights, gate receipts, luxury seating, sponsorship, and properties. And drafting of more international players by North American sport leagues has catapulted professional sports into new markets leagues - correct answer ✅in NA, 5 major men's leagues: MLB, NFL, NHL, NBA, and MLS - 149 teams at the major league level. WNBA is the only women's "major" pro league. More than 800 NA minor league teams across many sports professional history - correct answer ✅in 1869, the first professional team was formed - the Cincinnati Red Stockings. In 1876, NA first professional sport league, the National League, emerged - included bylaws for limits on franchise movement, club territorial rights, and mechanism for expulsion of a club. Use corporate governance model: owners act as the board of directors, and the commissioner acts as the chief executive officer league structure - correct answer ✅leagues are structured as an umbrella organization for franchises to cooperate in business while competing on playing field - leagues also handle rule making and rule enforcement. Trend for emerging leagues to be established as single entities to avoid antitrust liability and to create centralized fiscal control

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franchise ownership - correct answer ✅initially sport team ownership was a hobby for the wealthy - teams operated as 'mom and pop' businesses. Focus of owners today is to runs teams like a business. Most ownership groups today are diversified because of the costs of purchasing and operating a team - exception is NFL: family or individual ownership is still the norm because of enhanced degree of revenue sharing ownership issues - correct answer ✅owners trying to recoup initial investment in club and make more money on their franchises - a growing trend is for owners to challenge control over shared revenue streams. Some owners clamoring for local control over marketing revenues using logos, trademarks and sponsorships - ex. Dallas Cowboys and NY Yankees. Or working to maximize revenues - ex. BoSox and Fenway Sports Group ownership rules - correct answer ✅permission to own sports franchise granted by ownership committee of league; league imposes restrictions on ownership, including limit on number of franchise rights granted (number of teams) and restrictions on franchise location; leagues may also impose eligibility restrictions for franchise ownership - NFL bans corporate and public ownership; franchise and territorial rights are granted with ownership; and use of team colors, name and logo are granted with ownership

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the commissioner - correct answer ✅in 1920, there was the first commissioner of a pro sport league - MLB's Judge Kennesaw Mountain Landis. League constitution and bylaws set forth commissioner's powers

• granted authority to investigate and impose penalties when individuals are suspected of acting against the best interests of the game. Players' associations have used collective bargaining to limit commissioner's powers labor relations (part 1 - players league) - correct answer ✅labor; in 1885, John Montgomery Ward (lawyers and HOF baseballer) established first players' association to: fight reserve system, salary caps, and practice of selling players without the players receiving a share of profit, and to negotiate with owners. When his plan did not work, about 200 players organized a revolt that led to organization of the 'Players League' labor relations (part 2 - MLBPA) - correct answer ✅labor; in 1952, the MLNPA formed - dominated by management and negotiations were limited to pensions and insurance. In 1966, Marvin Miller organized players as true labor union by convincing all players that each of them was essential to game revenues - convinced players to fund players' association by giving their group licensing rights to the union from which the union would operate and give remaining funds back to players in pro-rate shares labor relations (part 3 - NHL union) - correct answer ✅labor; in 1957, NHL players tried to unionize - NHL owners humiliated, threatened,

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trade, and/or released players for involvement in players organizing efforts. Labor relations did not play major role in professional sports until the late 1960s, when growing fan interest and increased TV and sponsorship revenues transformed leagues. Once players unionize, collective bargaining must occur before league management can change hours, wages, or term/conditions of employment labor relations (part 4 - unions, CBAs, strikes) - correct answer ✅with a players union in place, a league can negotiated acceptance for restrictive practices with players' association - practices that on their own might violate antitrust laws. When the collective bargaining process reaches an impasse, the players strike or can owners "lock out" players. Strike and lockouts are far more disruptive in professional sports than in other industries because of the lack of replacement players PGA - correct answer ✅1916: birth of the PGA - objectives are to grow golf interest, elevate standards of golf professionals, establish a relief fund, and hold meetings/tournaments. In the 1960s, tension between PGA and local clubs through conflict - PGA players broke away to form the Tournament Players Division (PGA tour). Tours in the individual sports have their own rules/regulations - players must qualify for PGA tour (winning exempts), and players who don't make it usually compete on the Nationwide Tour

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franchise values - correct answer ✅owners diversify investments to protect against risk that a franchise will lose a great deal of money. Currently, franchise values for major league clubs are in the hundred of millions of dollars. Stadium games: team owners threaten to move teams if their demands for new stadiums, renovations to existing stadiums, or better lease agreements are not met revenue generation - correct answer ✅teams such as the Boston Red Sox and LA Dodgers maximize revenue potential in every inch of their stadiums. Large vs. small-market dichotomy created by the disparity in local broadcast revenues in MLB - some teams forced to focus on efficiency (Oakland A's), labor stability = cost stability contract law - correct answer ✅all players sign a standard player contract particular to each league. Commissioner of league can refuse to approve a player's contract if he or she believes it violates league rule or policy. Disputes may occur over which team retains rights to a particular player, and such disputes may lead to legal battles between teams and players of different countries antitrust law - correct answer ✅all professional sport leagues adopt restrictive practices (drafts, reserve systems, salary caps, free agent restrictions, and free agent compensation) to provide financial stability and competitive balance between their teams - depress salaries and keep competitor leagues from signing marquee players. Such practices are often challenged under antitrust law as anticompetitive - argument

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is that such practices restrain trade or monopolize the market for professional team sports race and gender in pro sport - correct answer ✅representation of minorities in sport management should match representation on the field. All in 2003, all leagues showed lower averages for women in management and coaching positions. NBA has their first African American majority owner in Bob Johnson (Charlotte Bobcats), and MLB first minority owner Mexican American Arte Moreno (Anaheim Angels) league office - correct answer ✅career opportunities; other than commissioner, personnel include hundreds of employees in a range of areas. Necessary skills - working knowledge of given sport, teams, and industry; good customer relations skills; willingness to work long hours team front office - correct answer ✅career opportunities; general manager - in charge of all player personnel decisions, traditionally former player or coach but has become more complex more complex individuals with graduate degrees have become more desirable. Other personnel - number of positions and specialization of jobs has increased gently, entry level tends to be in sales, marketing, community relations, and media/public relations with low starting salaries. tour personnel - correct answer ✅career opportunities; as with league sports, positions range from commissioner to marketer to special events coordinator - tours such as PGA and ATP employ many sport

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managers. Much of event management work for site operations of tour events; however, is often left to outside sport agency agents - correct answer ✅career opportunities; almost all team and individual athletes in professional sports have agents representing them and coordinating business and financial affairs. A growing number of coaches also rely on them. A range of opportunities is available in sport agencies in marketing, finance, accounting, operations, etc. salary cap - correct answer ✅current issue; were intended to create parity among teams by capping how much a team can spend on its players' salaries. Owners must negotiate with the players to have a salary cap, and the union will inevitably negotiate for some exceptions to the salary cap - exceptions have created loopholes for creative GMs and agents representing players. Caps require teams to cut players/renegotiate contracts/have spending minimums globalization - correct answer ✅current issue; pro sports are becoming globalized through the drafting and signing of players from other nations and the movement of marketing efforts into those countries. NFL played exhibition game in China and regular season game in England in 2007. NBA seeks to move full force into China women in pro sports - correct answer ✅current issue; for professional women's leagues, only the WNBA and NPF still exist - the ABL declared bankruptcy and WUSA suspended operations in the fall of 2003

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sport agency history - correct answer ✅C.C. "Cash and Carry" Pyle is often cited as the first sport agent - worked with Susan Lenglen and Red Grange. Until the 1970s was extremely rare for pro team sport athlete to have an agent, teams generally refused to deal with agents and there was no free agency until 1976, so little leverage to negotiate. Agents have existed in individual sports such as golf and tennis for a longer time. sports agency growth - correct answer ✅seven factors of influence: 1) evolution of players' associations, in 1970 MLBPA negotiated through collective bargaining for right for players to be represented by agents; 2) free agency granted to players (Messersmith-McNally arbitration decision); 3) growth of sport broadcasting industry lead to greater media revenues for leagues and teams; 4) need for tax planning increased as salaries increased; 5) increased competition and salaries for players; 6) increased number of tournaments/tours for athletes; 7) increased tv/entertainment opportunities for athletes representing individual athletes - correct answer ✅sport agency; income dependent on consistent performance events, appearance fees from events, and the ability to promote and market athlete's image. Agent often travels with athlete, tending to daily distractions to focus them on playing. Large firms doing individual reps are involved in all aspects of the sport (event management/marketing, broadcasting, consulting) - possible conflict of interest?

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representing coaches and management - correct answer ✅sport agency; because of increased income and increased job movement and added pressures on coaches to succeed, the number of coaches (and GM) with agents is growing. Increased complexities of coaching may make having an agent to rely on for advice and counsel almost a necessity. freestanding sport management firm - correct answer ✅type of sport agency firm; a full service firm providing a wide range of services to the athlete law practice - correct answer ✅type of sport agency firm; lawyer performs many legal tasks (contract negotiation, arbitration, legal counseling, dispute resolution, and the preparation of tax forms) boutique firm - correct answer ✅type of sport agency firm; small firms find greater success representing athletes in one sport and focusing on one or two services for the athletes of coaches. In smaller firms, an agent works alone of with small group: advantage may be that athletes receive greater attention, actually represented by contractee/disadvantage may be that solo agent cannot offer as many services conglomerate firm - correct answer ✅type of sport agency firm; in larger firms, the agency may be part of an international conglomerate

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representing many athletes in a broad range of sports: advantage may be that large firms employ professionals from many disciplines, large firms have many contacts throughout the sport industry and can use their power on behalf of athlete/disadvantage may be that there is often a large stable of clients, and an athlete may be small fish in big pond agency charge methods - correct answer ✅fees charged by agents; 1) flat fee arrangement - athlete must pay agent an amount of money agree upon before the agent acts for the athlete; 2) percentage of compensation method - often covers negotiation plus all of the work related to the provisions of the contract over its term; 3) hourly rate; and 4) hourly rate with a compensation cap fee issues - correct answer ✅the players' associations limit the amount of agent fees; fierce competition for clients has driven average fees down closer to 2-3%; limitation only exists for the fees the agents can charge for negotiating the athlete's contract, not for marketing deals sport marketing representative - correct answer ✅career opportunities with sport agency firms; coordinates all of the marketing and sponsorship activities for sport properties sports agents - correct answer ✅career opportunities with sport agency firms; may perform just one function (contract negotiation) or may have a number of employees performing functions for clients

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contract negotiation - correct answer ✅functions of the sport agent; agent must knowledgeable about the sport and rules, regulations, documents (contract, CBA, constitution), and common practices of its governing body; agent must understand the value of the player's or coach's services; agents must administer the contract and ensure the parties comply with their contract promises. marketing the athlete/coach - correct answer ✅functions of the sport agent; should develop plan in which each endorsement creates an image consistent with the athlete's or coach's ambitions and long-range goals; agent must keep in mind that client's career and public persona may be short-lived; must also be familiar with restrictions that may limit a client's marketing opportunities; usually seek product endorsements before nonproduct endorsements - easier to obtain financial planning - correct answer ✅functions of the sport agent; covers banking and cash flow management, tax planning, investment advising, estate planning, and risk management; sport agents often attempt to take on this function without proper skills and training - can lead to allegations of incompetence and negligence; disability insurance plans to protect athletes from career-ending injuries; recent surge of companies offering athletes pre-draft lines of credit career and postcareer planning - correct answer ✅functions of the sport agent; agent must help a client with transition into a professional career

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and again with the transition into retirement from the sport; agent must maximize the client's earning potential during and after their playing career but avoid overexposure; agent may take on the establishment of sport camps or charitable organizations under the athlete's or coach's name legal counsel and dispute resolution - correct answer ✅functions of the sport agent; provide legal counseling on contract and other legal matters - nature of legal work may require lawyer specialization; resolve disputes the athlete or coach may have with their league, team, fans, refs, press, or endorsement companies unethical behavior - correct answer ✅current issue; great deal of criticism and a public perception that the behavior of those in the agent profession is excessively unethical. 5 key problems in profession: 1) income mismanagement, 2) incompetence, 3) conflicts of interest, 4) charging excessive fees, 5) overly aggressive client recruitment agent regulation - correct answer ✅current issue; sport agents today must maneuver through a maze of conduct/governing regulations. Many groups regulate agents: players' associations - agents must register and pay fee; states; federal government (FTC); the NCAA. Athletes can also seek recourse under tort, criminal, agency and consumer protection laws.

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IAAM (international association of auditorium managers) - correct answer ✅is the professional trade association for the facility management field stadium history - correct answer ✅part of facility management; the gain in the popularity of pro baseball and intercollegiate football launched construction of stadiums. Constraints of urban space limitations dictated the irregular sizes and shapes of the older ballparks. Early NFL teams played in baseball stadiums until new stadiums were built arena history - correct answer ✅part of facility management; in 1927 hockey owners followed the lead of baseball owners and built arenas to host their teams. Needed to fill empty seats in arenas on nonhockey night: hosted boxing matches. Ice Capades put together to fill night. Basketball enters arena picture, and arena owners earn revenue from two tenants. modern era facilities - correct answer ✅part of facility management; baseball-only stadiums were becoming obsolete during the 1960s. Team owners could make great deal of money by making the host city build the stadium; cities built shiny new facilities to keep their teams enthusiastic about their hometowns; city leader believed that publicly built stadiums were good investments and added to quality of life arenas - correct answer ✅types of public facilities; built to accommodate one+ prime sports tenants or to lure a prime tenant.

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Intercollegiate facilities financed by private donations, endowments, student fees, fund-raising campaigns, and public grants from institutions. Public owner may manage its own facility or contract out for private management. Recent trends in facility construction include adjacent practice facilities for the primary tenants to increase event bookings. stadiums - correct answer ✅types of public facilities; outdoor or domed facilities for baseball, football and soccer. Stadium managers try to maximize booking but more difficult with stadium compared to arena (fewer sports can play, hard to attract crowds). Stadium managers have become increasingly effective in creating events for their venues that take advantage of all spaces convention centers - correct answer ✅types of public facilities; almost always built and owned by a public entity; built to lure conventions and business meetings to a particular municipality; publicly financed because the rents and fees they charge do not always cover costs; however, the economic impact the convention or business meeting has on the municipality is large theaters - correct answer ✅type of public facility; public assembly facilities that are primarily utilized for the presentation of live artistic entertainment; house prime tenants such as symphony orchestras, opera, dance companies, and resident theater groups; profits are rare but the spinoff business from theater attractions justifies public

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subsidies; provide culture and entertainment for a community, enhancing its quality of life facility financing - correct answer ✅the federal gov allows state and local governments to issue tax-exempt bonds; tax exemption lowers interest on debt and thus reduces the amount that cities and teams must pay for a stadium; public vs. private financing; team owners have had to look for additional revenue to compete for, and pay their players while maintaining profitability; building public assembly facilities meant other services had to be neglected. Team owners look for city or state willing to build new facility but let the team control stadium revenue streams, allows owners to maximize revenue without debt and service expenses bonds - correct answer ✅facility financing mechanisms; money to build facilities is usually obtained by issuing these; is a promise by the borrower to pay back the lender a specified amount of money, with interest, within a specified period of time. General obligation bonds: backed by the local gov ability to raise taxes to pay off the debt (safer); revenue bonds: backed specifically by the facility's ability to generate revenues (risky) taxes - correct answer ✅facility financing mechanisms; property taxes: paid by homeowners, who are often long-term residents of a city. Occupational tax: anyone who works in the community. more likely to pass in vote. Hospitality tax: forces visitors to pay directly for the facility; General sales tax: affects both local residents and out of town visitors

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corporate investment - correct answer ✅facility financing mechanism; sale of naming rights for stadiums and arenas is a current trend. Facility pouring rights: being the facility's exclusive soft drink or beer distributor. Outright corporate donations: defray costs in exchange for the publicity and public relations benefits that may result from such a donation why cities subsidize sports - correct answer ✅sports facilities are thought to improve the local economy in four ways: building a facility creates construction jobs, people attending games or work for team generate new spending in the community, team attracts tourists/companies to the host city, and new spending has multiplier effect as increased local income causes more spending and job creation facility ownership and management staff - correct answer ✅facility employers goal is to provide a clean, safe, and comfortable environment for patrons. Functions: security, clean-up, marketing and sales, scheduling and booking, operations, event promotions, and finance/box office operations. Private management: provides expertise with dedicated personnel and network of facilities that create leverage in cultivating key event relationships and in-turn event bookings. marketing director - correct answer ✅facility career opportunity; fast, stressful and challenging career track. Acts primarily as in-house advertising agent for the various events booked into facilities.

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Responsibilities: buying media (TV, radio, print), coordinating promotions and designing marketing materials (commercials, brochures, flyers). Multiskilled performers who possess excellent people skills, sales ability and written/oral communication skills public relations director - correct answer ✅facility career opportunities; forges solid working relationships with TV and radio news directors, newspaper editors and reporters. Coordinates TV broadcasts from the facility, writes press releases on upcoming events, works with the media concerning events and activities in the facility. Possesses a strong writing ability, creative mind, and the ability to respond under pressure event director - correct answer ✅facility career opportunity; acts as the point person for the facility during each show; must be able to think and react quickly to any problems arising during the event and must be able to deal calmly with show promoters, angry customers, lost children, and other situations booking director - correct answer ✅facility career opportunity; position devoted to booking events for the facility. Much time is spent talking on the telephone with agents and promoters, and attending conventions to solicit events. Negotiating contracts is also part of the job. operations director - correct answer ✅facility career opportunities; supervises facility preparation for all types of events. Coordinating, scheduling and supervising the numerous changeovers that take place

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each year as one show moves in and another moves out. Job requires a mechanical knowledge of a facility's inner workings. Must also possess superior people skills (advertising, sponsorship, and signage) salesperson - correct answer ✅facility career opportunities; responsible for selling signage and event sponsorships - an important source of revenue for facilities. Salespeople must possess excellent interpersonal and presentation skills. group ticket salesperson - correct answer ✅facility career opportunities; primarily responsible for selling large blocks of tickets for various events to corporations, charity organizations, schools, scout troops, and other parties. Needs to excel on the telephone and in face to face presentations box office director - correct answer ✅facility career opportunities; responsible for the sale of all tickets to events as well as the collection of all ticket revenue. Must be patient, have a calm demeanor in dealing with the public, and possess good supervisory skills