Sports Money Game: A Big-Bucks Bonanza
OUTFIELDER Barry Bonds agrees to play for the San Francisco Giants for six years and $43.75 million. ``The Great One,'' hockey star Wayne Gretzky, moves from the Edmonton Oilers to the Los Angeles Kings for $31.3 million over 10 years. One year later, he signs a new three-year contract for $8.5 million per year. Shaquille O'Neal signs a seven-year contract with the Orlando Magic basketball team for $40 million.
What's going on here? Have the owners of these teams found ways to print money?
According to accountants and co-authors Jerry Gorman and Kirk Calhoun in their book ``The Name of the Game: the Business of Sports,'' that is exactly what is happening. A star athlete can make a franchise owner rich. Look at what happened when Gretzky moved to Los Angeles - a city with no history of hockey - but an appreciation of stardom.
In Gretzky's first season in L.A., the per-game fee for cable went up significantly as did the number of games carried on the medium. The average ticket price leapt from $18.50 to $22. Higher prices did not stop the fans, as attendance increased by 120,231. Sellouts went from five games to 22 games. At the same time, the owner of the Kings, who originally paid $16 million for controlling interest in the club, turned down an offer of $90 million for the team in 1993.
The moral of the Gretzky story - as is true of Bonds and O'Neal - is that sport is not about sport; sport is about money.
Gorman and Calhoun, both from the acounting firm Ernst & Young, have written the book with Skip Rozin, a sportswriter who keeps the prose from getting too dry. The book would have benefited from some charts, since all those numbers need to be put into context. The authors have relied heavily on newspapers and magazines as source material. Although there don't appear to be any glaring errors, primary research is preferable to avoid duplicating other people's mistakes.
Hardly a cash-flow stream has been missed: general admissions, network television deals, cable rights, the sale of T-shirts, hats, franks and beer, scoreboard advertising, and baseball cards. They analyze where the money goes: the stars, the stadium fees, the minor league teams, and the bats and balls.
There are some real eye-openers. People who have shelled out $95,000 to rent a sky box for a season at Giants Stadium still have to buy tickets. A family of four going to a San Francisco 49er game will spend $205 for tickets, beverages, hot dogs, programs, parking, and two souvenir caps. In 1990, there were 20.5 hours of sports on television every day of the year.
Television figures prominently in any analysis of the money game in sports. Network TV deals, split among the teams, can be enormous. In 1992, the three major networks, plus cable biggies ESPN and TNT, paid the National Football League $3.6 billion for a four-year contract. Major League Baseball, in a four-year deal, was getting $1.46 billion, and the National Hockey League (for five years) was getting $80 million.
The reason the networks could spend that money is advertising. Monday Night Football has no trouble selling a 30-second spot for $250,000. That's nothing compared with the Super Bowl, where the top rate approaches $875,000 for 30 seconds. As the authors point out, the money would not be there if it weren't for the fans. ``Sports is a business, no question about it. But it is a very special business, one that survives and prospers because of the relentless attachment - even love - of fans,'' they write. Fans who want to know more of the cold hard facts about their clubs will appreciate this book.