Sport Funding and FinanceBy
- Bob Stewart, Associate Professor in Sport Management, Victoria University, Australia
Sport Funding and Finance is written for students who wish to get both a broad and deep understanding of the commercial and financial structure of sport in various contexts. To this end, the book provides students with a three-tiered learning experience. The first tier provides students with a broad appreciation of the commercial evolution of sport, and how it has managed to move from the kitchen-table model to the corporate-boardroom model, and along the way become quite a sophisticated industry from a financial viewpoint. Attention will be given to the commercial development of sport using USA and European pro-sport leagues as a benchmark. Changes in the funding arrangement of sport will be highlighted, and the different funding sources will be examined in detail. The second tier will give students a sound grounding in the principles and practice of effective financial management. Students will be introduced to basic accounting principles and practice, and then led into more complex issues of pricing, costing, financial analysis, budgeting, and financial projections. The third tier will explore future developments in sport finance and funding, and examine how they will impact on sport management knowledge and skill requirements.Within this framework, the book will provide students with two types of learning outcomes. The first outcome is knowledge based and will include the following:* a grounded understanding of the commercial evolution of sport from 1950-the present* an understanding of the different commercial phases sport goes through to reach commercial maturity * an appreciation of the major global sport events and leagues, and their financial arrangements.* an insight into the financial strengths and weaknesses of contemporary sport.The second outcome is skill-based, and by reading the book and completing the cases students will be able to:* identify the different legal structures of sport organisations and the financial implications of each structure* explain the main accounting conventions and how they impact on the financial management of sport organisations* identify the foundations of double entry bookkeeping* construct a simple set of accounts for a sport organisation* use financial ratio analysis to evaluate the financial performance of sport organisations * understand different methods of constructing budgets, and use them to control the financial operation of a sport organisation* set up models for identifying and managing costs* identify different methods for setting prices for sport goods and services, and to apply them to specific settings and events.* undertake a financial planning exercise and/or feasibility study for a sport organisation or facility* undertake a cost-benefit analysis for a sport organisation event.Therefore, students will obtain both a broad knowledge of the commercial evolution of sport and its current financial operation, AND the necessary skills for understanding and supervising the financial operations of a sport organisation.
Level 1 and 2 undergraduates undertaking courses in sport management and strategy, accounting principles, financial management, budgeting, fundraising and sport studies
Published: November 2006
Imprint: Butterworth Heinemann
- SECTION A: THE CONTEXTChapter 1: The financial evolution of sportThis chapter examines the shift of sport from the kitchen-table archetype to the corporate-boardroom archetype. It looks at the old model of amateurism and volunteerism, and traces through its transformation into a sport system that is heavily centred on the professional athlete, the governing board, and the paid manager. The effect that this shift has had on the finance skill requirements of sport managers will be investigated in some detail.Chapter 2: The funding of sportThis chapter will cover the funding of sport. It will distinguish between the different sources of funds (e.g. memberships, sponsorships, gate takings, social events, merchandising, broadcast rights, and government grants) and examine the strengths and weaknesses of each source. It will also distinguish between the funding of capital works (e.g. venues and facilities and grounds) and the funding of ongoing operations (e.g. the club, association or the organisation)Chapter 3: Financing big-time sport This chapter will look at the special financing requirements of mega sport events like the Olympic and Commonwealth Games and Soccer World Cup, and professional sport leagues like the American NBA, MLB, and NFL, the Australian AFL and NRL, the English Premier Soccer League and different European sport leagues. It will highlight the differences and similarities in funding, and also evaluate the financial viability of major events and leagues.Chapter 4: Government funding of sportThis chapter will consider the ways in which government funds sport, and implication of different financing models for the financial viability of sport organisations. A clear distinction will be made between recurrent spending and capital spending, and between grants and subsidies. The effects of spending on community sport will be compared to the spending on elite sport development. The above four chapters will provide the macro-context (i.e. set the scene) for a detailed micro-analysis of the principles and practice of financial management in sport.SECTION B: THE PRACTICEChapter 5: Foundations of sport finance This chapter will discuss the core theories and principles that underpin the effective financial management of sport organisations. Students will be introduce to the different financial entities relevant to sport organisations, and the special financial features of each entity. For the remainder they include sole traders, partnerships, non-profit incorporated associations, companies limited by guarantee, and public companies. The remainder of the chapter will focus on the crucial importance of good financial management, and the steps required to establish appropriate systems and structures.Chapter 6: Setting up the accountsThis chapter will introduce the students to the theory and practice of double entry book keeping, making sure to distinguish between cash accounting and accrual accounting. Financial data from a sport club will be used to establish a simple set of accounts, and students will be introduced to the three fundamental account types (ie the balance sheet, the profit and loss statement, and the cash flow statement). Chapter 7: Financial analysisThis chapter will provide a detailed discussion of the ways in which the financial performance of sport organisations can be analysed by examining the balance sheet, profit and loss statement and cash flow statement. Measures for gauging profitability, liquidity, and long-term indebtedness will be addressed. Customised measures to suit the special requirements of different sport organisations (e.g. player wage-to-revenue ratio) will also be discussed. Chapter 8: CostingThis chapter will cover the issues of costs in sport organisations, and the different ways they can be categorised, managed and controlled. A distinction will be made between fixed and variable costs, and how this division can be used to manage the costs of sport organisations. Controllable costs will be contrasted with uncontrollable costs, together with a discussion of how costs can be managed to ensure improved efficiency. The chapter will end with a discussion of recurrent and capital costs, and how they can be used to better manage day-to-day operations and sport facilities and venues in particular. Chapter 9: Pricing This chapter will examine the pricing of sport services and products from both a theoretical and practical perspective. A number of different pricing models will be discussed, including cost-plus pricing, demand-based pricing, competition-based pricing, discriminatory pricing, premium pricing, and equity pricing. Each pricing method will be applied to a number of sport leagues and events to assess their impact on demand, revenue and profitability. Chapter 10: BudgetingThis chapter will discuss the crucial importance of budgeting for sport organisations, and explain the tools and techniques for controlling expenditure. An initial distinction will be made between recurrent budgets and capital budgets, and how each of them can be constructed. Recurrent budgets will divided into line-item, program, and zero-based, and their application to different sport situations will be discussed. Variance analysis will be explored a means of monitoring expenditure and income. The chapter will end with a detailed analysis of capital budgeting and how it can be used to evaluate and appraise the costing of sport venues and stadiums. Special attention will be given to the pay-back, rate-of-return, and discounted cash flow methods of capital investment appraisal.Chapter 11: Cost-benefit analysis This chapter will examine the application of cost-benefit analysis to sport organisations and events. Cost-benefit analysis has become an essential tool for measuring the net benefits that accrue to cities and communities from hosting sport events. The chapter will commence with a detailed review of economic impact statements, and the ways in which they are constructed. Particular attention will be given to a critical assessment of their validity and how they can be manipulated to give exaggerated results. This will be followed by a discussion of the relationship between economic impact statements and cost benefit analysis, and how non-economic benefits and costs may be measured. Chapter 12: Feasibility studiesThis chapter will discuss the ways in which feasibility studies can be used to evaluate the potential viability of major sport projects. The main steps involved in undertaking a feasibility study will be identified and explained. Special attention will be given to the market analysis, the concept plan, location and environmental impact, capital costs and funding sources, and estimates of recurrent expenditure and income projections. SECTION C: THE FUTUREChapter 13: Financing sport in the futureThis chapter will examine the ways in which sport is likely to be funded and financed in the future. Special attention will be given to the move to privately owned sport teams and leagues, sport clubs being listed on the stock exchange, greater reliance on debt finance, government loans and grants, and public private partnerships.