Title: Entertainment and Media: Markets and Economics
1Entertainment and Media Markets and Economics
- Contracts Between Talent and Entertainment
Producers - Appendix A-Rod Deal
2The Texas Deal for Alex Rodriguez
- 2001 Signing Bonus 10M
- 2001 21
- 2002 21
- 2003 21
- 2004 21
- 2005 25
- 2006 25
- 2007 27
- 2008 27
- 2009 27
- 2010 27
- Total 252M ???
3The Real Deal
- Year Salary Bonus Deferred Salary
- 2001 21 2 5 to 2011
- 2002 21 2 4 to 2012
- 2003 21 2 3 to 2013
- 2004 21 2 4 to 2014
- 2005 25 2 4 to 2015
- 2006 25 4 to 2016
- 2007 27 3 to 2017
- 2008 27 3 to 2018
- 2009 27 3 to 2019
- 2010 27 5 to 2020
- Deferrals accrue interest of 3 per year.
4Costs
- Insurance About 10 of the contract per year
- (Taxes About 40 of the contract)
- Some additional costs in revenue sharing revenues
from the league (anticipated, about 17.5 of
marginal benefits uncertain) - Interest on deferred salary - 150,000 in first
year, well over 1,000,000 in 2010. - (Reduction) 3M it would cost to have a different
shortstop. (Nomar Garciaparra)
5PDV
- Using 8 discount factor
- Accounting for all costs
- Roughly 21M to 28M in each year from 2001 to
2010, then the deferred payments from 2010 to
2020 - Total costs About 165 Million in 2001
6Benefits
- More fans in the seats
- Gate the major component
- Parking
- Merchandise
- Miscellaneous
- Increased chance at playoffs and world series
- Sponsorships
- (Loss to revenue sharing)
- Franchise value
7How Many New Fans?
- Projected 8 more wins per year.
- What is the relationship between wins and
attendance? - Not known precisely
- Many empirical studies (The Journal of Sports
Economics) - My own study
8A Dynamic Model for Attendance
9A Dynamic Model for Attendance
10Baseball Data
- 31 teams, 17 years (1985-2001 fewer years for 6
teams) - Winning percentage Wins 162 percentage
- Rank
- Average attendance. Attendance 81Average
- Average team salary
- Number of all stars
- Manager years of experience
- Percent of team that is rookies
- Lineup changes
- Mean player experience
- Dummy variable for change in manager
11Baseball Data
12The Regression Model to Translate Wins into
Attendance
i team, t year
Loyalty effect
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14Translate Attendance into RevenueMarginal Value
of One Win
15Marginal Value of an A Rod
- 8 games 63,734 fans 509,878 fans
- 509,878 fans
- 18 per ticket
- 2.50 parking etc.
- 1.80 stuff (hats, bobble head dolls,)
- 11.3 Million per year !!!!! Its not close.
(Marginal cost is at least 16.5M / year) - Increased probability of reaching playoffs times
payoff of reaching - 7.5 for League Championship 10M
- 3.75 for World Series 10M
- Total, about 1,000,000 (if they do it every
year!!)
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17The IPN Player
- A-Rod and Yankees The Iconic Performance
Network Player - Attendance rose to 4M in 2005, 4.3M in 2007
- MVP in 2005 and 2007
- Huge growth in the YES network
- Seemed certain to break Bonds HR record
(Asterisk?) - New deal 275M over 10 years
- Chicago Cubs offer included team ownership.
- Drug Problems probably derailed this career path.