Transcript Chapter 1 General Economic Theory

Chapter 1
Basic Economic Theory
Sports, Movies, TV. Music and
Fashion
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Definition – study of how society uses
its scarce resources to satisfy its
unlimited wants
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Sports and Entertainment Economics –
Using economic theory and methods to
analyze the Sports and Entertainment
Industries
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Demand: Marketing
Supply: Management
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The Economics Problem
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Unlimited wants – Spiritual, physical, intellectual, emotional,
monetary, material, etc
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Goods – tangible
Service – intangible
Scarce resources – money, time, products
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Resources – inputs, factors of production
Labor – physical and mental efforts of humans(wages and
salaries)
Capital – plant and equipment (interest)
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Physical - plant and equipment
Human – education and training
Land – physical earth and natural resources (rent)
Entrepreneurial ability – management (profits)
Requires choices
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Economic Perspective (Tenets of Economics)
Scarcity and Choice – Scarce goods have a cost
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Scarcity
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Goods provide utility
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Utility is satisfaction and happiness
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Resources to make these goods are scarce
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Time
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Money
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Requires us to make choices
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Opportunity Costs – value of the best alternative not chosen
» Britney Spears didn’t attend LSU
» Shaq left LSU early
» Tom Cruise dropped out of high school
» Why did Lebron James not go to college?
– Rational Behavior – We choose with a
purpose and are rational
• We try to maximize our utility – material and
otherwise
– Marginalism: Benefits and costs – We think at
the margin (the next one)
• Marginal Benefits > Marginal Costs, pursue
• Marginal Benefits = Marginal Costs, stop
– Incentives matter
– Values are subjective
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Economic Decision Makers
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Households - largest
Firms
Government
Rest of the World
Branches
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Macroeconomics – the whole economy
Microeconomics – individual units
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What is arts and entertainment? How we
spend our leisure time and income
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Dance
Sports: Constant but a surge in the 60’s
Theater
Music: Constant
Film: Declining since the 40’s
Fashion
Visual: TV, Computer games, Art
Books
Radio
Warm-up: The
Business of Sports
Sports is Big Business
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Economic Importance
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Fewer than 10 of the top 100 people in sports actually
play the sport
Billions of dollars affect the economy, entertainment
habits, leisure time, disposable income and styles
Sports trademarks (logos) become fashionable
Personal Importance to Fans – Obsession
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TV shows and Talk radio
Radio, TV, Internet
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Befuddled Fans
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Fan confusion – believe it’s all about money
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Jealous – Fan envy
Amazed
Anger
Players and owners are skeptical of each other
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Players make too much
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No player loyalty
Become celebrities in film, commercials, music
Owners Exasperation - Owners can’t make a profit
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Franchise sales values – do better than a portfolio of common
stock
Expansion franchise prices have increased
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What is the product?
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Sporting Events: Live or on TV
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MLB
NFL
NBA
NHL
College
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Rockonomics
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Production Description: Sources of
Revenue
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Recordings
Publishing
Concerts
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Live
Promotion on TV, radio and film
Merchandise
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Types: Product is intellectual property
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Rock
Rap
Rhythm and Blues
Country
Pop
Gospel
Latin: Rising
Jazz
Classical
Money at
the Movies
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Product Description
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Motion Pictures
» Feature films: large theaters, more than 90
minutes, fictional or real story
» Short
» Animated
» Industrial
» Experimental
» Documentaries
» Educational
» Political
» Propaganda
» Adult
– Home Video and rentals
– Cable
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Network TV
Process
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Programs are produced by production companies
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Licensed to networks who sell advertising
Fictional
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Soap Operas
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Situation comedies
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Dramatic series
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Movies
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Variety shows
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hildren’s programming
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Mini-Series
Reality – least costly
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Talk shows
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Game shows
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Religious
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News
Live
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Sports
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Special events
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Telethons
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News coverage
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Fashionomics
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Fashion: Clothing in style or trend
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Includes accessories, hair, makeup even tattoos and piercings
Centers are NY, LA, Paris and Milan
North America fashion is more casual and comes from
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Urban centers, neighborhoods, schools, sports, TV, music and
movies.
Blue jeans
Sports logos and styles
Designer labels often become the fashion
Product placement in TV shows, films, music videos and
photographs
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Rap and hip hop
Designers, models and photographers often become celebrities
Imitations and copies (knockoffs) are prevalent
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Often are ignored as styles change very quickly
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Supermodels are Gisele Bündchen, Adriana
Lima, Tyra Banks and Heidi Klum.
Product Mix: all the goods an organization
sells, in fashion it is styles, prices and
classifications
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Retailers for fashion
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Department stores: Dillard’s and Macy’s
Discount stores: Target and K-mart
Off-price stores: T.J. Maxx
Chain stores: The Limited and The Gap
Boutiques: Tootsie’s
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Styles
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Classic: traditional with long product lifecycle
Trendy: current style
Young Designer: garments created by designers just
starting out
Designer: high quality, high fashion sold under the
designer name
Couture: Original one of a kind high quality garment
» Haute couture: high fashion individually designed
handmade original
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Classifications
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Sportswear: jeans, sports wear
Activewear: worn while participating in sport
Careerwear: workplace
Eveningwear: special occasion or formal wear
Social apparel:
Lingerie
Accessories
Trend: the direction fashions take