The Economics of Pro Sports: Why are the Cowboys and Yankees so Valuable?
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This lesson investigates the value of sports franchises in the various professional sports leagues. Students will investigate the revenues and costs of professional sports teams and determine which teams are the most valuable. Lastly, students will understand the specific rules of the game, which leagues employ that influence franchise values.
- Use a financial magazine's website to determine which professional sports teams have the highest current value, profit and debt-to-value ratio.
- Identify how teams' generate revenues, determine some of the business costs of operating professional sports franchises, and investigate different factors like debt-to-value ratios that make some teams more valuable than others.
- Understand that the specific incentives and rules of the game, which the various leagues use strongly affects the value of their team's franchises.
1. Define the term profit.
2. Are sports teams are interested in profits? What information is provided to a team which is profitable? Unprofitable?
3. Brainstorm the ways that a professional sports teams earns revenue.
4. List the costs that the typical sports team incurs.
5. Form groups of 2 or 3. Your teacher will assign your team a league (NBA, NFL or MLB) to research using the worksheet in this lesson. You will have about 20 minutes to collect data on the the five teams in their league with the highest revenue, profit (operating income) and current value.
6. Discuss why certain teams are so valuable (using the current value data).
This lesson investigates the value of sports franchises in the various professional sports leagues. Students investigate the revenues and costs of professional sports teams and determine which teams are the most valuable. Lastly, students understand the specific rules of the game, which leagues employ that influence franchise values.
1. Conduct the same analysis--using the lesson worksheet-- on the NHL. Explain why teams in this league tend to be worth substantially less than the other sports leagues.