Depreciation 145,000
Total operating expenses 1,297,000
Operating Income 2,630,000
PGA Tour's percentage of income 405,000
Net Profit Before Tax 2,225,000
Annual Revenues (above) are based on per-tournament projections (below). SportsBand anticipates netting about $250,000 at each event.
1990 P&L per tournament (based on 15-event schedule)
Revenues
Title sponsorship (based on $1-million $66,700title divided by 15 tournaments)
Presenting/commercial sponsors 57,600
Tournament operator's fee (for cost of production) 75,000
Tournament fee (for share of corporate overhead) 22,500
Tournament receiver rentals (20,000 units 30,000@ $1.50, prepurchased by tournament) and bundled into tick ets)
Other receiver rentals (by attendees with 45,000unbundled tickets; 3,000 people x 3 days x $5)
Retained rental deposits (when customers 30,000trade $3 deposit for corporate premium)
Broadcast sales (updates to radio networks) 5,000
Total Tournament Revenues 331,800
Costs
Labor and production costs incurred by $47,380broadcast subcontractor, Murray Street Enterprise
Additional contract engineering staff 4,900
Receiver distribution 8,520
Expenses of Dallas personnel in attendance 4,200
Fee to PGA Tour 5,000
Total Tournament Production Costs 70,000
Net Income from Tournament Broadcast 261,800
WHAT THE EXPERTS SAY
OBSERVER
JUDY LAFRENIERE
Director of sales, Sponsors Report, a sports market-research firm specializing in media analysis, Ann Arbor, Mich.
A million dollars for their title sponsorship, I don't see happening. For that kind of dollar investment, a company could sponsor an event and have it all to themselves. They could entertain clients, get television exposure -- the most important thing for almost all corporate sponsors -- and get print exposure. If you sponsor an event, you're bound to get covered across the country, if not with articles, then at least with box scores. Well, with SportsBand, you're going to get no print exposure.
Given the average attendance for SportsBand's events and using a formula where we put a value on the impressions that are generated, there's no way a company's going to get $1 million worth of exposure. SportsBand would reach 450,000 people, and I'd value it at $138,600 -- obviously, not even close to $1 million. Now say SportsBand included its title sponsor's name in every piece of print advertising and radio advertising it did, then it would improve the impressions count and maybe take the value up to $500,000. But $1 million is just too high a number to be attractive to sponsors.
OBSERVER
LESA UKMAN
Founder and editor, Special Events Report , an international newsletter that tracks events, Chicago
What's happened is these guys have put all their resources behind their product, but spent no time or money on creating demand for it. They say fan interest -- unit rentals -- has been low not because of the idea but because "we haven't educated them." I agree. They should have launched a publicity campaign at the same time SportsBand was being introduced, even though it was only a test, so people going to the event could have anticipated it and understood its benefits.
Until there's audience demand, there's nothing there for sponsors. Even then, SportsBand has to think about offering far more than just on-site spectators. Sponsors aren't using golf just to reach the ticket holders. They can reach a much larger audience through TV broadcasts of the events. What you can do, once SportsBand is a proven attraction, is tie it into sales promotions: test-drive a Cadillac and receive a coupon for a free SportsBand. One could argue that a Cadillac dealer can already do that with tickets to the tournament, but maybe SportsBand will become really hot -- it's new and sexier than the tickets. So it's an attraction. Maybe you propose to American Express that card holders get a free SportsBand; that's a way for Am Ex to create a sense of privilege. SportsBand has got to go to sponsors with these kinds of thought-out packages, but it has to create fan demand first.
I think asking tournaments to package SportsBand with tickets is totally absurd and unrealistic. There's no reason for the tournaments to do it; they're not going to sell more tickets because SportsBand is there. So asking tournament organizers to mark up their tickets $5 with no guarantee of return doesn't seem to me an enlightened proposition.
Tournament directors are used to people paying them a fee to be affiliated with the event. SportsBand is not only unwilling to pay them a fee and unwilling to say, "this is a great service, let us go out there for free and rent our units to your fans," they're saying: "underwrite a portion of our costs." They've gone three steps the other way.
If the SportsBand folks depend on tournament directors as the main revenue source, I don't think they'll succeed. But if they can market the service to the audience and then bring it to sponsors as part of a tournament-sponsorship package, there's a good reason for hope. But doing that will take a year or two more of start-up cost and time.
CUSTOMER
MIKE STEVENS
Tournament director, MCI Heritage Classic, Hilton Head, S.C.; currently considering SportsBand's pitch for bringing the service to next April's Heritage
I'm sold on the idea, but you have to look at the financial side of what SportsBand is offering. It's hard to seriously consider its current proposal. There will have to be some compromise on the company's side to make it more attractive, at least to this tournament. I don't want to negotiate in the magazines, but by "compromise" I mean that these guys might be off by at least a factor of two.
Right now we're looking to make SportsBand a revenue source for us. I might make a counterproposal by going back to SportsBand and asking for comme
