Competitive Sports’ Economics: Baseball

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Sport business is more about winning and managing the winning streak,” said the owner and the inspirational captain of The Patriots’ football team. All teams concentrate on winning, and by completing this mission, they draw a lot of attention to themselves; many fans support athletes, not only locals but also people from other countries. The Major League Baseball (MLB) initiated the Major League Baseball International (MLBI) to improve baseball’s global influence. It functions through the broadcasting of matches, expanding the new markets by helping the future generations of the players, coaches, and the fans, as well as licensing of franchises. (Jozsa Jr., 2006).
There are many ways, in which a business can enter into the global market. The strategies for this process include acquisition, merging, exporting and use of the turnkey projects, licensing and franchising, and joint ventures. There are tax implications and legalities that follow each of these tactics. Thus, it is right to say that these strategies have their own advantages and disadvantages (Jozsa Jr., 2006).
The MLBI has created international partnerships by allowing the live broadcast airing of all the season all-star games of the American League and the National League games. These events are aired in more than 13 languages and broadcasted in more than 200 countries including the American military personnel aboard the navy ships. The broadcasting of both the NFL and the MLB regular season games are usually on the network television which means that they are usually being transmitted for free.
However, the regular seasons gave up this right – the massive tax exempt – by letting the pay television to show their games. Such step meant that they could now earn from the pay TV channels, making them liable to pay tax as a for-profit organization. The IRS has determined that the NFL and the MBL regular matches are educational, but the sponsorship that these organizations received from the broadcasting was not. Thus, as a result, the tax laws were implied (Weiler, Roberts, Abrams, & Ross, 2010).
The MLBI has goals of expanding globally by opening training academies from the grassroots level. The various programs include hit and run, play ball, training with the professionals, and the coach in the residence among the other players (Jozsa Jr., 2006). The league organization also plans the enhancing of the fan base by holding the regular and the off-season games in other areas within the United States or even outside, in other nations. It, in turn, increases the tax implication on the athletes as they are now liable to pay their obligations to the states and the countries that they are visiting on top of the payments they make to the agents, the subscriptions to their club association, and the expenses for using the training grounds during the off-season conditioning.
Furthermore, this aspect then by all means calls for the athletes as well as the team members to be careful with their planning for the tax. Every one of them is aware about the obligations that one ought to pay. However, the corporate tax and the individual one are very two very different concepts. In the sport business, the team management, for example, the Patriots, pays the tax obligations for the players; it is done so that the teammates may, in turn, find much relieve in order to focus on the winning.
Besides paying the players and the coaches, the sports field, in this case the Patriots management, deals with the sales for the tickets and the other franchises in the business, the transport along with the other additional taxes (Miller & Schoepfer, 2017). As such, it is evident that the Patriots finance department has, therefore, to be extremely careful in analyzing the tax structures for the marginal as well as the average tax rates; otherwise, they would dip the business into the litigations from the shareholders for the reason of not providing the accurate information.
The best global market entry strategies for the sport businesses would be those of the franchising and the licensing. Such step, therefore, eases the tax burdens on the team’s management. This aspect, in turn, entails giving of the business goodwill to the other licensed retailers as well as the wholesalers.
The baseball apparel, for example, the F&F Company in South Korea, has remodeled and rebuilt the MLB stores in order to turn the business into being more lucrative. The MLB franchise stores in Taiwan familiarized the MLB girl’s line of clothing so as to be more fashionable and trendy to suit the market (Jozsa Jr., 2006). Franchising and licensing gives the opportunity to the society business owners to market the team products as if it was their own business.
The corporate status in the sport sphere helps the organization to avoid the extra tax implications and gives the enterprises the added advantages in the business field. The legal and the tax ramifications on the corporate sport business provide the organization with the equity volume to manage business. However, there also exist the tax implications on, for instance, the food stores, the ticket stamps, and the other property.
The MLBI is intending to open up the international baseball training academies as well as the displacing of some of the teams while expanding the other crews so as to identify with other new markets (Jozsa Jr., 2006). The MLBI should, therefore, consult with the legal, the finance as well as with the IRS specialists regarding the additional tax implications. Furthermore, the team management should focus their efforts and attention on conducting a thorough tax planning in order to ensure that the plans to expand the business are in line with the organization’s long-term goals. The investors should also calculate the tax-equivalent yield for the new tax implications before taking any step towards developing the business (Fried, DeSchriver, & Mondello, 2013; Lyon, 2010).
The business of the sport team is focused on managing the success. Besides campaigning the company’s franchise and the games, the sport management has to be differentiating themselves into utilizing the business maneuvers and the partnerships in order to help improving the business’ financial and the league performance. Differentiation of the skills and the roles is what the Patriots’ owner has implied (Miller & Schoepfer, 2017).
In addition, Robert Kraft has hired a controversial but a competent coach who has also had an undergraduate degree in Economics. As such, since the change in the management, the Patriots have been able to increase in the value as well as in the performance both as a team and as a business. Evidently, the customers are attracted to the good performance, and the Patriots have maintained a winning track record.
As Fried et al. (2013) claim, the value of the players, the franchise, the goodwill contracts, the lease contracts, the broadcast contracts, and the customer lists depreciate over the years. It, in turn, results into the reduction of the earned income. However, if the business can manage the winning record as Robert Kraft did, the appreciation of the profits is bound to increase. He has also invested in the player’s personal and financial lives to ensure that they focus on winning only. It is one of the tax advantages that the government may provide to the corporate institutions.
One of the financial risks that may hinder the sport teams from performing their best in the leagues is injury on or off the field. The teams are required to have been registered to insurance so as to limit the threat. The main reason for the risk management is to eliminate the potential dangers. The players are usually facing these challenges and hazards in the gym and on the field as well. In financial management, the use of the insurance to cover the team is referred to as the risk transfer (Miller & Schoepfer, 2017).
Lawsuits and legal complications from any decision are one of the reasons for financial loss. The organization is required to be knowledgeable about the tax laws and how they are applied to them. In the case of the Patriots’ lawsuit against the coach, Belichick, which cost the latter $500,000, the team was advanced the cost of $250,000 fine for the lawsuit settlement. Legal challenges are present all around. Other sources of the loss of income come from the environmental restrictions and the competitions. The organization should be well-prepared to meet these challenges or face the liquidation and bankruptcy otherwise. The team’s risk managers are required to calculate the financial performance and state whether the team is in financial murky waters (Miller & Schoepfer, 2017).
In conclusion, the plan by the MLBI and the MLB Advanced Media to move with the trend of advancing of the Internet and the technology has formed the partnerships with the wireless communication companies in order to allow the fans to download the MLB logos for their personal use. The league’s followers can also send questions to their favorite players and have them answered regularly on the television. Furthermore, the MLB has advanced the voting opportunity to the fans to view the league matches online by simply subscribing to the appropriate online service as long as they have access to Internet and a computer (Miller & Schoepfer, 2017). This wave of the Internet and technology has given the team the opportunity to access the international market where its laws have little legal implications to the team’s management.
References
Fried, G., DeSchriver, T., & Mondello, M. (2013). Sports finance, 3rd ed. Champaign, IL: Human Kinetics.
Jozsa Jr., F.P. (2006). Baseball, Inc.: The national pastime as big business. Jefferson, NC: McFarland.
Lyon, A. (2010). Cracking the code: Making sense of the corporate alternative minimum tax. Washington, DC: Brookings Institution Press.
Miller, J.J., & Schoepfer, K. (2017). Legal aspects of sports, 2nd ed. Burlington, MA: Jones & Bartlett Learning.
Weiler, P.C., Roberts, G.R., Abrams, R., & Ross, S. (2010). Sports and the law: Text, cases, problems, 4th ed. West Group.

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