Mount Saint Mary's College
Emmitsburg, Maryland
Business 329 Fantasy League

Preparing a Business Plan

An Economics of Sports Course will cover the sources of revenue and costs for a major professional sports team. In the EconFantasy.com simulation, students will need to, in the preseason, forecast their expected revenues and costs. Students should then generate a business plan for their fantasy franchise.

Typical revenue sources in professional sports include media (television and radio broadcasts), ticket sales, concession sales, licensing of merchandise, and stadium sponsorships. Typical costs consist of player salaries, front office costs, game-day expenses, and travel costs. Each fantasy franchise must begin the season by preparing a business plan for the year. Each team owner determines expected revenue and costs, and then prepares a budget for player salaries. The results of the previous year are available to franchise owners. The business plan must be completed by each franchise before Selecting Players: The Free Agent Auction. The Business Plan cannot be completed until after broadcast rights contracts and revenue sharing arrangements negotiations are completed. (See Negotiating TV/Radio Broadcast Rights and Negotiating The League Constitution.) The student franchise owners will then know how much they are willing to spend on player salaries in the free agent auction.

Although this activity will occur outside of the EconFantasy.com web site, the commissioner may require students to prepare a Business Plan that includes the following:

  • Introduction with statement of a franchise mission

    Each franchise must write a mission statement. The statement must explain the franchise's purpose and vision. The franchise owner must declare whether they are trying to buy a championship, whether they will try to make a profit, or whether they will attempt to do both.

  • Projected revenue sources
    ***Note that all revenue sharing arrangements may be renegotiated at any time during the simulated season***
    1. TV/Radio Broadcast Revenue is either negotiated individually by a franchise (in which case the revenue is retained by the franchise) or collectively by the league (in which case the revenue is shared according to the league's revenue sharing arrangement). The broadcast rights contracts will be renegotiated throughout the season and will change based on the competitiveness and popularity of the league.
    2. Merchandising Revenue is divided among franchises according to the league's revenue sharing agreement. Total league merchandise revenue is determined by the competitiveness and popularity of the league.
    3. Ticket Revenue will be divided between home and away teams for every contest according to the league's revenue sharing arrangement. Ticket revenue will be determined by attendance. Attendance will be dependent upon ticket prices, the popularity and success of the home and away teams, and the size of the local market. Ticket prices in four separate sections of the stadium (lower, middle, upper, and luxury) will be set by the franchise owner and may vary for each individual contest.
    4. Concessions Revenue will be divided between home and away teams for every contest according to the league's revenue sharing arrangement. Concessions revenue will be determined by attendance. Attendance will be dependent upon ticket prices, the popularity and success of the home and away teams, and the size of the local market. Concession prices for hot dogs, nachos, beer, and t-shirts will be set by the franchise owner and may vary for each individual contest.
    5. Stadium Sponsorship Revenues are not shared (each franchise receives an individual sponsorship contract) and are only collected for the regular season. For weeks 1 and 2 each franchise will receive a $1 million sponsorship each week. For each week 3 through 10, the teams will receive offers for sponsorships. Each team will receive a menu of contracts to sign based on the number of weeks remaining in the regular season. If there are six weeks remaining, a team will receive six possible contracts: a one week contract, a two week contract, etc. The owner must select one of the contracts. If he/she selects a three week contract, he/she will not receive another sponsorship offer for three weeks. The contracts will be based on each franchise's market base and its on-the-field success to date.
    6. Trades and Deals Revenue should not be budgeted for, but it may be a source of revenue for a franchise during the season. All franchises will have opportunity to trade players and include cash as a component of the deal.

  • Projected Costs
    1. Player salaries are typically the greatest expense for a professional sports franchise. Students use their revenue and cost projections to budget for player salaries. Each franchise will use their budget to assist with Selecting Players: The Free Agent Auction. The auction will occur outside of the EconFantasy.com site, and the commissioner will enter each franchise's total payroll for the season. The system will split the amount over the 13-period regular and post season and enter the amount into each franchise's financial statement. Each owner should realize that throughout the season, as franchises trade players, a franchise's payroll may change.
    2. Team Administration is an expense that every franchise must pay to manage a front office. It is a fixed expense, and each team will pay the same administrative expense for the fantasy season. This is a fixed $500,000 per week per franchise. The commissioner can change this number at the start of the season.
    3. Game-day expenses (vendors, concessions, and parking) is a fixed expense, and each team pays the same game day expenses for each home game during the season. This is a fixed $500,000 for each franchise when they are a home team. The commissioner can change this number at the start of the season.
    4. Travel expenses is a fixed expense that a franchise pays to travel for an away game. Each team will pay the same travel expense for each away game during the season. This is a fixed $300,000 for each franchise when they are a visiting team. The commissioner can change this number at the start of the season.
    5. Trades and Deals Costs should not be budgeted for, but it may be a cost for a franchise during the season. All franchises will have opportunity to trade players and include cash as a component of the deal.
    6. League Fines - The commissioner can fine any franchise any time for any reason.
    7. Interest Expense - A team that is losing money will have to pay the Commissioner's Bank and Trust 0.4% of the losses (losses * 0.004) in the next period. A line on the financial statement will be included that calculates this expense if the franchise's total profits were negative in the previous period.

  • Executive Summary

    Students prepare an executive summary to reiterate their projected budget for player salaries and their expectations for profits.

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