From an economic perspective, hosting the Olympic Games is often considered a poor investment. They are frequently touted as catalysts for explosive job, infrastructure, and economic growth. These results, however, are generally short lived: increased employment in the hospitality and service sectors only lasts until the end of the Games. Rapidly constructed infrastructure often falls into disuse, leaving vacant housing and sports venues. Economic growth fueled by tourism quickly fades after the end of the Games, returning cities to their pre-Olympic state, and often saddled with exceptionally large amounts of debt.

The 2016 Rio de Janeiro Olympics provides a typical example. In its Olympic bid, the Rio government estimated the costs of the Olympics to be approximately $3 billion. However, at the start of the Games this cost had increased to approximately $4.6 billion, ballooning to a final tally of over $13 billion after the Games had concluded, according to an article in popular statistics website FiveThirtyEight.com. Frequently, winter Olympics are even more expensive than their summer counterparts, with the 2014 Sochi Games in Russia resulting in a total price tag of around $50 billion, according to the Washington Post. The Pyeongchang Olympics, for its part, has a stated cost of around $12.9 billion, compared to its estimated cost of $7 billion – $8 billion. With such a high up-front cost, South Korea must consider the potential social, diplomatic, and economic benefits it may receive to offset the large amounts of debt hosting the Olympic Games in Pyeongchang is likely to incur.

From a social standpoint, many citizens in Korea, and Pyeongchang specifically, support hosting the Games, with 92.4 % considering it a “good thing,” according to several public opinion polls tabulated by the International Olympic Committee (IOC) in its Olympic Games Impact Study. For many, hosting the Olympic games is a point of pride, and similarly contributes to the host city and country’s international reputation. Due to the popularity of the Olympics (with approximately 3.6 billion people watching some part of the Rio Games — almost half of the world’s population), international recognition is unavoidable, and often the Games provide a cultural and societal value beyond that quantifiable by objective economic analysis.

Currently, the Korean peninsula is facing a time of increasingly tense international relations, exacerbated by the development of nuclear weapons in North Korea and threats of conflict between North Korea and the United States. A major hope of South Korea’s President Moon Jae-in is that the 2018 Games will help ease these tensions, echoing the “ping pong diplomacy” policy seen in the 1970s, in which table tennis players competed in Communist China and helped create the opportunity for President Nixon to visit the country in 1972, which had largely shunned interaction with the United States. This move towards unification, whether truly a representation of a unifying sentiment or merely a symbol of diplomacy, is epitomized by the decision for the North and South Korean teams to march together for the first time since 2007, following discussions in the Demilitarized Zone bordering the countries. The gesture of marching together in this Olympic Games, however, is particularly significant given the current diplomatic climate. Increased militarization and development of nuclear weapons in North Korea, as well as comments from both Kim Jong Un and President Trump, have likely increased tensions between North Korea and the USA. From a practical standpoint, the addition of an “Olympic Truce” in the 2018 Games ensures athletes’ safe travel, providing a conduit for athletes to leave North Korean.

Although the economic benefit of the Games tends to be overstated, it is not absent, as countries often experience an economic boost following a winning bid. A major challenge for Pyeongchang in generating economic growth will be in eliminating runaway costs, as was seen in the Sochi Games and its $50 billion price tag. In fact, the Hyundai Research Institute estimates that the Games will add over $61 billion into the South Korean economy — a $52 billion net economic benefit. It is estimated that over 2.6 million people (both local residents and visitors) will attend events associated with the Games, driving economic growth in a variety of sectors: from construction to hospitality and food service. A common issue to Olympic host cities is vacancy and a return to the former employment rate following the conclusion of the Games. In the case of Pyeongchang, however, city officials believe that they will be able to utilize the buildings constructed for the Games, coupled with the international recognition the Gangwon province will receive, in order to drive long-term growth in the area’s currently underdeveloped tourism industry. In this way, they hope to avoid the common pitfall of explosive growth followed by excess capacity and a return to the prior unemployment rate that appears to be endemic in hosting the Olympic Games.

Although the Games will likely result in a significant economic burden for South Korea in the long-run, there are additional non-quantifiable factors that could contribute to its ultimate success. It will assuredly increase the area’s international recognition, due to the worldwide popularity of the Olympic Games. It has the potential to catalyze discussions between the North and South, which could result in de-escalation at a time when nuclear tensions between North Korea and the rest of the world have never been higher. And it is certainly possible that Pyeongchang will be able to accomplish the unlikely, and utilize the Games to establish long-term, sustainable growth in the Gangwon region. With this in mind, the ultimate success of the Pyeongchang Olympics will not be determined by two weeks in February, but rather will take decades to be evaluated.

Nevada legislators ruled Oct 15 that playing daily fantasy sports will now be considered online gambling, forcing websites such as DraftKings and FanDuel to immediately cease operations in the state. This recent legislation is perhaps the most critical blow to the daily fantasy sports industry yet.

Daily fantasy sports (DFS) websites operate under an exemption to the Unlawful Internet Gambling Enforcement Act of 2006, which has allowed them to rake in as much as $736 million in investments from Comcast/NBC, Fox Sports, Google, and many others. In 2014 alone, DFS raised over $1bn worth of tournament entry fees and attracted 1.5 million entrants, according to McKinsey and Company.

But Nevada’s decision is especially troubling for the DFS industry because the state is seen as the “bastion of legal gambling” whose decisions often influence those of other states, according to Joe Drape of the New York Times. This recent Nevada legislation may signal troubling times for the young DFS industry.

But aside from this most recent legislation, the DFS industry also suffers from inherent flaws that restrict profitability prospects.

In the Daily Fantasy Sports industry, websites host tournaments, in which players must pay an entry fee to compete. Most of the entry fees go towards providing the reward for the tournament, and the website takes in around 10 percent of each entry fee as revenue. As a result, the more players that participate in each tournament, the more profitable the tournament becomes. In some cases, though, when the DFS website does not fill up each tournament, the company may even lose money.

In addition, two companies, DraftKings and FanDuel, own 95 percent of the DFS market, which presents another set of issues. First, newcomers to the industry rapidly go out of business as they fail to gain a foothold in the consumer base. Additionally, the nature of the DFS industry favors a monopoly where one company captures as many consumers as possible in order to maximize the rewards; however, the reality is that the top two firms exist as a competitive duopoly. If FanDuel were to increase potential rewards for the same entry fee by cutting the amount of rake from 10% to nine percent, consumers would favor FanDuel over DraftKings, as the benefit to cost ratio for FanDuel outweighs that of DraftKings. If either DraftKings or FanDuel decides to lower entry costs or reduce their “rake”, the other must match such an action or risk losing business — a situation where profits fall even further.

This exposes another issue with the industry that reduces profitability: negligible switching costs. With season long fantasy sports, if a player utilized a certain company to enter a tournament, the choice lasted for the rest of the season. With the lightning fast nature of daily fantasy sports, switching companies is both simple and entirely possible. This constantly escalates the rivalry between FanDuel and DraftKings as they strive to earn and keep consumers.

A manifestation of this intense rivalry is the ongoing advertisement war between DraftKings and FanDuel. Ads for the two companies are everywhere — in stadiums, on buses, the metro, even the sides of buildings. Turn on TV, flip the channel to ESPN, and commercials for DraftKings and FanDuel seem to appear every few minutes. The downside to this “advertisement arms race” is the cost: Ads are extraordinarily costly for both companies.

Despite the explosive growth of the Daily Fantasy industry, prospects for long-term profitability do not look promising. Inherent aspects of the competitive oligopoly may continue to reduce profits as competition between the two main companies increases. However, the industry is still in early stages; there is still room for innovations and ideas that may enhance the viability of the industry. If either DraftKings or Fanduel decides to take their company public, stockholders may take the company in a new direction that creates sustainable long-term profit. But don’t bet on it.

Jordan Spieth hates his new nickname, “Golden Child,” but in the eyes of his main sponsor, Under Armour, it is certainly appropriate. After a tremendous PGA Tour win at the Masters, Jordan Spieth is redefining what companies seeking endorsements look for in an athlete. Spieth is young, just like golfing legend Tiger Woods and mid-2000s tennis superstar, Maria Sharapova, once were. Spieth’s age and potential set him apart from other athletes today: “Being so young (and American) is another major benefit for Spieth and he will have sponsors queuing up to secure his services.” And, as expected, sponsors have done just that, especially his main sponsor, Under Armour (UA). During the days following his first major win in the PGA Tour at the Masters, UA noted a $33 million dollar increase in merchandise revenue.

Jordan Spieth.
Jordan Spieth.

For Under Armour, valued at around $4.1 billion, Spieth’s success is pushing it forward, though the company, however, is far from matching and surpassing major corporations like Nike, valued at over $19 billion. Spieth’s most recent Masters win has increased UA’s market value and Under Armour founder and chief executive, Kevin Plank, even stated that, “Thanks to Jordan, our company grew up today.” Nike’s revenue sky-rocketed under Michael Jordan—UA might have a Jordan of their own.

Remember the Tiger Woods fallout? A marriage scandal gone horribly wrong transformed the pro golfer–for the worse. Woods, the athlete who was once a glorified icon, was brought to shambles in less than a week. This fiasco cost Woods’ sponsors–Gatorade, AT&T, Nike, to name a few–several billions in losses. Woods’ failure to uphold his image as a model athlete undermined both his earnings and the image of his sponsors. Shareholders of Nike, Gatorade, and the rest of Woods’ sponsors lost around $12 billion. But this type of flop does not stand alone. Plenty of other athletes like the youth sensation and soccer prodigy Freddie Adu turned out to be a bust in the mid 2000s, which hurt his sponsor, Nike. Adu was sponsored at the ripe age of 13–probably too young an age to deal with the pressure of an endorsement.

Maria Sharapova, on the other hand, presents a different type of risk: injury. After winning the 2006 U.S. Open, Sharapova signed a deal with Gatorade. When the sponsorship began, Gatorade’s market value was just over 300 million. When she won the Acura Classic in August 2007, however, Gatorade’s market value leapt to 1 billion, and after her Australian Open win in February 2008, her sales once again returned to this level later that summer. The periodic deficits correspond, however, with Sharapova’s injuries. Though her injuries did not dissuade consumers from purchasing Gatorade products, her injuries swept her away from fame for months at a time. This, in turn, resulted in less coverage, and therefore less marketing for Gatorade.

sharapova

Spieth is quickly gaining traction in the sports world and UA’s revenue is rising significantly, but we must take a closer look at this endorsement. For now, it seems as though UA picked the right athlete for two reasons: Spieth is consistent and he’s winning. But what make’s him different than Woods and Sharapova? Sports marketing expert, Bob Dorfman, commented in an interview with Bloomberg’s Michael Buteau that, “[h]e’s very hard not to like, and certainly more approachable and accommodating than Tiger.” As much as we’d like to think that Spieth’s charming personality is transforming the market into into one focused less on skill and more toward off-the-field reputation, this is not the case.

Though risk is prevalent, companies use athletes as endorsers because it is worth taking this risk. Companies desperately need athletic endorsements because, as CNN reporter, Anita Elberse, explains, sales for brands jump about 4 percent, on average, in the six months following the start of endorsement deals, and in many cases jump as much as 20 percent. The revenue in the U.S. from sport sponsorships is predicted to reach $45 billion by 2015, and in an industry that will always grow because of the inseparable connection between fan and athletes, investing in a top athlete is undoubtedly the right decision.

Spieth’s success has undoubtedly pushed UA in the right direction, but his performance and media attention are nothing new. Spieth is another great athlete sparking growth for another company in today’s market. In a world in which Woods cost Nike shareholders billions but was resigned by Nike only five years after his fallout, it is clear that endorsements are worth the risk, and athletes are part of a larger game at the market level. Fans forget about the past. They move with the present and they want to use the products used by athletic legends. Like fans of basketball great Michael Jordan in the 1990s who wanted to “wear Nike to ‘be like Mike,’” the fans of today have not and will not change.

Whether he is driving friends and family on a boat on his favorite lake or sitting behind the desk of his Rochester, Michigan office, Andy Appleby is comfortable in a leadership role.

The Massachusetts native is the Chairman and Chief Executive Officer of General Sports and Entertainment, LLC, a sports marketing and management firm. Appleby has more than 25 years of experience in the sports management industry and was named one of Detroit’s “40 Under 40” by Crain’s Detroit Business in 2000. In 2002, Appleby was named the Ernst & Young Emerging Entrepreneur of the Year for Eastern Michigan. And later in 2002, his company was named as one of Metropolitan Detroit’s 101 “Best and Brightest Companies to Work For” and one of Greater Detroit’s “Future 50.” According to Appleby, the mission of General Sports is simple: to be the premier sports and entertainment firm in the world.

GSE offers executive placement services and management consulting to sports teams across the world. It serves as an advisor to clients in sports marketing, recruiting, hospitality programs, and team management strategies. Some of GSE’s expertise is delivered through in-staff training and development, negotiation of stadium leases, public relations, and development and execution of marketing and promotional strategies. It also provides advice for teams to generate revenue through ticket sales, in- stadium advertising, corporate sales and sponsorship, and publication sales. In addition, GSE brokers strategic matches between sports and entertainment properties and corporate partners. Some of GSE’s services in this area include the development and implementation of naming rights campaigns, the development of high-end sports marketing collateral, sales representation, and sponsorship negotiation services.

Appleby founded the company in 1998 after a 12-year tenure at Palace Sports and Entertainment. Over the years, he has designed and developed his company into four operational divisions, which include GSE Capital & Management, Team Acquisition & Management, Executive Placement and GSE Meetings & Events. In addition to business divisions, Appleby created two subsidiaries, the Sports Executive Leadership Conference and General Sports Alliances, a naming rights and sponsorship sales agency.

Under the GSE Capital & Management division, Appleby launched General Sports Venue in 2003. The company concentrates on sports venue solutions, specifically synthetic turf. GSV’s biggest affiliate in the past was AstroTurf, a brand of artificial turf with state-of-the-art products and services. GSV became marketing partners with Textile Management and Associates (TMA) for the AstroTurf brand in 2006 for the American market.

Perhaps General Sports’ greatest success thus far has come through its Acquisition & Management division in January 2008, when it acquired the Derby County Football Club of the English Premier League for $100 million.

“Derby was a huge acquisition for us,” said Appleby. “The process required great effort and a world wide consortium. General Sports put together an investment group to raise money and assemble a new structure for the Derby team.”

Derby County, once a team in the elite Premier League, dropped to football’s second tier league (The Football Championship) after years of losing. Appleby hopes to revamp the club and get it back to the top tier. After the acquisition, Appleby became chairman of the club. Previously, General Sports completed the acquisition of the Fort Wayne Wizards minor league baseball team, an affiliate of the San Diego Padres, in May 1999. General Sports owned the team for seven years before selling it.

Appleby believes the operations team management aspect of General Sports makes it different from competing firms.

“Team management as an operational division is something that is not found often in sports and entertainment firms,” he said. “That is definitely an advantage for General Sports.”

Now that Appleby’s organization has gone global, he admits General Sports faces some challenges, especially in today’s
market.

“It’s a difficult business that is highly competitive,” Appleby said. “Everyone wants to be different. Now that we’ve expanded to places like England and Saudi Arabia, we have to deal with the difference of time zones. There are always adjustments that need to be made.”

But Appleby is able to keep his team highly motivated.

“At General Sports, every project we do is big,” he said. “Our employees use the incentive of feeling successful as a driving force to work hard.”

Appleby takes the marketing tactics and strategies of GSE very seriously.

“From a marketing standpoint, General Sports likes to be ahead of the curve,” said Appleby.

Appleby was definitely thinking ahead of the curve in 2001 when he founded the Sports Executive Leadership Conference. Each summer, at the beautiful Broadmoor gold and spa resort in Colorado Springs, Appleby and General Sports host the premier annual networking and leadership conference in the global sports industry. By bringing together senior leaders from companies worldwide, Appleby is able to promote his firm as well. Appleby has estimated that in the past ten years, the conference has cost a total of $3 million.

“General Sports created this wonderful conference, which is designed for higher level members of sports management firms in an effort to create a platform and environment to promote long-lasting relationships,” he said.

Appleby’s work with General Sports has not solely been for-profit. After creating the General Sports Foundation, the company launched a banner program called the Suite Dream Project. The aim of the project is to provide healing environments and joy to the homes and hospitals of children who have serious medical conditions. It has been up and running since 2001.

Appleby’s success in sports dates back to his days as a high school athlete. The 1981 New England Wrestling Champion won three state championships in the sport. In addition to achieving All-American honors in wrestling, Appleby was also was an All- State cross-country runner and home course record holder. Appleby’s interest for sports continued as he attended Springfield College, where he earned his Masters Degree in Sports Management and a Bachelor’s Degree in English.

Appleby began making his impact on the sports entertainment world right after college in 1986 when he joined Palace Sports and Entertainment. After several years of work, Appleby became the youngest Senior Vice President in the history of the organization and helped lead the company to the top of the industry. To prove how Appleby’s presence is eminent wherever he goes, during his time with Palace Sports and Entertainment, the Palace of Auburn Hills was named national “Arena of the Year” eight times in ten years.

When he is not working, Appleby likes to spend time with his wife and four children. He especially likes getting away on weekends in the summer to the family’s lake house. His wife, Kristiana, is the Executive Director of the Suite Dreams Project. Appleby’s current goal at General Sports is to continue polishing his organization and to acquire more teams.

“It’s kind of like the Confucius quote–‘Choose a job you love, and you will never have to work a day in your life.’” he says of his passion for sports. “That is what keeps me going– what makes me want to put my all into General Sports.”