Is December the Cruelest Month?
By Evan Weiner
December 29, 2008
1:30 PM EDST
(New York, NY) --- A few weeks ago I asked T. Boone Pickens about his thoughts on the economy. Pickens was not particularly optimistic that things would turn around soon, but he was hopeful that the economy would begin to recover in the third quarter (July, August and September) of 2009. The third quarter cannot come soon enough for most people including sports owners. While Steinbrenner family conducted a spending orgy for players including C. C. Sabathia, Mark Texeria and A. J. Burnett, Yankees officials, presumably led by former New York City Deputy Mayor Randy Levine, requested some $259 million for addition tax-free bonds so the team can finish off paying for the new Yankee Stadium which opens in April. The Steinbrenners spent an estimated $161 million for Sabathia, another $82 million for Burnett and $180 million for Texeria or an estimated $420 million on three players yet need tax-free bonds from financially strapped New York City for the new stadium.
During Hank and Hal Steinbrenner’s wild spending spree, other franchises and sports related entities began looking for line lines. There will be no Tour de Georgia bike race in 2009 nor will there be an Arena Football League season. Both plan to operate in 2010 if they can find sponsors and backers. Hockey’s Double A ECHL has lost two teams as owners threw in the towel in Augusta, Ga. And Fresno, Ca. The LPGA is reducing the number of tournaments it will hold in 2009. While there will be a bailout or loans to the Big 3 automakers from both the United States and Canadian governments, it is very likely that GM, Chrysler and Ford will be pulling money out of sports. GM ended its estimated annual seven million dollar Buick marketing agreement with golfer Tiger Woods and dropped partnerships with the New York Yankees and Pittsburgh Pirates. NASCAR was very interested in the bailouts because they rely on the Big 3. Chrysler sponsors three teams, Gillett Evernham, Penske Racing and Petty Enterprises. In the past, the Big 3 have poured more than $300 million into NASCAR, that is going to change drastically though going ahead. NASCAR put out a statement on December 10 suggesting that attendance will drop in 2009. NASCAR officials expect a drop in sports sponsorship revenues. The International Olympic Committee has decided to wait a year and will put the 2014 Sochi Winter Games and the 2016 Summer Games up for bid for American TV rights after the groups awards the 2016 Games in October. The American TV networks provide the IOC with its biggest revenue source.
A drop in attendance and sponsorship put the Fresno Falcons out of business.
Although the NFL is still swimming in money and has been recession proof, the league is laying off people, following the NBA’s cut of nine percent of staff. But the one of the NFL’s television partners, NBCUniversal is having problems selling commercials for February’s Super Bowl. NBC has rejected Cesario Migliozzi plan for eight companies to come together and pay for a $3 million spot. The recession has even hit the Super Bowl.
The recession has not really hit the NFL, the NBA or the NHL yet, although the NFL kept its playoff ticket package prices at 2007-08 levels. The leagues will feel the pinch beginning in 2009. The first North American “Major” league that will feel the full fury of the economic slowdown will be Major League Baseball. The Yankees and to some extent, the Wilpon family New York Mets have spent some money but there have been very few players who have benefited from free agency this winter. Wilpon has had an interesting off-season. His team has been defending itself for taking money from the cash strapped Citibank, an institution that has been given money by the American government to continue operations after it cut an estimated 50,000 employees and Wilpon apparently was involved in the Bernard Madoff ‘s $50 billion ponzi scheme. The Citibank agreement that provides Wilpon with about $400 million for 20 years for naming rights at the Mets new Queens stadium is a public relations nightmare. There will be jokes about the Mets late season collapses in 2007 and 2008 and Wilpon’s business partners, the collapsed Citibank and Madoff, Citibank is the major problem for the Wilpon’s most public business, the Mets. Wilpon’s request for additional tax-free bonds has been flying under the radar because of the Yankees spending, the Citibank bailout and Madoff. But to be far to Wilpon, he signed the Citibank agreement long before the bank’s failure and a deal is a deal, no matter how unpalatable it might be to US Congressman or to the man/woman in the street.
The other baseball franchises are not sure of their ticket sales yet for 2009 or how many fewer marketing dollars will be coming into their coffers. Advertiser dollars will be scarcer in 2009. Arizona and Toronto have fired staff and MLB has implemented a hiring freeze. MLB has launched a baseball network in the United States in partnership with cable companies. MLB still is moving ahead with this year’s World Baseball Classic, recession or no recession, MLB has to maintain a global presence. So does the NFL and despite the global economic crisis, the league will play another regular season agme in London, UK in 2009.
The NBA and NHL will see just how much the economy has hurt them come playoff time in April when new ticket packages have to be bought. The NFL is preparing for a turndown in 2009. Detroit has to be a significant concern for MLB, the NFL, the NBA and the NHL. Windsor, Ontario is a major part of the Detroit market place, the US dollar costs Canadians about a $1.22 these days, which makes it more expensive to attend Detroit sporting events. Chrysler has shut down production for a month, even with the bailouts, the Big 3 will be leaner and trimmer and monies that might have gone into Tigers, Lions, Pistons and Red Wing games from the automakers and their employees may not be available at former levels. That will hurt the Detroit teams, on top of that, Mike Ilitch has raised 2009 Tigers ticket prices. The other border city that might have some concerns is Buffalo, New York. The Sabres and Bills have Canadian backers and Seattle is close enough to the Canadian border and that could impact some Mariners or Seahawks fans who travel from British Columbia to see a game.
There are additional worries. All the major sports leagues have deals with SiriusXM Radio, the satellite company which has some very major financial problems. The NFL is looking for a new American radio deal and its long time radio partner, Westwood One, has been delisted by the New York Stock Exchange and even though the network is trying to add content, like former US Senator Fred Thompson’s new daily show that will replace Bill O’Reilly, some soon to be laid off Westwood One employees may not be getting severance packages, that is how dire the situation is over at Westwood One. The NFL isn’t looking for billions from radio, maybe $20 million a year will get the contract.
Then there is the most tradition stream of getting the word out for sports teams. Newspapers. It has been a bad year for newspapers, one paper, the New York Sun folded, one chain, the Tribune Company is in bankruptcy, the New York Times is hemorrhaging money and may sell off its stake in the Boston Red Sox/New England Sports Network/Fenway Sports Group. Other newspapers have cut back; Newsday has decided to lop off three sports columnists among the group of employees that will be let go. The Washington Post and the Baltimore Sun have combined some operations and papers are not sending reporters out on the road to cover games as frequently as in the days gone by. Dallas Mavericks owner Mark Cuban thinks leagues should work with newspapers and form a “beatwriter cooperative” which would be funded by the leagues, who would hire reporters who would write exclusively for newspapers in sports markets and their work would be placed in newspapers sports sections.
Cuban admits that this could be construed as conflict of interest but he argues that if it can help newspapers, it should be considered.
The sports landscape is changing rapidly. The heady days of just four months ago when global expansion, which all of the North American leagues were pushing, was in full speed mode, where the rising value of the Euro was being bandied about by European basketball powers as a way to attract Kobe Bryant or Lebron James and the Kontinental Hockey League, backed by oil money and $147 a barrel oil prices was ready to challenge the NHL for players. There seems to be a market contraction going on that was unimagined a year ago. The causalities are beginning to add up. Two ECHL teams are gone, a number of LPGA events have been canceled, the Arena Football League has suspended operations, there are questions about the stability of the Phoenix Coyotes and the Tampa Bay Lightning and the viability of the proposed Brooklyn Arena for the New Jersey Nets and there is still a lack of new NFL facilities in San Diego, Santa Clara and Los Angeles in financially strapped California. T. Boone Pickens better be right that the economy will start showing signs of life in the third quarter, if it doesn’t happen, cities holding notes on publicly built arenas may default, some sports teams will move or fold and an unwelcomed market correction, unwelcomed by players, will impose a Darwinism in sports that has not be seen since the Great Depression in the 1930s.