Thursday, March 12, 2009

Sports economy, is it tanking?

Evan WeinerBusiness of Sports Examiner

Sports economy, is it tanking?

March 12, 9:42 PM
Has the sports economic bubble burst? The answer would seem to be yes, although Major League Baseball's Spring Training ticket sales are up and both Major League Baseball and the Major League Baseball Players Association seem to be making money on the World Baseball Classic as World Baseball Classic, Inc. will be distributing more than $15 million in proceeds from the 2009 World Baseball Classic to the participating federations and the International Baseball Federation according to a March 4 news release. The participating teams will split $14 million, which is nearly double the $7.8 million that was awarded after the inaugural event in 2006. In addition, the IBAF, the worldwide governing body for the sport of baseball, will receive over $1 million to invest in game development globally.

The 15 million dollar haul is pretty sizeable considering that the global economy is tanking despite a Wall Street rally over the past few days.

Last Monday, Major League Baseball announced that Spring Training attendance was up by two percent over last year's pace for overall Spring Training attendance through Sunday's exhibition games. "A total of 871,502 fans have gone through Cactus and Grapefruit League turnstiles in 154 games, an average of 5,659 per exhibition. That compares with an average of 5,548 through the same number of games in 2008," according to the news release.
So far, Major League Baseball based on the WBC and Spring Training attendance looks to be recession proof. But looks might be deceiving. It is far too early to tell if regular season attendance will drop, if luxury boxes will be sold or be empty over the course of an 81 game home schedule and if teams like the Yankees or Pirates can replace a sponsor like General Motors and get comparable dollars when someone jumps in, if someone jumps in, to take General Motors place. The real test comes once the regular season starts. April will not only be a litmus test for Major League Baseball, but Minor League Baseball, the National Basketball Association and the National Hockey League as well. NBA and NHL playoff bound teams are looking for their patrons to buy playoff tickets at a higher price than the regular season.
The NBA and NHL sold all of its sponsorship and inked all of its marketing partners for the 2008-09 before the crisis hit last September. NBA revenues in 2008-09 are up two percent from 2007-08 levels but there is trouble ahead. Major League Baseball is either selling new sponsorship or renewing expiring marketing agreements during the economic meltdown, the NBA and NHL are just selling playoff tickets now, the National Football League is beginning to sell tickets for 2009. The economic conditions are not favorable. Bill Davidson, the owner of the Detroit Pistons, will be lowering season ticket prices in 2009-10. Detroit may be the hardest hit sports market in either the US or Canada. The continuing troubles of the Big 3 automakers combined with a falling Canadian dollar will have an affect on The Pistons along with the Detroit Red Wings, Detroit Tigers and the Detroit Lions.
In Charlotte, a city dominated by the banking industry, Bobcats owner Bob Johnson will slash season ticket prices by an average of 17 percent in 2009-10.
Also this week, the NBA was hit with major economic jolt. The Simon Brothers told the Indianapolis Capital Improvement Board that they no longer could afford to assume the losses of their Pacers franchise and operate the team's home arena. The Simons are seeking relief and could sell or move the franchise with some city layer of government doesn't step in. The problem with that threat is simple. There are very few places that can take on a team. Kansas City is one place but that was a risky market even before the economic downturn. Kansas City's market is too small for the NFL's Chiefs, MLB's Royals and NASCAR, adding another team would just drain the other sports entities in the Kansas City market. Las Vegas is a dead market right now.
In good economic times, the Simons claimed they lost money on the team and they were one of eight ownership groups who asked for additional revenue sharing two years ago.
The NBA has offered 15 teams "bailout" money to help them get through tough economic teams. The NBA and the National Basketball Players Association still have two years left on their Collective Bargaining Agreement and a lot can happen between now and 2011. The economy could pick up or conditions could deteriorate.

All seems to be quiet in the NHL compared to the NBA. New York Islanders owner Charles Wang wants to see his "Lighthouse Project" given the go ahead by various Long Island governments. The Phoenix Coyotes franchise has major financial problems and the falling Canadian dollar is not helping the six Canadian teams. The NHL is in better shape than the Russian Kontinental Hockey League which was fueled by oil money. The KHL season is drawing to an end and it will be interesting to see how many of the 24 teams that started last September will be back in 2009-10 and if the KHL can hold onto big name players, particularly Jaromir Jagr.
In all of this economic chaos, there is some glimmer of hope for the sports economy and growth. The fledgling United Football League on Wednesday held a news conference to discuss plans for the 2009 season, the first one for the league. Paul Pelosi, who along with other investors, has sunk $30 million said the establishment of the UFL was "a tremendous opportunity, recession is time of opportunity."
Pelosi, the husband of United States House of Representatives Majority Leader Nancy Pelosi, thinks his league will thrive in time. Pelosi will know by December 1, long after the NBA, NHL and Major League Baseball have found out just how much the economy has dragged them down.

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