Pro Leagues Brace for Economy's Aftershocks
Tuesday, October 14, 2008
The economic crisis has executives in the country's major professional sports concerned about the potential long-term impact on their leagues and franchises if belt-tightening by consumers and businesses affects future ticket sales and advertising revenue.
In the most immediate sign that the country's economic problems are beginning to affect professional sports, NBA Commissioner David Stern said the league is laying off 9 percent of its domestic workforce, or about 80 employees, and that season ticket sales are down. Stern commented as NFL team owners gathered in St. Petersburg, Fla., for a two-day meeting that was to address the effects of the crisis on the country's richest sports league.
"This business has been thought to be recession-proof for a long time," New York Giants co-owner John Mara said. "But I don't think any of us has seen anything like this for a long, long time."
The major sports leagues have existed in a sort of financial fantasyland for years, with billionaire franchise owners assembling rosters of multimillionaire players. The NFL and NBA, along with Major League Baseball, could largely ignore the economy's ups and downs because they had guaranteed revenue from national television contracts, and fans and businesses seemed eager to continue to spend money on tickets and advertising sponsorships.
But the current climate is different, analysts say. "Everybody that does business with these leagues is taking a good, hard look at where they spend money -- fans, advertisers, municipalities," said David Carter, the executive director of the Sports Business Institute at the University of Southern California. "Basically, everybody that spends money in sports is going through some belt-tightening."
Talking to reporters in London, Stern did not say where the NBA would cut personnel, but laying off employees is a drastic step considering that the league was able to extend for the next eight years its lucrative TV contracts with ESPN/ABC and TNT last summer. Those contracts will pay the league almost $1 billion per year through the 2015-16 season.
Stern admitted this month that despite the league's strong TV and sponsorship deals, there might be a decline in overall attendance this season.
"Clearly, as business gets affected by the slowdown, then spending will get affected, both personally and by businesses," Stern said during a conference call with reporters. "So sports, I don't believe, can exist apart from that reality. The only thing that will probably increase will be television viewing as a low-priced alternative to spending money going to the movies, going out to eat, or going to the event itself possibly."
The economic downturn has already affected some NBA franchises. The Charlotte Bobcats laid off about 35 employees in non-basketball operations in late September. The Bobcats also attempted to save money by cutting radio broadcasts before the league office persuaded the team to keep them.
Peter J. Biché, the Washington Wizards' president of business operations and chief financial officer, said the team has yet to feel the sting from the financial crisis. NBA teams generally start selling season ticket packages in the spring, and Biché said the team has maintained the number of season ticket holders from last season, about 11,500, while suite and club level packages are on pace to beat the record numbers the team reached last season.
The team may find a decrease in walk-up tickets, Biché said. "I don't want to suggest we're naive. We all look at the market. We all see. We're in touch with it. I think our primary thought is, 'Put a good product out there.' "
He said the major challenge for the Wizards is with corporate sponsors, which "might be an area where we're flat. I think in this current state of the world, flat is not such a bad thing."