Economy's Impact on Sports Will Be Delayed, But Harsh, Experts Say
Thursday, April 2, 2009
MIAMI, April 1 -- Players in major sports will face salary decreases and poorly run franchises and sports entities will fail as the full force of the economic crisis hits the sports world in the coming years, according to several members on a high-profile panel at a sports business conference here.
Previously negotiated contracts -- such as television and naming rights deals -- have thus far blunted the effects of the crisis in sports, but as those deals expire they will bring significant financial travails, especially if inflation rises as many predict, according to Tim Leiweke, the president and chief executive of AEG, a company that controls a host of sports stadiums and franchises.
"In sports, buys are made six months, 12 months or years in advance," Leiweke said in comments before and after appearing on a morning panel at the World Congress of Sports, sponsored by IMG, a talent agency and production company. "We haven't seen the worst yet in sports. . . . Sports, ironically, will come out of [the crisis] maybe later than others because of those long-term commitments."
Leiweke, whose company controls the Los Angeles Kings, several professional soccer teams and the Staples Center, appeared with NHL Commissioner Gary Bettman; NASCAR Chairman and CEO Brian France; IMG Sports and Entertainment President George Pyne; former NBA star Alonzo Mourning; and Under Armour Chairman Kevin Plank at Wednesday's round-table discussion.
The shift decades ago from ticket-based revenue streams to a dependence on luxury suites, sponsorships, naming rights and other sources of income means financial woes could mount even for leagues or teams that ward off major attendance declines with lower or frozen ticket prices.
"Getting people to events hasn't been the issue," Bettman said.
Mourning said NBA players should prepare to accept less money during the next round of collective bargaining, which is expected to begin before the expiration of the current deal in December 2010. NBA owners have an option to extend the contract through the 2011-12 season, but they are not expected to do so.
If tough times continue, "you gotta cut salaries," Mourning said. "You do. You have to cut salaries. . . . It's going to be interesting how [NBA Players Association chief] Billy Hunter handles that whole situation because I think it's going to be a pretty interesting fight in the next round."
Added Mourning: "We have to be treated fairly, but at the same time, we have to prepare for reality. Reality is making the proper adjustments based on the economy."
Major League Baseball's collective bargaining agreement expires in 2011, and NFL owners opted out of their current agreement last year, meaning there will be no salary cap during the 2010 season unless a deal is reached.
"Collective bargaining issues in sports in the next two years to me is something to keep your eye on," Pyne said. "The fallout from that is not to be understated."
Meantime, NASCAR's France said in the aftermath of President Obama's rejection this week of Chrysler's and GM's restructuring efforts, he worried that one of the big three U.S. automakers would fail -- but not simply because of the effect it would have on sponsorship.
NASCAR fields four makes of cars in its top series, the Sprint Cup: General Motors's Chevrolet; Ford; Chrysler's Dodge; and Toyota.
"The bigger issue for us is jobs that could be affected, the potential race fans working in all of those factories," France said. "That's much bigger to us than direct sponsorship support. I don't want to minimize it, every sponsor is important . . . [but] they've already reduced sponsorship, frankly."
France said NASCAR had been trying to cope with the auto industry problems by seeking out less traditional sources of revenue, particularly in the technology industry. Leiweke noted that renewing sponsorships has proven immensely challenging because not only are companies struggling with revenue, but entire categories of companies with long sports connections have been virtually wiped out as potential sponsors.
"Forget the companies, the categories went away, so we have to reinvent ourselves . . . and think outside the box," Leiweke said.
Bettman said franchise owners who hadn't run their teams well or experienced financial struggles in other businesses represented a concern, and noted that two-thirds of the NHL's teams had frozen ticket prices. But he also touted the league's four straight years of increasing revenue and ticket sales.
"We're prepared to batten down the hatches," Bettman said. But "we're used to operating in adverse times."