The Sports Curmudgeon®

The “economic downturn” has allowed people to ask impertinent questions as a way to take their minds off the potential doom scenarios such as:

Who had a worse year in 2008, “Pacman” Jones or Dow Jones?

Do you still have a 301(k) or is it a 201(k)?

Nevertheless, the impact of the “economic downturn” is very real when it comes to sports and it may not be funny at all. For the last couple of months, I have tried to point out here and there how reduced discretionary income in the hands of fans and/or reduced resources in the hands of local governments and big-time sponsors might impact the world of sports. Rather than put such comments into piecemeal rants, I thought it might make sense to assemble them into a single essay - - and hope that I can make it coherent.

Sports franchises may not want to sound alarmist and scare off the buying public, but many of them realize that things have changed significantly - - and not for the better - - in the last year. Take the New Jersey Nets for example. Two years ago, it would never have occurred to them to use “unemployment” as a promotional gimmick but they are doing that now. Nets’ fans can send their résumés in and get free tickets to one of five home games. The Nets will then forward those résumés to their “corporate partners” in an attempt to find new jobs for those people. There is a limit of 500 such tickets for each of the five games. Folks, that is not an altruistic step taken by the Nets; they know that increasing unemployment endangers their ability to sell lots of those high priced tickets to their games. They know that unemployment is rising and looks to continue to rise over the next six to twelve months. So, they are “investing” the cost of 2500 seats they probably will not sell anyway as a way to help their fans stay employed and as a way to appear to be concerned and proactive on this matter.

In a much larger sense, the Nets have to worry significantly about their grand plan to move the franchise to Brooklyn and into a new arena that will be surrounded by new housing and commercial development projects. That involves getting credit extensions to the tune of hundreds of millions of dollars at any given time and total credit into the billions. Given the glut of housing on the market now, it might not be easy for housing/condo developers there to get their hands on that kind of cash.

The NHL St. Louis Blues are using the specter of mortgage default as a promotional item - - what fun! When the Blues play a Saturday night home game – next one is November 29 if you want to circle that on your calendar – the team will hold a drawing and call out a seat number during the game. The fan with that ticket will get mortgage payments or rent payments up to $4000 for the next four months. Do you think they even considered doing something like that a year ago?

In MLB, the Boston Red Sox announced a price freeze on all tickets for 2009. I would be willing to bet that when the Sox did their five-year financial projections in 2005, 2006 and 2007, that they had programmed in a ticket price increase for 2009.

The Olympics have always been a money sink for the cities/countries that host the games. The 2010 games are in Vancouver, British Columbia and they are running into “financial issues”. A professor at the University of British Columbia explained the cost situation there very succinctly:

“We’re looking at a very real potential here for some levels of government to pony up more money. The alternative would be an Olympic tent city.”

If the world economy does not turn around significantly between now and the winter of 2010, you can be sure that whatever projections the Canadians had for attendance and expenditures by attendees will not be met.

Meanwhile the folks in London who rejoiced at getting the 2012 Summer Games are looking at a financial black hole. Original cost estimates were in the range of $6-7B; current estimates are in the range of $20-22B. Originally, the organizing committee and governmental overseers planned on getting $2B in private funds for sponsorships and the like. Now it seems as if they may not be able to get $1B from the private sector. That led the British Olympic Minister to say:

“We have lost half a billion pounds of private investment. But that does not mean it won’t come back. We have to be optimistic about the coming years and that there will be deals to be done. We will go back to the banks when borrowing terms are more favourable.”

For the full article on the London Olympics financial “situation”, check this out:

In a related Olympic development, Sports Business Journal reported that Johnson and Johnson decided not to extend its major Olympic sponsorship through to the 2012 Games. J&J explained this decision by saying that the decision was ‘’in part because of the economy and the expiration of key patents that J&J faces in the coming years.” I wonder which of those two factors is more important here. Let me see… Johnson and Johnson signed on with the Olympics as a top-shelf sponsor right after the conclusion of the 2004 Games. At the time, they knew when those “key patents” would expire and they looked forward to a growing if not necessarily exploding economy. Now about 42 months later, they still know about the expiring patents and they see the economy tanking. Hmmm…

In light of all this great news, maybe someone might be able to explain why the mayor of Chicago remains focused like a laser on getting the 2016 Olympic Games for the City of Chicago…

I can imagine someone saying to themselves that all of these things deal with second-tier things in professional sports or second-tier sports. After all, problems here or in NASCAR or the NHL or in horseracing are to be expected in troubled times. But what about the “gold standard” of US sports; what about the NFL? Glad you asked…

It is one thing for the New Jersey Nets to have difficulty getting huge credit loans these days for a new playpen. But surely, the Dallas Cowboys – America’s Team – would have no such difficulty, right? Well, we shall see about that. Like the Nets, the Cowboys are building a new playpen and they are reportedly in search of a $350M loan sometime between now and 1 December, which the Cowboys need to refinance a $150M loan that has come due plus other funds to cover over-runs on the new stadium. Not to get too technical here, but the Cowboys were to fund about 40% of the cost of the new stadium; and to get that money, they went into the auction rate securities market. That was a great idea two years ago; but in the current market, that has made their interest payments soar and they really do need to pay off that $150M in auction rate notes. As of today, I have not read anything to indicate that the Cowboys have received the loan that they need from a bank or an investment company… Stay tuned.

Even the NFL Front Office sees that things are not well and sees that the league needs to be seen as recognizing that fact. This week, the NFL announced that the average price of a playoff ticket for this year will be 10% lower than prices last year. In addition, the NFL will allow teams to charge less for the wild-card games than they will charge for the divisional playoff round games; that was verboten last year.

More importantly, tickets for the Super Bowl, which cost $800 last year, will only cost $500 this year. That is the first time in history that Super Bowl ticket prices have gone down.

The advertising revenues for the Super Bowl telecast present a mixed picture. NBC has the game this year and has been charging $3M for a 30-second spot. About a month ago, NBC said that 90% of that time had already been sold so any price reductions would only seem to apply to the remaining 10% of their inventory. However, major sponsors such as General Motors are going to pass entirely on ads during the game. [Of course, GM may be in Chapter 11 bankruptcy by February so that may not be such a big loss.] However, viable companies such as FedEx have not committed to Super Bowl advertising as of yet. Reports are that the company fears a backlash if they appear to be spending lavishly on advertising here while laying off workers and asking others to take pay cuts or furloughs.

The NFL is the 800-lb gorilla of US sports and the Super Bowl is the capo di tutti cappi of NFL events. That game is 10 weeks away; sponsors have not yet decided if they will participate or not; that is not the way it has always been.

Folks, the economic problems facing the US and the rest of the developed world are real and they are serious. Professional sports here grew to a point where the financial superstructure in terms of lavish facilities and huge guaranteed contracts were supported only on the condition that there was a steady stream of sponsorship money and fan revenue to feed the monster. I do not want to sound alarmist here; those revenue streams have not dried up. But they are not growing either. It would be foolhardy to ignore what is going on in the real world and pretend that it cannot have any impact on the playful world of professional sports.

Not all is lost. Not all is peaches and cream either.

But don’t get me wrong, I love sports…