Dropping the Ball: Economic Crisis Hitting Pro Sports
Professional sports leagues are expressing concern over the economy, and how it might impact sports attendance.
Imagine the NBA's Shaquille O'Neal driving around Phoenix in a used Scion xB, or NFL defensive end Orpheus Roye heading out on the town in a Honda Civic Hybrid. The global financial crisis is slashing jobs and annihilating investment portfolios, as well as real estate values. Could it be threatening to send professional athletes to the poor house, too?
Commissioners go on the record
In a recent statement, NBA Commissioner David Stern alluded to some uncertainty regarding ticket sales and game attendance. Even more surprising, he also indicated that the league had plans to cut 9 percent of its workforce. Professional football and baseball aren't immune to the economic crisis, either. Given the state of the credit markets, the NFL is reconsidering its maximum debt policies. MLB Commissioner Bud Selig says that ticket sales have been soft lately, an indication that the league needs to keep an eye on prices going forward.
In the grand scheme of things, these developments seem minor. But given the sports industry's lofty position in our society, they speak volumes about the severity of the financial crisis.
In contracts we trust
For years, pro sports has existed in a world that seemed unaffected by everyday economic realities. Athletes and coaches commanded guaranteed multi-year contracts paying multi-million dollar salaries. Sports arenas negotiated huge sponsorship contracts with U.S. companies like Staples, Target, American Airlines, and Honda, to name just a few. Large and small businesses were funding season tickets and luxury boxes out of marketing budgets, just to entice prospective clients with tickets to big games. And then there were lucrative, multi-year television deals. These contracts were the real source of security for sports; locked up years in advance, they were largely untouchable in the here-and-now.
Corporations and consumers cutting back
Sports will feel the rapid deterioration of the economy, however, by way of reduced corporate sponsorships, ticket sales, and merchandise revenues. The Wachovia Center is already shopping for a new name, and it's possible that other venue sponsors may become unable, or unwilling, to fund the expense. Tightening corporate budgets will require some businesses to say goodbye to their box seats. Then there are the fans, the regular people who are losing their jobs, their homes, and their savings. They've cut back on their spending in stores; they'll probably cut back on their spending on sports, too. More fans are likely to watch the game from home or from the sports bar down the street.
Fortunately for the industry, a lost corporate sponsor or two and depressed ticket sales aren't going to topple entire sports leagues. Teams with weak fan bases may fold or relocate, however, and free agent salaries might be impacted. But the leagues will remain, and the big stars will continue to command big salaries. You can bet Shaq won't be seen in a Scion, unless the automaker ponies up for him to be their Big Pitchman.
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