Friday, December 05, 2008

Sports slowdown

As the economic climate gets bleaker and bleaker here, there and everywhere, it's easy to start wondering about what might happen to the sports business in the coming months.

As in, will the bubble burst? Are teams about to get hurt? There are reasons to worry.

Let's start with the behavior of fans. They are known for their enthusiasm and loyalty. Why else would they pay $100-plus for a three-hour sporting event, when a movie of similar length will cost them a tenth of that? But if money gets tight for some of the population, suddenly it might come down to paying the rent or going to see an NFL game. Will we start to see people, gulp, stay home? And if they do, does that mean television ratings actually might go up? That could change the economic order quite radically. Can you picture a major sports team having a "sale" on tickets?

Then there are the businesses. Some of them buy season tickets to teams' games and entertain clients there. You'd have to think that sort of spending might take a hit in the near future, if it comes down to that or making payroll. Then there is advertising, whether it be directly with the teams through ads in the arena or through media outlets. Sports advertising relies on emotion too; teams often charge a premium to be associated with them. Being the official tax preparer of the Buffalo Bandits (or whatever) can't generate that much business. Some teams and businesses have multiyear deals in place, but the climate might be different when renewal time comes around.

Finally, we have the players and their salaries. Some teams are locked into big numbers for top players (see Rodriguez, Alex, among many others). If the economic pie gets smaller, that might means teams playing in a sport with salary caps or luxury taxes might have to do some creative accounting to make it all work. And, that salary cap may have to be adjusted downward if revenues fall.

In other words, I'm not sure this is the best environment to be a free agent. CC Sabathia won't starve, but it's easy to wonder if he's really worth $130 million to the Yankees right now. I'd be tempted to take any big offers I'd get in the near future. Those big endorsement deals for athletes may dry up too. Ask Tiger Woods about his now-expired deal with General Motors.

I have my doubts that we're headed into a textbook depression, so I don't think pro sports is going to go away or that whole leagues will fold. Heck, athletics made it through the 1930's. Our thirst for leisure is pretty strong. But we may see the landscape change in the next few months. I never thought I'd live to see an America without General Motors, and that looms just down the road potentially. Anyone who knows what this all will look like at the other end of the tunnel is kidding himself.

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