Tumultuous U.S. Economy Begins to Affect Major League Sports

Published September 18, 2008

| Associated Press

The tumult in the U.S. economy finally is starting to affect an industry that has enjoyed years of growth: major league sports.

The NBA is laying off employees. Major League Baseball attendance has dropped after four straight record years. The NFL says revenue is under pressure.

While the symptoms are relatively mild so far, the latest developments say something about how far financial woe has spread in a nation where the appetite for sports seems ever-expanding.

"I used to come to maybe eight or 10 games a year, but this year it was only four games on three trips," said Jack Maloney, a Cleveland Indians fan who watched his team play at home against Kansas City last weekend. "The price of tickets has gone up, you've got to pay to park, the price of food at the ballpark is ridiculous, and so are the gas prices. I'm glad we filled up Friday. It was $3.67 then. This morning, it was $3.99. That's just stupid."

NBA commissioner David Stern said his league intends to trim at least 50 of the 800 jobs in its U.S. work force, more than 6 percent, and says the NBA has shuttered its league office in Los Angeles.

"Our revenue targets are still being met," Stern said. "But we know that there's going to be enormous pressure on those targets in the next year or two, based on the country's deteriorating economic circumstances.

"I think it's fair to say that a sporting event may well define disposable income," he said.

Make no mistake — America's major leagues still take in billions of dollars, with individual team incomes varying through a sliding equation that includes tickets, luxury suites, national and local broadcasting, sponsorship, advertising, concessions, parking and licensing.

But executives throughout sports are taking a new look at expenses, fearing the boom years may be over in a business that once seemed recession-proof.

Last winter and spring, coming off baseball's first season topping $6 billion in revenue, commissioner Bud Selig was saying the sport could break 80 million in attendance for the first time. Indeed, during the opening half of the season, MLB was at times slightly ahead of last year's pace.

Heading into the final two weeks of the regular season, however, average attendance was 32,553, down about 1 percent from last year's record of 32,785.

"I think 80 million was a realistic expectation based on the prior four years," said Bob DuPuy, baseball's chief operating officer. "But to draw 79 million or 78 million or 79.5 million or 80 million, wherever we end up exactly is absolutely remarkable given the economy."

Yet in Kansas City, where the Royals beat the Seattle Mariners before an announced crowd of 10,307 on Monday night, the team offered a retro pricing deal: $3 for upper deck seats and $5 for parking. Even that was too much for some fans who came to see the two last-place clubs.

Ed Stoll, a retiree from Blue Springs, Mo., brought his three granddaughters to the game.

"Price has restricted us. Every once in a while we get free tickets — that's why we're here tonight. I really can't afford to come very often," he said. "We have to control what we spend and don't usually buy souvenirs — we're not into them that much."

While season tickets sold before mid-2008 already are locked in, there are indications teams may face a tougher time selling seats for 2009 and beyond.

"Anything outside of rent, taxes, fuel, food, shelter, after that everything falls into the category of discretionary spending," said Bernard Baumohl, chief global economist of The Economic Outlook Group. "We may not see any significant rebound in consumer spending, especially discretionary, disposable spending, until 2010."

Stern anticipates the sale of full season tickets and equivalents will be down about 1 percent to 2 percent this year following the three highest-drawing seasons in league history. The NBA's average of 17,395 last season trailed only 2006-07 (17,757) and 2005-06 (17,558).

The NFL has set regular-season attendance records for five straight years, drawing 17.3 million fans last season and averaging 67,738. But darker times may be ahead, at least when it comes to the bottom line.

In May, the league decided to opt out of its labor contract in 2011, as opposed to 2013. At the time, the owners noted they were paying players $4.5 billion this year, just under 60 percent of total revenue. Salaries generally lag behind the economy by a couple of years.

"We recognize that it doesn't work long term for us," NFL commissioner Roger Goodell said of the labor pact at the time.

More recently, Goodell wrote in a memo to his staff that costs are rising and league revenues are under pressure. He urged staff to control costs and identify new sources of revenue.

The NHL's story is slightly different from the other leagues, because of a lockout that wiped out its 2004-05 season. It's been busy rebuilding its revenue and fan base, so it's harder to compare its recent seasons to those of the other leagues. Ticket sales are up 3.6 percent from last year.

"Our results on season tickets are actually a good story to date," deputy commissioner Bill Daly said. "Perhaps the economy has kept those numbers from being bigger."

Across the board, tickets prices have risen steadily.

Baseball's average increased 10 percent this year to $25.43 and the NFL's went up 8 percent to $72.20, according to the Team Marketing Report. The NBA's average was $48.83 last season and the NHL's $48.72, TMR said.

And teams still are content charging as much as they think the market will bear.

The best seats at Citi Field, the New York Mets' ballpark opening in 2009, will cost an average of $495. That's a New York bargain, believe it or not. The top tickets at new Yankee Stadium are $2,500.

In New Jersey, the Jets and Giants are combining to build a stadium that will open in 2010 and is estimated to cost $1.6 billion. To help pay for it, they plan to charge up to $25,000 for personal seat licenses that only give an individual a right to buy the tickets.

Some in the stands have had enough, especially in poorer, small markets.

"We used to come to maybe 10 games a year," said Paul Jackson, another Indians fan who attended Sunday's game in Cleveland with his wife Pat and 12-year-old son, Shawn.

"This year, it is this game and opening day. We live in Minerva, and it's 150 miles round trip. That's 25 bucks for gas in addition to the price of tickets and food," he said. "We were coming to the Browns game anyway tonight, so figured we'd double up and watch both games. We packed a lunch, and we'll eat in the parking lot between games."

Declines in ticket sales have started for some teams. After reaching 3 million in attendance for eight straight seasons, the San Francisco Giants will fall short. Is it due to the slowdown, the departure of home run king Barry Bonds or the Giants' losing record?

Outgoing owner Peter Magowan insists "this wasn't because of the economy." Indeed, there is typically an intersection between on-field performance and ticket sales. Bringing baseball back to Washington hasn't meant a packed house for the Nationals, who could lose more than 100 games this seasons and are averaging 29,500 in the first season of a ballpark that has a capacity of 41,188.

A weak economy doesn't help, and the slowdown is felt beyond the turnstile.

Team coverage in many newspapers has been cut back, with media budgets battered by advertising and readership declines. That translates into a decreased presence in print for teams.

At the same time, all the leagues expect a decrease in car ads — long a major sponsor — forcing clubs and networks to search for other advertisers.

For Major League Baseball, the sale of licensed goods — such as jerseys and caps — is flat when compared with last year. It would be down factoring out the All-Star game at Yankee Stadium, which produced extra revenue.

Kevin Kolb, a Royals fan from Pleasant Valley, Mo., complained that souvenirs and concessions were too expensive. "It costs $50 for us to buy hots, Cokes and nachos," said Kolb, who had his son and daughter in tow.

To ensure stability, NBA commissioner Stern recommended more than a year ago to his owners that they try to lock in long-term TV contracts with regional sports networks.

There's an odd logic to his advice. If fewer fans buy tickets for games, more may watch on TV — and higher ratings could mean more revenue for regional sports networks, many of which are partially controlled by team owners.

So, in the end, teams could win by losing.

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