This isn’t exactly a groundbreaking conclusion. But the WSJ put out its obligatory this-industry-is-also-suffering article about the major sports leagues today, without making any real distinction between them. In part:
Fans have packed the nation’s stadiums for the baseball playoffs this fall, and end-zone tickets for next month’s football game between the New York Giants and Dallas Cowboys are fetching hundreds of dollars.
But, as the upheaval in global markets, mounting job losses in the U.S. and other signs of a worsening economy continue to undermine consumer confidence, it is already clear sports won’t escape unscathed.
“We’re not just competing for people’s entertainment dollars anymore,” said Brett Yormark, chief executive of the National Basketball Association’s New Jersey Nets. “We’re going up against milk and orange juice.”
The article mentions some specific areas where leagues are having (or will have) some trouble, in particular stadium naming rights and stadium construction financing. And no doubt, those will be tough. But there are a limited number of teams in each sport that will actually be affected in those areas (in MLB’s case, the Nationals still don’t have a corporate sponsor for their park, and the Marlins may hit a major roadblock in trying to get their stadium built).
The leagues’ core revenue drivers are television contracts and ticket sales. The TV deals are almost all locked in for 2009 and 2010 for the four major sports, so that revenue is already fixed. But ticket prices are generally very elastic, particularly so during a downturn (as MLB found during the last recession in 2001 and 2002).
So what businesses generally do well during a period like this? Necessities (i.e. food), and low cost entertainment. Movies, in particular, are often thought of as recession-proof, since it is a relatively cheap way of getting out of the house for a night.
In the same sense, baseball tickets are still very affordable, especially compared with the other leagues. According to Team Marketing Report, the average ticket prices for each sport go as follows: $72.20 (NFL), $49.66 (NHL), $48.84 (NBA), $25.43 (MLB).
In general, baseball relies much less on the high-end consumer market than the other leagues. If corporate demand holds (as I think it will, since season tickets and/or luxury suites represent fairly minimal expenses for a big company), MLB ticket revenue should hold up very well.
It is the NHL and NBA that should be most concerned. Both rely on ticket revenue far more than the NFL does, and football tickets are usually much more inelastic since supply is so low. Single-game tickets are very expensive in both leagues, and both may have a very tough time this season.
On a side note, the economy may end up really hurting the Cowboys, Jets, and Giants, all of whom are looking for $10 million+ annually for naming rights (the Jets and Giants will share their new stadium). Just two years ago, the Mets scored a 20-year, $300 million deal with Citigroup, which now looks even more outlandish.
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
Add New Comment