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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

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  1. on October 15th at 08:34 am
    Rodney Fort said:

    Thanks for the post.

    I think I’d rate them according to income elasticity: If incomes fall, which sports are most likely to suffer a downturn? Rating by the price of tickets I think misses what is actually happening so far: incomes are falling (and as inflation creeps in, real incomes will be falling).

    On income elasticity, I think I’d rate it NFL, NBA, MLB, NHL.

  2. on October 15th at 10:55 am
    Shawn said:

    Hey Rod,

    Can you give your reasoning for that order? I’m curious…

    Also, I think a key point here isn’t just ticket prices, but fixed revenue sources. In this sense, the NFL is probably number one, but MLB should be a very solid number two going forward given their TV deals and MLB Network’s launch.

  3. on October 15th at 10:57 am
    malcolm said:

    I think it was 20 years/$400 million, not $300.

  4. on October 16th at 11:16 am
    Rodney Fort said:

    Hi Shawn.

    Based on income elasticity, I would think that it’s lowest for football, then basketball, then baseball, then hockey.

    For football and basketball, it’s all about the revealed income level of buyers; changes in price will change real income very little in percentage terms for those buyers.

    More so for baseball and hockey.

  5. on October 16th at 11:18 am
    Rodney Fort said:

    Hi Shawn (part 2)

    I also should have said that since income will fall less in percentage terms for the truly richer folks, and they buy football and basketball tickets moreso than others at lower income, then football and basketball will hold their own better than the other two sports.

  6. on October 16th at 10:52 pm
    Shawn said:

    Thanks Rod, very interesting stuff. I wonder if MLB will rise in that index with the new stadiums in NY? Yankees games especially will probably turn into mid-90s Knicks games, where you only got tickets if you were with a corporation.

  7. on October 17th at 10:59 am
    Rodney Fort said:

    Thanks Shawn.

    One additional thought for you. It isn’t the coporation buys at MLB parks that will tell the tale. They’re going to buy anyway since they are more recession proof than the middle class fan that buys most of the tickets. And, again, your observation on the Knicks adds to my earlier observations-when higher incomes dominate the buying, expect less impact from recession.

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