Baseball Musings
Baseball Musings
February 20, 2009
Surviving the Recession

Fortune Magazine looks at how sports are being hurt by the downturn. Professor Zimbalist thinks teams won't be as recession proof as in previous bad times:

Historically, teams haven't had to go to such lengths because the bond between team and town was so strong. The National Basketball Association grew its attendance during both the 1973-74 and 1980-81 recessions. And Major League Baseball enjoyed record attendance in the summer of 1983, when the U.S. unemployment rate was 10%. "The old adage is that people need distractions when times are tough," says sports economist Andrew Zimbalist, a professor at Smith College. "So they go to ball games."

Nevertheless, Zimbalist is one of many sports-business experts who think this recession will be different. Sports leagues today are more dependent on economically vulnerable sources of revenue such as corporate sponsorships, luxury suites, and other premium seating. Even if attendance doesn't nosedive, teams could still find themselves swimming in red ink.

Not even pro sports' richest franchise, the Yankees, seems immune. General Motors (GM, Fortune 500) - once baseball's biggest corporate sponsor - has canceled its sponsorship deal with the team. And even before superstar third baseman Alex Rodriguez was caught up in a steroid scandal, the Yanks were having trouble selling premium seats in their new stadium - so much so that they hired a Manhattan realty firm to market unsold club seats and luxury boxes.

The article, however, holds up the Arizona Diamondbacks as a team that is going the extra yard to keep its fans:

And yet last summer, with the economy tanking and her income shrinking, Smiley began thinking seriously about giving up her beloved seats. The bear market had halved her IRA, and spending $5,000 a year on baseball tickets was a luxury Smiley was no longer sure she could afford.

Torn, Smiley sent D-backs CEO Derrick Hall an e-mail asking him if he could help. Five minutes later the phone rang, and shockingly, it was Hall was on the other end. "Basically, he said that they'd do whatever they could to keep me as a season ticket holder," says Smiley. "I was surprised." The eventual solution: The D-backs arranged for Smiley to share season tickets with someone else in her section. The D-backs kept a customer happy while also managing to preserve a few thousand dollars in revenue. "They did a nice thing," Smiley says.

It's probably more important than ever to win. Losing gives people a good excuse not to spend money.


Posted by David Pinto at 08:27 AM | Management | TrackBack (0)
Comments

according to a white paper by John Moag, the sport with the most to risk is hockey, as 25% of its revenues come from sponsorship and premium seating. Luxury boxes are usually leased on a long term basis, but premium seats are y-o-y.

basketball is next, with MLB then the NFL with regard to the exposure to a risky revenue stream

Posted by: Bob Tufts at February 20, 2009 02:37 PM
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