Wall Street Journal: As Economy Weakens, Sports Feel a Chill

Another of our predictions is beginning to come to fruition. In May 2008 I wrote

I've written as well, I believe discretionary entertainment will also take a hit (ex video games) - RVs, boats, even sporting events ALTHOUGH most sporting events are now populated by the upper 10% whom this slowdown will hit last, and corporations. But I just cannot imagine the average football game where parking is $30, concessions are $50 for a family of 4, and tickets are $150-$200 being at top of mind for the bottom 80% in this country. Things like NASCAR which caters more to middle America will take a hit.

I followed that up in June 2008 with...

Without wages rising much, the pie of spending must draw down from one place (sporting events, camping trips, entertainment, non essential travel, Vegas, boating, eating out at restaurants, buying that extra pair of shoes) and go into essentials. This is pooring of America 101, and why sentiment gauges continue to fall to ungodly rates (in a low inflation, low unemployment - by government standards - economy).

I've been watching intently for the first signs in the sporting world since this is (a) one of the last things Americans want to give up and (b) ticket prices have gotten to a point where many families of the lower 2/3rds to 1/2 in America were frozen out a long time ago - hence the slowdown means the upper 1/3rd (and corporations) are finally getting hit. Here we go. I do believe this will lead to the first deflation in ticket prices and concessions in many many years. What would be really shocking would be seeing athletes median salaries go DOWN year over year - when is the last time that ever happened? Never, in my memory. I think it's a distinct possibility if things drag out as long as I believe they will.

I have repeated this week after week, and will continue to. Anything discretionary in America that caters to the bottom 70-85% is now at major risk. [Stuff I've Been Negative on Since Last Fall] And it will be worse in 1st half 09. Not better, as the pundits assure us. Unemployment is just starting to hit its stride nationwide.

• The crisis in financial markets is sending a chill through the sports industry, cooling the ardor of many longtime season-ticket holders and formerly deep-pocketed corporate sponsors. 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." (I think this is a very important quote and one the perma-bulls need to think over)
• Stealing a page from the retailing playbook, Mr. Yormark is trying to lure fans with a buy-now-pay-later offer that allows season-ticket buyers to attend games without paying for them until Jan. 5. (that's pathetic and basically it a symptom of our national spending disease - if you can't pay for it now - put in on credit and kick the bucket down the road - when the bill comes due later, we'll try to come up with the money)
• On Monday, NBA Commissioner David Stern announced that the league would lay off about 80 employees, or 9% of its work force. And he said season-ticket renewals would be down leaguewide when the season opens next month.
• For decades, long-term television deals helped to insulate big-time professional sports from the economy's ups and downs. In fact, many major-league teams got the bulk of their revenue from such deals. But the business has changed in recent years. These days, teams rely increasingly on the money they collect by selling premium tickets to the sparkling new stadiums and arenas built during the past 15 years.
• With a night out at a ballgame potentially costing hundreds of dollars for a family of four, cheering on the local team in person may be just the kind of expense that strapped consumers will start to balk at. (bingo)
• Some stadiums themselves are in jeopardy, opposed by taxpayers and public officials who don't think investments in sports facilities are justified in the current climate. (not with the state revenue crisis we will be hitting in 2009-2010)
• The economic downturn comes at a particularly bad time for teams trying to sell their most exclusive sponsorships, naming rights to new stadiums. In the past, such rights frequently fetched nine-digit sums. (many were banks - oops)
• Within the past two years, Citigroup Inc. and Barclays PLC have signed deals to spend more than $300 million over the next 20 years to put their names on sports venues in New York City. Citigroup will lend its name to Citi Field, the new home of baseball's New York Mets. (hey that's our tax dollars going to name the Citigroup Field - shouldn't we call it Taxpayers Field now or Bailout Field?)
• Brett Daniels, a spokesman for the Cowboys, called finding a deal to put a sponsor's name on the team's $1.1 billion stadium a "monumental undertaking."

Again, the culture in the U.S. is going to be starkly different in the years ahead as we make this much needed adjustment, willingly or unwillingly. (it will mostly be the latter)