How financial crisis will hit sports industry

Image: There are empty seats for the Tampa Bay Rays home baseball game against the Minnesota Twins Thursday, Sept. 18, 2008, in St. Petersburg, Fla.
The biggest change fans see may be noticeably smaller crowds — even at post-season games — and a corresponding lack of energy in the buildings, several economists said.Mike Carlson / AP file
/ Source: contributor

Crashes and collapses? Slumps and slides?

Nobody knows nose dives like the sports world, where the dark half of every highlight is failure. For each dunk, dinger and end zone dance, somebody got burned. Bouncing back from big losses? Just part of the game.

Unless the agony of defeat you’re talking about involves the recent Wall Street beat-down. That blowout — and what it will mean for all the big leagues — still has economists fumbling for answers. Most agree that if a recession takes deep root, the sports landscape will look different in five years.

How different? Like any good sports topic, that’s up for rugged debate. But the predictions include smaller crowds, smaller athletes and smaller salaries, longer seasons and longer road trips, deep financial snags for pro golf, hockey and NASCAR, and perhaps the death of some younger leagues.

“You may see some sports-business Darwinism the next several years,” said David Carter, head of the Sports Business Institute at the University of Southern California.

“The two industries that have been recession-proof through the decades are entertainment and what Tony Soprano does. This fiscal cycle will test the first of those two,” added Mark Kreidler, an columnist and author of two sports books.

Who’s vulnerable within the pro sports herd? Second-tier circuits are the most susceptible to collapse if corporate sponsorships further fade, as they have in Major League Baseball and NASCAR, according to interviews with three sports economists, a futurist and a sports columnist.

“Maybe for some of the lesser leagues — the National Lacrosse League, maybe the new women’s soccer league, which has the misfortune of starting during the recession — it’s possible they will have to close their doors,” said Andrew Zimbalist, a noted sports economist and professor at Smith College in Northampton, Mass.

Women’s pro golf has edged closer to the financial rough, losing four title sponsors including ADT Security Systems this year. The LPGA now says it expects to drop two or three events in 2009. Even in a Tiger Woods world, the PGA also may shrink its tour and cut prize money over the next five years as big companies draw in their sponsorship dollars, said Glen Hiemstra, the founder of

“Of course, that doesn’t mean we won’t have a cadre of men or women who want to go out there and play professional golf — they’ll just do it for a possible purse of $20,000 instead of $200,000,” Hiemstra said.

None of the economists foresees the demise of the four “major” leagues or the deaths of NASCAR or Major League Soccer, although money trouble lurks in many corners. Network and cable TV contracts — the lifeblood of most sport economies — are in place in the NFL until 2011 and 2013, in Major League Baseball until 2013, in the NBA until 2016 and in NASCAR and MLS well into the next decade. Those dollars are guaranteed. Only the NHL and its one-year, revenue-sharing deal with NBC is facing the potential loss of a network partner.

( is a joint venture of Microsoft and NBC Universal.)

“For these bigger sports leagues to take a financial hit is neither unprecedented nor terribly worrisome. In the main, they’re so flush, it’s ridiculous,” said sports author Kreidler. “If (for example) the NBA owners make less in two years than they’re making now, that is not the same as losing money.”

But due to the economic storm — which already has led companies like General Motors to end sponsorships — some big leagues may see radical changes in their on-field products by 2013, the experts said.

For example, road trips in baseball, basketball and hockey that now span a week or 10 days may routinely last three weeks or more to cut travel costs. Regular seasons could be stretched into new months so owners can reap more TV and gate revenues. (The NFL is considering extending its regular season from 16 to 18 games). Some even predict that tomorrow’s pro athletes — particularly NFL players — will be ordered to bulk down so leagues can reduce devastating injuries and better protect their precious investments.

“Let’s bring it back to realistic human size,” said futurist Hiemstra. “It would have to be a league mandate for that to work, but the NFL may limit offensive and defensive linemen to 300 pounds.”

Among individual major sports, the NHL — with its shrinking national footprint — is considered to have hardest road to survival, several economists said. Depending on the length of the recession, the NHL governors may be forced to take over and run several financially strapped franchises, while a few more teams may eventually go bankrupt, causing the league to contract, said Smith College professor Zimbalist.

NASCAR has its TV money locked up for a while, but that circuit’s 43-car field may lose a chunk of teams in next few years, meaning smaller races on Sundays. The Big Three U.S. automakers are scaling back their NASCAR connections. Corporate sponsors, which fuel about 80 percent of NASCAR’s budget, also are reducing support. With the Daytona 500 looming in February, Dale Earnhardt Inc. and Petty Enterprises — two premier teams — still lack sponsors to fund four of their six cars.

“It could end up being the Daytona 50 if we’re still talking about this (recession) 10 years from now,” Carter said.

Will the athletes themselves feel any of this pain? Yes. But not enough for the stars to change their limo lifestyles, the experts said. Owners likely will use the economic stall to renegotiate stiffer salary caps — limits that currently are quite soft.

“This is the kind of atmosphere in which management often jumps up and tries to realign things in its favor for the long, profitable future to come,” Kreidler said.

“Contract duration will be shortened and I expect teams to be very cautious about entering into hundred-million-dollar deals,” added Raymond Sauer, professor of economics at Clemson University and founder of “The Sports Economist” blog. “But it would take a decline of cataclysmic proportions to return to a salary era equivalent to, say, the 1960s.”

At the games themselves, the biggest change fans see may be noticeably smaller crowds — even at post-season games — and a corresponding lack of energy in the buildings, several economists said. Some baseball teams, including the Washington Nationals, the San Diego Padres and the Oakland Athletics, have cut ticket prices for 2009. But as consumers feel the further bite of a recession, a night at the arena may be a luxury that gets quickly stripped from family budgets.

“It’s not the end of the world if the Rose Bowl isn’t sold out,” Sauer said. “Although it will take the gloss off the event.”

On the other hand, that may not matter to league honchos who, some experts predict, soon will place less value on huge, live crowds. As long as TV viewership stays healthy, network and advertising dollars will continue to come to the leagues. The rise of mixed martial arts as a TV phenomenon already has shown that you don’t need 65,000 people in a stadium to make the product appealing to home viewers. In short, this is television’s best art: manipulation.

“You do need a few thousand people, situated properly for the best camera shots, both for the regular broadcast and the YouTube kind of viral distribution that can really kick-start a national conversation,” Kreidler said.

“That’s a radical concept when applied to football,” he added, “but not so much something like the NBA, where empty seats already are common during the regular season.”