This time around, sports aren't recession-proof
Nearly every sport and sports team take hits in 2009, from layoffs to dips in advertising, attendance and sponsorships. They get more creative to lure fans who have seen discretionary income dwindle.
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By Baxter Holmes December 30, 2009
<!-- sphereit start --> This year the Lakers e-mailed Christmas cards to save postage. The team cut back on corporate gifts, created an installment payment plan for season-ticket holders and noticed many fans didn't buy season parking passes.
Blame the recession. Even the Lakers, the NBA's most valuable franchise (worth $607 million and with a $51.1-million operating profit last season, according to Forbes magazine) is pinching pennies.
"We're doing cost-cutting," said Tim Harris, the Lakers' senior vice president of business operations. "We're looking at how we're spending money. It's going to be easier to shave off a million in costs than it will be to raise a million."
In past recessions, economists considered sports to be almost recession-proof because of a devoted base that was especially loyal during economic woes, using games as a way to escape harsh realities. Not in this one.
"It was no longer a case of middle-class Joe Smith saying, 'Instead of buying a new pair of shoes, I'm going to buy a ticket to the Mets game,' " said Andrew Zimbalist, an economics professor at Smith College.
Nearly every sport and sports team took hits, from layoffs to dips in ads, attendance and sponsorships. The Arena Football League canceled its 2009 season. The NHL's Phoenix Coyotes filed for bankruptcy protection in May.
Several sports economists blame the downturn on a trend that started 20 years ago, when many major sports leagues shifted their focus from typical middle-class fans to corporations. That shift led to bigger stadiums and steady increases in prices all around to help pay for them.
This year some fans had no choice but to stay at home. Max Eftekhari, who in recent years attended 20 games a season at Dodger Stadium, didn't go to any this year.
"I was watching the Dodgers on TV this October and some of that sentiment came back, but not enough to spend," said Eftekhari, 48, of Anaheim Hills, a transportation engineer and father of two.
"If you're trying to save money, you don't buy tickets for basketball or football," said his colleague, Wes Pringle, 43, of Whittier.
With fans, corporate sponsors and advertisers cutting back, many teams trimmed staff and got more creative to lure customers. The NBA league office reduced its staff by about 80, or 9% of its workforce, as did the NFL, which shed about 170 jobs, or 15% of its workforce.
"The sports industry was really taken off its moorings because it was accustomed to corporate cash flow and as corporations began to scale back . . . the industry felt that as much as it did the retrenchment of the everyday fan," said David Carter, executive director of the Sports Business Institute at USC.
MLB clubs created hundreds of promotions to sell tickets. The Cincinnati Reds had a "Straight A-Program," and offered two free tickets to students in seventh through 12th grades with an "A" average, with friends or family getting tickets at half-price.
Perhaps the most telling promotion: the NBA's Minnesota Timberwolves' "No-Risk Pledge" season-ticket plan that guaranteed full refunds to customers who lost their jobs in 2009.
The Dodgers led MLB in attendance with 3.76 million (up about 1% from last year) and didn't raise parking or ticket rates. The Dodgers cut prices on soft drinks (starting at $3.75, down from $5), water ($3.75, down from $5.75) and beer ($6, down from $8), and offered a new five-payment installment plan for season-ticket holders.
"I don't believe there is a business in America that hasn't been impacted by the economy . . . and the Dodgers are no different," Dodgers President Dennis Mannion said.
That was certainly true in the NBA, as 12 of the 30 teams lost money in the 2008-09 season, according to Forbes.
"We don't exist in a vacuum," said Chris Granger, NBA senior vice president of team marketing and business operations. "Because everyone we interface with feels some sense of pain in the economy, so do we."
For some teams, success kept ticket sales robust. The Lakers won the NBA title in June and the team enjoyed the league's highest season-ticket renewal rate at 98%, compared to the NBA average of 75%. The Los Angeles Kings, off to their best start in years, have about 1,200 more hockey fans per game so far this season compared to last at Staples Center.
Tennis also did well, with record crowds at Wimbledon (511,043 total spectators) and the U.S. Open (721,059).
But other sports felt the downturn. Several NASCAR teams were forced to merge: Petty Enterprises combined with Gillett Evernham Motorsports to create Richard Petty Motorsports; and Chip Ganassi and his NASCAR partner, Felix Sabates, teamed up with Dale Earnhardt Inc. to create the Earnhardt Ganassi Racing with the Felix Sabates team. The LPGA lost McDonald's, MasterCard, Corona and Michelob as sponsors and cut four events from its 2010 schedule. Next month, the PGA's Bob Hope Classic in La Quinta won't have Chrysler as a title sponsor -- no surprise, given the automaker accepted billions in government bailouts.
The WNBA, which saw the four-time champion Houston Comets disband last December, cut its rosters from 13 to 11 players before this season to save money. This month, WNBA owners agreed each team would have only one head coach and one assistant, causing some to be let go.
Some college and high school athletic budgets got trimmed. Northeastern University in Boston ended its football program after 74 seasons. At least 13 Division I programs dropped sports teams, according to the Chronicle of Higher Education.
In the Los Angeles City Section, trimming travel expenses, reducing baseball and softball schedules and eliminating junior varsity playoffs should save $448,000 from high school budgets, City Section Commissioner Barbara Fiege said.
Meanwhile, UCLA said its Bruins football season-ticket sales fell 15% this year, and its men's basketball season-ticket sales are down 10%.
With unemployment up, people gambled less. Gaming revenue on the Las Vegas Strip is down 12.3% through October of this year, to $4.6 billion (sports accounts for 4% of all gaming).
It was also a tough year in horse racing. Magna Entertainment Corp., the largest operator of North American race tracks, filed for bankruptcy in March.
Del Mar Race Track cut its summer session from six days a week to five and offered free entry, a free program and a free seat to the track on Wednesdays. Santa Anita Park offered "Free Fridays" (free attendance, $1 hot dogs, beer, soda and popcorn), but at its Oak Tree meet this fall, on-track attendance fell 11% and its all-sources betting handle was down 15%.
"The recession has been very tough across the board," said Mike Willman, the park's director of publicity.
"One of the more interesting things is what happens in 2010," said Allen Sanderson, a sports economics professor at the University of Chicago. "Do people go back to the mall or not, and will people be weaned off going to ballgames?"
Sanderson expects more fans will trim their sports budgets and go to one game a month instead of two, or carpool to save money on parking, or buy one drink instead of two.
Although the Lakers out-earned every team in the NBA, Harris said each department is taking a "fine-tooth comb" to its expenses. Harris said because the Lakers owe so much in payroll and luxury taxes, and ticket prices remained flat, the team expects profits will be flat this season.
"We're not recession proof," said Harris. "Anybody in any business who says they are, that's a risky position."
baxter.holmes@latimes.com
Nearly every sport and sports team take hits in 2009, from layoffs to dips in advertising, attendance and sponsorships. They get more creative to lure fans who have seen discretionary income dwindle.
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By Baxter Holmes December 30, 2009
<!-- sphereit start --> This year the Lakers e-mailed Christmas cards to save postage. The team cut back on corporate gifts, created an installment payment plan for season-ticket holders and noticed many fans didn't buy season parking passes.
Blame the recession. Even the Lakers, the NBA's most valuable franchise (worth $607 million and with a $51.1-million operating profit last season, according to Forbes magazine) is pinching pennies.
"We're doing cost-cutting," said Tim Harris, the Lakers' senior vice president of business operations. "We're looking at how we're spending money. It's going to be easier to shave off a million in costs than it will be to raise a million."
In past recessions, economists considered sports to be almost recession-proof because of a devoted base that was especially loyal during economic woes, using games as a way to escape harsh realities. Not in this one.
"It was no longer a case of middle-class Joe Smith saying, 'Instead of buying a new pair of shoes, I'm going to buy a ticket to the Mets game,' " said Andrew Zimbalist, an economics professor at Smith College.
Nearly every sport and sports team took hits, from layoffs to dips in ads, attendance and sponsorships. The Arena Football League canceled its 2009 season. The NHL's Phoenix Coyotes filed for bankruptcy protection in May.
Several sports economists blame the downturn on a trend that started 20 years ago, when many major sports leagues shifted their focus from typical middle-class fans to corporations. That shift led to bigger stadiums and steady increases in prices all around to help pay for them.
This year some fans had no choice but to stay at home. Max Eftekhari, who in recent years attended 20 games a season at Dodger Stadium, didn't go to any this year.
"I was watching the Dodgers on TV this October and some of that sentiment came back, but not enough to spend," said Eftekhari, 48, of Anaheim Hills, a transportation engineer and father of two.
"If you're trying to save money, you don't buy tickets for basketball or football," said his colleague, Wes Pringle, 43, of Whittier.
With fans, corporate sponsors and advertisers cutting back, many teams trimmed staff and got more creative to lure customers. The NBA league office reduced its staff by about 80, or 9% of its workforce, as did the NFL, which shed about 170 jobs, or 15% of its workforce.
"The sports industry was really taken off its moorings because it was accustomed to corporate cash flow and as corporations began to scale back . . . the industry felt that as much as it did the retrenchment of the everyday fan," said David Carter, executive director of the Sports Business Institute at USC.
MLB clubs created hundreds of promotions to sell tickets. The Cincinnati Reds had a "Straight A-Program," and offered two free tickets to students in seventh through 12th grades with an "A" average, with friends or family getting tickets at half-price.
Perhaps the most telling promotion: the NBA's Minnesota Timberwolves' "No-Risk Pledge" season-ticket plan that guaranteed full refunds to customers who lost their jobs in 2009.
The Dodgers led MLB in attendance with 3.76 million (up about 1% from last year) and didn't raise parking or ticket rates. The Dodgers cut prices on soft drinks (starting at $3.75, down from $5), water ($3.75, down from $5.75) and beer ($6, down from $8), and offered a new five-payment installment plan for season-ticket holders.
"I don't believe there is a business in America that hasn't been impacted by the economy . . . and the Dodgers are no different," Dodgers President Dennis Mannion said.
That was certainly true in the NBA, as 12 of the 30 teams lost money in the 2008-09 season, according to Forbes.
"We don't exist in a vacuum," said Chris Granger, NBA senior vice president of team marketing and business operations. "Because everyone we interface with feels some sense of pain in the economy, so do we."
For some teams, success kept ticket sales robust. The Lakers won the NBA title in June and the team enjoyed the league's highest season-ticket renewal rate at 98%, compared to the NBA average of 75%. The Los Angeles Kings, off to their best start in years, have about 1,200 more hockey fans per game so far this season compared to last at Staples Center.
Tennis also did well, with record crowds at Wimbledon (511,043 total spectators) and the U.S. Open (721,059).
But other sports felt the downturn. Several NASCAR teams were forced to merge: Petty Enterprises combined with Gillett Evernham Motorsports to create Richard Petty Motorsports; and Chip Ganassi and his NASCAR partner, Felix Sabates, teamed up with Dale Earnhardt Inc. to create the Earnhardt Ganassi Racing with the Felix Sabates team. The LPGA lost McDonald's, MasterCard, Corona and Michelob as sponsors and cut four events from its 2010 schedule. Next month, the PGA's Bob Hope Classic in La Quinta won't have Chrysler as a title sponsor -- no surprise, given the automaker accepted billions in government bailouts.
The WNBA, which saw the four-time champion Houston Comets disband last December, cut its rosters from 13 to 11 players before this season to save money. This month, WNBA owners agreed each team would have only one head coach and one assistant, causing some to be let go.
Some college and high school athletic budgets got trimmed. Northeastern University in Boston ended its football program after 74 seasons. At least 13 Division I programs dropped sports teams, according to the Chronicle of Higher Education.
In the Los Angeles City Section, trimming travel expenses, reducing baseball and softball schedules and eliminating junior varsity playoffs should save $448,000 from high school budgets, City Section Commissioner Barbara Fiege said.
Meanwhile, UCLA said its Bruins football season-ticket sales fell 15% this year, and its men's basketball season-ticket sales are down 10%.
With unemployment up, people gambled less. Gaming revenue on the Las Vegas Strip is down 12.3% through October of this year, to $4.6 billion (sports accounts for 4% of all gaming).
It was also a tough year in horse racing. Magna Entertainment Corp., the largest operator of North American race tracks, filed for bankruptcy in March.
Del Mar Race Track cut its summer session from six days a week to five and offered free entry, a free program and a free seat to the track on Wednesdays. Santa Anita Park offered "Free Fridays" (free attendance, $1 hot dogs, beer, soda and popcorn), but at its Oak Tree meet this fall, on-track attendance fell 11% and its all-sources betting handle was down 15%.
"The recession has been very tough across the board," said Mike Willman, the park's director of publicity.
"One of the more interesting things is what happens in 2010," said Allen Sanderson, a sports economics professor at the University of Chicago. "Do people go back to the mall or not, and will people be weaned off going to ballgames?"
Sanderson expects more fans will trim their sports budgets and go to one game a month instead of two, or carpool to save money on parking, or buy one drink instead of two.
Although the Lakers out-earned every team in the NBA, Harris said each department is taking a "fine-tooth comb" to its expenses. Harris said because the Lakers owe so much in payroll and luxury taxes, and ticket prices remained flat, the team expects profits will be flat this season.
"We're not recession proof," said Harris. "Anybody in any business who says they are, that's a risky position."
baxter.holmes@latimes.com
