Monday, September 29, 2008


You may have no interest in politics or economics, but they have a serious impact on sports in this country. The current economic "crisis" is a perfect example of that.

The financial institutions of this country are facing drastic changes in the status quo. 150 year old companies like Lehman Brothers are going bankrupt, banks are failing; and without something happening (like the "bailout" which is really more of a buyout), it's going to continue (which isn't necesarilly bad, it will simply change the way our economy functions).

The effects of this crapstorm will be felt in many different ways. This post tries to narrow the focus to its effect on the sports world.

Right now, there's no credit available. You want to take out a mortgage, or get a business loan; you'll either be denied or have to pay an extremely high rate of interest. Banks simply lack the cash to give out credit right now.

For huge teams like the Red Sox, Yankees, Mets, Cubs, Dodgers, NFL teams, Lakers, Celtics; this doesn't mean much. They have so much cashflow and they're such good investments for banks, that they'll get any loans they need. Hell, the Yankees are getting money from New York to build their new Stadium in return for nothing.

But the KC Royals won't be getting a new ballpark anytime soon (but they're almost done with a major renovation project). The Rays will find it very difficult to get any private financing for their proposed new ballpark. Their owner - Stuart Sternberg - is primarily a Wall Street investor. It's been a rough month for some of those guys.

That leads me to another potential impact. Most of the owners of sports teams are business tycoons who use teams as a toy as well as a business. See: Mark Cuban. A lot of these people have enough personal wealth to absorb a few bad hits in the market. They didn't get rich by not diversifying either. But a few might be forced to sell their teams in order to help their other businesses. God willing, Jeremy Jacobs will be one of those sellers, but I doubt it.

Think about the names of ballparks, stadiums, and arenas: TD BankNorth Garden. Wachovia Center, Progressive Field, Lincoln Financial Field, Quicken Loans Arena, PNC Park, INVESCO Field at Mile High, Scotiabank Place, Chase Field, Bank of America Stadium, Prudential Center, Citizens Bank Park, RBC Center, M&T Bank Stadium, HSBC Arena, BankAtlantic Center, Scottrade Center, Comerica Park, SAFECO Field. These are all in the financial/insurance industries.

When these banks fail, or are purchased, the teams they sponsor might lose their lucrative naming rights deals. SAFECO was just bought by Liberty Mutual, and it will be interesting to see what that does to Seattle's SAFECO Field.

And it's not just naming rights. Through billboards, commercials, and luxury boxes; corporate America provides most of the revenue for sports teams. As credit vanishes, most companies will be focused on survival, rather than expansion (no credit=no expansion). They won't pay huge amounts on advertising. This could also have a domino effect through television. TV stations make money from ads, then they pay the NFL $3.7 billion a year to broadcast football.

You won't be seeing teams declare bankruptcy. You won't see significant declines in attendance. The teams that make money now will continue to make money. The teams that lose money will continue to lose money, but not catastrophically. Things may get a little tighter for many teams. New ballparks/stadiums and major renovations will be rare for a while. Smaller market teams might get a little tighter when it comes to paying players.

Things will change.

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