The Arena Football League, the "bearded lady of the gridiron," recently announced that it was canceling its 2009 season. Deep in debt, the league looks to restructure, but the chances that the wacky alternative to the NFL can recover look grim.
If you're like me, when you open the morning paper you skip past the national, local and business sections to the one that really matters: sports. With other news taking up so much attention, it's time to see how our beloved, beleaguered teams are doing.
Major League Baseball
The league as a whole is coping relatively well — it recently refinanced the pool of credit that its teams can tap to pay salaries if they do not have the cash on hand. Managers were initially concerned because two-thirds of the pool consisted of commercial paper, the normally secure security that allows companies to sell debt directly to investors (rather than to banks). The market for these securities suffered a rare breakdown in September after the bankruptcy of Lehman Brothers, and the banks covering the other third of MLB's credit pledged to step in should such a failure take place in the future.
However, certain teams are not doing as well. The Chicago Cubs suffered a one-two punch when their owner, the Tribune Corporation, declared bankruptcy last Monday, only to be labeled the next day as a pawn in the allegedly corrupt dealings of Illinois Gov. Rod Blagojevich. Also hit last week were the long-suffering New York Mets, whose owner, Fred Wilpon, was among the victims of indicted Ponzi schemer Bernie Madoff. This has not been the Mets' year for good P.R. The refusal of Citigroup to relinquish its $500 million commitment for naming rights to the team's new ballpark has drawn public scorn, as the company received a $20 billion equity injection from the federal government (two City Councilmembers suggest renaming it "Citi Taxpayers Field". Mets fans might have some sympathy from their St. Louis counterparts sitting in a stadium whose namesake, Anheuser-Busch, was bought by the Belgian brewer InBev. The Yankees, of course, are still the Yankees.
National Basketball Association
Despite cutting 80 of approximately 900 staff positions, the league is in relatively good shape. In fact, star player Doug Christie even pitched in to bring attention to the crisis-stricken financial sector — by buying 3000 shares of AIG stock! Part of the NBA's relative stability might stem from its salary cap, which limits teams' budget for players; this prevents teams located in big, wealthy markets from buying up all of the stars, thereby keeping the league more competitive. According to Forbes, management prowess separated successful teams such as the Rockets and Trail Blazers from the less successful.
National Football League
After promotional gambits like holding games overseas, the league recently cut 150 of its staff of 1,100. The tight credit markets have encumbered teams' efforts to raise financing for new stadiums. The 2009 Super Bowl will look very different from its recent predecessors: historically big spender General Motors has not purchased ad slots. On the upside, career sites Monster.com and CareerBuilder.com have added commercials.
National Hockey League
According to reports, this league is in trouble — economists at a recent league meeting gained the monikers "Dr. Doom and Gloom." Teams in smaller markets are in particular trouble. While hockey may be more vulnerable to economic downturns than baseball, basketball or football, the NHL might be the best-prepared to deal with declining revenues: after a labor dispute led to the cancellation of the 2004-05 season, the league successfully restructured its finances and emerged with a more competitive offering for fans and profitable investment for financiers. Maybe more teams should copy the Blues' Fan Bailout Plan?
The auto racing circuit has been hit hard. It has been more dependent than other sports on corporate sponsorship, and one-third of the $1.5 billion it received for the 2008 racing season came from automakers. In response to anticipated revenue declines, garages are cutting both the number of cars they race and the size of the crews. Nevertheless, fans are worried that it may not be enough. As USC professor David Carter quipped, the Daytona 500 race "could end up being the Daytona 50 if we're still talking about this (recession) 10 years from now."
For the Win:
The failures in the financial services industry have left a constellation of team sponsorships in limbo. Retail banks Washington Mutual and Wachovia, acquired in distress by JPMorgan Chase and Wells Fargo, respectively, sponsored a total of 14 MLB, NBA and NFL teams, as well as a host of events and tournaments. It is still unclear whether the acquirers, who have their own sponsorships, will continue the relationships.
Sports teams have historically done well during bear markets: "It's like booze and movies," notes sports banker John Moag. "Psychologically, people do not want to give it up." However, with Americans' credit cards at their limits and mortgage payments piling up, going to the game may become another expense to cut.