Rick Burton
Friday March 13th, 2009

Just like every other business, America's professional sports teams and leagues are dealing with an economy they've never seen before. And as franchises scan the horizon, trying to size up a type of "game" they've never trained for, they are becoming increasingly nervous.

It's somewhat akin to playing in the TV show Survivor where host Jeff Probst shows the assembled teams an outrageous obstacle course (let's call it The Recession Pit) and announces a few losers may get voted off the island if they can't climb out on the other side. In this year's episode, there are 136 contestants (the number of pro teams for the NFL, MLB, NBA, NHL and MLS) and many of them are wondering if they have the financial strength to fight their way through the cloudy waters of 2009.

Is it really that bad? Are pro teams really looking over their shoulders at their brothers in arms and thinking they don't have the moxy to stay in the game?

Recently, the NBA announced it was borrowing $175 million and making it immediately available to bail out 15 struggling teams facing operating losses. That money sits on top of $1.7 billion of league-wide credit the NBA draws as collateral from its media contracts to help teams fight the good fight. The Orlando Magic says it has been annually losing $15 to $20 million and essentially needs a bridge loan to survive.

The Magic is close to one extreme but based on new information may not even be the worst of the NBA's franchises. In fact, this week, Indiana owner Herb Simon suggested the the Pacers could lose up to $30 million this season and might not be able to survive.

Even clubs with basically sound bottom lines are feeling the pinch. In January, the New York Yankees, a team about to move into a new $1.3 billion stadium, felt compelled to hire a residential real estate brokerage -- a non-sports organization -- to help them close deals on seven unsold luxury suites and nearly 1,000 premium seats. And if the Bronx Bombers, arguably the most successful franchise in sports and in the nation's largest city, are struggling filling their stadium, you can only imagine the trouble other teams are facing.

In Dallas, where Cowboys owner Jerry Jones is planning to open a new 80,000-seat, $1.3 billion-dollar stadium later this year, the NFL's most valuable franchise still has more than 20 unsold suites and roughly 15 percent of its ticket base outstanding. The 'Boys also have yet to land a naming rights sponsor for the stadium. This from a franchise that for 15 years, from 1991 through 2006, enjoyed 128 consecutive sellouts.

"What you're seeing," says Declan Bolger, president of Stoneybatter, Inc., a Portland, Ore., sports marketing firm specializing in franchise, revenue generation, marketing and brand management, "is that everybody's feeling the heat. We've always felt sport was recession-resistant but now teams can't count on that conventional wisdom. Everybody is trying to adapt to what is going on out there."

Adds Bolger, "Teams suddenly can't enjoy the ticket price increases they've always counted on in the past. So now you're seeing more bargains, more creative ticket-pricing and packaging." While that bolsters the turnstile count, Bolger says, "that cost-cutting hurts clubs that are highly leveraged."

Leveraged or not, the Cleveland Cavaliers and Anaheim Ducks recently informed current season ticket-holders that they would freeze prices for the 2009-10 season. Remarkably, these announcements were made in February for games that wouldn't be played until October. The Cavs, who hope to keep superstar LeBron James when his current contract expires in 2010, have gone so far as to design a new eight-month payment plan.

In Philadelphia, where both the 76ers and Flyers are notably buoyed by owner cable-giant Comcast-Spectacor, neither team will raise prices next season, and the Sixers' payment plan rolls across an almost unheard-of 10 months. It's a far cry from the days when top teams waited until after a season ended to send their renewal letters and usually included language inferring that if fans didn't make full payment on the next season's games, their seats would be sold off to others who could make an immediate contribution to the team's bottom line.

Granted, not all pro clubs are freezing prices. The NHL's Toronto Maple Leafs announced they would increase 2009-10 ticket prices by 3.5 percent, with the 20 percent renewal deposit non-refundable. At present they are one of only three NHL teams taking this type of aggressive stance.

In the NBA, only two teams are that bullish. The New Orleans Hornets and Portland Trail Blazers are both planning to raise prices in their lower bowl. In the Trail Blazers case, the increase is 6.7 percent but it is not happening without a great deal of compassion for their smallish marketplace and thus they are making a standing offer to free up 1,000 tickets per game in the upper bowl at $9.

"My sense is that all teams are evaluating business practices and making sure they are taking into consideration their fans and their financial circumstances," says Sarah Mensah, chief marketing officer of the Blazers. "The whole landscape has changed and there isn't anybody who isn't mindful of what's going on and making necessary adjustments."

In Denver, Greg Carney, vice president of marketing for the NFL's Broncos noted, "We have to be creative and sensitive to our clients' needs and do so in a way that doesn't devalue our primary assets. If you can deliver the best and most creative ideas and work the hardest, you can still win."

That competitive nature, of course, will, by default, pit all professional teams against one other and other entertainment options like movies, DVD rentals and concerts, for a finite amount of local dollars. Portland features only the Blazers and no major conference NCAA school, so their challenge may be manageable.

But the Denver market must sustain the Broncos, Nuggets, Rockies, Avalanche, Rapids, Mammoth (National Lacrosse League) and the Colorado Buffaloes. The New York market has 11 major professional teams, and numerous colleges, plus major cultural attractions like Broadway, dance and opera.

"This period of time is a bit unusual," says Carney. "We've all been through work stoppages and those were trying times. But this is becoming self-perpetuating. The more we talk about [the challenges of the economy], the more we might all start to believe we have problems. The challenge for teams is that as they cut expenses to offset lost revenue, they are now finding they can't recapture lost revenue through their fans."

Or to put it in Survivor parlance, many team owners, particularly the ones that are carrying extra weight in the form of leveraged debt, may need to create alliances with their fellow clubs (and their fans) to ensure they are still playing this big money game two years from now. Otherwise, we shouldn't be surprised if there are fewer players in the years to come.

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