Someone forgot to tell the country's sports executives that we've been living in an era of low inflation for the past several years.
Taking in an NFL game costs 20 percent more than it did three years ago, while tickets for the NHL and Major League Baseball are about 17 percent higher. Only the NBA, with a 7 percent rise in prices since the '05-'06 season, has kept in line with the real world.
And with attendance continuing to climb for most franchises, why wouldn't prices go up? After all, your product is worth whatever people are willing to pay for it. But the latest shivers making their way through the economy could very well change how much that is, at least in some places. The economic fantasy world that pro sports has had the benefit of living in could be in for a bit of a jolt.
"It depends on how long and deep a recession there is," says sports investment banker Sal Galatioto. "Something like six to nine months won't cause a lot of dislocation, but if it's two years …" He didn't have to finish.
Early signs of the downturn's impact: The NFL says prices for Super Bowl tickets this season will drop a bit from last year. The Boston Red Sox, despite having a successful team and the smallest ballpark in the majors, are freezing ticket prices for 2009. Their arch rivals, the New York Yankees, are still trying to sell the last few corporate suites in their new stadium.
It's generally been true that sports' biggest appeal is the escape it provides people from the real world, which many are willing to pay for. That's made the industry better equipped than most to weather any downturn.
But there are limits. It's clear that some pro teams are anticipating a tough year ahead, the solution for which may be cutting back ticket prices or losing sales. But some markets are in worse shape than others. Which teams around the country are most vulnerable to a fan base with income that isn't keeping pace with the recent run-ups in ticket prices?
A look at the numbers would suggest that baseball's Los Angeles Dodgers and New York Yankees and Mets are good candidates. So are the NFL's Indianapolis Colts and Tampa Bay Buccaneers, and the NHL's Pittsburgh Penguins and New York Rangers.
Why these teams? All are at or near the top of their respective leagues in ticket-price increases over the past three years. Combine that with each city's 2009 economic prognosis for unemployment and income, and it's tough to see current ticket prices being sustained much longer. The Dodgers, for example, have jacked up the average cost of a game 44 percent since 2005, to $229 for a family of four, according to Team Marketing Report's Fan Cost Index. Meanwhile, Moody's Economy.com projects unemployment in the L.A. metro area will increase by two percentage points by the end of next year, to about 10 percent.
New York City, at the heart of the financial storm, should also see unemployment rise more than two percentage points by the end of 2009, with a slight drop in real income per household as well, Economy.com projects.
The Yankees are faced with finalizing sponsorship deals for various sections of the park, the tactic they opted for instead of a full-stadium naming-rights deal (across town, the Mets were fortunate to lock in a 20-year, $400 million naming rights deal with megabank Citi for their new park before all the bad financial paper hit the fan). The Mets' naming rights situation is indicative of the bright side, according to Galatioto: Since the landscape of stadium naming rights agreements, suite sales and media deals are staggered, few are at risk of expiring in the midst of the economic storm.
Not that any major league owners envision a doomsday scenario just yet. All compete with cheaper entertainment alternatives, but with only 30 franchises across the country, fans looking to see baseball have no where else to go.
"Everyone is kind of a monopoly," says Oakland A's owner Lew Wolff. "It's not like having a McDonald's franchise."
In the NBA, the New Jersey Nets, sensing an opportunity to develop some fan loyalty, recently announced an offer of free tickets for as many as 1,500 unemployed fans. Those who take it up will also be permitted to network and share their resumes with the teams' sponsors. And the Orlando Magic, already offering the seventh-lowest ticket prices in the league, are trying to appeal to fans' appetites (and wallets) by serving up an all-you-can-eat meal plan for ticket holders.
The Indiana Pacers have put a mini-plan together that gives ticket buyers 11 games for the price of eight, which includes seats in the lower bowl of Conseco Field House. That's after the team gave away $30 worth of gas during the preseason to fans who lined up at three local filling stations, with the players themselves pumping gas for an hour.
In boxing, driven these days by pay-per-view buys for big fights, the industry powers that be have to be more conscious of delivering value, according to HBO Sports Senior Vice President Mark Taffet. That means shifting more fights from the pay-per-view calendar to the HBO premium channel in 2009.
"We'll have to get more selective," says Taffet, while noting that the upcoming Oscar De La Hoya-Manny Pacquiao bout Dec. 6 is a rare boxing event that fits the pay-per-view bill. For those that make the cut, count on HBO to promote the value of gathering a half-dozen fight fans at one house, where the cost per head is about the same as going to the movies. Come to think of it, movies may well become the cheap alternative for sports fans in some places. Unless prices start to drop.
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