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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.

December 30, 2009|By Baxter Holmes

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.

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