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News » TEAMS TACKLE ECONOMIC WOES


TEAMS TACKLE ECONOMIC WOES


TEAMS TACKLE ECONOMIC WOES
Amid mass layoffs, eroding stocks and government bailouts, Indians fans hear that Cy Young award pitcher CC Sabathia lands a $161 million, seven-year deal from the New York Yankees and wonder: What dire economy?


The natural assumption is that the commerce of sport is immune - which would be wrong.

"The Yankees are a different story," said Marc Ganis, a Chicago-based sports business expert. "Just throw the Yankees out as a benchmark."

Because with few exceptions, the sports business, from the bank vault that is the NFL to the rolling billboard known as NASCAR, is feeling some measure of unprecedented economic pain.

And those not yet in the throes are bracing for the possibility, by trimming staff, delaying capital improvements and squeezing expenses where possible.

The Browns have seen two of their critical long-term sponsors, National City Bank and General Motors, forced into a takeover and a bailout, respectively.

The Indians have delayed some minor building and equipment improvements for a year.

The Cavaliers are faring well at the box office for two reasons - a record-setting start and LeBron James. But another team that plays at The Q, the Arena Football League's Cleveland Gladiators, is not. Last month, AFL owners voted to cancel the 2009 season rather than continue financially limping along. Cleveland Gladiators owner Jim Ferraro said all AFL teams lost money last season, and that the economy was a big factor in the decision to sit out the next one. The Gladiators have pared down to a skeletal staff and left schedulers at The Q scrambling to fill the empty dates.

They are not alone. Within the last few months:

The NFL announced plans to cut more than 10 percent of its headquarters staff, about 150 jobs. And for the first time, teams are charging about 10 percent less for this weekend's wild-card playoff tickets than for next weekend's second-round divisional playoff games. Even the Pro Football Hall of Fame in Canton has frozen ticket prices for next year to boost attendance.

The NBA cut about 80 employees from its headquarters.

Major League Baseball laid off 20 employees from its Internet division.

The International Olympic Committee's president cautioned planners to keep the size and cost of the Games in check because of sponsors' financial concerns.

The LPGA announced that its schedule will have three fewer events in 2009, with winning purses down $5 million from this year because of a shortage of sponsors.

NASCAR teams are cutting staff or merging to survive, including such stalwarts as Petty Enterprises and the Wood Brothers.

Even the ultimate sports extravaganza has been affected. Some companies have scaled back or canceled their Super Bowl parties in Tampa, Fla. Ad sales for the Feb. 1 Super Bowl TV broadcast are running on par with past years, but FedEx announced it won't buy a slot during the game for the first time in 12 years; and there are predictions that other sponsors could back out.

The tremors are being felt throughout the industry as banks and other financial institutions, automakers and other established sports sponsors have imploded, merged or hang by a government lifeline. The largest loss of jobs in a generation threatens discretionary spending - the kind that spins turnstiles at stadiums, arenas and ballparks.

"Now we know sports is as vulnerable as anybody else," said sports business consultant Rick Horrow.

To a point, maybe.

Despite cutbacks, the other big three - the NFL, NBA and Major League Baseball - remain somewhat insulated by long-term broadcasting, licensing and merchandising deals. NFL teams, for instance, can count on as much as 65 percent of their revenue from guaranteed TV contracts and other sources.

Browns President Mike Keenan said it was still too early to predict how the economy might affect the team's business in 2009.

Heading into this season, more than 95 percent of the Browns season-ticket holders re-upped despite a jump in ticket prices. Lease renewals for the stadium's 145 luxury suites haven't been an issue, Keenan said, although the key sponsorship deals with National City Bank, which was acquired by PNC Bank, and GM expired at season's end. The Browns have been negotiating extensions with both.

At Progressive Field, attendance has been flat for about three seasons and the number of leased luxury suites is about half of what it was 10 years ago. The Indians have ramped up sales of on-site special events and business meetings, and are looking for other ways to squeeze more revenue from the ballpark. And rather than cut staff, the team intends to hire more people to avoid paying overtime, which saves money.

"We're trying to be prudent," said Dennis Lehman, the Indians' executive vice president for business, "because we just don't know what's out there right now from the standpoint of customer spending."

The uncertainty is forcing teams to be more creative, which could benefit fans.

Entering this season, the NBA's New Jersey Nets pitched a "buy now, pay later" option for season-ticket sales, and offered free tickets and a job fair to the unemployed.

Closer to home, the Indians launched new 2009 ticket prices based on the month, day of week and opponent, with the understanding that "not all 81 games are created equal." Early-season weekday games were offered at a big discount.

Minor-league baseball's Akron Aeros rewarded season-ticket buyers with merchandise certificates in an "Economic Recovery Plan" promotion. The Cavaliers offered tickets discounted 20 percent to select games earlier this season in an "Entertainment Stimulus Plan." The NHL's Columbus Blue Jackets offered a flexible payment plan, allowing fans to pay $10 a week through March 30 for three pairs of tickets.

"Everybody wins to some extent, because prices either don't go up or they go down," said Andrew Zimbalist, a Smith College sports economics professor.

"So there is some silver lining here."

The Yankees aside, there have been others showing actual signs of being somewhat recession-proof. It's called winning.

Led by one of the NBA's marquee players, the Cavs are on a record pace for home sellouts, have seen an increase in walk-up ticket sales and report that group-ticket sales are running among the highest ever.

"It never hurts to get off to the best start in franchise history," said Len Komoroski, president of the Cavs and The Q.

In fact, Komoroski said, a gloomy economy doesn't necessarily spell doom for the entertainment industry. He recalled that when he was working for the NFL's Philadelphia Eagles, the team had to market a new stadium after 9/11.

Luxury suites and club seats sold out quickly. A record naming-rights deal was struck.

"It was incredibly successful," he said. "It just spoke to the power of sports."

BOX WITH STORY:

Browns

The team has seen two long-term sponsors forced into a takeover and a bailout.

Cavaliers

The Cavs are faring well at the box office for two reasons -- a record-setting start and LeBron James.

Indians

The baseball team has delayed some of its minor building and equipment improvements for a year.



Author:Fox Sports
Author's Website:http://www.foxsports.com
Added: January 3, 2009

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