Impacting Future of New Stadiums in California?

How bad is the economy?  If it is any indication, recently the 22 year old Arena Football League cancelled
its 2009 season. The League cites the lack of sponsors to cover the costs. Two teams, Los Angeles and
San Jose franchises are impacted by the decision. Yet, the smaller cities associated with Arena Football 2
continues with Stockton and the Fresno franchises.

But some experts say that the lucrative marriage between sports and the corporate world is on the rocks
and the future for sports sponsorships and advertising looks bleak and not just for the lessor known sports
but for all pro and college events.

For example, ailing General Motors, the top sports TV advertiser and a big sponsor of golf and racing events,
announced in November that it will not buy any Super Bowl commercials this season. GM also withdrew its
Cadillac division's sponsorship of the Masters' golf tournament, scaled back NASCAR commitments and
terminated an expensive endorsement deal with Tiger Woods. Anheuser-Busch, considered the premier
advertiser for sports is no longer owned by American interests and its future commitments is anyone’s guess.

                                             

The New York Mets and Citigroup face blistering criticism over the troubled bank's $400 million, 20-year
commitment to put its name on the New York Mets ballpark that opens next April. This comes at a time
when the bank is laying off more than 50,000 workers and receiving billions in federal bailout money.
Of course, Californians already witnessed something similar during the electrical transmission deregulation
debacle when the state bailed out utilities, just as Southern California Edison was footing the bill for
sponsorship at the then Anaheim Angels facility.

And speaking of Major League Baseball, at their November annual meeting, Commissioner Bud Selig warned
teams to be careful with money, and later he asked former Federal Reserve chairman Paul Volcker to address
the owners. The Toronto Blue Jays have already said they may not bid for free agents this off-season due to
the economy, and at least 16 of the 30 teams are freezing or lowering season ticket prices for 2009. But it’s
not sure whether anyone in MLB is paying attention to the advice. Because as it pertains to the New York
Yankees, they just recently signed left-handed starter CC Sabathia to a seven-year, $169 million contract —
a record for a pitcher. And within two weeks, signed yet another contract for first baseman, Mark Teixeira
for $180 million.  Meanwhile, Major League Baseball hauled in $6.5 billion in revenues in 2008. Although 
today's baseball players are a long way from the bread lines of the Great Depression, they may find less
fans supporting them not only in the seats but resenting their astronomical salaries as well.  For example,
in 1929, before the market crashed, major-league baseball ticket revenues were $17 million. By 1933, gate
receipts had plummeted to $11 million. A big-leaguer made an average of $7,000 in 1929. That dwindled to
$4,500 by 1936. 

                                    

The NFL, long regarded as the most popular and successful sports entity in the world, laid off about 10
percent of its staff recently at its New York headquarters, at NFL Films in New Jersey and at its broadcast
center in Los Angeles. "These are difficult and painful steps, but they are necessary in the current economic
environment," Commissioner Rodger Goodell wrote in a memo to his staff. "I would like to be able to report
that we are immune to the troubles around us, but we are not." In the NFL, the Dallas Cowboys, New York
Jets and New York Giants are still searching for corporations willing to pay to put their names on stadiums
the teams are constructing.  And given the current credit crisis, the San Francisco 49ers may find themselves
in a similar situation as they look for financing for their new stadium deal.

The NBA, which has ridden a wave of popularity for nearly 30 years, laid off dozens of staffers earlier this
year. "The economy will impact everyone, every place," Commissioner David Stern said in a recent
conference call.

For example, the Sacramento Kings play before empty seats, never previously seen in the history of the
franchise.  Unfortunately some of this could be due to their poor record.  However, the Denver Nuggets,
despite the triumphant return of Denver native Chauncey Billups and a far better record than the Kings, are
often playing in front of thousands of empty seats, some unsold, some simply unused.

In addition to the nation’s big three sports, others are feeling the pain. Corporate sponsors are deserting
NASCAR, the kingpin of American auto racing, and the Big Three U.S. automakers are rethinking their racing
commitments amid crippling financial pressures that have sent them to Washington in search of assistance
in recent weeks. Some of the most successful NASCAR teams have been laying off workers. Petty
Enterprises, once the most prestigious name in the game owing to the legacy of Richard "the King" Petty,
is seeking a merger with another team to ensure its survival.

But NASCAR isn't the only racing entity suffering. Honda recently announced it would no longer compete on
the Formula 1 circuit, and every series is looking at rigorous cost-cutting measures to try to ride out the
recession.

And the economic downturn knows no gender bounds. The Women’s National Basketball Association, WNBA
will operate with at least one fewer team in 2009 with the recent dissolution of the Houston Comets, who had
won four championships in the early years of the league. The Ladies Professional Golf Association, LPGA lost
five title sponsors this year and will play a reduced tournament schedule in 2009.

So it appears that this economic downturn has and is having a greater impact on industry segments than
previously thought.  For California, the three NFL teams, four NBA teams, five MBL teams and the three NHL
teams will suffer.  The efforts to build new facilities for the San Francisco 49ers, Oakland A’s and Sacramento
Kings could easily be delayed due to the downturn.  

                                       

And while the numbers are not in for this year’s college football bowl attendance and subsequent revenue
impacts, specifically for the Rose, Holiday, Emerald and Poinsettia held in California, there have already been
identified reductions in attendance at bowl games across the nation due to the cost of travel and the impact
on people’s pocketbooks.

So, the future for sports in 2009 will have to be played out before a trend is set and a forecast made, before
reduced seasons and schedules occur.  But until then, play ball.

TJohnson@CaliforniaBusinessMinute.com  
www.CaliforniaBusinessMinute.com