Smaller sports teams, leagues suffering in downturn

CHICAGO (Reuters) - Bigger may be better for sports team owners trying to survive an economic slump that is battering even businesses once believed to be recession resistant.

Smaller teams and leagues, especially those without hefty broadcast rights deals, such as indoor football, beach volleyball and women's sports, will be squeezed as sponsors and fans slash spending, analysts and sports bankers said.

Even the bigger sports like NASCAR, the National Basketball Association and Major League Baseball are cutting costs as executives scramble to stay ahead of what most economists believe will be the deepest recession in decades.

"You could Google up all the quotes over the years about how sports is recession proof or recession resistant, but it's a different time than it was before, said Michael Cramer, professor of sports management at New York University.

"It's harder to spend money on a $75 ticket than it was on a $5 ticket when we were in a recession before," added Cramer, the former president of Southwest Sports Group, which owns the Texas Rangers baseball and Dallas Stars hockey teams.

"It costs more to make yourself feel good now."

The price of admission to sporting events is up about 38 percent since the beginning of the last recession in March 2001, according to the Bureau of Labor Statistics. And that is just to get in the door.

"I don't think we've ever had an attendance-driven bankruptcy," said Robert Tillis, chief executive of Inner Circle Sports, a New York merchant bank focused on the sports industry. "But I never thought we'd see banks on the brink of failure, so you can't rule anything out."

CUTTING BACK

While consumers are cutting back on non essentials, corporations, which have long pumped billions of dollars into sponsorships as well as pricey suites and season tickets, also are curtailing expenditures.

General Motors Corp saved millions of dollars on Monday, when it announced it would end its endorsement deal with popular professional golfer Tiger Woods one year early.

The U.S. automaker, running short of cash amid declining demand, previously cut spending related to golf events and motorsports, as well as ad spending.

DHL Express, which sponsors MLB and several individual teams, approached at least one club seeking to end its sponsorship deal early after its parent, Deutsche Post AG, said on November 10 it was slashing 9,500 jobs and halting U.S. domestic delivery services.

"The free and easy money that was out there over the last couple of years will tighten up," said a sports banker, who asked not to be identified. The real impact will not be seen until 2010 or 2011, when sponsorship deals may not be renewed.

Smaller teams and leagues will struggle the most as they do not have lucrative TV deals like the National Football League, MLB and the NBA, analysts said.

LOWER-PRICED

League that could suffer include professional lacrosse, women's sports, indoor football, the beach volleyball circuit AVP Inc, and the pro bull riding and rodeo circuits.

Officials in smaller leagues argue, however, their ticket prices offer a lower-priced alternative to move night. "Everybody's looking for value right now," AVP CEO Leonard Armato said.

Nevertheless, analysts said the margin of error for smaller leagues is razor thin. Running at a loss since 2001 with sponsorship revenue that barely covers the cost of running its events, including shipping sand and paying prize money, AVP is working to retain sponsors whose deals expire at year end.

Analysts said there also could not be worse timing for such new leagues as Women's Professional Soccer and the United Football League, which both intend to begin play next year.

Size alone does not guarantee safety as NASCAR, with its own large TV deal, already is making cuts -- suspending on-track pre-race testing by teams at a savings of $1 million a car. Further cuts could mean fewer teams, analysts said.

Golf and tennis are heavily reliant on sponsorship revenue like NASCAR, analysts said. The LPGA cut three events from its 2009 schedule, and the PGA Tour and tennis could follow suit.

"I remain positive despite the market telling me differently every day," said Adam Barrett, a senior vice president at sports and media company IMG, which owns or manages several global tennis tournaments.

Major League Soccer, pushing ahead with expansion to 18 teams by 2011, is another league analysts said is heavily reliant on "butts in the seats."

The National Hockey League has so far sidestepped any major problems -- attendance hit record levels through November 18 -- but many analysts expect it to suffer eventually.

Another major league in the spotlight is the NBA, which laid off 80 people recently.

Bankers question the NBA's commitment to its women's league, as well as whether it will slow expansion plans in China.

However, Commissioner David Stern dismissed those fears, pointing to a new TV deal for the WNBA and plans to begin building arenas in China.

MLB has responded to the financial meltdown by freezing the league budget for 2009, while many teams have frozen or, in the case of the Oakland A's, cut ticket prices.

"No one wants to count any dollars before they actually come across the transom," President Bob DuPuy said.

Even the NFL, considered the safest U.S. league, has warned that revenue could be under pressure and in May reopened its contract with the players early in the hope of cutting costs.

Team values also could suffer. The sale of the Chicago Cubs baseball team has been delayed and some bidders said offers could suffer due to the weak economy.

Offering protection for some of the large leagues, however, are lucrative TV deals, said Neal Pilson, head of his own sports consulting firm and the former president of CBS Sports.

"The sports that have a safety net are the ones that enjoy rights fee deals that are guaranteed," he said, pointing to the $500 million Walt Disney Co's ESPN agreed to pay for several top college football bowl games starting in 2011.

Nonetheless, college sports are not immune as the weak economy likely means delayed stadium construction, lower booster donations and weaker financial performance of school endowments, said Andrew Zimbalist, professor of economics at Smith College in Northampton, Massachusetts.

"All the sources of income that colleges depend upon are plummeting right now," he said. Consequences could include layoffs, reduced travel and football teams declining invitations to play in post-season bowls to save money.

In the end, the winners will be those sports that can capture the imagination of fans, said Jeff Gagne, a vice president with MPG North America responsible for national sports negotiations. MPG is a media buying and planning division of France's Havas SA.

"When you've got a great story for America to grasp on to sports provides a nice platform for a more uplifting story line versus what you feel in your real life," he said.

(Reporting by Ben Klayman)