Smaller sports teams, leagues suffering in downturn

By Ben Klayman

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.