Big league recession to hit big league sports
by February 20, 2009 6:57 am 65 views
It might take until 2010, but major league sports will eventually get a sour taste of the national economic mess.
Fitch Ratings reports that the “sector outlook” for U.S. sports-related assets is negative and overall rating outlook for credit in the sector is stable to negative. The ratings agency said major league business owners will be tested in 2009 and 2010.
“Given that a substantial amount of league, team and facility generated revenues were locked in through 2008, with some rollover into 2009, the league and stadium financings have maintained their financial margins,” Fitch said in a press statement. “However, credit ratings will likely be tested this year and next. Fitch expects the immediate effects of the economy to first hit the franchise level given the potential decline in revenues on a high fixed cost base, primarily player salary contracts.”
Fitch analysts predict continued weak economic conditions will reduce individual and corporate discretionary spending “which can affect ticket price levels, renewals of existing premium club seating and suites as well as sponsorships and advertising contracts.”
Factors helping the major sports franchises are multi-year national broadcast contracts, collective bargaining agreements in place for at least two more seasons, and contractually locked-in club seat and luxury suite contracts.
Predictions from Fitch include the following:
• Attendance levels at regular season games, particularly for weaker market teams, will likely decline due to the economic slowdown.
• Teams in stronger markets, including New York, Chicago and Los Angeles, will probably hold the line on seat pricing rather than implement normal increases.
• Fitch expects continued active management of pricing to optimize revenues for the medium term, coupled with continued aggressive marketing and sales, and creative franchise product development, to partially mitigate downside risks.
• National television broadcast viewership has generally remained stable across the leagues but remains vulnerable to smaller market franchises and lackluster rivalries, which have affected some recent league playoff games and series television ratings.