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Business/ Sports business Alt

Industry Smarting from 9/11

Elina Frumerman

SAN FRANCISCO, Oct 29 (Reuters) - In the wake of the September 11 attacks on the United States many in the sports world are bracing themselves for what could be a serious setback after decades of phenomenal growth. 

The sports industry, now tied to the fortunes of U.S. business as never before, is feeling the effects that have been rippling through the economy. 

On October 18, the Association of Tennis Professionals (ATP) scrubbed their season-ending doubles championship which was to have been held in India in November. 

The women's golf association, the LPGA, has cancelled one event and scaled back its entire schedule in 2002. Attendance at National Football League (NFL) games is down and television networks lost an estimated $80 million in sports advertisements in the immediate aftermath of the attacks. 

"There's so much uncertainty about the overall economy and in broad strokes that's bad news for the sports world," said Andrew Zimbalist, a professor of economics at Smith College and co-author of the book "Sports, Jobs and Taxes". 

Already, estimates of the loss to the U.S. economy fall in the $100billion range. That is based on economists' calculations that the nation's gross domestic product of nearly $10 trillion will shrink by one percent in the second half of 2001 rather than grow by one percent. 

Such predictions could be dire for the sports industry, which has become increasingly intertwined with the fate of U.S. business in the last two decades. 

Corporate America largely drives everything from Olympic sponsorship to stadium financing to luxury suite sales. 

With war being fought in Afghanistan, fears of spreading 

bioterrorism and weakening consumer confidence at home, things could get even worse next year. 

"People are just starting to see the magnitude of the fallout in the industry," said David Carter, principal of Los Angeles-based strategic marketing firm Sports Business Group. 

While it is impossible to pinpoint the actual dollar loss so far, many are concerned and with good reason. 

The sports industry finds itself squeezed by dwindling corporate spending, added security costs and fan attrition. The spillover can be seen everywhere. 

In golf, the Ryder Cup competition was postponed until next year. The LPGA cancelled a tournament in South Korea and announced it would scale back its 2002 schedule to 38 tournaments -- its fewest since 1992. 

"Part of it is the economy. Part of it is attrition. Part of it is strategic on our part, not to break our necks to replace a struggling event with another struggling event," said LPGA commissioner Ty Votaw. 

Major League Soccer cancelled its final week of regular-season games, costing it millions. Other major league sports either postponed, cancelled or rescheduled preseason and regular season games in the weeks after the attacks on New York and Washington. 

While fans have not stayed away altogether -- many college and pro baseball, football and hockey venues have been packed -- there is evidence that attendance is slipping. 

Up to week five, NFL attendance had fallen from an average of 67,318 in 2000 to 64,693 this year. 

In college football's Pac10 Conference, average home attendance is down to 47,092 through 26 home games after averaging 49,056 in 2000. 

Some individual teams must also shoulder the additional costs associated with beefed-up security at venues. 

Television Contracts

 The NBA cancelled six overseas preseason games but that is the least of its problems. 

The league has just started exclusive negotiations to renew its television contracts with NBC and Turner Sports, after a period already strained by a dismal advertising market with NBA ratings down 35 percent over the last three years. 

"It won't be pretty for them," said Zimbalist, despite the expected jolt of energy from the comeback of Michael Jordan with the Washington Wizards. 

Similar concerns loom over one of the world's biggest sporting events -- the Winter Olympics to be held in 2002 in Salt Lake City. 

With little more than three months to go before the Games kick off on February 8, organisers are counting on an additional $30-$40 million in federal funds for added security while scrambling to sell some 250,000 remaining tickets -- roughly 20 percent of the total. 

Included in that figure are some 50,000 tickets that various national organising committees, corporate sponsors and other groups handed back, saying they no longer planned to use them. 

Salt Lake Olympic Committee president and CEO Mitt Romney said he was confident the Games would hit their ticket sales and marketing targets and, at least, break even. 

Top sponsors such as Coca-Cola Co. and Xerox Corp. also say they are moving forward with Games-time marketing and hospitality as planned. 

Still, cancelled events, dwindling sponsorship and advertising dollars as well as increased security costs and declining attendance at venues are just some of the challenges facing the industry. 

Public Money

 Stadium deals that will rely on public money or even private financing may be delayed, or put off for good. 

New York's hopes for public assistance in the building of new sports palaces for the Yankees, Mets and Jets are a tough sell in any environment and now seem to have been dashed. 

Diverting public money for new facilities with lower Manhattan reduced to rubble will not be a high priority, experts said. 

"Anybody whose deal was not completed and financed is facing tough times," said Randy Vataha, president of Game Plan LLC, a Bostonbased investment bank that advises municipalities and teams. 

Some deals in the works have already been affected. In Miami, the Florida Marlins' negotiations with local authorities for a new stadium were pushed back. 

A bond sale of nearly $400 million to finance the renovation of Soldier Field in Chicago was also initially delayed, though it went off successfully several weeks after the attack. 

It is not all bad news. Many sponsorship deals are locked in for years, so the impact will play out over time, experts say. 

Another bright spot in the sports economy might be retail. The Sporting Goods Manufacturing Association (SGMA) expects wholesale sales to hit some $67-$68 billion this year, up slightly from 2000's $65.5 billion. 

Though the fourth quarter is the most crucial period for retailers, SGMA spokesman Michael May said he expected many families to turn to recreation such as throwing a Frisbee or kicking a soccer ball as a way to reaffirm bonds and deal with anxiety. 

"Sport represents a way to cope with crisis," he said. Some, however, think the role of sports as a palliative in American society could be diminished. 

"The old line has been that sports is recession-proof, that people have looked to it as a distraction from the drudgery of daily life, a kind of unscripted drama," said Rick Burton, executive director of the University of Oregon's Warsaw Sports Marketing Center. 

"It's been a long time since we've had a recession and the sports world has changed a lot in that time. We'll find out how much it's changed."