A TERRIBLE WEEK FOR SPORTS
By Evan Weiner
December 4, 2008
(New York, NY) -- It has been an absolutely brutal week in sports business. The WNBA’s Houston Comets went out of business after the Women’s National Basketball Association owners could not find someone with a financial plan to save the franchise. The ECHL’s Augusta Lynx franchise folded after the owners of the Double A hockey franchise concluded that it was too costly to continue to keep the team in business. Honda dropped out of the Formula One racing circuit after spending more than three hundred million pounds last year and will no longer supply engines for cars.
Honda officials blamed the global economic crisis as the reason for the company’s exit from the F1 circuit. Honda is concentrating on its core business, producing cars. In the past month, Honda’s American market sales were down by 30 percent.
The Ladies Professional Golf Association has cut back on its 2009 schedule, bicycle’s Tour de Georgia race has been canceled with organizers hoping that they can find sponsors to back a 2010 race. There seem to be no plans to restart the process and get the All-American Football League going, a planned spring 2008 schedule never materialized. The United Football League is still looking for investors after not being able to get onto the field last summer. Hockey’s low level Eastern Professional Hockey League did start with four teams but lost two of its original five franchises while the Mid Atlantic Hockey League folded and the remnants of the league can be found in the US Midwest as the All American Hockey Association.
On the plus side, the NFL plans to stage its annual game in London in 2009 when New England plays Tampa Bay on October 25.
The American and Canadian sports business world has always been connected to car advertising. In the 1960s, the National Football League partnered with Ford while the American Football League’s vehicle marketing partner was Chrysler. William Clay Ford purchased the Detroit Lions in 1964 and both his Lions and his car company are sinking quickly. The backers of the World Hockey Association and the World Football League put franchises in Detroit in the 1970s because they felt Detroit was an important market because automakers were in Michigan and they could get advertising dollars from them. In the early 1980s, it was that type of thinking by United States Football League founders that made Detroit a part of that league.
Cars and beer sponsors are sports staples. Over-the-air and cable TV is the lifeblood of Major League Baseball, the National Football League, the National Basketball Association, the National Hockey League and big time college sports and the television industry needs American’s Big 3 automakers, General Motors, Ford and Chrysler’s money to keep the sports machine going. GM has slashed its advertising budget and will not will have any commercials during the 2009 Super Bowl on General Electric’s NBC-TV. In 2006, GM poured about $100 million in advertising into GE’s NBC coffers during the Turin Winter Olympics. GM recently severed its marketing ties with golfer Tiger Woods.
GE has not sold out its advertising inventory for February’s Super Bowl and is firing people across the NBCUniversal workforce including NBC, CNBC and other properties, about 500 layoffs altogether. Viacom (CBS) plans to let go 850 employees or about seven percent of staff in 2009. GE, Viacom, Disney (ESPN), and Ruppert Murdoch’s 20th Century Fox all have deals with the National Football League. Murdoch has indicated he will be cutting back as well. Disney, ESPN and Time Warner (Turner Sports) have deals with Major League Baseball, Disney and Turner are broadcast partners with the NBA. Comcast’s Versus has a deal with the NHL and GE’s NBCU has a revenue sharing contract with the NHL. There are various network deals with colleges, the Professional Golf Association, the Ladies Professional Golf Association, tennis, soccer and other sports.
Automobile sponsorship is a significant player in all of those deals, whether it on a national network or on regional cable TV sports networks.
Detroit has had the “Big 4”, MLB, the NHL, the NFL and the NBA for 51 years in its metropolitan area along with big time college football but the market is being squeezed by the struggles of the Big 3 automakers and the sinking Canadian dollar. Detroit is a global center of automobile research and development and is the world headquarters for General Motors, Ford and Chrysler. Detroit Tigers and Red Wings owner Michael Ilitch, Pistons owner William Davidson and Ford have to be very concerned with what is a sports market that may be dying on the vine. Detroit has lost half of its population in the past 30 years and the city population dropped below one million in the 2000 census; it was the first time in 80 years that Detroit officially had less than one million people.
The automakers have been cutting jobs during that time in Michigan, Ohio and Indiana along with Ontario. Windsor, the southernmost Canadian city, is an important part of the Detroit metro area and is the home to Chrysler Canada, along with Ford and GM plants and the associated industries such as too and die and automotive parts. The Windsor market has more than 300,000 people and the market turns out to support the Tigers, Lions, Red Wings and Pistons along with US college sports. But Windsor is a Canadian city which means that it costs more to cross the border and go into Detroit than it did last summer when the US and Canadian dollar was on par or in Canada’s case, slightly stronger. On December 5, the Canadian dollar was worth about 23 percent less than the US dollar which means Canadians going to Detroit for a sports event are paying nearly a $1.30 instead of a buck.
That will cut down the number of Canadians in the Windsor area buying tickets, especially those connected to auto industry who don’t know what will happen to the Big 3.
Ilitch is raising Tigers 2009 ticket prices about two dollars per seat for about 40 percent of Tigers season ticket holders and tacking on a surcharge of two to 4 dollars a ticket for “Premium” dates when teams like the New York Yankees and Boston Red Sox come to town. Ford’s Lions sold out game the annual Thanksgiving Day game, after three straight non-sellouts starting with the October 26 game against Washington. Detroit’s market includes Lansing, Saginaw/Flint and Toledo, Ohio. Ford’s Lions franchise is doing as well as his car company, Detroit is winless.
Ilitch and Davidson might start feeling the full force of the economic downturn in hockey and basketball next spring when playoff tickets need to be sold.
The Detroit market needs to be closely watched, if Congress gives the Big 3 bailout or loan money, will it be enough to keep people employed and will the Big 3 use any of that money to advertise cars? Car dealerships around the America are folding; the auto industry has been a reliable media and sports partner for ages. The Detroit-based Chalmers Motor Car Company won the 1910 Glidden Tour, an early car race and Hugh Chalmers in 1910 gave out a Chalmers Model 30 car to the top batters in the American and National Leagues. Between 1911 and 1914 the Chalmers Award was given to the most valuable player in the American League and in the National League.
Chalmers car company could not survive the post World War I recession and merged with the Maxwell Auto Company. Chalmers went out of business in 1923 and Maxwell ended production in 1925 four years after Walter Chrysler acquired controlling interest in the company. Chrysler formed his own company in 1925. Chrysler was also a thoroughbred breeder as well.
The baseball meetings get underway on Monday in Las Vegas, the real question that MLB general managers and players agents should be asking is not how much money will be required to sign C. C. Sabathia, Adam Dunn and others, but who will be footing the bill because the faltering global economy and the reluctance of advertisers to spend money right now will play a major role in how much money will be doled out.