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Posts Tagged ‘Recession’

Will the NBA & NHL be forced to cut teams?

Posted by ZA on March 24, 2009

There is a saying that “once is chance, twice is coincidence and three times is a pattern.”  If that saying is true, then we will soon see a pattern of conversations about the NBA and NHL being forced to shut down teams due to the economy.  That is because a couple of knowledgeable sports columnists have recently written articles about the dire situation for certain teams due to the current economy.  It is only a matter of time until more of the mainstream sports media begin to harp on this subject.

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My initial reaction was surprise at reading in Bill Simmon’s “Welcome to the No Benjamins Association” column that he and his sources guess that between “three and eight” NBA teams will be sold, move to a new city or turn over operations to the league.  I had not thought about this possibility because I naively assumed that all of these owners or ownership groups had sufficient capital to ride out the current economic storm.  But I heard a similar story, confirming what Simmons has heard, when I talked to a friend of mine who works in the front office of a prominent NBA team.  My friend specifically pointed to the Memphis Grizzlies as an example of a team that is riding on fumes and said everyone in the league knows it.

Simmons went on to say in his article that the situation in the NHL is probably worse than the NBA.  Simmons writes that contraction of teams in the NHL is likely, whereas NBA Commissioner David Stern will probably refuse to cut NBA teams, even if he should do it.  Simmons said Stern’s stubborn nature that would probably be the reason the NBA doesn’t eliminate failing teams.  Wow that is a lot to absorb; it’s hard to fathom multiple NHL teams closing up and the possibility of the same in the NBA.

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But Bill Simmons makes a compelling case in his column; he mentions the declining attendance, corporations who cannot afford their luxury suites and fans that are choosing to stay home.  Combine those factors with the escalating salaries in the NBA and you start to see a recipe for disaster.  And just when I think I’m starting to get my head around it, then another respected media member comes 0ut with a similar story that adds credibility to the dangerous situation the league’s face.

Darren Rovell, who is master of all things sports and business for CNBC, wrote a column about the trouble owners needing to sell might find in trying to locate a buyer.  He says that some of people who own pro franchises are not nearly as rich today as they were when they bought their club.  That downturn in their net worth may cause some of those owners to be forced to sell their team.

Complicating the matter, says Rovell,  is the fact that the days of debt financing the purchase of a professional sports franchise are done.  That means the only people who have the means to buy a franchise are those with loads of cash; like $300 million dollars or more in liquid assets.  Rovell says at this point that it is probably more feasible for a team to be taken over by their league than sold on the open market right now.

The question then becomes how many teams can the NBA & NHL afford to operate on their own dime?  If the rumblings turn out to be true, and there are a handful of teams in each league that cannot afford to continue on their own, then how can the leagues help them?  The simple answer is that they cannot save them; the NBA and NHL would have to instead shut down some of their teams.

I believe it is beyond theory now, it is going to happen.  The NBA & NHL will have to shutter some of their teams, or make otherwise drastic changes in order to save them.  Fans should get accustomed to this idea now, because it is only a matter of time.

Again, if I had just read it once I might shrug it off as a theory that might not come to fruition.  But this story is out there and being told by people who are “in the know”.  So in my mind it is no longer a matter of “if” the leagues are going to shut down teams, it is “when” they make the decision and how many teams will be affected.

Posted in Improve Attendance, NBA, NHL, Sports Brands, Tickets | Tagged: , , , , , , | Leave a Comment »

Bank of America is making money off sports marketing

Posted by ZA on March 16, 2009

Why all the fuss about Bank of America spending on sports marketing? People have been complaining about BOA’s spending on sports endorsement deals and sponsorships because BOA took government bailout money.  They took TARP money, but Bank of America is making money from their sports marketing deals.  Let me repeat that, Bank of America is reporting that they are MAKING MONEY from their sports marketing deals.  So it appears those that criticize BOA’s spending, might not really know all of the facts; perhaps they should have listened to the BOA CEO before passing judgment.

Bank of America CEO, Kenneth Lewis, says they make “Ten dollars ($10) in revenue and three dollars ($3) in earnings” for every one dollar ($1) they pump into sports marketing deals.  Lewis went on to say that the money Bank of America spends on sports marking “is not wasted money.”

I don’t know much about how Bank of America runs their business, but it does appear their support of sports has been lucrative for their business.  They are making a 300% ROI (profit) from investing in sports, which you take every time in the advertising world  So perhaps the politicians in Washington will refrain from wagging their tongues on the matter, until they at least have some facts to support their criticism.

Bank of America’s Sports Sponsorships
include:

* Major League Baseball
* Nascar
* NFL
* PGA golf
* US Olympic Team

Read more on BOA’s sports sponsorships on their website.

Posted in Sponsorship Deals, Sports Marketing | Tagged: , , , | 4 Comments »