Commentary: Take Me Out to the Ball Game, James
In the early 1950s, Henry Luce was famously hesitant to start Sports Illustrated because spectator sports were considered a low-brow diversion for the masses. Oh, if Henry could see the sports world now. No doubt he would be shocked by the multibillion-dollar TV contracts, the millionaire players, and the gleaming, publicly financed stadiums. But perhaps nothing would amaze him more than the white-collar crowd in the stands.
Live sporting events have increasingly become spectacles for the corporate luxury class. According to Team Marketing Report Inc.'s Fan Cost Index, it costs $266.61 for a family of four to go to an NBA game. That number represents a 108% increase in ticket prices over the 1991-92 season. The bill for an NFL game, at $258.50, isn't much of a bargain, either. Football's 1999 ticket prices represent an 81% hike over 1991. (The Fan Cost Index is based on the tab for two average child-price tickets, two average adult-priced tickets, four soft drinks, four hot dogs, parking, two game programs, and two souvenir caps.)
At those prices, the everyday fan can no longer afford to take the family out to the ball game on anything more than an occasional basis. And the elitist aura of new stadiums that have become extravagant, business-to-business marketing facilities has some corporate sponsors rethinking their investments in sports marketing. Last October, Target Corp. announced plans to scale back its sponsorship of pro teams. It cited the fact that pro sports increasingly cater to a corporate clientele, as opposed to families. Others are finding big-time sports marketing just plain ineffective. Sprint chose not to renew its NFL sponsorship last season. And CEO Peter Lewis said this about Progressive Insurance's sponsorship of the halftime show at Super Bowl XXXIV: "It was a total bomb, a disaster, but I learned a lot. When you spend $20 million for nothing, you learn a lot." Certainly such misgivings will spread as vehicles such as minor league baseball offer compelling access to coveted markets.
Although the major leagues might not want to admit it, any drop in corporate support, whether associated with a sudden downturn in the economy or an evaporating base of everyday fans, would put sports franchises in a squeeze. The sporting world's reliance on the corporate dollar extends well beyond the pricey advertising that pays for enormous TV contracts. For example, according to Moody's Investors Service, the group building the Staples Center in Los Angeles--home to the NBA Lakers and Clippers and the NHL Kings--last April cited the following revenue streams in order to secure its original $315 million in financing: 33% from the sale of luxury suites, 29% from corporate sponsors such as Anheuser-Busch and Pepsi; and 11% from naming rights.GIVING PAUSE. Franchise owners who are highly leveraged because of the inflated cost of acquiring teams would, of course, be the most vulnerable to a contraction of the sports marketing dollar. And without powerful streams of non-shared revenues such as corporate suites, franchises could no longer command enormous premiums.
All of which should give the major leagues pause. Pricing the everyday fan out of the stands may not hurt them in the short run, since most folks see their teams play on TV. But over the long term, catering to the corporate elite could surely lead to a dwindling fan base. And that, in turn, could redirect mass-market advertisers toward more populist forms of entertainment, like stock-car racing and professional wrestling. It's tough to root for a team when you need a second mortgage to buy tickets to a game.By David M. Carter; Carter Teaches "The Business of Sport" at the University of Southern California Graduate School of Business and Is a Principal of the Sports Business Group in Los Angeles.