Sports and the economy get along uneasily at best. Over the next few weeks, as the nation looks for some economic stability, CC Sabathia and Mark Teixeira are going to sign two of baseball’s most valuable contracts. Meanwhile, teams are raising ticket prices and hoping to sell luxury boxes.
Historically, sports haven’t always suffered when the economy dips. In periods of prolonged slumps, attendance does decline, but in periods of shorter economic downturns, sports have, by and large, not witnessed decreases in attendance. Concession sales may slag, but ticket sales remain relatively robust.
This doesn’t stop, however, writers from wondering if the financial crisis will impact the Yanks who are opening some expensive new digs in six months. Fortune’s Jon Birger ponders this exact question:
Take the New York Yankees, for instance. The Yankees move into their new stadium next year, and over the past year they’ve been trying to sell New York’s corporate titans on the virtues of the new stadium’s 47 available luxury suites. Asking price: $600,000 to $850,000 a year – several times what other major league teams charge for their luxury boxes.
A year ago, selling Yankees skyboxes was considered a slam dunk. Today, not so much, not with the stock market tanking and most financial companies gushing red ink. “I would hate to be in their position,” a top executive with another Major League team says of the Yankees. “$850,000 for a luxury suite?” says Phil Matalucci, president of sports-suite broker Luxury Suite Alternative. “There could not be a worse time for teams to be selling luxury suites.”
A Yankees spokeswoman insists that the economic crisis has not had any impact on the commitments the team has already received from prospective suite-holders. Still, as one Yankees’ limited partner tells Fortune, it’s a little too soon to judge since the contracts for the suites were only recently sent out.
While we last looked at this issue less than a week ago when the Yanks seemed like they would ride out the storm, Birger introduces an interesting phenomenon. First, high-rolling clients — such as New York’s banks — find value in investing in luxury suits. Bank of America says that its return “is multiples more than the initial investment.”
At the same time, though, can a bank that just had to accept billions of dollars of governmental bailout money really turn around and spend more than three quarters of a million dollars on baseball tickets? I doubt it.
This could get interesting over the next few weeks. The Yanks and Mets both claim that luxury suite sales are robust, but are the contracts signed? Have the tickets been delivered? There would be some irony in the Yanks’ not selling out their luxury suites considering that those suites were one of the prime purposes behind the new stadium. Perhaps, for now, the baseball gods will have the last ironic laugh over the destruction of Yankee Stadium after all.