The Yankees and the economy, redux

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ALCS Game 5: Rays @ BoSox

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.

Ajax, Miranda pound Mesa
ALCS Game 5: Rays @ BoSox
  • Rich M.

    “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.”

    Because some of these banks are also advertisers at the new stadium I’m sure they can bury the cost of a luxury box in the language of thier advertising agreement.

    • DonnieBaseballHallofFame

      “Because some of these banks are also advertisers at the new stadium I’m sure they can bury the cost of a luxury box in the language of thier advertising agreement.”

      That is EXACTLY how this is done.

  • http://www.puristbleedspinstripes.com Rebecca-Optimist Prime

    It’s going to be very interesting, that’s for sure…

  • A.D.

    Really isn’t that much of an issue, there are tons of private banks, banks doing fine, PE, and other industries which can pony up for boxes, and if companies really feel that BoA quote, it probably won’t be much of an issue.

  • radnom

    “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.”

    Unfortunately yes…yes they can….

    http://ap.google.com/article/ALeqM5g3InVeHoYnmXZnM2ACXSgjG0-nIQD93R68VO0

    “A handful of top executives from American International Group Inc. spent thousands of dollars during a recent English hunting trip, even as the New York-based insurer asked for an additional $37.8 billion loan from the Federal Reserve.”

    This is the same AIG that the original bailout is for…..

    • radnom

      Oh, it doesn’t list it in the little blurb, but for those who don’t want to click the link it was an $86,000 two day hunting trip.

      And this is while they are still asking for the bailout, I can’t imagine they will be too timid to get those luxury boxes next April. Besides, as the BoA quote states, they really can be an asset when dealing with high profile clients.

  • pat

    instead of spending 700 billion to bail out bad investments the govt should just give everybody over the age of 18 like a million bucks or so. All debt would be paid off credit market would rebound, banks would be flush with cash to lend to small businesses factories and such would be booming to keep up with the demand for new cars and other stuff. And most importantly, we could have an official RAB luxury box to party in every night id be a shareholder in that.

    • Ed

      While I had the same initial reaction you did, could you imagine what that would do to inflation? How much do you think a bleacher seat would cost if the Yankees knew that EVERYONE had a million dollars in their pocket?

      • pat

        yea that whole inflation thing sucks and you’re right about it but the thing that pisses me off the most is you know not all of that 700 billion is going to the right places. I see many an unscrupulous person getting very rich off this bailout program oversight committee or not.

        • radnom

          2.17 × 10^14

          This is how much your proposed plan would cost. (that is 217 with 12 zeros following it).

          for the record, 700 billion in that notation is

          is 7 x 10^11.

          Which means your proposed plan would be about

          $216,000,000,000,000 more expensive. Now, considering we are currently just taking this from taxpayers anyway (everyone over 18) the only way this would do anything would be printing more money. So, essentially hyperinflation

          (For the record, I know this wasn’t serious, I was just curious as to how much it would actually cost to give every adult in the country a million bucks, so then I shared)

          • Steve

            Radnom, Radnom, Radnom.

            What’s 216 quadrillion bucks among friends?

    • Chris

      If you split up 700 billion across everyone over 18, it would come to about $3000 per person…

      • Steve

        The rest will be given out in Monopoly money.

  • JK

    I love it when scared shitless executives from other teams are worrying about the Yankees bottom line. If the Yankees sell ZERO luxury boxes they would still generate more revenue than from the current stadium.

  • JK

    600 team controlled parking spaces @ $25 a pop
    Hotel & conference center going up near stadium
    New company established to handle concessions
    Naming rights sold
    More Retail space
    Partnerships with restaurants
    Museum selling Yankee memorabilia co merchandise
    More Luxury boxes
    Overall more expensive ticket prices

  • Januz

    There is no question that the economy and the lack of luxury box sales will affect the spending of the Yankees, which should trickle down to the players getting less then they expected (Although 7 unused luxury boxes at $500,000 per box, does not equal Abreu’s contract that is now off the books). That is the bad news, for Yankee Fans who want Sabathia, Teixeira, Manny, and everyone else who is a free agent. Offsetting this of course, is getting other ugly contracts like Giambi’s and Pavano’s off the books as well . Not to mention, all of the other goodies a new stadium has to offer (Such as higher ticket & concession prices at the stadium) so the Yankees will be better off than most.
    Here are the real losers: The Nets, The Islanders, The Rays, The Marlins, The Vikings, and every team that wants a new stadium or arena. Abreu (Good luck to $16,000.000 multi-year year contract), Giambi, and Scott Boras (Lets see what Oliver Perez, and Manny end up with?). NOT The Yankees, they will be fine.

  • bornayank

    the yankees will be making tons of cash with the new stadium,sorry yankee haters but the yankees are the exception to the rule. I want to thank god for making me a yankee fan!!!!!!!!!!

  • THU

    I thought the Mets had 47 and the Yankees had 67 boxes?

  • Steve S

    They will be sold out. Lets be honest even if they have to drop prices to sell them out, I dont know if the Steinbrenners are going to need a bail out.

    And as for the commentary on these investment banks spending the money on luxury items. Look at the severance packages for the CEO’s of all these bankrupt banks. Guys like Cuomo are going to bitch and moan but they cant do anything about it. Its a contract and the guys were given this compensation as part of that contract. Its a constitutional right and the government cant intefere. Its all show boating because you can get a name for yourself. In the end BoA or any of these major financial institutions wont default on a contract.

    And the remaining unsold ones, there are plenty of pharmaceutical companies out there and other types (ie commodities brokers who would love to have them).