Could declining sports sponsorships change the sport?

Yankees MtoM Catcher Prospect List
The eighth highest paid man in all the game

Sports teams seeking new corporate sponsorships in 2009 might find themselves disappointed by a lack of interest. We’re all used to seeing commercials, billboards, and other advertisements from corporate sponsors in the automotive and financial services industries, but the credit crunch is going to suppress their marketing budgets. The result could be the bursting of the sports bubble, Jordan S. Solomon of Gibbons P.C.

That seems pretty obvious, right? If companies are cutting back on their marketing budgets, sports teams will see less money than they’ve been used to in years past. True, baseball and football aren’t as directly reliant on corporate sponsorships as NASCAR, but if there are fewer marketing dollars flowing into our favorite sports, they’ll surely suffer.

We’re seeing signs of this changing tide in the Citi/Mets saga. We’ve long known that Citi would sponsor the Mets new stadium, CitiField. But when the credit crunch started hitting hard this past fall, Citi fell into some trouble. This caused a bit of an uproar about their sponsorship of the stadium. Congressman Dennis Kucinich thinks that the Treasury Department should “demand that Citigroup cancel its $400 million advertisement at the Mets field“. That would certainly have an adverse effect on the Mets ability to keep their payroll at the level it’s been the past few years.

Solomon also points to broadcasting as an area affected by these marketing cutbacks. Since many of these companies also advertise with broadcasters, we will see a cutback there, too. This means broadcasters will likely not pay as much for exclusive rights, as they have in the past. That’s another area which could deal a financial blow to our major sports.

What I do find strange, though, is the assumption Solomon makes at the very end of his article:

eams that are unable to offer the highest salaries will be unable to attract the best players and without the best players, teams will have difficulty winning. Losing teams will have a more difficult time attracting sponsors. It is a vicious cycle that is bound to have a lasting effect on how the sports industry has been operating during this sports bubble, which could be the next bubble to burst.

This is true, but only to an extent. As we’re seeing this winter, many teams aren’t willing to spend. This will drive the price down on free agents — it is a market, after all, and if there aren’t dollars flowing in a market prices will go down. Some teams, possibly of the small market persuasion, will get Adam Dunn and Bobby Abreu for a sweetheart price. Not only that, but the team with the biggest wallet has piles of money tied up in future salaries, thus taking them out of the bidding for many free agents, including, by default, those who play first and third base.

What I’m trying to say is that as baseball revenues fall, salaries will fall as well. The teams best positioned for this will be those with smaller and shorter term contracts on the books. If sponsorship and broadcasting rights get squeezed enough, the Yankees, the team with the huge wallet, might find themselves in a tough position because of their current salary commitments. A smaller market team with few long-term contracts, like, say, the Pirates, might find themselves better positioned in a slumping market.

Yankees MtoM Catcher Prospect List
The eighth highest paid man in all the game
  • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

    At least the Mets have already lined up a good backup plan if Congress forces CitiGroup to back out of the naming deal:

    “Inaugural Season Stadium”

    • jsbrendog

      they should get dominoes to be the sponsor then. they already have the same logo. and the noid would be a kick ass ocmpliment to mr met as mascot

    • A.D.

      Wal-Mart Field?

      • jsbrendog

        come to universal pictures field and ride a ride better than any at our olando florida park. This ride takes 6 months to complete and ends in a fall off a cliff so intense you won’t know what hit you. 5 and a half months of joy and euphoria just to collapse in september and kill their fanbase!

        THIS IS A RIDE YOU WON”T WANT TO MISS!!

        • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

          The New York Mets = Tower of Terror

          • jsbrendog

            with a 5 1/2 month climb to the top of the tower

  • jsbrendog

    as in everything in life, things build and snowball and get out of hand and then inevitably crash and reset themselves. and so it will be with baseball salaries.

  • http://www.theyankeeuniverse.com Moshe Mandel

    So the economy is hurting the sports, salaries are coming down…..and Bud Selig pulled down 18.5 million last season. Wow.

  • A.D.

    It would take a group of banks to put up 400 mil for stadium rights now. Think:

    Barclays, Credit Suisse, RBC & Morgan Stanley Field

    • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

      FWIW, CitiGroup’s market capitalization is still about 40B, and they’re getting about 45B in government assistance. This naming rights deal represents one percent of their total worth, and that one percent is spread out over 20 years, so you’re really talking about an annual expenditure that’s 1/20th of a percent of their total worth per year. (And the naming deal was made when their market capitalization was about 3-4 times larger, as well.)

      I understand the point Kucinch is making, but the stadium naming deal is pretty small potatoes and the 20M per year probably represents a good ROI, all things considered. Citi gets a huge presence throughout that stadium, I’d imagine, and probably builds a fairly decent amount of brand loyalty among the Met “Nation”.

      • jsbrendog

        yeah exactly, its allabout advertising. if its not naming the field its billboards, commercials and taxi cab headers. this way they get their hooks into atms at the staidum which charge 3-5 dolllar fees for non citibank customers, which think about how many ppl use that thing a game over 81 games at 3-5 dollars a pop. people might even switch banks for that (because we as a people are lazy and instead of bringing cash in the first place might think it is easier to just switch banks therefore trying to rationalize our lazy and inherently stupid behavior)

        nto to mention the free citibank tshirt giveaways (sign up for a credit card, shoot them into the crowd, fan appreciation days, etc)

      • A.D.

        It is small, and I’m aware its essentially chump change… the joke would more be tied to the recent Pfizer-Wyeth deal in which Pfizer got ~22B in financing from a consortia of some 5+ banks, while in the past a deal of that size would not have included nearly that many partners.

        At this point with the Citi plane order and everything some congressmen are just on a witch-hunt of sorts where they can villanize the banks as these crazy evil spenders that don’t care, their district will love it and they will get re-elected in 2 years.

        • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

          A sports stadium naming deal is an easy target for scoring political points in a recession.

          Just like Joe Torre scoring easy points off ARod and Carl Pavano.

          • A.D.

            Exactly, as is the purchase of a private jet, easy targets that make nice headlines & gets the name in the paper

      • huuz

        so how is this different than the Yankees getting public loans to build their stadium?

        you seem quick to give a free pass for taxpayers indirectly funding $400M for naming a stadium; but you come down hard on taxpayers paying a similarly large amount to build YS.

        both involve spending of taxpayer money in a controversial manner
        both involve a nebulous (at best) return on taxpayer $.

        • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

          A) The Yankee Stadium deal is 1.5B all at once, not 20M a year for 20 years.
          B) The Yankee Stadium deal was misrepresented from the beginning as being some type of undeniable public boon to the downtrodden residents of the poor South Bronx when it really benefits nobody other than the Yankees. The CitiGroup naming deal was a kosher, above board private deal between two private entities for mutual financial benefit that is now being erroneously used as a political football.
          C) The Yankee Stadium deal involved possible criminal malfeasance from the outset regarding inappropriately overvaluing the land beneath the stadium in order to qualify for federal tax breaks, creating massive tax shelters for wealthy private investors. The CitiGroup naming deal was legal, and the current federal bank bailout is unrelated to this tiny and utterly legitimate naming rights deal.
          D) Cancelling the naming rights deal doesn’t involve “spending of taxpayer money” as the naming rights deal was agreed to long before the bailout money. The bailout monies are being spent to soak up the toxic subprime loans and failed derivatives on Citi’s ledger sheets. The modest 20M naming rights deal comes from Citi’s advertising revenues; two totally different arenas of the bank. Saying that the federal taxpayer money is “funding” the naming rights deal is patently false.
          E) The purpose of the bailout is to improve Citibank’s capitalization so they can begin lending again, something which is in the public interest. Cancelling the naming rights deal doesn’t make it easier for Citibank to lend again; it’s a non-factor in their lending ability (and thus, a non-factor to the public interest). However, cancelling the naming rights deal would involve breaking a contract; the Mets can and should seek damages, and thus Citi’s bottom line (and thus, the public) is hurt more by canceling the deal. The purpose of Yankee Stadium, meanwhile, is to enrich the Yankees; that project holds little to no positive value to anybody other than the Yankees.

          • huuz

            i agree with your point A and the part of E regarding the Mets seeking damamges.

            points B-D are more a matter of perspective. obtaining public funding was/is legal; and it is debatable whether or not the YS plan was misrepresented.

            while i do understand your point about “The modest 20M naming rights deal comes from Citi’s advertising revenues; two totally different arenas of the bank.”, i disagree. at the end of the day, all $ collected goes in the plus column and all $ spent goes in the minus column.

            but again, points A and E are well-taken. it would likely cost taxpayers more to reneg on the naming rights contract and pay damages than to just honor the contract.

  • A.D.

    What this is likely to mean is less terrible veteran FA contracts. Carlos Silva’s of the world aren’t going to be paid what they aren’t worth

    • jsbrendog

      carlos silva is laughing hsi way to his water tower of gold coins he goes swimming in ala scrooge mcduck

      • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

        Fun Fact of the Day: For what the Mariners are paying Carlos Silva, Jarrod Washburn, Kenji Johjima, Endy Chavez, and Russell Branyan in 2009, they could have had ARod.

        • Ryan S.

          They also probably could have gotten:

          Adam Dunn
          Ben Sheets
          Oliver Perez
          Bobby Abreu
          Joe Crede
          Orlando Hudson

          For a similar amount of money.

        • Tom Zig

          I bet A-rod could pitch better than Silva too.

  • http://nyyankeesrumors.com Bob Ruffolo

    Judging by who has the money this year, I wouldn’t be surprised if we see Pepsi Park, Hyundai Field, or Doritos Stadium.

    • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

      PEPSUBER!!!

      • Ryan S.

        If Pepsuber were the official mascot of Pepsi Park, and before each game or during the 7th inning stretch, he pulls off some kind of nutty stunt that blows up in his face … I would enjoy that.

        • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

          There is only one cola he will pour into his mouth hole… PEPSUBER!

          • Ryan S.

            Who else suffered permanent damage to their vision with those god damn 3D commercials?!!!!?!

            • Should be working

              If you were drunk, they looked normal.

    • A.D.

      Its gotta be Doritios Dome!

  • http://www.spartacus.schoolnet.co.uk/CRsmithT1.jpg tommiesmithjohncarlos a/k/a Ridiculous Upside

    True, baseball and football aren’t as directly reliant on corporate sponsorships as NASCAR, but if there are fewer marketing dollars flowing into our favorite sports, they’ll surely suffer.

    This sticker is dangerous and inconvenient, but I do love Fig Newtons.

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