Academic journal article International Journal of Sports Marketing & Sponsorship

Sports Marketing in a Recession: It's a Brand New Game

Academic journal article International Journal of Sports Marketing & Sponsorship

Sports Marketing in a Recession: It's a Brand New Game

Article excerpt

The North American professional team sports industry has long been thought of as recession-proof or recession-resistant. Like the brewing industry, pundits have suggested the average consumer will forego certain discretionary income purchases but not relinquish "basic needs". This paper raises questions about the viability of that logic by suggesting the economic conditions of sport in America in 2002 will be unlike any sport marketers have seen in the last 30 years. Fundamental to this review is a clear understanding of recession economies, the financial foundations of contemporary American spectator sports and how sport marketers may need to change their short-term marketing strategies.

Keywords: Recession, professional sport leagues, price sensitivity, customer loyalty, service guarantees

Executive Summary

Are sports recession-proof? It is a question sports marketers have not had to address for more than a decade. However, in recent months economic conditions in North America have changed dramatically. The leading economic forecasting organization in America recently declared that the United States has been in a recession for most of 2001 (The Economist, 2001). There is no consensus as to the depth or duration of the slump. Some economists look for the economy to rebound quickly while others are more cautious, suggesting a recovery by spring of 2002 (Hager, 2001).

While many team executives have generally proclaimed sports as "recession-resistant" (Saunders, 2001), an objective evaluation of the current state of major league sports suggests a far less optimistic assessment. The declining economy of 2001, exacerbated by the terrorist attacks of September 11, left professional sports leagues more vulnerable to a recession, or even near-recession, than at any time in the past 30 years. Major league sports teams have become more dependent on corporate investment than at any time in their history and, at the same time, have become increasingly reliant on a narrowing market segment of affluent consumers (household incomes in excess of $80,000).

Given corporations' multi-billion-dollar investment in the sport industry, major league teams in particular are increasingly dependent on revenue streams produced from corporate investment in luxury suites, venue naming rights, sponsorship agreements, and premium tickets. Credible estimates indicate that revenues from corporate sources account for more than 25 per cent of the total annual income generated by many professional sports teams. A respected industry analyst declared "corporate luxury seating has become the lifeblood of sports organizations" (Saunders, 2001). The critical question confronting sports teams is whether they can sustain their current high levels of corporate support through a period of economic decline.

Over the past decade, ticket prices for professional sports have more than doubled (Zimbalist, 2001). During the last recession in 1991, the average cost of ticket to a major league baseball game was less than $5.00. In 2001, that ticket price had jumped to $18.36. Among major league sports, baseball is by far the biggest bargain, with National Football League (NFL), National Basketball Association (NBA) and National Hockey League (NHL) tickets all averaging in the vicinity of $50 (1). The high cost of attendance has increased the number of middle- and lower-income fans priced out of attending games (Zimbalist, 2001). This situation has led one celebrated baseball author, Roger Angell, to proclaim that "going to a ball game has become a perk of the rich" (Howard, 1999). Thus, the relative affluence of the new fan base is dramatically different than the income profile of fans attending during previous recessions.

Evidence from previous recessions, reinforced by recent economic indicators, makes it clear companies may be inclined to pull back on spending. It is our belief that maintaining a business-as-usual approach to the marketplace will be disastrous for major professional sports leagues and teams. …

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