Tuesday, April 07, 2009

Ad money shrinking in sports

Yesterday the New York Yankees opened their season in Baltimore, where the Orioles roughed up one of the Yankees newest zillion-dollar acquisitions, southpaw C.C. Sabathia. Baltimore chased an ineffective Sabathia off the mound after four-and-a-third innings and went on to win the game: Balt. 10, NYY 5.

To the chagrin of Yankees fans, Sabathia, finished his day at the office with a 12.46 earned-run-average and a 0-1 record. It's a good bet he’ll have better outings as the season wears on.

In December Sabathia, 6-7, 250, signed a $161 million contract to wear the pinstripes for seven years of throwing strikes and balls. Well, yesterday he didn’t look like much of a bargain; Sabathia looked more like a 300-pound pitcher -- he was Charles Barkley-esque! -- who was worth way less than $23 million a year. Maybe $11.5 million-a-year?

Or, maybe half of that. Or, what?

Assigning a dollar value to what an athlete might be worth to his team today, or a month from now, seems like a tough enough job. How in the world the Yankees can feel good about being obligated to pay the fat guy who took an early shower yesterday 23 million bucks this season, next season, and so on, is beyond me.

In the economic climate we are in now, I can’t fathom how anyone associated with professional sports can feel good about the huge contracts the owners have signed with players, or more importantly, with broadcasters.

The optimists who think the money is going to be there to pay Sabathia must be thinking that the current trend in advertising in America is going to shift. They’ve convinced themselves that soon it will all go back to what it was before the economy tanked. The people who NEED the new Yankee Stadium to draw big crowds and millions of pay-TV viewers for years to come have to believe it will all go back, and then some.

Among other amenities, the new $1.5 billion Yankee Stadium has an art gallery, a collectibles boutique, a conference center for meetings and weddings, etc., a Hard Rock Cafe and over a dozen other restaurants/bars. In other words, there are plenty of ways to spend money ... if you have it to spend. By the way, the best seats sell for $2,625.00 per game.

Yet, as the baseball season unfolds there’s a good chance more baseball fans in New York and elsewhere will lose their jobs. Some of them will be able to afford to go to games at the posh new Yankee Stadium. Many will not. So, they’ll have to watch the games on television.

Of course, for the unlucky Yankees fans in New York or Richmond, who’ve had their cable TV disconnected, because they missed a payment, they’ll have to follow Sabathia’s adventures some other way.

Newspaper? Maybe not.

In the past, part of professional baseball’s dependable revenue stream came from flush fans spending their money on seats, hot dogs and gear at the stadium. However, for Major League Baseball the more important flow of money came from millions of fans spending their money on the products they saw advertised on television during games and watching highlights on ESPN.

Well, ask anybody in the ad biz. The clients aren’t spending money anything like they did last year. How long this will last, nobody knows. What’s happening to the daily newspapers all over the country is due in some part to the sudden disappearance of advertising money.

We’re seeing the dramatic effect of the slashed ad budgets first in the daily newspaper business for a couple of reasons. It was already in decline. Secondly, with production and delivery costs, newspaper publishers are at a disadvantage to ride out a storm. Electronic media can cut rates and hang on much longer in a time of drastically reduced advertising budgets.

Beyond the collapse of banks and car manufacturers has come a collapse in the faith all sorts of companies have had in advertising of any kind. Say what you will about the American economy, successful advertising in some form has been a big part of making money.

Now, it seems, the public has stopped watching as much television. People appear to be tuning out ads, young people are especially good at it. It's like the consumers have finally developed an immunity to advertising's buzzwords, jingles and subliminal suggestions.

It has been widely reported that Richmond will get a new baseball team next year. If that’s true, the owners will want to sell lots of advertising, from signage in the stadium to ads in programs, etc. Without such support they will be in trouble.

This is the difficult climate in which the developers who want to build a baseball stadium in Shockoe Bottom are working. If they could do it without any risk to the taxpayers, without any guarantees to back up their financing, that would be one thing. But it doesn’t seem that’s the case with their project. It's my understanding they want Richmond's taxpayers to ultimately back their deal, if their projections for revenue don't pan out.

My guess is, there won’t be any new publicly-financed sports stadiums built in Richmond, or New York, or anywhere else for a while. It looks to me like John Q. Public has lost his patience with government "bailout" thinking that takes the risk out of capitalism.

If I’m right, the owners of the new baseball team, supposedly on the way to Richmond from Connecticut next year, had better get used to the sensible idea that a refurbished version of Parker Field/The Diamond is all Richmond will have in the way of a baseball stadium for some years to come.

Furthermore, in the next couple of years, I predict that players’ contracts in all pro sports will have to be renegotiated, as will the multi-zeroed contracts between leagues and broadcasters. The money just isn't going to be there.

The severe contraction being felt in the advertising business now is eventually going to change the value of a fat starting pitcher even to baseball's richest franchise, just as it will change the price of commercials in the broadcast of the game.

Baseball isn’t going to die. But the large advertising money that has propped up professional sports, is shrinking. That's true of all sports.

It says here, we’ve seen the last of the $23 million contracts for jocks for a good while. Likewise, we’ve probably seen the last of $400 million naming rights contracts for stadiums, such as that recently paid by Citigroup for the New York Mets new baseball stadium, also opening this season.

Where did a hurting bank like Citi get the dough for such a big advertising deal?

From the recent federal bailout program, at least in part. Yep, the taxpayers bought that advertisement in a time in which big corporations are afraid to risk their own money on ads.


FanGuy said...

Care to back up this statement and tell us what your understanding is based on? You could break some real "news" if you have a legit source for this claim.

"It's my understanding they want Richmond's taxpayers to ultimately back their deal, if their projections for revenue don't pan out."

F.T. Rea said...


My understanding that Richmond's taxpayers stand to lose if the Shockoe Bottom development fizzles is based on reading a number of articles from various publishers and from discussions I've had with real people with real names.

Still, I don't know if they would qualify as "legit" sources in your book.

We both know that with your comments under many posts you have consistently branded any sentences you didn't like as disinformation or deliberate lies. While hiding your identity, you've consistently hurled insults at any writers who won't jump on the Baseball in The Bottom bandwagon with you.

So, what's the use?

With baseball season underway, you've just about worn out your welcome here.

FanGuy said...

So in other words, you have no legit source to cite for such an important accusation. If there was any merit to your accusation, I would hope that you would be running to the media to spread the word, because I would certainly like to know about it.

F.T. Rea said...


No, in plain words: Your anonymous comments -- which have consistently been crafted to be annoying, rather than edifying -- are no longer welcome here. That means from here on any future comments from you will be deleted.

Anonymous said...

That is hardly very First Amendment of you Terry. So all anonymous comments on your blog will be deleted or just ones that you disagree with?

F.T. Rea said...


In the six years of SLANTblog's existence, I've previously told three very pushy characters that their comments were no longer welcome. I've been close a couple of other times ... FanGuy is No. 4.

In the future any of FanGuy's comments here will be deleted just like so much spam. I'm simply no longer willing to provide a platform for her/his game.

No one has a "right" to comment on my blog, so the First Amendment hasn't got anything to do with this.

Meanwhile, to vent her/his spleen, FanGuy has her/his own blog and she/he has the comments sections of any number of publishers still willing to offer hospitality.

Peter said...

You should disable comments entirely. At least be honest about the fact that you can't handle criticism and aren't willing to engage in a discussion.

Here, let me go ahead and fill in your response so you don't have to: "I can handle criticism, Peter (if that is your real name) but I feel no need to respond to the blatant provocations of nameless commenters, who instead of engaging me in a legitimate discussion, prefer to hurl mud while cloaked in the shadows of anonymity."

F.T. Rea said...


Thanks for your advice.