The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, reviews the business of the big five major sports – baseball, NFL, NASCAR, NHL, and NBA – coinciding with the one week in the calendar where "the Big Five" come together.
Next week is unique on the sports calendar – and a veritable harvest-season cornucopia for every true sports fan.
"The Big Five" professional sports are all in play at the same time.
Baseball's World Series comes together in St. Louis and Detroit, amid considerable fanfare over the early extension of the Collective Bargaining Agreement. NASCAR enters the homestretch in its Chase for the Nextel Cup heading into Sunday's Bass Pro Shops 500 at the Atlanta Motor Speedway. The National Football League begins Week 7 in better business shape than ever, as the NFL owners' meetings wind down in New Orleans. The NHL starts its fourth regular season week, buttressed by a 90 percent increase in payrolls as 26 of the 30 teams are within $4 million of the $44 million salary cap (a sure sign of financial rebound). Finally, the regular National Basketball Association season tips off on Halloween, with average franchise values exceeding $326 million (a nine percent increase over the previous year).
According to PricewaterhouseCoopers, total sports spending in the United States will approach $61.6 billion in 2010, rising 41 percent from the $43.6 billion spent today. The projection covers sponsorships, merchandise, television rights, and gate revenues. What's more, the overall entertainment industry will expand to $726.2 billion in 2010, with the strongest gains coming from video gaming and the Internet.
The five-sport Halloween bonanza provides a good opportunity to assess the financial health of each of "the Big Five." We'll evaluate each sport based on four factors: (1) overall financial health/interested billionaires; (2) television and Corporate America; (3) retail sales; and (4) the next generation.
The overall financial health of each sport is directly related to the stability of its ownership. According to Forbes, the collective net worth of the nation's wealthiest 400 individuals climbed $120 billion to $1.25 trillion this year. Of the 400, 62 have been involved in sports in some manner, and 36 involved in team ownership. In professional sports, a pinnacle achievement would be persuading all of these billionaires to invest a professional sports franchise.
Television and Corporate America go hand in hand. According to the Sports Business Journal, over $8 billion annually is now spent on sports advertising by Corporate America, a 40.4 percent increase since 2000. All of the major networks wrote nearly $8.9 billion in primetime ad business this year, at least two percent less than they did the previous year.
Many blame diversification. Disney CEO Robert Iger says that over 85 percent of the people who streamed video from "Lost" and "Desperate Housewives" remember the advertiser from the program they streamed – a significant plus for future ad sales. NBC (and parent General Electric) claim that Sunday Night Football is about nine percent ahead of last year's Monday Night Football ratings, but that the NFL "will deliver more than $1 billion of GE revenue outside of the NBC relationships."
Retail sales are a good measure of the sports industry's financial health. According to an International Licensing Industry Merchandisers' Association report prepared in conjunction with Harvard and Yale, sports captures 12.3 percent of licensed goods overall sales (movies are 44 percent, fashion 17 percent). Retail sales of licensed sports products rose five percent last year to $13.2 billion. Sports ticket sales continue to rise – nearly $15 billion was spent on sporting events last year, an increase of more than 30 percent since 2000 (compared to $9 billion spent on movie tickets). Again, the key is to capture appropriate market share in a highly competitive industry.
The next generation may be the most critical factor. Each sport must not be complacent in its marketing efforts, as more and more alternatives present themselves to impressionable 7-11 year-olds.
Here are what each of "the Big Five" are doing about these financial health factors.
Major League Baseball
