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The Credit Crisis and Sports or What's the Name of that Building Again?

Sports is often said to be a microcosm of society and to the extent that is true, we shouldn't be surprised to see that the ongoing global credit crisis is adversely impacting sports in a number of ways. The most visible way perhaps is something that teams and their fans have experience with and that is the ever changing landscape of stadium and arena naming sponsors.

We have seen a number of financial institutions disappear from the landscape in the last few months and several of them, Washington Mutual and Wachovia among them, have their names on arenas around the country. Just like the period following the dot com bomb in 2000, I expect that teams will move quickly to attempt to reclaim the naming rights to those arenas and resell them. The Wachovia Center in Philadelphia, were it to be renamed following the sale of Wachovia's banking operations to Citigroup, would have its fourth name since 1994 as a result of bank mergers. Similarly, expect changes to the name of the WaMu theatre in Madison Square Garden and in Seattle.

The credit crisis has also caused the delay in financing and building of arenas. The new home of the Nets in Brooklyn has been delayed at least a year as result of the crisis. Barclays, the British bank which is the naming rights holder appears to be one of the banks which will survive the crisis, so we should expect that deal to go forward. Barclays is also the title sponsor of the Barclay's Open which is the kickoff of the PGA's year end Fed-Ex Cup playoff and is the sponsor of the English Premier League.

The PGA may be the sport most affected by the crisis as it has the most financial institutions as sponsors. One-third of the Tour stops are sponsored by financial institutions and 25% of network ad time comes from that industry. Golf's audience has always skewed upscale and financial institutions have been more than willing to pay a premium to reach it. Now, however, those dollars, and indeed, those institutions, may no longer be available. It doesn't help that golf ratings have been falling this year, particularly since Tiger has been out.

It's difficult to predict how this will all shake out. After the dot com imploded, replacements for title sponsors were found, and new names appeared on arenas and stadiums. Some of those deals were less lucrative but many were significantly better. This time, all signs point to a larger worldwide recession looming so it's not reasonable to assume that replacements will be either easy to find or as lucrative. The television marketplace is different as is the naming rights market. Nevertheless, replacements will be found because sports always represents unique properties that are in demand somewhere and with someone.

Full post as published by Sports Biz on October 02, 2008 (boomark / email).