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Impact of the Credit Crisis Cont'd.

The common wisdom has always been that sports would be immune from most of the gyrations of the American economy. Unless there was a depression on the order of the Great Depression, then the impact of a recession would be fairly minimal. After all, Americans still want their entertainment and watching televised sports is cheap. Sure, attendance in the cheaper seats might be a little less, but businesses would still need to entertain customers and besides, if you weren't the NHL, then your money came primarily from television anyway.

Well, welcome to the recession of the 2008-09, when the received wisdom is being tossed away like most businesses ability to obtain a loan from their friendly neighborhood bank. The NFL has responded to the crisis in a way that demonstrates once again just how much different it is from other professional sports leagues. According to Chief Financial Officer Anthony Noto, the league is about to close on almost $2 billion in financing to ensure that the 32 clubs can weather the storm without difficulty. This at a time when most major corporations in this country and around the world are having trouble tapping into the commercial paper market or their bank credit lines to finance their ongoing operations. While the NFL is an obviously good credit risk, since the borrowings are backed up by nearly $3.5 billion in annual television revenue, creditworthiness does not seem to count for too much in this market. However, the cachet of the league and its reputation for operations as well as it TV revenues, and the new stadiums coming online, made this financing appealing. Access to tickets may not have hurt either.

In another sign of the weakening economy, Chevrolet, traditionally one of the largest sports advertisers, announced that it would be significantly reducing its sports sponsorships because of falling sales and the economic slowdown. General Motors has begun closing plants and downsizing as it is hemorrhaging red ink. It is currently in Washington seeking a federal bailout to aid a possible merger with Chrysler, although why GM execs believe that will help matters is beyond me. GM had previously announced that it would not air a Super Bowl commercial this year. By next season's Super Bowl, there may not be a GM to consider a commercial.

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