Headline Sports Business

“This is the Business We Chose”

the godfatherIf you’re not a Godfather fan like myself, you may not have caught the Hyman Roth quote, but these words are easily applicable to the sports industry.  Whether you like it or not – and if you’re an avid reader of this site I’m guessing you like it – the business of sports is almost as important as the game itself.  A recent ESPN article postulated that almost a third of sports news is dedicated to business issues.  Every year the contracts get bigger, new stadiums cost more, and the fans foot the bill as ticket prices go up.  And while we complain about the extravagance and audacious stories that occur in the name of sports’ business, we’ve also played our part in creating a market that allows agents to negotiate gargantuan contracts for 21-year old kids, and pushes teams to pay one player more money than the entire roster of another (Alex Rodriguez).  As aspiring agents, many of us stay connected to the business on our Blackberry’s and computers all day long, constantly visiting sports business sites and tracking news on Twitter.  But the present state of the American economy has started to take its toll on the sports industry, and most parties involved are beginning to take notice of their shortcomings and mistakes, possibly adjusting their practices to fit an economy that may never recover fully.  Yet some things have remained exactly the same.

Since free agency began in the 1970’s, the trend for rising contracts has skyrocketed.  In addition, there has been a continuous push towards defining sports as big business.  Just think about the deals we’ve witnessed in this past year.  C.C. Sabathia signed a 7-year, $161 million contract with the New York Yankees, who also opened their new $1.5 billion stadium in the Bronx.  This latter fact wouldn’t be as disheartening, until you remember that the New York taxpayers are picking up the tab during one of the worst recessions in American history.  A year ago we saw the Dolphins give their #1 draft pick Jake Long a 5-year, $57.75 million contract.  A player who had never stepped foot on a pro field became the highest paid offensive linemen in the NFL.  No need for more examples of the huge deals that have already been made amidst this economic crisis.

So where does this bring us?  What’s the state of affairs now?  Both the New York Yankees and the New York Mets overestimated their ability to sell high-priced seats in the newly christened Yankee Stadium and Citi Field.  Keep in mind that some of the seats in the New Yankee Stadium exceed $2,500, so who’s surprised that they aren’t filled for every game?  Both owners have now decided that they will review their ticket prices and possibly make changes.  Likewise, ticket sales are down in many places, and many teams are coming up with new, creative ways to sell seats.  The Detroit Pistons are clearly feeling the wrath of the economy, as they struggled to sell tickets for Friday night’s playoff game against the Cleveland Cavaliers.  Tickets were found on Stubhub for as low as $11, and the team’s front office even sent e-mails to Cavs season ticket holders offering tickets to those who want to make the 4 hour drive.  But the business of sports is not in a complete decline; in fact, it’s becoming increasingly impossible to make a general statement about the effect of this economic downturn on the industry.  Don Garber, MLS commissioner, said that the league’s law firm had canceled its season tickets at Yankee Stadium.  However, the large sports law firm Proskaeur Rose actually upgraded from a 20-game package to a full season ticket package in the new stadium.  Furthermore, while the housing construction industry may be in utter disarray, the Florida Marlins plan for a new $600 million stadium was just approved.

And what about the players that make these games possible?  The week leading up to this past weekend’s NFL draft hasn’t shown us that spending is down.  The Detroit Lions and the agents for Georgia QB Matthew Stafford were in talks all week to reach a deal before the draft.  Stafford was inked to a 6-year $72 million ($47 million guaranteed) which greatly exceeds Jake Long’s contract.  So the money may be getting out of hand, especially considering we are in an economic crisis.  As a future agent, these probably aren’t the words I should be saying, but it’s probably true.  But where do we place the blame?  Jeff MacGregor, senior writer for and ESPN the Magazine, infers that the fans are just as, if not more, responsible than those within the industry:

“Most of the men and women I’ve met over the years in professional sports would gladly go on playing their games for much less than they’re being paid now…Rather it is the market, reflecting the madness of the individuals who constitute it, that determines the relative value of that calling, whether to be a linebacker or golfer or shortstop. The athlete (and the agent and the owner) just operate within the market we allow them to create.”

At least we know that many players will take less money if the economy forces teams to do so, but probably not without a fight.  We have seen previous examples of extremely unselfish players who opted for lower contracts, despite the current trend for ever-increasing contracts.  Before the 2007 NBA season, Tim Duncan took less money so that the Spurs could create a winning team.  So maybe there’s some hope.  At least we can sleep knowing that not all athletes are only in it for the money.  For most great athletes, it’s about the game…they’ve already made enough money.  As fans we should feel lucky that it hasn’t reached the point where the money is the only factor for most players.  Imagine if the USA basketball team had to revert to using college players for the next Olympics competition.  As for sports in general, this industry may be feeling the effects of the economic crisis, but you can count on it returning to its normal form when the economy rebounds.  The Yankees will continue spending, the Marlins will still probably offer two-fer ticket deals in their new stadium, and most fans will watch ESPN waiting to hear about that next big contract with a mixed response of amazement, excitement, and disgust.  Hopefully I will be negotiating it.

4 replies on ““This is the Business We Chose””

Great article. The Godfather quote is what drew me in. The spending is getting outrageous. Especially considering that Stafford may not be the full time started for Detroit. The NFL needs some kind of rookie cap similar to the NBA’s. Unproven players shouldn’t make that much money. Reggie Bush has shown me that he’s worth the $60M that he’s getting from the Saints.

Stafford’s contract is just insanity. How can a rookie QB, who has NEVER taken an NFL snap make nearly twice as much money as Tom Brady, a 3 time Superbowl QB, or Peyton Manning? It’s just insane. I’m sorry, but I hope Stafford turns out to be a huge bust so the lions will have to deal with the consequences.

hey this is america. any and everybody is entitle to make money. there is no limit on how much. if you can make that amount of money at 21 then so be it. i’m not mad at the kid for being where he’s at for being a rookie. god bless him and i wish him all the luck in the world. prove people wrong. cause people dont want you to succeed.

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