How the Economy is Affecting Professional Sports: “Second Tier Sports”

I was orginally planning of writing my fourth installment of the economic situation surrounding professional sports on future draft transactions in the NFL, MLB, and various other leagues. As I researched the subject I came across all sorts of material concerning what I deemed “second tier” leagues such as the WNBA, Arena Football, and NISL (National Indoor Soccer League). By “second tier”, I mean professional sports that are not necessarily on ESPN’s Sports Center on an every day basis, and do not have nearly the economic strength and fan bases the major leagues like the NFL, NBA, MLB, and NHL enjoy. Many of these leagues and franchises have been under enormous pressure because of the economy, with some of them even postponing seasons a year in hopes of an economic rebound next year. I will begin first with the Arena Football.

The Arena Football League has lain off all but four to five workers in its New York and Chicago offices. The League hopes to emerge from its one-year hiatus in a more cost-efficient form in 2010. AFL Commissioner Ed Policy explains the one year hiatus,

“Every owner is committed to going forward. The question was do we restructure while we play or take a timeout and field teams again in 2010. The decision was that trying to do it on the fly would be a challenge, but doing it on the fly in the worst economy any one of us has seen would have been irresponsible.”

The AFL, during the break, will restructure its overall organizational model, hopefully streamlining its league office with emphasis on revenue generation and centralizing marketing initiatives. When arena Football does return to the spotlight, Policy believes in a full financial and fan-base recovery, but foresees a different situation with sponsors.

“Even with the down economy, I don’t think we anticipated much of a drop-off in attendance.We think we were well-positioned with an average ticket approximately $24. The problem is with sponsorship dollars, primarily those related directly and indirectly to the automobile and mortgage industries. The long-standing cliché is that the economy in sports is somewhat bulletproof. In our mind, it might be considered somewhat bullet-resistant, but this has been a bazooka.”

Casey Wasserman, owner of the Los Angeles Avengers, is looking past the now, and into the future of the league which will hopefully make a full recovery.

“It’s important for the Arena Football League to think about the next 20 years, and the economic model, combined with the economic environment we’re in currently doesn’t allow us to take that perspective. By suspending play for the year — in cooperation with our players and our partners — it allows us to get the perspective to try and make the decisions that are in the best interest of the long-term viability of the league.”

By taking a year off, Wasserman said, the 16-team league is hoping to mitigate potential losses, regroup and create economic efficiencies such as a more centralized marketing structure. The AFL, which was founded in 1987 and is the longest-standing U.S. football league besides the NFL, has never taken a season off. The AFL needs to restructure in order to better adapt to the surrounding business environment. This falls along the line of a Contingency Model which emphasizes the importance of balancing organizational structure with the surrounding environment. I guess in no organizational structure in the current environment is the best option for AFL franchises. Similar to the AFL, the WNBA is also feeling the pinch of the economy.

The Houston Comets, a franchise that won the first four WNBA championships, is officially disbanding. The currently league-owned team could not find a person in this economy willing to throw up big bucks to become an owner, thus the team had to break up. To compare the Comets with a male sport, it would be like the Los Angeles Lakers going under. WNBA president Donna Orender failed to comment much on the move, but assessed the overall health of the league.

“You have to build on strength. My outlook is to build on the fact that the league has great momentum and in Houston we didn’t have the enough runway to get a deal done in time for the 2009 season. So right now we have to move on.”

The WNBA is also struggling on the job front. Similar to recent moves by the NBA, the WNBA could not find placement for staff of the Comets which will result in the loss of 37 jobs. Even through the team is disbanded for now, Orender, much like the AFL, hopes once the economy settles down, talks could resume and a possible return could be arranged.

“You can’t ignore the fact this team was the engine that drove the league. We appreciate the fan base. With the affection the fans in the city have for the team, maybe one day the corporate and city leaders will aggregate their resources and resurrect a formidable franchise.”

This quote leads directly into my final post concerning the decline in corporate sponsorship in all professional sports.

Sources Used:

“WNBA Disbands Comets Because New Owners Couldn’t be Found.” Mechelle Voepel, Associated Press. December 3, 2009

“Tough Economy has non-major Sports Struggling to Stay Afloat.” Seth Livingstone, USA Today. January 14th, 2009.

“Sports, too, Hit Hard by the economy.” Dan McGrath, USA Today. December 16, 2008

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2 Responses

  1. What kind of ownership structures do these have compared to the NBA, NFL and so on? How much does revenue-sharing keep smaller market teams attractive to new investors?

    Where do you put MLS? 1.5 tier?

  2. Compared to the NBA, NFL, and so on, second tier team rely much more on owners to finance and bring popularity to the team. Take the AFL’s Philadelphia Soul for example. The team is owned by famous singer Jon Bon Jovi, whom does much is terms of advertising for the team including radio adds and game promotions. Second tier leagues for the most part utilize a strict hierarchical structure with the owner solely at the top. The NFL for example has supervising boards and General Managers that often have veto power over an owner. They use a bottom up method of running the team. For example, a coach will tell the owner what he needs, and the owner will provide the necessary support based on this information. This however is not always the case. Jerry Jones of the Dallas Cowboys and Mark Cuban of the Dallas Mavericks (must be a Dallas thing) utilized a strict top down structure where they tend to micro manage the entire organization, much like second tier teams. They decide they direction of the teams often over the requests of the coaches and staff.

    Revenue sharing is much more common in in the first team leagues because of TV contracts. The NFL alone makes 3.5 billion dollars of TV revenue, which is shared among the teams playing. This is why teams always want to be in the spotlight on Sunday and Monday night games when the biggest audiences are typically found.

    If I had to place the MLS in a tier I would actually agree with your assessment of 1.5. The MLS does have TV contracts with ESPN, but it is solely one game a week on Saturday nights, not considered a prime time viewing night. However, compared to a decade ago, this is a huge step for the growth and popularity of soccer in the US.

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