Is it recession-proof?

Nothing can entirely escape the economic downturn. But leading sports come close

AFP

GLOOMY days, these, for English cricket. On February 7th the England Test (international) side was skittled out for 51 runs, its third-lowest total in 132 years and 880 matches, as it slid to ignominious defeat against the West Indies, one of the lowest-ranked Test sides in the world.

England may be useless, but they’re not worthless. The previous day, some of the players were auctioned—that’s right, by a man with a gavel—for the second season of the Indian Premier League (IPL), a six-week tournament of short matches (lasting around three-and-a-half hours each) which begins in April. The services of England’s two great crowd-pleasers, Andrew Flintoff and Kevin Pietersen (pictured above), fetched $1.55m apiece. A third member of the team scooped $275,000. For cricketers, these are huge sums—and the top price has gone up since last year.

There is little hint of global recession there. You might conclude the same from other sports, even in shrinking economies. The average price of television-advertising slots during this month’s Super Bowl, American football’s ultimate prize, was even higher than in 2008. And on February 6th the Premier League, the top tier of English football, said it had sold domestic live broadcasting rights for three seasons from August 2010 for nearly £1.8 billion ($2.6 billion), 5% more than the existing deal. Deloitte, a consulting firm, paints a broadly positive picture of European football in a report this week (seearticle).

Sport is not immune to economic woe. As Deloitte notes, the shirts of Premier League teams offer a brief history of the credit crunch: Newcastle United’s sponsor is Northern Rock, a nationalised bank; Manchester United sport the initials of American International Group, an insurance company now owned by the American government; and West Ham went logoless for three months after XL, a travel company, went bust. On February 4th the Detroit Pistons, an American basketball team, failed to sell out a home game for the first time in five seasons. And although NBC, the Super Bowl’s broadcaster, increased average advertising revenues, says Jason Maltby of Mindshare, a marketing and media consultancy, it struggled with the last few slots.

Yet leading sports are, by and large, standing up to recession better than most. They have two big advantages. It helps, first, to be able to sell broadcasters and sponsors what they crave in a world of myriad channels: lots of dedicated viewers. This advantage may even rise in a downturn. As recession grips, fans may decide that season tickets are too great a luxury, but they will cling on to their television subscriptions.

The other advantage is timing, which is just as important in the business of sport as it is on the field of play. Long-term broadcasting contracts help to lay a good base of revenue and some sports are in the early days of such deals. The IPL, for instance, started out with a ten-year, $1 billion agreement. In America the National Basketball Association is in the first season of eight-year contracts worth $7.5 billion.

With a sought-after event, it is possible to plan ahead—beyond, with luck, today’s troubles. The International Olympic Committee is already negotiating for the 2014 winter and 2016 summer games. So far it has struck separate deals for Italy and Turkey, rather than sell all European rights to the European Broadcasting Union as in the past, and has done rather better from them.

Not all sporting activities can rise above today’s troubles. Away from the top table of sport, times look harder. Stefan Szymanski, an economist at Cass Business School in London, notes that sport is like any other industry: “All recessions are about consolidation,” he says. The IPL is “pretty much recession-proof”; English county cricket looks much less robust. Of course there are winners and losers.

Even at the top, not all is rosy. Mr Maltby detects “cracks” in sponsorship as well as advertising. For example, cars in the National Association for Stock Car Auto Racing, or NASCAR, are no longer festooned with logos over every square inch. Some NASCAR teams have merged and selling the right to be a sport’s official beer, say, may get harder.

This is not a good time to be looking for a sponsor to name a new stadium or for a lender to finance it. But the world of sport can console itself. In hard times people need escapism more than ever, it seems. They like heroes to watch and cheer. And still they are willing to pay.