- The Washington Times - Sunday, June 9, 2002

Ed Goren knows the paradox all too well. Last year, Fox Sports aired the most-watched baseball game in 10 years, posted the best national ratings of any network televising the National Football League (NFL) and registered the largest TV audience for the Daytona 500.A fiscal winner for the network? Hardly.
Mr. Goren, the president of Fox Sports, finished the year writing down $909 million in losses, the result of record broadcast-rights fees and an anemic ad market.
The news sent shock waves through the TV and sports industries, as well as Wall Street. But it shouldn't have, according to Mr. Goren.
"Either we are the dumbest businessmen in network television, or we are just being honest," he said. "I believe in the next few months you will see write-downs totaling $1 billion. We can't be the only ones."
In fact, Fox's situation represents just a small piece of a much broader economic malaise that is spreading quickly across the entire sports industry.
Consider the developments in just the past few months:
Major League Soccer (MLS) folded its Miami and Tampa franchises, the Arena Football League eliminated four teams for this season, and Major League Baseball (MLB) said it still intends to cut at least two teams.
Long-planned stadium and arena construction projects in New York, Phoenix, St. Louis, Pittsburgh and Miami were killed or are in danger of being canceled.
cAttendance dropped for many leagues. MLB attendance is down 6 percent this year, and early season turnstile counts for the Women's United Soccer Association (WUSA) also are failing to match 2001 numbers.
Stadium- and arena-naming rights, once the hottest commodity in sports sponsorship, plummeted in value. Operators of the Louisiana Superdome have unsuccessfully sought a naming-rights sponsor for nearly a year and recently cut their asking price by almost half. Corporate bankruptcies of Enron Corp., PSINet Corp. and others have flooded the market for stadium-naming rights.
Television ratings continued to fall. College football's title game in January posted its worst ratings since the creation of the Bowl Championship Series. The National Hockey League (NHL) All-Star Game in February attracted its smallest audience.
A recent report by Morgan Stanley Dean Witter predicted that the ABC, CBS and Fox networks will combined lose as much as $4 billion on sports-rights contracts between now and 2006.
The current state of big-time sports is a stark contrast to the heady days of the mid-to-late '90s. Between 1993 and 1999, 15 new teams began play, and 42 stadiums and arenas were constructed for the NFL, NHL, National Basketball Association (NBA) and MLB. Eight leagues of national prominence also were created. But while sports retains its vise-like hold on American culture, the business climate in which it operates has changed.
"I think in the next five years you're going to see [team] bankruptcies," said Tim Lieweke, president of Anschutz Entertainment Group, which owns parts of six of MLS' 10 teams, the NHL's Los Angeles Kings, and several European soccer and hockey teams. "Arenas will close. You're going to see a league or two that's going to Armageddon."
MLB arguably is leading the charge to disaster.
Commissioner Bud Selig has worked hard to sell the idea that the game has enjoyed a "renaissance" since the 1994-95 strike by players. But underneath the spin lies serious trouble: a labor war brewing with the players, sagging ratings, baseball's still-active attempt to eliminate two franchises, the competitive and fiscal imbalance between rich and poor teams, and the leagues' overall grim financial state. Mr. Selig said MLB lost $519 million in 2001.
Baseball fans have responded with a collective shrug this season: Nine stadiums have already posted record lows.
The NBA, too, is being forced to retool despite the much-celebrated return of Michael Jordan to the hardwood. In its new TV contract with ESPN, ABC and TNT, the league slashed its exposure on network television and will almost exclusively be seen on cable, which still does not reach about one-third of U.S. TV households.
Why the switch? NBC, the league's longtime TV partner, was losing about $150 million per year on the NBA a combined result of the weak ad market and playoff ratings that have fallen 31 percent since 1998. No other broadcast network was willing to make a large financial commitment to the NBA under such conditions.
"There's an old saying that sports are recession-proof," Mr. Goren said. "I have a hard time these days selling Rupert Murdoch on the fact we're recession-proof." Mr. Murdoch is Fox News Corp.'s chairman.
So what is to blame for the industry slowdown? As with explanations for baseball's home run boom, there is no one easy answer. Rather, the general state of the economy, ever-rising ticket prices, increasing demands on free time, labor strife within pro leagues, duplicitous team owners, boorish millionaire players, lengthening game times and competing forms of entertainment play a role to varying degrees.
"Our fans in the 21st century are very different from our fan base in the 20th century," NFL Commissioner Paul Tagliabue said. "Their habits are different, their attitudes are different, the ways we need to connect with them are different."
But in simpler terms, all industries go through down cycles at some point, and it appears sports is well ensconced in its own. A decade of explosive growth created false expectations of easy success and boundless growth, but the low cycle has acquainted the industry with a new, harsh reality.
The XFL (Xtreme Football League), MLS, the WUSA and the Women's National Basketball Association (WNBA) all started play in the past six years, each expecting to quickly carve its own powerful niche in the crowded sports marketplace.
Instead, the XFL died a quick and ugly death, lasting just one season and losing $70 million. MLS has lost more than $250 million over six seasons and shut down its Miami and Tampa franchises earlier this year. The WNBA, which has lost millions in each of its five seasons, and the WUSA are still trying to resonate with mainstream sports fans and don't have mass popularity or profitability in their near-term sights.
"It will be some years before we fully turn the corner," said MLS Commissioner Don Garber. "Collectively, we will not turn a profit in the near future. We are still in a development mode with respect to building our fan base and building the kinds of stadiums we need to showcase our sport."
Also playing a significant role in the industry downturn is a broad lifestyle change among children and teen-agers. Corporate dollars and adult fans are the primary economic drivers of sports today, but children are those of tomorrow, and their interest in professional and major college sports is a fraction of what it was even a decade ago.
The participation of children in baseball, for example, is down 20 percent in the last three years and trails even that of in-line skating.
"Kids today aren't gym rats like they used to be, certainly not on any mass scale. They're not schoolyard rats," Mr. Goren said. "They've been far more adept of late developing their game thumbs and becoming great video game players. That unquestionably has an effect on interest in sports, both spectator interest and viewer interest."
Since there was no one fiscal sonic boom that sent sports into its funk, there almost certainly won't be one to herald recovery. And getting a sizable push from a broad economic expansion looks at least months, perhaps still years, away. In the meantime, many leagues and teams are investing unprecedented time and resources into grass-roots marketing to win back, quite literally, one fan and one viewer at a time.
Several team owners, including the Washington Capitals' Ted Leonsis, Mark Cuban of the Dallas Mavericks and Howard Schultz of the Seattle SuperSonics, personally answer every letter and e-mail from fans. Discount-ticket nights, fan focus groups, and "owner for a night" events in which fans can suggest and implement operational changes are spreading. New broadcast agreements between leagues and networks regularly include provisions for Internet rights, additional TV programming and other joint ventures to reach fans not watching as many live games.
The collective result is a higher degree of salesmanship than seen on most used-car lots.
"If we lose our relationships with the core consumer and overly focus on economic models, we'll turn ourselves upside down," said Mr. Schultz, who recently bucked NBA tradition and opened his arena early to allow fans to watch pre-game shoot-arounds and get autographs. Thousands turn up for each game, and the atmosphere is not unlike that during batting practice in baseball.
"We have to remember that success in pro sports is not an entitlement," he said.
Despite the slowdown, economic success stories and growth still do exist within pro sports.
The NHL recently set its fourth straight league attendance record and boosted network TV ratings 29 percent this season, a rather remarkable feat considering the strong chance of a work stoppage in the sport in 2004. NASCAR continues to expand in nearly every measurable indicator, and golf also shows very strong ratings when Tiger Woods is contending in a prominent tournament. ESPN remains a dominant force within sports broadcasting and publishing, even amid the troubles of its corporate parent, Walt Disney Co.
"We feel like we're poised for significant future growth," said NHL Commissioner Gary Bettman. "The key is executing on every area of our operation our product on the ice, our product on TV, our international development, creating a sense of balance and franchise stability."
The Washington Redskins have become the most lucrative sports team in the world, posting more than $220 million in annual revenue. The team enjoys a potent combination of the NFL's largest stadium, which it owns; the league's most expensive tickets; an incredibly loyal and willing-to-spend fan base; and its share of a massive national TV contract. But even owner Dan Snyder concedes the uniqueness of his situation.
"There are a lot of better businesses than sports if all you're after is financial return," he said.


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