Could Intel’s cable killer undermine the entire sports business model?

The New York Times ran a piece yesterday on Intel’s plans to offer TV channels via the Internet, and cable and satellite companies’ plans to fight tooth and nail to stop them. All of which is very interesting if you care about telecoms and tech giants beating each other over the head with lobbyists — or, as sports economist Rod Fort notes, if you watch sports:

The implications if Intel is successful go far beyond whether you’ll be watching future NBA postseasons on your TV or your computer. Cable revenue, always a big deal for the sports industry (except for the NFL, where it’s swamped by network cash) has become an even bigger deal in recent years, as cable channels have thrown crazy money at the only events that people still watch en masse without DVRing through the commercials. To earn it back, they’ve — well, in part engaged in massive layoffs, but mostly turned around and gotten cable and satellite providers to pay through the nose for the rights to carry the sports channels. Hence the growth of “sports surcharges” that have caused your cable bill to head skyward. Sports teams, meanwhile, especially those in large cable markets, have been raking in record profits; it was the promise of future cable riches (albeit now slightly less rich, thanks to MLB revenue sharing rules) that led the Guggenheim Group to plunk down a ridiculous $3 billion for the Los Angeles Dodgers.

And here’s the part where I cop out by not actually answering the question raised in my headline: I don’t pretend to know precisely how adding Intel (and presumably other Internet-based providers) as competition will affect the cable-to-sports-owner money pipeline, but it certainly has the potential to be a doozy. More options for viewers could lead to a price war that would drive down cable fees, or it could lead to a programming war that could drive them up. Putting more content online, meanwhile, can only make piracy easier (I’m sure Intel has plans to keep people from re-streaming their services, just as I’m sure there are already people working to get around them), speeding the day when TV sports becomes just another thing that you look for illegal downloads of. Not to mention the day of reckoning for sports leagues to figure out those nasty local blackout issues.

Either way, it’s a huge bomb waiting to be dropped into what for the past 30 years has been a fairly simple system of steadily increasing payments from viewers to cable systems to cable channels to the pockets of sports team owners. It’ll likely be several years to a decade before we see how things will shake out, but for any teams making plans for the 2020s, it might be a good idea not to count their cable money before it’s hatched.

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“Sports welfare” is bad, says site co-owned by MLB

Patrick Hruby of Sports on Earth wrote a long, long, long (did I mention it’s long?) article yesterday on “sports welfare” that touches on many, many issues during the course of its length, which is clearly an example of this “long-form journalism” that several sites are now trying to reclaim by running articles that are so long that—

So anyway, here are some of Hruby’s more notable points, condensed to human scale:

  • Getting rid of sports welfare could solve the “fiscal cliff,” because MONEY.
  • The Tiger Woods Foundation and the Baseball Hall of Fame have both received federal grants.
  • The public cost of stadiums between 1991 and 2004 could have built three aircraft carriers.
  • Judith Grant Long’s new book “Full Count: The Real Cost of Public Funding for Major League Sports Facilities” estimates that the average stadium costs $70 million more than its sticker price thanks to hidden subsidies. (Note: Book not actually called that. Also, Long’s updated figure for hidden subsidies is now $106 million.)
  • The Cincinnati Bengals stadium deal was a real bad one for taxpayers, something you may have heard before.
  • Sales taxes are regressive, and car rental taxes hit out-of-towners who may not even be going to the stadium.
  • Bill Veeck came up with some creative sports tax loopholes.
  • Tax-exempt bonds for sports facilities cost the federal government a whole lot of money.
  • Major League Baseball is a co-owner of Sports on Earth, which is disclosed in this article but not in other baseball articles on the site.
  • College athletic departments are non-profits, but they pay their head coaches a whole lot of money.
  • The Pentagon sponsors a NASCAR team.
  • Sports team owners (and Mitt Romney) want to cut government spending, but not on themselves.

Okay, so add it all up and what do we have? A whole lot of useful links to interesting articles on various elements of the big-money sports industry, certainly, and a helpful reminder — if we really needed one — that many rich people hate government spending except when it’s on things that they like. That’s an important subject for mainstream sports sites to be tackling, so it’s good to see that Sports on Earth (which was launched this summer as a joint venture of MLB Advanced Media and USA Today) is taking it on.

If there’s a weakness to this piece, it’s in making clear what exactly Hruby thinks should be done about this, other than cut it out already; there’s little discussion of the campaigns (mostly city-by-city) that have been conducted to fight sports subsidy deals, or what legislation has been proposed to rein them in. Maybe that can be the topic for a 4,500-word followup.

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Sports bubble watch: Yanks draw another record low

And it’s another record low attendance at the New York Yankees‘ new stadium:

An announced crowd of 40,081 came to the Bronx on Thursday night to watch Yankees-White Sox, setting a new low for attendance at the new Yankee Stadium.

The previous low was an announced crowd of 40,267 on April 5. Capacity at the new Stadium is a little over 52,000.

In case you’re wondering how overall MLB attendance is doing so far this year, it’s down about 2.3% at the moment, in line with the last time I checked, as well as with the per-season average over the last three years. It’s not a crisis just yet, but it is definitely a trend — and a further sign that the sports ticket price bubble is still deflating.

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NYTimes: Stadium subsidies on wane, except when they’re not

Aw, man: Favorite FoS punching bag Ken Belson of the New York Times wrote another inane stadium article last week, and I somehow missed it. A quick recap of the lowlights:

  • The headline: “Teams and Owners Find Public Money Harder to Come By.” Belson’s evidence? “In the last few years, owners of the Mets and the Yankees in New York, the Jets, the Giants and the Red Bulls in New Jersey and the Cowboys in Texas built stadiums that they financed primarily themselves.” Yeah, uh, not so much in the case of the Mets and Yanks, and the others got significant subsidies as well. More to the point, all of these teams got every penny that they asked for from the public — so it’s tough to argue that public money was any harder to come by for them.
  • Even Belson doesn’t seem to believe his own premise: He writes that “Cities that are short of cash can no longer afford to build stadiums, which is why teams in Sacramento, San Diego and San Francisco have struggled to win support for public subsidies.” (Actually, those cities’ teams have all been struggling to get support for stadium plans since well before the economic crash, but whatever.) He immediately follows that up with: “But in just as many cities and states, lawmakers, often desperate to appease fans, are finding new ways to help their home teams.” And then sports economist Dennis Coates points out that “no matter how often the public sector says no, the people who want to build a facility will come back to that well because no is not permanent, but yes is.”
  • Belson writes: “Public dollars made up less than one-third of the price tags for Citi Field and Yankee Stadium.” The actual figure is about 57%.
  • Belson notes that “a recent St. Petersburg Times/Bay News 9 poll showed that two-thirds of residents were against using taxes to pay for a new stadium, even if it meant the team would move,” citing this as an example of tea-party opposition to tax hikes. Except that a little historical research would have found that this isn’t anything new: Polls asking if people want their tax dollars used for sports stadiums have almost always found people overwhelmingly opposed, especially when a team hasn’t yet presented a full-court public campaign in favor of a stadium plan — as is the case with the Rays.
  • The Wall Street Journal already did this exact same story two months ago.

And so on. I probably shouldn’t blame Belson too much: He does get some information right, even if it doesn’t remotely support the overall thrust of his article. But it may not be his fault that tighter stadium subsidies got spun as a rising trend — his editor probably heard it at a dinner party.

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WSJ: “End of an era” for stadium building

The Wall Street Journal ran a piece over the weekend looking at the state of stadium financing, and concluding that:

  • “From New York to Florida to Arizona, some taxpayers are opposing agreements to fund baseball projects after a decadeslong boom in publicly financed ballparks.”
  • This can be seen in Mesa, Arizona, where, although a new spring training for the Chicago Cubs was voted in last week, “nearly 40% of voters objected to building the park by selling city-owned farmland and raising hotel taxes.”
  • “Even as some baseball projects go forward, often after delays and on smaller scales, the push back marks the end of an era.”

Not to take anything away from stadium opponents in Mesa, but: This is supposed to be a sign of a trend? Stadium votes winning by slim margins have a long and storied history (as do stadium votes losing, but the stadium getting built anyhow) — it’s the stadium referendum that wins by a landslide that’s the oddity. And stadiums facing “delays” are nothing new either, as witness the decade-long sagas around new stadiums for the Minnesota Twins and Florida Marlins that began in the mid-1990s.

Certainly, the horrible economy (and in particular its effects on state budgets) is hurting attempts to get sports facilities built, but stadium campaigns have hardly ground to a halt. As someone who speculated in 2003 about the tide beginning to turn against stadium deals — something I credited, in part, to local governments then mired in red ink — I know better than anyone that you can’t stop the push for publicly subsidized stadiums, you can only hope to contain it.

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Sports bubble watch: Team values crashing?

The New York Times has a front-page story today on the woes of sports team owners, who are finding that in the post-recession economy their investments may not have the guaranteed appreciation value that they’d grown used to during the bubble years. “It used to be you got bailed out when you sold your team even if you lost money year after year,” sports business consultant Marc Ganis tells the Times. “Now, you’re no longer assured of cashing out to cover your capital costs and losses.”

The evidence presented, though, is a bit sketchy: Aside from last month’s sale of the Tampa Bay Lightning at a huge loss from the $206 million its previous owners paid for the franchise in 2008, and the potential sale of the Charlotte Bobcats to Michael Jordan for less than they garnered in 2002, it’s mostly a list of team owners who ran into financial trouble, via such issues as divorce proceedings and bad real-estate deals, neither of which really has much to do with the value of sports franchises. It could well be that the sports-team bubble has popped, but we’ll need to see a few more cut-rate sales before we’ll know for sure.

The most interesting item in the Times piece: Congress is considering a major hike in the capital gains tax rate, which would certainly change the economics of franchise sales. It would also make the Veeck depreciation loophole much less lucrative, since owners would have to pay more in capital gains when selling a fully depreciated team.

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There are bailouts, and there are bailouts

Economist and New York Times columnist Paul Krugman is up in arms about President Obama justifying Wall Street executive salaries by comparing them to baseball player salaries, but he chooses an odd way of making the point:

Again: the president compares Wall Street paychecks to baseball players. That’s really bad messaging: first, baseball players didn’t trigger a global economic collapse, and second, the baseball industry isn’t the beneficiary of a massive and continuing taxpayer bailout…


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