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Sports face a tough future amid fears of a prolonged recession

Sports face a tough future amid fears of a prolonged recession
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First Published: Wed, Dec 17 2008. 10 03 PM IST

 Shrinking budget: Former champion Subaru, the automotive division of Fuji Heavy Industries, has pulled out of the World Rally Championship because of the global financial crisis and falling car sales
Shrinking budget: Former champion Subaru, the automotive division of Fuji Heavy Industries, has pulled out of the World Rally Championship because of the global financial crisis and falling car sales
Updated: Wed, Dec 17 2008. 10 03 PM IST
Milan: Sport is less vulnerable than other industries to the highs and lows of financial markets but it has still suffered in 2008 and faces a tough future as fears of a prolonged recession spread to every sector of the economy.
Shrinking budget: Former champion Subaru, the automotive division of Fuji Heavy Industries, has pulled out of the World Rally Championship because of the global financial crisis and falling car sales. Jean-Pierre Belzit / AP
Sports heavily reliant on the auto and financial sectors have been in the firing line and experts wonder if signs of recovery will surface before 2010.
“It’s still too early to say how big any problem will be. It’s maybe a problem like the housing market, like the banking sector, for six months, nine months, maybe 12 months,” said Richard Worth, chief executive of European sports marketing company Sportfive. “Golf and Formula One may have more problems but it’s not forever, it will come back.”
Sponsorship has been most affected by the global downturn while companies and families are cutting back on non-essential spending.
Japan’s Honda Motor Co. Ltd withdrew from Formula One this month because of worsening conditions in the auto industry and FIA (Fédération Internationale de l’Automobile), the sport’s governing body, proposed radical cost-cutting measures, including the possible use of standard engines from 2010. Suzuki Motor Corp. pulled out of the World Rally Championship this week and a day later former champions Subaru, the automotive division of Fuji Heavy Industries Ltd, followed suit.
In the US, golf’s PGA Tour is considering replacing some struggling auto and financial sponsors. Next year’s LPGA Tour will feature three less events than in 2008 while Major League Baseball (MLB) and the National Association for Stock Car Auto Racing have been hit by job cuts and a dip in attendance and sponsors.
American International Group Inc.’s bailout by the US government raised concerns over the future of the insurance firm’s £56.5 million (about Rs417 crore) deal with Manchester United, one of the world’s more marketable soccer clubs. “One thing for sure is that the sponsorship market is going to be difficult. And it is going to be very difficult in the financial sector,” Worth said.
Television deals are in a better position to weather the storm due to longer-term contracts and a global audience but terrestrial broadcasters dependent on advertising are feeling the strain.
“Sponsorship will be most affected, while the impact on TV deals will be measurable in three to six months,” said Andrea Radrizzani, CEO of Singapore-based media agency MP&Silva.
Many analysts agree that top-level soccer, which stirs up passion in 73% of Europe’s population, is avoiding the worst of the crisis because of its global fan base and long-term sponsorship deals, but clubs may be forced to pay the price for their high debt exposure. English soccer alone has amassed debts of around £3 billion at all levels of the game and David Triesman, chairman of the English FA, said in October he could not rule out a top club falling into receivership.
Dan Jones, head of the Sports Business Group at Deloitte consultancy firm, said he expected European soccer revenue to be flat for this season.
The total European soccer market grew to €13.6 billion in 2006-07, a €1 billion increase in revenue on the previous year, according to Deloitte’s last annual report.
“I think what we will see is that 2008-09 revenues will level out, I expect that they will be pretty flat but they will not collapse,” Jones explained.
However, Deloitte’s top expert does not see a huge impact on soccer ticket sales in the short term.
West Asia and Russia are still considered safe havens for sports business while Hong Kong and Indonesia are feeling the pinch, experts said.
“American and European markets will be able to withstand the pressure,” said Worth, whose Sportfive group held television rights for some of the year’s top sporting events, including June’s Euro 2008 soccer championship. “Asia is a new market, it’s less mature and that’s where the first problems will come.”
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First Published: Wed, Dec 17 2008. 10 03 PM IST