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An Industry Panel Warns of Difficult Financial Times Ahead for Sports Sector

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The panel, appearing at the IMG World Congress of Sports, had some interesting, if not grim, predictions regarding near-term financial pressures facing professional athletics.  To wit:

"We're facing the greatest economic challenge of all of our lifetimes," said Tim Leiweke, president and CEO of Anschutz Entertainment Group, which oversees arenas including the Staples Center in Los Angeles and owns the NHL's Los Angeles Kings, two Major League Soccer franchises and cycling's Tour of California. "We have never seen anything like this and I pray that we never see anything like this again. And if you look at our industry, sports in particular ... we have to reinvent ourselves."

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The five biggest pro sports in North America — baseball, football, basketball, hockey and NASCAR — have taken at least some sort of hit from the economic downturn in recent months. The NFL reduced its work force by 169 people, the U.S. Olympic Committee recently lost 54 employees and the NBA and Major League Baseball's Internet division laid off employees last year. Plus, hundreds of people who worked on NASCAR teams last year aren't trackside in 2009.

Leiweke also expressed concerns about potential future inflation, and how that may affect the cost structure of sports ventures.  NASCAR CEO Brian France had some additional comments that are particularly applicable to the struggles of several troubled MMA ventures:

"People that don't run their individual businesses as well as they should, and aren't recognizing getting cost out of their system as fast as possible," said France, who has seen longtime NASCAR cornerstones Ford and General Motors fight for survival in recent months. "You've got to reprice things for the various companies in our industry. Everybody is spending less ... or not spending at all. So you've got to reprice it and that says something.

"No one's having a good moment in this economy," France added. "The question is, how do you come out of the other side?"

France's thoughts certainly aren't complicated or unique, but the basic premise is important for anyone who is trying to pilot a successful sports-related business.  The term "deleveraging" that's a commonly used term in the business press describes nothing more than the shedding of debt.  It's indicative of a situation where financing is less available, thus at higher rates, because investors' appetites for risk have diminished.  The importance to sports, and particularly MMA, is that less capital will likely be available for new ventures to be initiated, and there will be less for existing ventures to expand.  At an even more basic level, consumers may fore go sporting events and merchandise due to financial restraints.  This is probably quite evident for Las Vegas events - a location that's experiencing distinct economic struggles.

In my estimation, the more worrisome aspect of the situation deals with the availability of sponsorship dollars.  Even if the core business is ticking along nicely, a promotion (and its fighters) will likely feel some financial pain due to the fact that sponsors are fewer and spending less.  That's more of a macroeconomic concern rather than a sports or entertainment-specific one.

Of course, this isn't a new issue.  The point to take away from this particular panel is that, in their opinion anyway, there are new financial struggles ahead.  There's much going on in the larger world whether it be political or private action.  Many of the actions being taken are quite large in size and scope.  Not only does the current slowness of the economy pose problems, but the initiatives to encourage and facilitate spending will have real, future effects.  No one can say for certain what they will be or what impact they will have.  It is, however, important that those shepherding an MMA venture be cognizant that effects - both positive and negative - will emerge at some point, and these leaders must be responsive enough to deal with issues that may not exist in the current playbook.