You said some of the things are very predictable as far as your revenue streams. What gives you comfort as far as predicting what’s going to happen?
A good part of my business truly is somewhat predictable. At the league level, we generate revenues for the teams from three primary sources. One is our national TV contracts. We’ve got deals with Fox, with ESPN, with Turner that generate a substantial amount of revenue for clubs. Plus we have national sponsorship deals that we provide that assure revenues to all the clubs. And third, we have licensing revenue. If you see anyone wearing a Yankees cap, a Red Sox cap, or any cap or jersey, all those marks are licensed through our office in New York City. It’s divided equally 30 ways, so there’s an equal share in all revenue among all the teams.
At the team level you do find some differences in revenue generation. Teams have local TV contracts. Markets like Boston, New York, and Chicago have a much higher source of local revenues, so it creates some revenue disparity. But the revenue is contractually obligated, typically for 10-plus years. So even in times like this, it’s a fairly stable source of revenue — one that you can count on for clubs to pay their bills. They have gate receipts that start with season tickets. While season-ticket renewals tend to run in the mid-80 percent range overall, it’s probably lagging a bit this year. Clubs have to be very flexible this year in allowing extended payment plans and other innovations. Renewals tend to come out in the late fall and early winter. And so you can use that as a gauge for how things are going to be going.
The schedule will dictate an awful lot of how a team might perform. If you are a team in the National League and you’ve got the American League East coming to your town, if you’ve got the Yankees and Red Sox coming, you can count on those dates even if they’re weekday dates. You can also count on moving tickets that weekend, and package them with other dates.
So there are some pretty good metrics we use to forecast our revenue that we can count on. The sponsorship revenue is probably one the softest places. As I was going through the club reports for December and discounting or rejecting some on the bases of their 10-percent-down cases, I saw that one club in particular was projecting that their sponsorship dollars would be the same in 2009 as it was 2008. And I looked at the market and I thought there’s absolutely no way in this economy, in this market that you’re going to be able to keep those sponsorship dollars. And it was true.
In reaction to the economic downturn, some potential sponsors are pulling back on luxury boxes and some very big underwriters for major league baseball, like Bank of America, are under pressure to pull back because they’re taking government funds. How do you account for that or even anticipate something like that?