Sports and Recessions - The Popular Games Will Go On

Skip Sauer makes an excellent point regarding why teams in the four major sports here in the US are likely to continue in spite of tough economic times, even if they are not recession-proof.

This is key. If you love sports, the great thing about it is that the best players will remain on the field of play whether their value is $10mm per year or $2mm per year. In contrast to the monetary figures, baseball attendance held up well during the depression. This is because teams lowered prices in response to declining nominal demand. [Note that the aggregate price level dropped 25% between 1929 and 1933.]. This should not be taken as evidence that sports are "recession-proof" since the financial side of the operations are inextricably tied to the aggregate economy. But the primary monetary cost for the major pro sports is in the form of player talent. Since the players earn such large rents over their next best alternative, the games will go on as scheduled, with the same cast of characters. Provided price adjustment takes place, the on-the-field-impact should be minimal, at least for the big three.

No, sports are not recession proof.  It's just hard to find the evidence in attendance studies because the impact is found, as Skip notes, in the prices.  When the NHL canceled its 2004-2005 season, most teams in the ensuing season lowered the prices to ensure that fans kept coming back.  A similar thing happened in MLB after the 94-95 players' strike.  And the underlying "habit" that is fandom, if that's what you want to call it, is likely to persist.

Anyways, this is the best explanation I've seen and it helps confirm my sense that the least-popular sports, those where the rents earned by the players are the lowest and where the finances are the most rocky, will be the first to go.  See the Houston Comets of the WNBA and the AFL season.

Skip is commenting on this Patrick Saunders piece in the Denver Post.