The Sports Business Journal reported recently that the National Basketball Association will take out a $175 million loan from Bank Of America and JPMorgan to bolster its ability to prop up teams suffering from the economic downturn. The money comes at a whopping 8.27% interest rate. Perhaps the NBA could have received better terms by borrowing the money from LeBron James.
According to another SBJ report, the NBA expects gate receipts to stagnate, while sponsorships for events, venues, publications and team-related products have become a very tough sell. The players are also suffering, with many endorsement contracts bringing in half of what they did during the recent boom times.
Overall sponsorships for the league are also up for renewal, and only a Hail Mary bucket could help it avoid a sharp decline in the revenue from these rights.
The NBA is not alone in this decline. All pro sports, from the NFL to NASCAR, are struggling to find replacement sponsors for companies that can no longer afford the cost and the perception of fiscal irresponsibility of sports sponsorships. Minor sports such as arena football have already canceled entire seasons, and I expect that before the economic crisis is over, we'll see some pro teams in the three major sports on life support.
I mean, while we're bailing out banks, automobile manufacturers, and insurance companies, can't we spare a few billion....