Madison Square Garden owner James Dolan files for bankruptcy – but what is the future for sports? | R, y, a, n, , c

The news out of bankruptcy court this week is both intriguing and frightening. One half of American basketball’s historic New York Knicks franchise, James Dolan, has filed for Chapter 11 bankruptcy protection, saddled with $4.7bn in debt and crippled by the declining popularity of the Knicks.

This news offers a clear snapshot of a sports team not yet ripe for a successful relegation bid. The other half of the US sporting-team economy, in which one-sixth of teams are currently insolvent, feels far less perilous. Yet, while the financial crisis may be long gone, it has not totally departed. It’s still causing carnage in the sports world.

The US sports-team bankruptcy index, published by Aspire Financial Services, has climbed steadily since a peak in 2009 of 2.54 insolvencies for every 100,000 Fortune 500 companies. The average in 2017 was 1.91. The index does not distinguish between bankruptcies and bankruptcies. It has climbed because debt-saddled teams have pushed out fans and created circumstances – from increasing ticket costs to demand caps – which make attending low-margin events less attractive. Moreover, teams would rather cannibalise existing revenues – especially merchandising – by selling their team names to corporate sponsors, rather than bid to put up new arenas.

Saddled with debt? Was any 2017 season a bust? Read more

Is sports bankruptcy an existential threat to sports teams, which are becoming less stable business units on the basis of tighter stadiums, declining TV audiences and fan protests? Some might expect that a club in the business of building loans rather than selling them would shoulder its consequences better than a team in the business of selling. And, indeed, owners have faced a one-two combo of tumbling revenues and consumer discontent. The Youngstown, Ohio, General Motors co-op that invested heavily in renovating its stadium after the city declared bankruptcy in 2011 ended up losing almost 70% of its original capacity to 7,098 in 2012 and 2013. The Astros, after investing heavily in new stadiums after an economic depression, now can’t fill them when they have discounts.

There is something worth seeking – a malign malaise that has taken root in the sports franchises that business models, while still more robust than their funding model, are evolving into a thing of the past. And so I am as guilty as anyone of being shocked by the step collapse of the Rockets, the New York Knicks and the Oakland A’s teams. Why did the New York Knicks have two nine-game losing streaks in the same season? Why are the people going to rager in the hallway? Why do we have Thunder Mountain water fountains at half-time? The bankruptcy court is not so much a destination as a cleansing experience, not necessarily the best route to relieving teams of their debt, but hopefully an indication that – for all the bluster of the boardrooms – this and every other sports team could not be surviving as an ace-in-the-hole.

Leave a Comment