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Michael Brush // Michael Brush

Company Focus10/21/2009 12:01 AM ET

How the credit crunch cost the Cubs

Lots of sports teams -- the Knicks, Nets, Rangers, Cubs, Dolphins and more -- could change hands as owners feel the recession's bite. Here's how investors can get in on the action.

By Michael Brush
MSN Money

While avid sports fans brave the chill to follow baseball playoffs, NFL matchups and hockey faceoffs this October, team owners fighting a cold economy are focused on another game.

They're playing "Let's Make A Deal."

No fewer than a dozen professional sports teams -- an unusually large number -- are for sale or have recently changed hands as the credit crunch and recession cause fans to tighten their belts and owners to pare their businesses to the core.

Just last week, the Chicago Cubs, one of the sports world's most famed franchises, filed for bankruptcy as part of a sale by struggling Tribune, which needs to raise money to pay off lenders.

Other teams in play or recently traded include hockey's Montreal Canadiens and New York Rangers, football's Miami Dolphins and basketball's New York Knicks and New Jersey Nets. With them on the block are sports landmarks including the Cubs' Wrigley Field and New York's Madison Square Garden, the latter part of a much-anticipated spinoff later this year.

It's a trend that shows just how widespread the impacts of the credit meltdown really are -- and that may just let a few investors become sports team co-owners, an elite position usually reserved for billionaires.

Trade time

There are three reasons so many teams have ended up on the trading block:

1. The sports business is soft. Companies have cut back on luxury suites and season tickets. Fewer fans are coming out for a day in the stadium. "In this economy, fans are saying, 'Guess what -- I might just watch it on TV,'" says Richard Honack, who teaches sports marketing at Northwestern University's Kellogg School of Management.

Major League Baseball attendance dropped 6.6% in the regular season, which just closed, compared with the year before. Attendance at National Football League games is down 1.5% so far this year (and TV ratings are up, supporting Honack's theory). National Basketball Association attendance for the 2008-09 season edged up 0.72%, but more than half of its 30 teams saw declines.

"Unquestionably, the economy has hurt teams," says Mark Cuban, who owns the NBA's Dallas Mavericks. "It's more difficult to sell tickets."

Video: Are the Cubs recession-proof?

While Cuban's playoff-caliber team has posted seven years of sold-out games, the economic slump is especially hard on marginal franchises in any sport. Embarrassingly, the Phoenix Coyotes, a money-bleeding NHL franchise that's on the block, had to start discounting seats on opening night this year.

2. Sponsorship has slumped. Companies have also cut back on sponsorships, so sports events that relied on financial-services companies and automakers for support have been particularly hard hit. Sponsorship spending overall will grow just 1.1% this year to $16.79 billion in North America, compared with 15% growth last year, says IEG, which tracks sponsorship spending.

3. Team owners feel the crunch. The flip side here is that the economic slump has created serious financial troubles for many owners, for whom a team may be just a side business. Such owners are unloading even profitable teams to raise cash.

"In these challenging economic times, a lot of owners are in a liquidity crunch, forcing them to sell," says Laurence DeGaris, a sports marketing professor at the University of Indianapolis.

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The Cubs are a great example. They're currently owned by Tribune, a newspaper publisher and TV station operator that's been knocked into bankruptcy by the weak economy. It's selling the Cubs -- along with storied Wrigley Field -- for $845 million to raise money to pay off creditors as it refocuses on its core businesses.

Here's another: New York real-estate developer Bruce Ratner recently agreed to sell the New Jersey Nets to Russian billionaire Mikhail Prokhorov. Because banks had tightened credit demands, Ratner needed to raise funds to keep alive a real-estate project that would move the Nets to a new arena in Brooklyn.

So who's lining up to buy these teams?

Continued: Trophy teams

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