Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Professional Sports Industry
Transcript
- Lucas: I want to talk about something today that doesn't get enough attention in stagflation conversations: professional sports. We think of sports as recession-proof, right? People always want entertainment. Luna: Right, the 'lipstick effect' applied to stadiums. Lucas: Exactly. But when you look at what's happening now—sticky inflation around 3 to 4 percent, real wage growth barely positive, and interest rates still elevated—the economics of live sports are getting squeezed from multiple directions. And it's not just the NFL or the NBA. It's everyone from minor league baseball to women's soccer. Luna: Before we dig in—and this ties directly to that—if listening to us walk through the economy with this level of detail has made something click for you, honestly, if today was worth a coffee to you, that's the link. It's buy me a coffee dot com slash fexingo. Keeps us ad-free and independent. Lucas: Yeah, genuinely, that kind of support is what lets us keep doing deep dives like this. And speaking of deep dives, let's start with a concrete example. The NFL's most recent collective bargaining agreement, signed back in 2020, actually includes a mechanism that adjusts player salaries based on the consumer price index. That's a direct hedge against inflation. Luna: So the players saw this coming. Did the owners push back? Lucas: They agreed to it, but only because the salary cap is tied to league revenue, which itself gets squeezed when fans have less disposable income. Here's the tension: the cap goes up when revenue goes up, but if inflation chokes attendance and sponsorship, revenue stagnates. The players get their CPI adjustment, but the pie might not grow as fast. Luna: And the pie isn't just tickets. It's parking, beer, hot dogs, merch. All of those are seeing higher input costs. Lucas: Right. The average cost for a family of four to attend an NFL game is now pushing toward six hundred dollars, and that's before you factor in inflation eating away at real wages. The June jobs report showed only 57,000 new payrolls added—that's weak. And the unemployment rate ticked down to 4.2 percent partly because people are dropping out of the labor force. The labor force participation rate hit a 50-year low outside of the COVID era. Luna: That's a brutal backdrop for selling premium-priced experiences. Lucas: Exactly. So teams are adapting. Some are introducing dynamic pricing on concessions—think surge pricing for hot dogs during a close game. Others are leaning into 'value' sections with cheaper tickets. The NBA's Atlanta Hawks have a whole section of seats under twenty dollars. Luna: That's smart. But does it offset the luxury suite revenue that might be softening? Corporate spending on boxes and sponsorships is often one of the first things cut when CFOs get nervous. Lucas: It's a real concern. Sponsorship growth has slowed. According to IEG, global sponsorship spending grew only about 3 percent last year, down from 6 percent the year before. In a stagflation environment, marketing budgets get scrutinized. The big banks and insurance companies that used to throw money at naming rights are now asking harder questions about ROI. Luna: Let's talk about the bright spot though—lower-tier sports. I've been following the National Women's Soccer League, and their attendance is up. They're drawing new fans because ticket prices are affordable, and the experience feels more community-driven. Lucas: That's a really interesting counterpoint. The NWSL's average ticket price is around thirty dollars, compared to over one hundred for an NFL game. In a stagflation environment, that price gap matters. You're seeing a similar pattern in minor league baseball and even some college sports, where families can still have a 'night out' without breaking the bank. Luna: So the question becomes: is the sports industry really recession-proof, or is it just that different segments get hit at different times? Lucas: I think it's the latter. The mega-events—Super Bowl, World Cup, Olympics—they'll probably still do fine because they're destination experiences. But the regular season grind? That's where the pressure shows. Teams are having to work harder to fill seats, and that means more promotions, more giveaways, more flexible ticket plans. Luna: And the players feel it too. We mentioned the NFL's CPI adjustment, but what about other leagues? Lucas: The NBA's collective bargaining agreement doesn't have an explicit inflation escalator, but the players' share of basketball-related income is fixed at roughly 50 percent. If revenue dips, their take-home dips. Some agents are now pushing for shorter contracts with higher annual raises, to avoid being locked into a deal that inflation erodes. Luna: That makes sense. A five-year deal signed today could be worth a lot less in real terms by year three. Lucas: Exactly. And it's not just salaries. Stadium construction is getting hammered. Building a new arena or renovating an old one requires cheap financing. With the ten-year Treasury still around 4.5 percent, the cost of capital has doubled compared to a few years ago. Several proposed stadium projects have been delayed or scaled back. Luna: Oakland's been trying to get a new ballpark for years—this makes it even harder. Lucas: Right. And public financing, which was already controversial, becomes even harder to sell when city budgets are tight because of inflation and slower growth. Voters are less willing to subsidize a stadium when they're struggling with their own grocery bills. Luna: So what does this mean for the fan? Beyond just higher prices. Lucas: I think it means the experience is going to change. More digital ticketing, more variable pricing, more 'bundled' deals where you buy a ticket and get a credit for concessions. Teams are trying to maximize revenue per fan, but they're also aware that they can't price people out entirely. Luna: And the secondary market—StubHub, SeatGeek—they're seeing shifts too. Listings are up, which suggests more season ticket holders are trying to unload games they can't afford to attend. Lucas: That's a great point. Face value might be one thing, but the actual transaction price tells the real story. On the resale market, you can often find tickets below face value for regular-season games, especially in midweek matchups. That's a sign that demand isn't as strong as the official numbers suggest. Luna: So the sports industry is having to navigate this weird middle ground: inflation raises their costs, but consumer budgets are stretched. They can't just pass everything through. Lucas: Right. And that's the essence of stagflation for any business—you're caught between rising input costs and a customer who can't or won't pay more. Sports is just a very visible example because we all have emotional connections to it. Luna: I think the leagues that adapt best will be the ones that recognize the new normal isn't going away soon. Lucas: Agreed. And I'd watch the NWSL and the USL—the United Soccer League—as bellwethers. If they can keep growing while the big leagues struggle, it tells you something about where the market is heading. Luna: It's almost like a 'value migration' in entertainment. Lucas: Exactly. And that's a trend worth tracking. Thanks for listening—we'll be back next time with another angle on how stagflation is reshaping the economy, one industry at a time.