Sports World Bleeds Billions
Can the sports industry survive the coronavirus pandemic?
In the midst of the coronavirus pandemic, but multi-billion dollar sports industries have lost a large percentage of their revenue.
With the cancellation of the Olympics and NCAA’s March Madness basketball tournament, along with indefinite delays to the MLB, NHL, WNBA and NBA seasons, the sports industry is predicted to lose a total of $12 billion.
The ultimate loss could surpass this estimate if the worst-case scenario for sports rings true: cancellation of the entire MLB and WNBA seasons, no NHL or NBA playoffs and, most catastrophically, no football. If the NFL and college football seasons are delayed, the predicted loss in revenue is expected to double.
Northwestern University Athletic Director, Jim Phillips, spoke on the possibility of a shortened football season.
“There’s absolutely a possibility that a football season may not happen and that we may not be ready for college football or any of our fall sports across college athletics or professional sports,” said Phillips. “But I always try to stay on the optimistic side and also to try to remain hopeful.”
To visualize the impact of a shortened or cancelled college football season, look at last year’s NCAA football champion, Louisiana State University (LSU).
In the 2018-2019 academic year, LSU’s athletic department brought in $8.8 million in net profits. However, LSU football brought in a whopping $56 million in profits, while the rest of the athletic programs brought net losses of $47.2 million.
With the likelihood of a shortened football season, many men’s and women’s sports on college campuses could lose scholarships, funding and benefits. Universities are obligated to continue payments for student-athletes’ scholarships, housing, food and much more, even if they can’t compete in their sport.
The 68 team NCAA postseason basketball tournament, known as March Madness, usually generates the highest revenue behind football. The cancellation of this three-week tournament led to a missed potential earnings of $375 million.
An anonymous Power 5 Conference athletic director mentioned that the cancellation of the tournament will have a long lasting effect on college sports.
“There’s just going to be less money to go around,” said one major conference athletic director. “How much less, and for how long, we don’t know. But we need to be ready to adjust to that.”
The long road ahead to recover from the absence of the NCAA men’s and women’s tournaments could spill over into interfering with the new legislation passed in California that will allow collegiate athletes to profit off of their names and likeness.
Fortunately, the NCAA anticipated for a catastrophic cancellation or suspension of their men’s and women’s postseason basketball tournament 15 years ago, and saved $400 million in preparation.
The NCAA distributed this safety net to schools to help them recover from the cancellation. Unfortunately, many professional sports leagues have not been so lucky.
In 2019, MLB planned to reduce Minor League Baseball from 162 teams to 120. Owners, fans and minor league players across the country met this plan with outrage and defiance.
However, the coronavirus may have hurried this plan along as many minor league organizations have been hit hard. Even if games can be played at neutral sites without fans, these small organizations lack the revenue streams from TV contracts to keep them afloat, which could result in the closure of these farm systems.
Different revenue problems haunt teams in the Big Leagues. With no fans at games, there will be no ticket sales which will negatively impact a team’s per capita revenue–the accumulated amount of concessions, merchandise, and parking fees that are sold. Across MLB, the loss of per capita would result in an estimated loss of $2 billion.
“Our clubs rely heavily on revenue from tickets/concessions, broadcasting/media, licensing and sponsorships to pay [player] salaries,” MLB Commissioner Rob Manfred stated. “In the absence of games, these revenue streams will be lost or substantially reduced, and clubs will not have sufficient funds to meet their financial obligations.”
On March 11, the NBA shut down for the seeable future. One day later, NHL followed suit and cancelled the rest of their regular season, with the question of the playoffs still up in the air. Not only do home playoff games usually sell out, they are also nationally broadcasted. To not have a postseason campaign severely impacts teams and their ability to pay staff members, as well as large broadcast stations such as NBC and ESPN.
Another concern in the world in sports is how the pandemic will affect women’s sports. Traditionally, female sports leagues have had to work extra hard to cultivate their brands, generate marketing strategies and increase overall viewership. With the coronavirus suspending the WNBA’s season as well as the National Women’s Soccer League (NWSL), many female players could see a major dip in their salaries, and these leagues that already face unequal pay, viewership and revenue streams could be in serious trouble.
And finally, one more party that is losing money in the absence of sports: team employees. Between the MLB, NHL and NBA’s cancelled seasons, workers for North American teams will lose approximately 19.5 million hours of work, totaling upwards of $370 million. Even though most team owners, and even some players, have offered compensation checks for their employees in this time of financial uncertainty, the checks do not outweigh what the workers would normally be making.
We live in a new reality for the sports world. Teams forecasted revenue and cash-flow predictions for 2020 will not be reached, and the impact of this is still unknown. While this pandemic continues to remain prevalent around the world, the sports industry will have a harder time adjusting than most. All we can do, as sports fans, is hope that games will be back soon so we can go back to experiencing the unpredictable entertainment that defines us as fans.
Nic Carpino contributed reporting