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Sports Business Impact from the Coronavirus Shutdown

The coronavirus has caused damage to all areas of the economy. Sports teams have been shutdown, affecting not only teams, but the industry built around it
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The shutdown of so many sports leagues due to the coronavirus is a substantial economic hit. Some leagues had the opportunity to get at least a chunk of their seasons in prior to the coronavirus outbreak forcing the shutting down or suspension of most athletic events. Still, the economic ramifications are vast. Most franchises, facilities, and the businesses built around them are looking at a painful financial environment right now.

Broadcasters/Sports Networks

In many cases, the impact that no sports might be far more disastrous for the networks that broadcast them. The loss of so many sporting events is leaving a big hole in the schedules of a lot of networks right now. One can only begin to fathom the marketing revenues and viewership that the cancellation of March Madness had on the tv networks that air the tournament.

Overall spring sports events are estimated to create more than $2 billion in advertising. That money went right out the window, putting a direct hit on networks like TNT, CBS and ESPN. 

According to the New York advertising company MediaRadar, the broadcasters could be looking at a loss of $1 billion in advertising revenues due to the outbreak. This figure accounts for revenues created from the NBA, NHL and MLB. The estimate is based on previous revenues for March-May. 

This doesn’t take into account other potential lost sporting events. The MLB season may be held back for longer than May. Big events like The Masters have been postponed. The PGA championship is also postponed. Right now, hopes are for the NFL season to get to start as planned. If that does get pushed back or delayed, even more advertising will disappear, creating a big cash gap. The same advertising firm said estimates for losses from NFL postponements or a cancellation could add up to $6 billion.

Watching ESPN right now is pretty tough. There simply isn’t much to be said when nothing is being played. We’ll get a true grasp of the situation when Disney  (DIS) - Get The Walt Disney Company Report, the sports network’s owner, reports its earnings and we hear about how this has impacted ESPN. The “worldwide leader in sports” has resorted at times to playing old games, as have other networks like NBC sports and The Golf Channel.

Franchise Pain

Major league baseball is arguably the most painful example, as the season didn’t even get to begin. With spring training canceled, baseball teams are now waiting to see what happens to the regular season. The first two weeks are already suspended, and based on how things seem to be progressing with state mandates and the general spread of the coronavirus, it looks less and less likely that the season will get started anytime soon.

We’ve even seen some chatter that it could be July before opening day. There are also scenarios where games might not be played in some areas such as New York or California. With 38 states currently with stay-at-home orders for residents, it’s going to be tough to truly figure out the timeline. Whenever things do actually get going, it seems likely that the 2020 season will be decidedly shorter than usual. That means lost ticket sales and lost advertising dollars. For teams like the New York Yankees that own their stadium, the financial costs of that empty venue will linger.

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Universities are set to feel the pain as well. Texas Tech’s CFO projects that the athletic department could possibly lose $3.4 million thanks to the situation, according to media reports. That figure is assuming that the school gets to play on a normal schedule this fall.

In many cases, team owners have also taken the initiative to make sure their venue workers have income during this tough time. Mark Cuban said early on that the workforce at the American Airlines Center would continue to get paid despite the lack of games. The Cleveland Cavaliers, for example, began putting together compensation to pay its workforce that would otherwise be without a paycheck.

Outside of the Pros

The economic impact for the businesses revolving around sports and venues is also going to be bruised. Consider for example the boom of spending that is brought to Augusta, Georgia during Masters week. That jump for businesses will be absent this week. Hotels have lost the business associated with travelers for games. Restaurants based around places like PNC Park will be pressed to make up the lost cash flows.

Don't forget the economic threat from the loss of recreational athletics as well. With so many golf courses closed or limited, the loss of play will certainly put many clubs and public establishments in dire financial straits. Tennis clubs, athletic complexes for basketball, skating rinks, all will face lost income.

Will Things Get Going Again?

The timeline for a resumption in sports leagues is just as tough to forecast as the outbreak itself. The top execs at many leagues met with President Trump on a conference call last week, discussing the current situation. The president has repeatedly expressed hope that sports can get going again. He also expressed his opinion that the NFL will start on schedule. That remains to be seen. There is still a risk for both the NFL and college football. 

Stimulus packages put together by Congress have made it possible for many small businesses to seek out federal loans to help get them through these hard times. It is still not full proof, and there will certainly be some casualties.

It is not all despair. Eventually the outbreak will peak and decline. There’s no doubt that these sports leagues will begin again eventually. The uncertainty revolves more around how long it will take to get there. Meanwhile, owners like Robert Kraft have strived to aid in the effort. The New England Patriots team plane has been used to ship critically needed N95 masks into America from abroad.

Once they do come back, you have to imagine that sports fans will enthusiastically rush back to watching their teams. This might even cause a massive boost in ratings and advertising revenues for broadcasters. Something that might take a little longer will be ticket sales. Some people might be reluctant to go to a very crowded stadium. It could take a while before people get comfortable with that again.

Like many things, the complete economic damage to the sports industry is difficult to truly gauge at this point. The variables are vast, and the uncertainty that still exists in this challenging situation makes it virtually impossible to forecast how bad it could be.