The NBA has suspended its seasons due to the coronavirus, but the impact on the sports business ranges wider than just the NBA. The NFL isn't even in season, but can reasonably expect an impact to business.
Furthermore, there may be an impact on state revenues, at a time when the U.S. economy needs its government to be cash rich.
Sports Illustrated senior analyst Bill Enright and Host Robin Lundberg sat down with TheStreet for the full breakdown.
Coronavirus Special Report for Sports Fans at Sports Illustrated
Lundberg's top takeaway? Losing sports hurts, but it may be needed testament for just how real the coronavirus situation has become. "Perhaps that is the best reality check of all for fans as to just how serious a situation this is," Lundberg wrote in a column on Sports Illustrated.
Another reality check? Markets continue to plunge as Wall Street comes to grips with the fact that virus is here to stay. As of 12 p.m. ET Thursday, markets were set to mark their worst week since the crash of 1987.
And the stock market isn't the only gamble at risk. Enright noted that the coronavirus could impact sports betting for the foreseeable future, from the NBA, to March Madness, to even the NFL season. "That's a pretty big chunk of, of tax revenue that the States are going to be missing out on," Enright said.
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TheStreet's Jacob Sonenshine: The NBA has suspended it season indefinitely. Not only is that a blow to fans, even if many would be afraid to go to games, but it could be a real blow to the businesses of teams and all parties with business models tied to sports fanfare for the rest of the corporate world, earnings will be dealt a double whammy from the virus. Firstly, revenues will be decimated as consumers stay at home and global supply chains are disrupted. Secondly, many companies, companies must continue to pay salaries and wages, shrinking revenues plus shrinking, operating margins spells disaster. And the end of the bull market here to discuss the impact on the sports industry is built and right. Senior analyst for sports illustrated and Robin Lunberg host for sports illustrated. Robin, we'll start with you. The totality of the MBA impact.
Lunberg: Well, I mean it's massive, right? I mean you're, you're talking about basketball related, uh, revenue that that's what helps pay the players and that's not going to be there for the time being. Now when you look forward in this scenario, Mark Cuban did say today of course the, the owner of the Mavericks that they, they may just push the season back. And I think that's the best case scenario. If they play in the summer and maybe the finals happens in August and that way you can get those games in or at least get the playoffs in, which would be great for sports fans. But this has a ripple effects all over the place, including two arena workers. Right. And Cuban also mentioned they might put a program together for them to make sure that, you know, those people get paid cause they're the ones really suffering. But I, I would expect this to continue, you know, the, the fallout here, I don't expect any sports league to be playing games, uh, very soon. I would expect March madness to be canceled. I would expect the, the, the star, or at least push back the start of the baseball season to be pushed back. The, the ripple effects of this are going to be astronomical. And we're all sort of reeling.
Sonenshine: Speaker 1: (01:44)
People have to get paid their wages. If we want some consumer spend in the economy and then nobody wants a recession. But this is a huge blow to profits of NBA teams. Wha,t if anything, could teams do until the summer when maybe we have a resumption of games?
Lundberg: I mean this is unprecedented, right? I'm not sure there's anything they can do. I mean, uh, you know, you're, you can't have fans in the arena was the first thing, but then you start having players contract the disease where to go bear of the jazz, Donovan Mitchell, uh, of the jazz so that these guys are going to have to be quarantined. So I just don't think there is an option. The only option is figuring out what you do once this is all figured out and how you resume play at that point because then you can start selling tickets again when you start playing the games. If this is under control, then you know, obviously the TV stuff plays itself out. But until then, I don't think there is an option. Unprecedented is going to be a word that's overused, but it is a word that applies.
Sonenshine: How are fans feeling about this? How are teams feeling about this? Where are we with that dynamic there?
Lundberg: Fans, I mean, fans are upset, but I think it's a reality check, right? It shows us how little sports actually matter even though they matter to us so much. Um, but you know, it hammers home because we usually use sports as an escape in times like this or a way to come together. And now sports are, are keeping us a apart if you will. But we're going to have to figure this out. And even if we can't turn to sports and we need to practice social distancing, we're going to have to get through this together.
Sonenshine: All right, Bill, I want to go to you here on March madness. There will be no fans at March madness. Tell me anything you know about.
Enright: Yeah, so the NCAA already came out and said they're not going to allow fans that March madness. Charles Barkley, one of the commentators for, for the tournament came out and said they should probably cancel the whole thing. And that's going to have an enormous impact for a lot of casinos, a lot of sports books, and a lot of state by state tax revenue. Because if you look at New Jersey, for example, where eight and a half percent of the tax revenue bet, uh, at sports books or 13% bet online, uh, last year for March madness, uh, casinos made 31 point $5 million. So that's a pretty big chunk of, of tax revenue that the States are going to be missing out on.
Then right now there's 16 States that have legalized gambling. So with with no revenues happening at all in March madness, who are the parties impacted by that? There's the NCAA, there's the, there are the universities. The casinos educate me here. So if you, if you break it down into basically the three parties that are involved when it comes to making money in college sports, it's the NCAA, uh, then you go to the casinos and the sports books, and then the States that all have the tax revenue based on anything that's being wagered. So Nevada for example, $500 million, uh, per month is bet on sports in, in, in this and just the state of Nevada. Uh, I think there was eight point $6 billion wagered collectively between brackets and, and, and actual bet on games, uh, for last year's March madness. So this is not, you know, just a couple of dollars amongst friends. This is a multibillion dollar industry we're talking about here.
Sonenshine: And by the way, just for our viewers, we need our government to be cash rich right now. And that is a negative there on that. The NFL is also having issues.
Enright: Yeah. So the NFL, all the sports are having issues in the NFL is planning to have their NFL draft one of their biggest tent pole events of the year in Las Vegas later in, at the end of April. And right now the rumors are saying that they're probably going to cancel all fan events for the NFL draft. They're going to limit the amount of exposure that these NFL draft Scouts have with traveling to the different schools across the country over the next couple of months. And they're not going to have representatives at the NFL draft. They might have them phone in. These are all rumors at this point. A lot of speculation. But the NFL is certainly in the process of taking steps to limit the fan engagement, uh, in, in Las Vegas act at the actual draft.
Sonenshine: Does the NFL monetize that event in any way?
Enright: Yeah, the, the NFL has a way to monetize everything and it's a, it's a business. So they, they know, uh, where their bread buttered and they have different events for fans at the draft. Some are free, they have a lot of free concerts like you see at the super bowl, but a lot of merchandise and a lot of um, fan experiences that you can pay a premium for.
Sonenshine: Sports teams are not public companies. Usually a few are. Most are not. You can't just look up financial information. How much revenue compared to their overall revenue stream. Um, are we talking about here? But do we have some sense of how impactful from a revenue standpoint, this is the NFL?
Enright: Well, the NFL is still months away from their actual games being played and I'm sure by the time September rolls around, maybe this coronavirus thing will, will be in the past. Uh, hopefully it will certainly be in the past. Uh, it's probably going affect the NBA more NHL, MLB, I think the MLB is, are going to come out and say that they're going to cancel their, um, spring training games. Uh, so that's going to be more of the inner, uh, the immediate future compose to the NFL where the NFL drafts in late April, but the games are not being, uh, being played until September.
Sonenshine: I'm a big baseball fan. That makes me really sad. Bill and Robin, thanks a lot for being here. We'll continue to cover the Coronavirus' impact on markets, sports, and the intersection between the two. If that sounds good to you, stick with the street.com and sports illustrated.
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