The financial blow of the coronavirus on sports

For the first time in nearly two decades, the $160 billion sports world has gone dark.

The ramifications of cancelling or postponing play are wide-ranging, from mundane considerations about competition to potentially serious financial consequences for athletes, teams, leagues and organisations, and the tens of thousands of people who work at sporting events.

LeBron James, who could lose about $400,000 for every game the Los Angeles Lakers don’t play, might not get a lot of sympathy, given his riches. But there are low-paid minor league baseball players who need money for rent and food, and college field hockey teams that depend on money from the NCAA basketball tournament to fund their own seasons.

In the past, the sports business has largely proven to be somewhat recession proof. Most major sports organisations weathered the economic fallout of the Sept. 11 terrorist attacks and the financial crisis in 2008.

The problem now is that, as a mass event business, sports cannot occur because of the risk of spreading the coronavirus, bringing everything to a screeching halt.

“These are significant impacts,” said Michael Lynch, the former director of sports marketing for Visa and a longtime consultant to the sports industry. “They are both economic hits and the loss of the opportunity.”

The Galleria Vittorio Emanuele shopping mall in Milan is nearly deserted on Tuesday, Mar 11, 2020. Commerce in Milan and throughout much of Italy has been reduced to a fraction of its usual activity due to the coronavirus pandemic. The New York Times

Certain teams and leagues may have contractual provisions or insurance polices that can cover some of their lost revenues, but the effects of any lengthy stop will have an impact that will last long after play resumes.

“Sports has always been the arm around the shoulder at the end of major trauma,” said Andy Dolich, who ran business operations for the Memphis Grizzlies, Golden State Warriors, Oakland A’s and the San Francisco 49ers. “Now sports is right in the middle of it.”

Here is a look at how coronavirus will affect some of the major sports organisations.

The NBA

The biggest financial danger for the league is lost revenue from its television contracts. The league makes roughly half of its $9 billion in revenue from media fees, which are crucial to nearly all the top leagues. “It’s not one size fits all,” said Chris Bevilacqua, who has negotiated numerous major media rights deals in sports. “But if you don’t deliver the full set of content there are reduction rights.”

There are also potential losses from ticket sales. Teams have not announced whether they will refund tickets, or offer credits toward future purchases.

However, a key provision in the NBA’s labour contract allows the teams to withhold a little more than 1% of player salaries for each game the teams miss, and the teams won’t have to spend money on travel or holding games.

Marc Lasry, who co-owns the Milwaukee Bucks, on the morning after the suspension in play, initially said that he expected the season to be halted for three or four weeks

“I think it’s a wait and see,” Lasry said in an interview on Thursday. Later, NBA commissioner Adam Silver said it would be at least 30 days.

Some teams, such as the Cleveland Cavaliers have agreed to compensate arena workers. Players, including Kevin Love and Giannis Antetokounmpo, have pledged $100,000 to help workers.

The NCAA

The NCAA, which cancelled its marquee basketball tournaments, will suffer financial repercussions that will reverberate on campuses across the country.

The association collected more than $1.1 billion in its last fiscal year, with more than $1 billion of that coming from major events and television and marketing rights fees. But no matter what emergency provisions may exist in television contracts, the association is certain to miss out on at least many tens of millions of dollars in ticket sales.

A soccer match at Riverside Park, where many courts and fields were going unused in the afternoon, in Manhattan, Mar 13, 2020. It was strange, thinking of sports as a threat, not a diversion from life’s problems. They shut down this week, one by one, starting at the top, now filtering to the bottom, for the protection of all involved from a new virus we don’t yet understand. The New York Times

Some of the association’s insurance policies may help to ease the losses, and as of the end of August, it had about $611 million in assets, including almost $474 million in investments.

Many college sports executives said the NCAA had no other choice, and Robin Harris, executive director of the Ivy League, said she thought that top officials had prioritised health over money.

“Finances just aren’t a factor,” Harris said.

They will be. The NCAA’s complex plan to distribute money to conferences hinges, in large measure, on the performances of teams in the men’s basketball tournament.

Schools generally earn units — this year’s are valued at $282,100 each — as they advance in the tournament, accruing units for most, but not all, games they win. Those dollars eventually make their way to the conferences, which are “encouraged” to share the proceeds equally among member schools, who use the money to fund sports that don’t make much or any money. It was not yet clear how the system would work without a basketball tournament or how much money would be available for distribution.

“This is unprecedented and uncharted territory,” said Dennis Thomas, who has been commissioner of the Mid-Eastern Athletic Conference since 2002.

The NHL

Perhaps more than any other league, the NHL is very familiar with how to manage missing games. Lockouts cost the NHL its entire season in 2004-05 and reduced the season to 48 games in 2012-13.

There are two major differences between those years and this one. During the lockouts, the NHL did not have to pay its players, and its labour agreement does not include the provision the NBA’s has to reduce salaries.

Also, during the lockouts, some teams could make up for lost revenues by scheduling concerts, other sports events and family shows in their arenas. Not this time.

Another issue: Because hockey does not have a large television audience in the US, it relies on ticket sales more than the other major sports leagues.

MLB

Major League Baseball has been devising multiple models for its schedule, which is delayed until mid-April at the earliest.

The impact will vary from team to team. The Mariners in Seattle, one of the hotbeds of the virus, may have more trouble drawing fans back to its ballpark than teams playing in areas that have fewer cases. And for competitive reasons, it will be difficult to restart the season if some MLB cities still have restrictions on the size of gatherings, as is the case in San Francisco.

Teams that own their own regional sports networks may face a double-hit — no revenue from tickets and little content for their networks, though fees from cable companies may deliver a small cushion to absorb the blow. Other teams that are already losing money could see steeper losses.

As players disperse from spring training, at least for a few weeks, it is possible they won’t get paid. Under the terms of baseball’s uniform player contract, the commissioner can suspend contracts during a national emergency in which games are not played. President Donald Trump declared a national emergency on Friday afternoon.

The NFL

For now, the NFL has the least pressing problems because the season ended in February. The league cancelled its annual meeting at the end of March.

The biggest date looming on the calendar is the draft at the end of April in Las Vegas. The event is supposed to be a coming-out party for the Raiders, who are set to start playing in Las Vegas instead of Oakland in September. For now, the league has not changed its plans for the draft, which will draw tens of thousands of fans to The Strip. Mark Davis, owner of the Raiders, told The Dallas Morning News that the league “won’t put anyone in jeopardy over it.”

Tennis and Golf

It’s too early to say what the ultimate impact will be on the ATP, WTA, the PGA and the LPGA. A lot will depend on whether events can be rescheduled.

The floor of the New York Stock Exchange after the closing bell on Wednesday, Mar 11, 2020. The coronavirus pandemic has sent stock markets hurtling downward. The New York Times

The players are all independent contractors, and they stand to lose millions collectively if they can’t compete for prize money. But the charity partners of the PGA Tour may lose the most. Most golf tournaments are owned by nonprofits, who turn their earnings over to local charities. The tournaments raised $204 million for charities last year. Each lost tournament may cost a local charity one of its more significant donations.

Combat Sports

Late Thursday night, Todd duBoef, president of Top Rank Boxing, finally succumbed to the inevitable. He cancelled the fight night scheduled for Saturday at Madison Square Garden, headlined by Shakur Stevenson’s defence of his featherweight belt.

He said that he is out the money for airfare and lodging for about 100 people, and certain costs for events like the weigh-in ceremonies. But the real losers here are the fighters, who are only paid when they compete.

“Some of these guys have got to pay rent next month, and they may need the money,” DuBoef said. “We are reaching out on a one-by-one basis, reaching out to fighters and advisers to accommodate their livelihoods.”

UFC’s Saturday night fights from Brazil are still on, albeit without fans. Dana White, the UFC president, said he decided to go ahead after consulting with the White House. Future UFC events could be televised from the UFC’s gym in Las Vegas.

MLS and NWSL

Just by virtue of the calendar, American soccer leagues are better off than their counterparts in basketball, hockey and other sports if the prohibitions on mass gatherings last significantly longer. Major League Soccer’s season just started, and the National Women’s Soccer League has yet to kick off, giving teams time to make up for lost games.

“At MLS, it’s a 30-day pause and then we’ll re-evaluate,” said Merritt Paulson, the owner of both the Portland Timbers and the NWSL’s Portland Thorns.

There could be more weeknight games, which are often bad for attendance, or the seasons could stretch into December. Cancelling games is problematic, because both leagues depend so heavily on ticket sales for revenue.

State and local governments

A less-visible fallout from the cancellations is the effect on local governments, stadium authorities and teams that issued bonds to help pay for stadium construction costs.

Cities and states will also forgo collecting income taxes on the player salaries, or sales taxes, and the fees generated in and around stadiums and arenas, including in parking lots.

With arenas and stadiums closed, tens of thousands of part-time workers who are paid hourly wages with no benefits have seen their paychecks disappear. They pour beers and grill hot dogs, serve food in luxury suites, scan tickets at turnstiles, work in parking lots and provide security, run the scoreboards and lighting equipment, and clean up locker rooms.

In a building with 20,000 seats, roughly 300 workers would be behind concession counters and hawking drinks in the stands. The food purveyors and suppliers will also suffer.

The big question is how quickly fans will feel safe enough to start attending games again.

“After the baseball strike, there were questions about whether fans were going to come back because they were fed up,” said Chris Bigelow, a food and beverage consultant. “It’s different now because there might be fans who don’t want to be next to other fans.”

© 2020 New York Times News Service