The coronavirus pandemic razed the American sports world last week. The fallout will cost billions.
With fans unable to watch their favorite teams and many of those teams facing financial doubt, one Chicago-based sports research firm estimated North American sports could be looking at a collective $2.5 billion of lost revenue per month, factoring in gate revenue, sponsorships and media rights.
Using figures from the most recent Forbes report, Navigate Research estimated the Timberwolves could lose $7.2 million in gate revenue if they couldn’t finish the regular season, and the Wild $8.5 million or more because of a potential playoff run. The Twins could lose $2.4 million, Navigate estimated, if the games during the two-week delay to the start of the season are not made up.
“The impact’s huge,” Navigate founder AJ Maestas said.
From local businesses to professional leagues, from arena workers to star players, the financial ramifications of suspending one of the U.S.’s biggest multibillion-dollar industries will have an effect. Just how big that effect will be remains unclear.
“We don’t know where this is going to end up. We just don’t have any idea how long or how deep it’s going to go,” said David Carter, sports business professor at the University of Southern California. “And until you have a better picture on that, it’s hard to even begin to forecast the economic impact.”
The reach will radiate deep into communities that house major league teams or were planning to host major events. Minneapolis, for example, was on deck to host the NCAA Wrestling Championships for three days next week at U.S. Bank Stadium.
An NFL stadium has never hosted the event, so organizers expected it to shatter attendance records for six sessions.
Jeremy Williams, the general manager of Bus Stop Burgers and Brewhouse, a block from the stadium, has started calling his vendors to cancel all his over-orders of supplies and informing his staff to stand down. He anticipated a big bump in business, especially after last year’s Final Four men’s basketball tournament significantly boosted the now-16-month-old restaurant. That championship brought a $143 million economic impact to Minneapolis, according to Pennsylvania-based Rockport Analytics.
But the past week dashed any hopes of that when the NCAA canceled all of its championships for the rest of the school year.
“A lot of people were looking forward to bigger paydays, and that’s obviously not going to happen now,” Williams said. “… Especially for the service industry, it’s just going to take a big blow over the next couple months, and to really keep our bartenders and our cooks and everybody employed is going to be tough.”
‘Major economic impact’
Major League Baseball and Major League Soccer suspended play at or near the starts of their seasons, hoping it’s only a couple of weeks. That would give them time to make up missed games.
Twins President Dave St. Peter said the team is still working under the premise it will play all 81 home games, though he admits these are unprecedented times, and there’s no question that “there’s going to be a major economic impact across sports.”
The only good news for the Twins is that if they had to lose games, April is probably the best time to do it, since it’s not their peak month.
“It’s difficult to gauge what the impact ultimately will be from this pandemic on people’s attitudes over time, whether we’re playing baseball in mid-April, mid-May or mid-June,” St. Peter said. “I’m not really sure how fans are going to react when we start playing games again. Will they come back as if it’s a normal course of business or not?”
For the NBA and NHL, the question is whether they will resume the regular season or just skip to the playoffs, if they’re able to salvage this season at all.
Carter, the USC professor, said it’s hard to sum up what the total economic impact might be since this is still so new. The different sports leagues also have different business models and rely on different revenue. For example, the NBA has a $24 billion TV deal, meaning it is less reliant on ticket sales than leagues like the NHL and MLS.
But who takes the hit when it comes to those media rights deals — as well as other corporate partnerships, sponsorships, advertising, etc. — will come down to contracts, which could take years to sort through, according to Kent Schmidt, a partner at international law firm Dorsey & Whitney who specializes in business litigation.
The NCAA men’s basketball tournament, for example, will not be played this year. The NCAA made about $900 million on the tournament last year, thanks in part to an eight-year, $8.8 billion agreement with CBS and Turner Sports in 2016 to broadcast the games.
That eventually trickles down to college conferences and individual schools in the form of distributions. Last year, the NCAA distributed nearly $600 million. Conferences also distribute money annually to their member schools to share money from broadcast deals. These distributions will likely decrease.
In fiscal year 2019, the Gophers athletics department took in almost $10 million in NCAA and Big Ten Conference distributions. The Gophers’ main revenue-generating sports (football, men’s basketball and men’s hockey) had already completed all their home games before the cancellations, so the Gophers stand to lose only about $100,000 in ticket sales from spring sports like baseball and softball, per the most recent athletics department budget.
Stadium crews suffer
Many expect professional salary caps to decrease next season as well, particularly in the NBA and NHL. How players’ salaries will take a hit depends on the different collective bargaining agreements. ESPN approximated NHL players’ share of revenue from this season could fall $200 million if the rest of the season doesn’t take place.
But it’s not just people and organizations already worth millions or billions of dollars that will lose money. The absence of sports will ripple to the concession stand staff, ride-share drivers, luggage handlers at the airport and beyond. The impact on those workers, many of whom might make around only $30,000 a year, could be significant. Several team owners and pro athletes have pledged to help financially support venue employees during the hiatus.
Helping one another is maybe the only way to weather such an uncertain economic situation.
“Most of these entities — the union, the league, the broadcasters, the owners, the venues, etc. — they have to find a way to work together because they’re all going to be harmed if they don’t,” Carter said. “If they don’t pull in the same direction, their recovery is going to be slower.”