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News Article

The Biggest Defeat for Sports, the World’s Favorite Hobby

By Daniel González | Tue, 04/14/2020 - 18:24

The doctor from the Utah Jazz, an NBA team, jumped onto the Oklahoma City Thunder court with his face uncovered. He whispered a few words in the ear of one of the referees, who, without thinking, called the game off. It was March 11 and the NBA was informed for the first time that one of its players had tested positive for COVID-19. A few hours later, Adam Silver, NBA Commissioner, sent a press release to the media announcing the suspension of the world’s top basketball league. The drastic measure put the competition’s commitment to its audience and players on the table and opened the way for other professional sports competitions to make the same decision worldwide. Soon after, La Liga, Serie A, Premier League, ATP, PGA, F1, Champions League, NHL, MLB, NASCAR, cycling and even the Olympic Games followed the same path.

Professional sports, an economic activity that according to the World Economic Forum was worth US$471 billion in 2018, was about to suffer the biggest defeat. Another significant fact: many of these sports continued their regular activities during World War II. Such is the magnitude of the crisis.

Professional sports have not stopped growing worldwide since David Stern, former NBA Commissioner and one of the most important figures in the history of this field, decided in the mid-1980s to treat it as just another business. A roadmap that was followed page by page by other leagues. Even the most traditional ones, such as the Premier League, got on this boat in the 1990s. Today, professional sports is one of the most important economic activities in the world and its economic value has not stopped growing since 2011. Between 2011 and 2018, the industry had grown 45 percent. Today, its entire value chain including athletes, executives, leagues, teams, media and sponsors has been affected by the mandatory shutdown caused by the fast spread of the virus.

Sources of income relied on three pillars: TV rights, sales of official products and ticket sales. All three sources have stopped without a clear horizon for their return. As for TV rights, they are the most affected by this crisis, both in terms of volume and economic influence. For instance, the NBA signed a nine-year television contract valued at US$24 billion in 2014. MLB did the same in 2018 by selling its TV rights for five years at US$5 billion, while the Premier League sold its rights for US$12 billion for three years. Today, those contracts are on hold. Without professional sports there is no TV and without TV there is no income.

 

Media Rights

 

The problem, moreover, is a two-way street, as many of the satellite and cable companies have based the sale of their packages on the attractiveness of these types of competitions. Losses, therefore, are growing unstoppably. Most professional leagues sell their rights jointly, with the money then divided between the clubs and teams on a pro-rata basis. In other words, if the sport gets suspended, so will broadcasts, which will lead to the renegotiation of contracts and the restructuring of teams’ annual budgets. The same is true for tickets at stadiums and for sales of official products which are mostly sold during the games.

In this context, the main competitions are looking for solutions that, inexorably, make the most of technology. “We have launched an NBA 2K competition with players streaming from their homes. We have expedited production to bring forward the release of a Michael Jordan documentary. We are hosting live quarantine parties on social media with current and former players and we are showing classic games every night,” said Mark Tatum, Deputy Commissioner and Chief Operating Officer of the NBA, to World Economic Forum. Other sports have also followed the same roadmap. The league has organized FIFA video-game tournaments involving some of its biggest stars and the Tour of Flanders, one of the symbols of Belgian culture, took place on the Zwift platform with some of the most representative athletes of the international cycling squad.

The complicated situation caused by the expansion of COVID-19 has led many sports clubs to face the enormous expense of paying for their stars. This is the case of FC Barcelona, which has reached an agreement with its players to reduce payroll expenses by 70 percent, including Lionel Messi, the highest paid sportsman in the world earning a total of US$92 million a year. Other teams, such as Atlético de Madrid, have opted for the figure of the ERTE, a Spanish mechanism that allows companies to dismiss their workers during a specific period of time without losing their social security and unemployment benefit rights.

The future is therefore uncertain for professional sports, which is why some are looking at Asia in search for the light at the end of the tunnel, although this light is still very dim. In Japan, baseball games, the country’s main sport in terms of audience and market value, were played behind closed doors for weeks, while China decided to postpone its basketball league, one of the most important in the world in economic revenue. In Spain, Liga de Fútbol Profesional, the association that encompasses all clubs in the First and Second Divisions, is considering the possibility of concentrating all competitions in a specific area once the compulsory confinement decreed by the government is lifted. The association has put forward the idea of moving its entire structure to the Canary Islands, where the impact of the COVID-19 has not been as serious as in the rest of the country. This territory, in addition to having a pleasant climate all year round, has enough tourist facilities to accommodate the entire structure of what is considered the best soccer league in the world. If this proposal is successful, matches would be played behind closed doors, but at least TV rights would be saved, considered the main source of income for professional clubs.

Unlike other economic activities, professional sports has its own idiosyncrasy based on the identification of the public with the values or culture of a city or team. This may mean that the paradigm shift is harder than in other disciplines. However, the globalization of disciplines and players and the internationalization of products that many of the disciplines went through at the beginning of the 21st century can have its benefits in these times of tribulations.

The data used in this article was sourced from:  
World Economic Forum, Forbes, Sports Illustrated, Le Monde, The Guardian, El País
Daniel González Daniel González Senior Writer