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Understanding the Impact of the COVID-19 Crisis on the Sports Business

The COVID-19 crisis has upended all aspects of life and the business of sport has not been spared. As the virus spread across the globe, an increasing number of sporting events and matches at the national, regional, and international level were postponed or cancelled. Of course, all industry stakeholders were concerned and deemed these measures as necessary to safeguard the health of athletes, fans, and all others engaged in sporting events. But these measures also resulted in adverse repercussions for the sporting industry. Every aspect of sport has been impacted, from athletes, spectators, teams, leagues, to sports retail, sponsorship, media coverage, and hospitality.

Major Sports Events Cancelled

For the first time in the history of the Olympics, which is one of the most-watched sporting broadcasts, the 2020 Olympic and Paralympic Games in Tokyo were postponed to 2021. Tokyo had invested over $26 billion USD in preparations and the decision to postpone the event was made just 122 days before the grand opening ceremony.

Similarly, the UEFA EURO Championship was supposed to be held across Europe in the summer of 2020 to coincide with the 60th anniversary of UEFA. But the event was postponed to 2021 and all matches and competitions for both women and men, including friendlies for clubs and national teams as well as playoffs were cancelled. The Championship generates approximately €2 billion annually for UEFA in revenues from sponsors, ticket sales, and broadcasters, but that was not the case in 2020 thanks to the pandemic.

Also, the Boston Marathon was put on hold for the first time in the event’s 124-year history. The International Tennis Federation saw over 900 tournaments (the US Open, Roland Garros, Wimbledon, among others) cancelled or postponed, and over half of its personnel being laid off.

However, Wimbledon managed to recoup some of its losses since the tournament is insured in case of a pandemic. They decided to sign up for pandemic insurance after the 2003 SARS outbreak. After paying approximately $31.7 million USD in premiums over the past 17 years, they are set to receive an insurance payout of $142 million USD for the cancellation of 2020’s event. The Monaco Grand Prix was not spared by the pandemic either. For the first time since 1954, the event was cancelled in 2020’s Formula 1 calendar because of fears of the spread of COVID-19. Even the NBA had to suspend its season briefly but the league resumed in August 2020.

Major Financial Losses for Sporting Industry

Analysis suggests that revenues within the sporting industry were under $74 billion USD in 2020 as a result of the crisis, approximately half of the pre-COVID-19 estimates. The global sports market is estimated to be worth $756 billion annually, with the U.S. accounting for $420 billion, Europe around $250 billion, and China, one of the fastest growing markets, contributing to most of the remaining balance. It is estimated that the potential loss of gate revenues in the NBA stood at $450 million USD, while the potential loss of TV and Marketing rights was estimated to be $867.5 million USD. The Formula 1 Group’s Stock also lost 45% of its market value according to estimates.

Implications for the Biggest Basketball League in the World

Estimates had projected that losses from COVID-19 were expected to exceed $1 billion USD. The same period of the NBA league, in the 2018-2019 season, generated about $800 million for the league. Aside from the Playoffs, the cumulative losses from missing remaining league games would cost the NBA approximately $229 million USD. Based on the 21.1% as the base figure, the NBA would have lost$548.6 million USD from media rights deals.

Despite the gloomy outlook for the league, the NBA has managed to withstand the shocks and recover quite fast. The fact that the pandemic is a small fragment of the current NBA conversation is a testimony of the success of the NBA bubble. Towards the end of the season, there were no outbreaks among players and no interruptions have been reported since the bubble began. The bubble offered an appropriate setting to explore critical questions about testing: data on thousands of people, detailed information about who they are, who they came into contact with and other important specifics. The NBA consequently created a kind of blueprint for how institutions can manage COVID-19 as well as other scientific challenges.

Indeed, the impact of the COVID-19 crisis on the business of sports has been far-reaching and disruptive, resulting in diminishing revenue for all stakeholders. It is clear that the impact of any crisis on a business will accompany it at every step in its evolution, and no industry or company is immune. However, if the industry is prepared, its response will be swift and effective. It is therefore necessary to build a crisis plan from the start as well as keep an eye on any potential crisis triggers.

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