- Sport is not going away. People still value and enjoy sport. It’s part of our culture. Money and even health will not stand in the way of that.
- Professional sport will come back. There will be opportunities to make money, just less of it.
The enthusiasm of the industry to find cheap and cheerful ways of filling the gap in the near term mask some bigger problems looming medium (and long) term.
Let’s be clear, tough talk is cheap. Sport whether professional, amateur or recreational (and its easy, and foolish, to conflate those three categories) is not going away. People still value and enjoy watching and playing sport at all levels. It’s part of our weekly and often daily routine. It’s part of our culture. Money and even health will not stand in the way of that.
But sport’s role and purpose will, can and should change: more on this later
Companies naturally will look to increase liquidity as cash will be king, revenue uncertain and marketeers will be looking for value. That will create downward pressure on media and sponsorship fees.
The pattern from 2008 may be repeated but with some deeper cuts. An excellent summary of advertisers in the US by category on US TV is here and a graph on the changes between 2008 and 2009 is below. We can expect more deals like the one just concluded between Hockey Australia and Fortescue metals
Further pressure will come from broadcasters who depend on not only sponsors but carriage fees and retransmission fees or subscribers. In the US a lack of sports content means the prospect of an accelerated trend of cord cutting
While advertisers and agencies scramble for slots to fill the gaps the challenge is not just whether appetite to pay for and produce sports programming will return. Many commercial networks and even streaming challengers who are heavily leveraged may not recover.
Unsuprisingly for a business lead by a leader as decisive as Carolyn McCall ITV in the UK has already announced a 300m GBP cut in programming budget and cancellation of dividend.
The Warren Buffet maxim: “You never know who’s swimming naked until the tide goes out” applies.
Rights fees and obligations can be put on hold but debt is the silent killer.
A former employee of one of the biggest sports agencies told me that even before Coronavirus he was expected to factor an internal discount rate of 14% to achieve internal rate of return and service debt into costing any project.
Another in a sportswear business was facing supply chain collapse and the prospect of deep discounting especially in summer stock and the very real threat of a surging Nike forcing the rest of the industry into consolidation.
Mediapro has made 1,200 temporary layoffs. Appetite for pending rights deals, especially CBS/NFL, Sky Deutschland/Bundesliga, will weaken. Sinclair’s purchase of Regional Sports Networks from Disney now looks a bad bet. Narrow subscription offers like DAZN and ESPN Plus may be under pressure and in general OTT models without deep pockets and short runways to profitability will struggle.
We can be pretty sure that public service broadcasters as well as Amazon, Youtube, Disney, Apple and probably Netflix will be there to pick up the pieces when other networks fail and right holders will be furiously sending messages (or imessages, or Facebook messenger messages) to their counterparts.
Social platforms traffic is booming right now. They will welcome any rights holders wanting to stream content with open arms, but are unlikely to want to pay for the privilege.
Salary cuts are inevitable, as well as job losses.
The size of many professional sports’ teams salary bills relative to other outgoings is well known. Some, like these four Premiership Rugby clubs have announced 25% pay cuts for playing staff already while senior staff at the NBA are taking a 20% pay cut, Juventus players have taken a pay freeze and even the mighty Barcelona is not immune.
Athletes find themselves in an interesting position. Some leagues and sports may find themselves able to reintroduce salary caps and other labour constraints and oblige players to take pay cuts. Others may find themselves even more beholden to the power of talent that is learning to create content on its own and will only get better at it in the coming months while they work, and we watch, from home.
Many athletes already have bigger reach than the teams and rights holders they play for. If they can parlay that into new content types and formats while sport lies fallow that disparity will grow further and money will follow. As a leading executive at a social media company told me top athletes have an opportunity to grab a larger share of the economic pie, shape the nature of sports business and fan behaviour, and wield more leverage in negotiations across the board.
Some famous teams will go bust, others will seek new owners and there will be some surprise survivors – a question in some leagues of the survival of the least unfit.
Hearteningly some Premiership clubs such as Brighton and Manchester Utd. have offered to carry on paying matchday staff. Other teams may not be able to.
Fewer host cities will be willing to bid for and stage major events . Government funding will dry up and tax breaks for sports organisations may be at risk (Pro tip: if you want to know how much many top US sports executives are (or were) paid the NFL, NHL and PGA among others have charitable status and declare these details in full via 501(c) declarations which you can find easily on Guidestar.com, I wrote about in 2014)
Government money is the engine of the event sector. Those in charge of the public purse will allocate funds to try to help. This process is inexact and unreliable and it will make some of us angryRobert Datnow of the Sports Consultancy writing in Sportspro: Ten truths for the sports industry
In the UK demand for the lottery has collapsed and with it potentially the source of 69% of British Olympic athletes funding
Event organisers may be more phlegmatic than most. Games and big events are in the business of planning and tend to have very strong contingency and business continuity planning.
As part of my research for this guide I re-read the London 2012 incident communications handbook which includes 108 pages of protocols and pre-scripted messages just for communications. And yes, pandemics were included. The wider IT plan even included the risk of the earth being hit by a solar flare
Nonetheless there will be less events and those that are in planning may be more modest.
Be in no doubt, professional sport will go on. Sports people of all types will have opportunities to make money, just less of it. Professional sport will have to be cheaper and more humble. And it may look very different.