The unprecedented emergency situation across the globe will have lasting impacts on all aspects of life, the sporting industry cannot escape and will already suffer.
The Covid-19 global pandemic is truly unprecedented on many levels, delivering astonishing impacts to individuals across the world from both a health and wellbeing perspective and also economically. Undoubtedly we will see huge impacts to leading global economies and also to many whereby we are yet to see the extent to how far this will reach.
At the time or writing this blog, Europe is confirmed as the global Epicentre, with China seemingly on a course of recovery with the US moving in the opposite direction. The Middle East and Africa are yet to suffer the same journey but are taking many necessary precautions.
The economic fallout has so far been catastrophic with the majority of industries impacted across all layers of the economy. Sport is not protected against such impacts and in fact was one of the earlier victims of significantly reduced activity, with a diverse range of knock-on impacts. Here we look at some of the obvious revenue streams which will no doubt hit the balance sheets of companies, income of individuals and ultimately the flow of cash for the whole industry.
Early loss of income
At the earliest stages of the outbreak sporting events were cancelled with among the more high profile including football matches in Europe, Basketball in the US and tour schedules such as PGA Tour for golf and ATP/ WTA tennis tours. Whilst the impact extends to virtually every form of sport these help us highlight the economical impacts;
Events
With hundred of events cancelled (taking UK Premier League football for example), weekly matches have been halted which mean an instantaneous loss of income through gate receipts for the clubs which are often a key source of revenue and cash flow which go to paying player and staff wages. However, the local economic impact is the unwitting victim whereby match day employees will likely lose unrecoverable income such as those responsible for internal/ external catering, security and administration staff. Many of these employees rely on the sporting event schedule structure for personal and commercial income and the future remediation of this is uncertain.
Looking at this from another lens we consider the PGA tour in golf where the schedule tours the world in different locations each week for circa 50 weeks of the year. On any given event, the local economy prepare and rely on the income to the area whereby spectators bring vast amounts of revenue for local leisure and hospitality businesses.
TV rights attached to some of the biggest spectator sports is crucial to clubs’ income and largely provided by an oligopoly of companies such as Sky Tv and BT Sport in the UK. We are yet to understand the impact or insurance arrangements in place for this, however whichever way it goes will highly impact either partner; should the funds still be paid by the broadcasters, they will be suffering a severe loss of income for a loss of tv subscriptions which we know are being suspended for at least a 3 to 4 month period. If the funds are ceased to be paid to the clubs then they will lose yet another loss of income that contributes to the Profit & Loss and survival of these companies.
Branding & Partnerships
The above example of TV rights debate applies similarly to the vast network of marketing, branding and sponsorship activity across all sports. Again here there is a dependency on impact of whether contractual arrangements continue or cease. Where individuals are sponsored (e.g tennis, golf etc) there is a likely loss of income where appearances and overall media exposure significantly reduced although it can be argued that social media can help to offset much of this.
Where clubs are sponsored there is likely a contract that will continue and therefore those industries who have committed funds will suffer a significant reduction in benefit which is likely forecasted into their forecasted sales.
Another layer on this and linked to the tv rights element above is the loss of marketing opportunities on tv during sporting events. We can see the value that televised sporting events provide where companies can capitalise by occupying prime time advertisement slots. These will now be unavailable and unlikely to be recovered unless broadcasters are able to pivot their investments in an agile manner.
Athletes
Whilst some athletes are protected from the economic impacts having amassed significant fortunes, many up and coming stars of the future rely on the opportunity to take part in events. For example golfers on the Korn Ferry tour are often playing to break even and scratch an income in the search of making it on to the PGA tour. Whilst there is an ever present risk of failure, the events that have unfolded are unaccounted for and will significantly effect the livelihood of many individuals.
With news of the Tokyo olympics being postponed until 2021, athletes across many sports such as athletics, swimming often survive on modest or Olympic funded incomes already. Now their opportunity for sponsorship and marketing revenue are either lost or postponed until a year later.
Outlook
So the true extent of the impacts of this are still somewhat unknown and one of the key questions to be answered is how much of this will be recoverable when the pandemic is out of sight. Until then it is clear that revenue streams through the various areas of cash flow. The impact of the $11bn Japanese investment in the Tokyo Olympics will provide us with new information in the future but for many in these current months there will be significant losses on 2020 accounts and the ability to absorb this will be a huge test.
One thing is for sure, the legal and insurance contracts that surround the sporting economic activity touched on in this blog will change drastically which in itself will have a distinct impact on the way this business is carried out.
Regardless of this, we continue to witness human nature at its best fighting this pandemic and there are strong chances that we will see sport bounce back and capture the way in which humanity is working together and proving resilient, qualities that all sports possess.
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