Follow the money! The catchphrase, which was popularised by the 1976 docudrama film “All the President’s Men,” came ‘to life’ after being uttered at the 1974 Senate Judiciary Committee hearings by Henry E. Peterson and now seems altogether appropriate in the current global climate.
The coronavirus (Covid-19), a disease which, we are told, emanated from Wuhan, the most populous city in Central China, has now enveloped the global business landscape.
The financial fallout has rocked the world and a global sports industry valued at somewhere between US$480 and US$620 billion (other estimates put the figure at around a trillion dollars) has been dealt a number of devastating body punches.
Soccer
Association football, which owns the lion’s share of the global sports market, raking in around 47%, of total sports revenue has, understandably, been the most seriously affected.
Europe’s five largest leagues, the English Premier (EPL), La Liga, Bundesliga, Serie-A and Ligue-1, are, together, projected to lose more than €4.1 billion in revenues as a result of cancelled matches. Overall, the continent is estimated to likely lose more than €6 billion! On top of this, some of the financially weaker clubs in Europe that literally live from gate to gate, could ‘go under’ altogether.
The EPL, Europe’s most viewed and most valuable club football institution is likely to be the biggest loser, estimated to ‘drop’ around €1.2 billion. This astronomical loss will come from revenues that would have derived from broadcasting rights, around €800 million; commercial/merchandising, around €300 million; and match-day services inclusive of tickets, approximately €130 million.
Not least among global sports’ big money-earners that have had their earnings slashed by COVID-19 has been the English Football League (EFL) where throngs of fans ‘shell out’ huge sums to watch the League’s 71 clubs ply their trade under a pyramid system that places the EPL at the pinnacle.
In England, soccer qualifies perhaps much more as a ‘religion’ than as a mere sport and it is not just the Clubs but the society as a whole that has been impacted by the sudden withdrawal of the weekly diet of the game. The ensuing financial losses are almost too staggering to contemplate. The League One and League Two clubs are estimated to incur losses on average of €300 million respectively.
Some Clubs dwell perpetually on the borderline, depending primarily on same-day ticket sales and stadium services for their revenues. For many of them the Coronavirus may mean the end of the line. In Spain, for La Liga (the Spanish Football League), it is estimated the revenue losses could reach €950 million, broken down as follows: Broadcasting Rights – €600 million; Commercial/Merchandising – €200 million and Match-Day Services – €170 million.
In Germany, the Bundesliga is expected to be denied revenues totalling more than €700 million… €400 million, €250 million and €100 million, from Broadcasting, Commercial/Merchandising and Match Day Services, respectively.
Serie-A, Italian soccer’s Championship League, is expected to be denied around €700 million. Broadcasting (€450 million), Commercial/Merchandising (€150 million) and Match-Day Services (€100 million.)
France’s Ligue I rounds out the quintet of European football empires that will be dealt a body blow by COVID-19. Losses in France are expected to reach €400 million… €200 million from Broadcasting, €140 million from Commercial/Merchandising and around €60 million from Match Day Services.
Where the Union of European Football Associations (UEFA), the governing Confederation of European Clubs is concerned, financial losses likely to be incurred from switching the 2020 European Cup to 2021 could reach hundreds of millions of euros. This event has been known to generate more than €2 billion from sponsorship and broadcasting rights. It is worth mentioning that CONMEBOL, South America’s football governing body, has also bowed to the coronavirus menace, opting to shift their flagship event, the Copa America, to next year.
NBA and NCAA
American sport has not escaped the knock-on effect of COVID-19. Several of their marquee sporting events have declared a blanket lockdown in the face of the rampaging virus. Once the rest of the National Basketball Association’s (NBA) current season is cancelled, the sport is expected to lose more than US$9 billion. The major fiscal danger is the loss of revenue from its lucrative television agreements, which stand at more than US$4 billion.
The USA’s National Collegiate Athletic Association (NCAA), meanwhile, has cancelled their Men’s and Women’s Basketball Championships. This annual tournament generates more than 90% of the organisation’s US$1.1 billion in projected proceeds. According to the entity’s projected fiscal year report which ends on August 31st 2020, revenues in the region of US$821 million were expected to be received from its marketing and multimedia contracts. That is now clearly under serious threat.
The 2020 Olympic Games
It is altogether unnecessary to emphasise the global popularity of the Olympic Games and the impact of the event being side-lined by COVID-19. As it happens, the event will now be held in 2021.
The Games were set to be staged in Japan from July 24th to August 9th. The Paralympics were also set to follow from August 25th to September 6th. Japan is estimated to have invested amounts in the region of US$9 billion in preparations for the staging of the Games. There are other even higher estimates.
State spending aside, Japanese brands have allegedly spent more than US$3 billion to secure sponsorship deals. Globally, various media establishments have expended significant sums on television rights. The American network, NBC, has forked out $1.4 billion to secure the rights.
With regards to the local hotel industry, the renowned corporation, Okura, has spent over US$1 billion in renovations in anticipation of a significant visitor influx for the Olympic Games. In May, Japan Airlines was expected to launch a low-budget subsidiary, Zipair Tokyo, at a cost of $200 million to meet increased air-travel demand during the Games. All of that is now ‘up in the air.’
The Indian Premier League
The list of sports events that have fallen victim to COVID-19 is still not exhausted. On Thursday March 12, the Board of Control for Cricket in India (BCCI), cricket’s financial juggernaut with more than 85% of the total sport market share, announced the suspension of the Indian Premier League (IPL) initially for a fortnight. The likelihood that this time line will be significantly extended looms large and seems rather a formality than an uncertainty.
Leaving aside the BCCI, which secures the largest slice of its revenues from the IPL, significant losses also loom for the hordes of advertisers, the eight League Franchises and the advertisers, US media giant Disney, holds the broadcasting and digital rights for the IPL matches, and for more than 200 players. In 2019 an estimated 500 million viewers watched the IPL, which at the moment, has a brand value exceeding US$6 billion.
If there are, as yet, no reliable estimates regarding the likely extent of the financial losses that will result from a complete abandonment of IPL 2020, an eventuality that can by no means be ruled out, the prognosis is grim. When account is taken of television rights, loss of players’ earnings, hotel occupancy, sponsors and loss of revenue to the franchises and to the BCCI, the figure could run into billions!
These estimates do not take account of what we respectfully describe as the “minor sporting spectacles” where the investments are relatively modest and the losses nowhere near as substantial as those that we have afforded a more thorough treatment. Events like the current Caribbean Premier League cricket tournament have already been called off, though, setting aside the relatively modest financial losses resulting therefrom, the logistics of re-starting the tournament once COVID-19 comes and goes are relatively uncomplicated.