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Sports business

Pandemic to challenge sports world for at least another year

Leagues that rely on game-day revenues the least — the NFL, NBA, and MLB — are best situated to recover faster when some degree of normal returns thanks to lucrative broadcasting deals.
Leagues that rely on game-day revenues the least — the NFL, NBA, and MLB — are best situated to recover faster when some degree of normal returns thanks to lucrative broadcasting deals.Jim Davis/Globe Staff

A year after the sports world came to a sudden halt amid the outbreak of COVID-19, the pandemic’s grip on the industry’s financial health will likely stay tight for another 12 to 18 months, several experts said.

But even as pro and college leagues, grappling with lost revenue in the tens of billions of dollars, will face challenges stretching into 2023, optimism is strong that a comeback may be on the horizon.

“This will be the scar tissue for our generation and it will last about a thousand days, then we have to rebound,” said sports owner and technology advocate Ted Leonsis in a recent Sportradar-Sportico webinar. “You heard about the Roaring Twenties — I do believe in that. I just don’t think it’s going to be 2022, I think it will be out years.”

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The rally, which will favor the largest and deepest-pocketed leagues and owners, will hinge primarily on when fans believe it’s safe to reenter arenas and stadiums.

The lure will require teams and leagues to make significant investments in technology and data that will forever alter the game-day experience for fans, turning it into a touchless and cashless couple of hours spent in a mostly spotless venue, said Patrick Rishe, founding director of the sports business program at Washington University in St. Louis.

Teams and leagues believe their faith in fans will be rewarded — eventually.

“I don’t think the pandemic has done anything to our love of sports. I don’t think it’s done anything to the role sports plays in our society. In fact, with a lot of things that have happened in sports with things like the racial justice movement, in some ways it’s made sports even more relevant over the past year,” said Pete Giorgio, principal and US sports practice leader for Deloitte, the accounting and consulting firm. “I think this has only enhanced, not diminished, fans’ desire to consume sports content, full stop.”

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An NFL fan wore a mask while attending Super Bowl LV.
An NFL fan wore a mask while attending Super Bowl LV.Patrick Smith/Getty

Since the pandemic emptied venues, teams have sought tech- and hospitality-oriented companies that provide software and hardware support to venue operators, such as VenueNext with its mobile commerce applications, CLEAR’s biometric screening, and industrial hygiene and sanitation companies that will use drones to spray seating areas.

“I do think most fans by 2022 will be prepared to come back to the venues, but it’s going to be more expensive for teams to be able to make sure they will be able to create as safe an environment as they need to,” Rishe said. “To make your building cleaner and safer in a more cost-effective way, the only way you can do that is through tech.”

That the pandemic hit at a time when sports industry titans were already concerned about the changing consumption habits of fans, especially those in their teens and 20s, further complicates the challenges leagues face. Participation and viewing of eSports such as Fortnite are surging, while Netflix and other streaming services are pandemic mainstays.

The reasons for a decline in sports viewing numbers over the past 12 months are not completely understood. Competing for clicks and eyeballs on screens, let alone in arenas, is a formidable challenge for the sports industry. Victory, at least a swift one, is not guaranteed, especially for the smaller, less-well-capitalized teams and leagues.

“Just because things may look kind of normal next fall doesn’t mean that there aren’t huge things hanging over the leagues and hanging over sports in general, including the fact that sports depends on people getting addicted,” said Victor Matheson, a professor of sports economics at Holy Cross. “The Red Sox depend on you being a Red Sox Nation addict. If you get a chance to kick that addiction, are we ever going back in the same way we did before? It’s not 100 percent obvious that we will.”

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Social distancing signs have been on display at JetBlue Park in Fort Myers since the start of Spring Training.
Social distancing signs have been on display at JetBlue Park in Fort Myers since the start of Spring Training.Jim Davis/Globe Staff

A PricewaterhouseCoopers study estimated the North American sports market was generating approximately $75 billion per year in revenue prior to the pandemic. While sports leagues shield most details about their finances, the leagues that rely on game-day revenues the least — the NFL, NBA, and MLB — are best situated to recover faster when some degree of normal returns thanks to lucrative broadcasting deals.

Game-day revenue accounted for about 38 percent of the NFL’s estimated pre-pandemic revenue of approximately $16 billion compared with around 40 percent for MLB ($10.5 billion) and NBA ($9 billion). The NHL, which lacks a rich national broadcast deal compared with the other three major leagues, relied on game-day proceeds for about 50 percent of its estimated $5 billion in revenue, according to a Globe analysis of available data.

For leagues such as MLS, WNBA, and NWSL, along with Minor League Baseball and midsize college sports programs, the road ahead is more challenging. Without lucrative media deals, they are more reliant on ticket sales and concessions. They often lack the resources of deep-pocketed owners, so finding the capital to invest in cutting-edge stadium improvements would be a greater challenge.

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Consolidation has also emerged in the midst of the pandemic. Midsize and smaller teams unable to sustain one or more years of revenue shortfalls are being eyed for takeovers by sports conglomerates, often with the help of private and public equity groups on the hunt for investments.

A recent report that Fenway Sports Group, parent company of the Red Sox and Liverpool FC, is considering a $750 million investment from private equity firm RedBird Capital Partners in order to achieve its expansion goals is just one example of that bullish sentiment.

Another is what’s been happening in the background of the sports business over the last 12 months. MLB landed a rich new media deal, NFL will soon land a flurry of its own, and the growth of legalized sports betting across the United States is spurring an array of partnerships among media, leagues, and gaming companies.

“Yes, there was a crisis and yes, it’s had a huge financial impact on the sports industry, but like any industry, A.) They demonstrated their resilience and B.) They didn’t let the crisis go to waste, they learned from it,” Giorgio said. “There’s enough money involved that they’re going to figure this out and they’re going to make it work. The fundamentals are there. There is a need, there is a desire.”

Correction: This story has been updated to reflect the correct first name of Pete Giorgio.

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Michael Silverman can be reached at michael.silverman@globe.com. Follow him on Twitter: @MikeSilvermanBB.