The Effect of COVID-19 on the Sporting World

By Yash Khushalani

COVID-19 pandemic has shaken the sporting world, with several professional and amateur sporting leagues across the globe being postponed or suspended. The global value of the sports industry was estimated to be $471bn in 2018 – an increase of 45% since 2011. Before the virus, there only seemed to be an upwards trajectory for growth. Now, every part of the sporting value chain has been affected, from athletes, teams and leagues, to the sport media.

In particular, the virus has negatively affected larger sporting industries including the National Basketball Association (NBA) and the Australian Football League (AFL). The highly anticipated Tokyo 2020 Olympics has also been delayed as a result of the pandemic.

NBA

On March 11, the NBA decided to indefinitely suspend the regular season until further notice after Utah Jazz centre Rudy Gobert tested positive for the Coronavirus. There were still 259 games left to play and NBA fans all over the world are waiting, eager to watch and support their favourite teams. Although current NBA commissioner Adam Silver is optimistic for a June return, the league’s finances will still take a catastrophic hit. The notion to resume the season without fans is being considered, but it will cost the league a fortune in ticket sales, food, beverages, parking, and merchandise.  

According to TicketIQ, the NBA could lose an estimated $690.7 million in ticket revenue due to the coronavirus pandemic. Potential ad revenue losses have also been approximated at around $800 million.

Silver stepped in as commissioner on February 2014 when the NBA’s salary cap was $58 million – this season that number has almost doubled, at $109 million. The league’s total annual revenue is now $8 billion and according to a high-ranking team executive and the total damage may reach $40 million per team, or more than $1.2 billion.

AFL

The AFL season was halted one round in after states across Australia closed their borders and state and federal governments announced restrictions on travel. Midway through the Hawthorn vs Brisbane match on 22 March, AFL CEO Gillon McLachlan announced the indefinite suspension of the season. An immediate impact was felt as the AFL stood down 80% of staff from 30 March to 31 May, while AFL players agreed to take a 50% pay cut given the season resumes. However, if no more football is played this year, the players consented to give up 70% of their salary for the remaining play periods. The AFL are hoping to resume the season in June, after securing a line of credit reportedly in excess of $500 million from NAB. The money will allow the AFL to provide loans to clubs that are struggling during the crisis and assist them through the financial turmoil caused by the virus.

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The AFL are hoping to resume the season in June, after securing a line of credit reportedly in excess of $500 million from NAB. The money will allow the AFL to provide loans to clubs that are struggling during the crisis and assist them through the financial turmoil caused by the virus.

Tokyo 2020 Olympics

With the Tokyo 2020 Olympics set to begin on July 24, the Coronavirus pandemic forced the postponement of the Games to 2021, with the most likely start date being July 23. A whole host of contracts will need to be renegotiated: hotels, transport, equipment, temporary commodities, tents, trailers, generators, seats, contractors, broadcasters, staff, warehouses, maintenance, and security. The latest budget suggests that the Games were already due to cost around $12.6 billion which was to be shared between the organisation committee, the Japanese government, and Tokyo City. Estimates of damage for this one-year postponement is said to be between US$5.4 billion to US$18 billion.

As the costs of hosting have skyrocketed, revenues cover only a fraction of expenditures. Beijing’s 2008 Summer Olympics generated $3.6 billion in revenue, compared with over $40 billion in costs, and London’s Summer Games in 2012 generated $5.2 billion compared with $18 billion in costs.

Although the Japanese government is touting the Games to be “proof of mankind’s victory” against the virus, one must wonder if this is really worth the effort – perhaps it is just an optimistic outlook during a grim time.

Sources: CNBC, Tufts Daily, CBS, Washington Post, The Age, Economic Times, Canberra Weekly


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