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Impact of the Coronavirus Pandemic on the Sports Industry

Editor, TRANSFIN.
Jun 21, 2020 5:40 AM 4 min read
Editorial

The erstwhile dependence of sports leagues on broadcasters and broadcasters on advertising revenue could very well become increasingly challenged in a post-COVID world. The coronavirus is affecting the sports industry in many ways.

Broadly speaking, sports leagues attract three types of income streams:

  1. broadcasting (= sales of media rights), 
  2. commercial (= sponsorship and advertising partnerships) and 
  3. match day revenue (= ticketing and hospitality)

The extent of each stream’s importance depends on the sport or country involved, but all have been negatively impacted by the pandemic. 

Media rights are hefty deals and shutdowns have seen leagues unable to meet their commitment to broadcasters; companies are slashing ad budgets since many of them have shut shop or see demand too limited to invest heavily in ad campaigns right now; and match-day revenue is difficult to attain when there are no matches in the first place!

For broadcasters, the fact that fans are stuck at home and consuming digital content at high penetration rates may present a new window for monetisation. For instance, ESPN and Fox Sports are showing classic games, archived content, documentaries, e-sports and niche competitions. Many are removing paywalls to attract more subscribers. These bids to keep consumers watching are paying off. The NFL, for example, made every game since 2009 available for streaming on its direct-to-consumer (D2C) channel Game Pass. The result was a 500-fold increase in daily sign-ups for the service.

Many sports bodies are also revisiting agreements with TV partners regarding media rights, often citing force majeure clauses. On the table: more compensation, additional rights and extending the agreements’ durations.

Playing in Empty Stadiums: As lockdowns across the world continue to be eased and the world slowly limps back to normalcy, the spectre of the virus and a second wave remain.

So while sports matches have recommenced in some countries, there are some...tweaks. For starters, the audience stands are empty - thousands of fans screaming and booing and cheering while shoulder-to-shoulder would be the coronavirus’s wildest fantasy come true, no matter how many face masks and hand sanitizers you pass around!

This has given rise to remote production, where broadcasters and content owners work remotely and coordinate operations online. And viewers follow the match on their phones, tablets, laptops and TVs.

So how are leagues and clubs trying to replicate fans and the energy of a stadium match?

South Korea's football league has piped in crowd noise. Taiwan’s baseball league has put cardboard spectators in the stands (and charged fans to have their own faces stuck onto them). Sky Sports is considering superimposing computer-generated fans into stands.

Impact of the COVID-19 Pandemic on the Sports Industry

Fans on Zoom (Source: @brfootball)

Obviously, this has many limitations. For one, cardboard fans and artificial cheers can’t replace the energy and excitement of actually cheering your team while they compete before your eyes. And you can’t charge holographic projections for ticket sales - the viewers are at home, so nobody’s buying tickets still. (By the way, some broadcasters are offering you the luxury of choosing team-specific crowd noises while watching the game.)

Tech Talk: The absence of live events gives an opportunity for various technologies to enter the fray. Many sporting bodies are looking to develop their own D2C outlets and investing in immersive virtual reality tech to give fans a more engaging viewing experience, besides alternate income streams like “gamified viewership” and even gambling. On a similar note, it might be interesting to note that the online gaming industry has seen a surge in traction and revenue since the beginning of the pandemic.

Fun Fact: In South Korea, a country praised for its efficient handling of the pandemic, the first baseball game after a long time was opened by a nine-year-old boy who threw the first pitch. Besides an empty stadium and coaches wearing face masks, what was unique about this moment was that the boy threw the pitch while being inside a “social distancing bubble”. And it was a literal bubble.

 

Survival of the Richest: The Road Ahead

Now, OTT innovations, D2C outlets and virtual technologies sound well and good, but not every league, club, broadcaster or sport can afford them. Some sports will invariably be hit harder than others.

Before the pandemic, many sports had a hand-to-mouth existence. Now, the cash crunch could mean that smaller clubs, smaller teams, smaller organisations and smaller sports might face a difficult future or go bankrupt altogether.

Then there’s player value, which is what a player could sell for in the market based on their performance, age and position. This could fall across clubs and leagues - but top-ranked players could see their value retained, with those on the bottom rung being more adversely affected. Good news for those at the top, bad news for those up-and-coming athletes hoping that 2020 would be their year (this is sort of akin to what the news industry is going through right now).

Some sports, like golf and snooker, don’t rely on a live audience. For others like cricket, football and tennis, spectators shouting at the enemy team or gasping at a sixer are an integral part of the game. Whether technology can satisfactorily replicate these emotions is an unsure prospect.

The Bottom Line: The sports industry will see a rough few months ahead but it’s not the end of the road. If it innovates and adapts smartly and swiftly enough, it could ride out the turmoil ahead. And who knows: one day, not too far away, we’ll again join hands to cheer the Indian Cricket Team at the ICC World Cup Finals! (Provided we get a vaccine ASAP.)

FIN.

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