Written by Tess Britton
Back in May when the virus was still young in the U.S, many economists made predictions about how this virus would affect the sports industry. Warnings of mass revenue loss, unemployment and termination of some leagues all together flocked the media causing many to worry about the lasting impacts of this virus on the industry; little did we all know how destructive it would really become. In this article I hope to articulate the predictions back in late spring and early summer and compare these predictions to how the sports industry has truly been impacted thus far. To begin, let’s look at how the sports industry was doing in the U.S. before the virus hit.
In the subsequent years leading up to COVID, the market for professional sports was doing very well both within and outside the arena.
Below is a graph depicting total NFL revenues from 2001-2019. As can be seen from this graph, revenues generated from this professional sport were increasing year by year, until 2020 of course.
[1] In this next graph, revenues generated by arena attendance are shown. These numbers are specifically outlining how much money the physical stadiums make rather than the league as a whole.
[2] For clarification purposes, these numbers, denoted as 2.256 for example, are the equivalent of 2,256.
Here, U.S. specific leagues are boxed in red. As can be seen, stadium’s and their consequent attendance make up a substantial proportion of revenue from these professional sports teams. In fact, for every $1 spent attending a sporting event, up to $2.5 on average can be gained indirectly. For example, if a fan buys a ticket for $1, it is said that simply by attending the game, or buying merchandise, the actual revenue from this direct purchase of one ticket for the game, is much more than that[3].
Of the entire global sports market, the U.S. contributes $420 billion, half of the world’s sports revenue[4]. Evidently, the global sports market as well as the U.S. economy relies heavily on U.S. sports to bring in revenue each year. In particular, revenues depend largely on filling the stands with consumers and capitalizing on their attendance. When coronavirus hit the U.S. several economists made predictions about the potential losses from sports and what the implications of a fan-less stadium would be.
At the beginning of the pandemic, when everything was shut down immediately in mid-March, economists projected that up to 92.6k would be lost from U.S. sports revenue every minute[5]. In addition to those staggering numbers, cancellations of sporting events impacted “1.3 million sports jobs: furloughed, reduced, or erased.”[6]
ESPN conducted a study with Patrick Rische, an economist and sports business professor at Washington University in Saint Louis. Their analysis predicted losses from the sports industry beginning with estimates that the pro sports sector will lose around 5.5 billion while college sports will lose 3.9 billion in revenue. As such, Rische predicts that “the sudden disappearance of sports will erase at least $12 billion in revenue and hundreds of thousands of jobs, an economic catastrophe that will more than double if the college football and NFL schedules are wiped out this fall by the coronavirus pandemic[7].”
To break it down further, Rische looked at specific aspects of the sports industry and what contributes to total revenue generated. He found that “the crisis stands to wipe out more than $3.25 billion that fans would have spent on pro sports. It would erase nearly $371 million in wages – approximately 20 million hours – for ticket takers, beer vendors and other stadium and arena employees. At least $2.2 billion of national TV revenue would be lost.[8]”
The MLB also did a study attempting to uncover their total revenue losses due to the pandemic. According to a presentation from the commissioner’s office obtained by The Associated Press, “Major League Baseball told players their prorated salaries would contribute to an average loss of $640,000 for each game over an 82-game season in empty ballparks[9]”.
Given these predictions, it is evident that many believed that this pandemic would have an incredibly detrimental impact on the sports industry. Looking at the true numbers now, exactly one year from when the virus began to impact our nation, we can see that these predictions were not even close to the true losses the sports industry has had in the past year.
According to the accounting firm PwC, “in 2020, the sports industry in North America was projected to generate $75.7 billion[10]”. Instead, it lost almost a third of this expected revenue as a consequence of shortened seasons and limited stadium access for fans.
Recalling Patrick Rische’s estimate of $12 billion lost in revenue, the true number is close to $29 billion according to Emsi, an economic modeling firm[11].
Below, a figure from Emsi shows the impact that COVID has had on employment in the sports industry.
As can be seen, thousands of jobs have been cut due to the pandemic. While many of the 1.3 million jobs that were lost in April have managed to find work elsewhere, 111,000 are still unemployed.
In addition to unemployment and stadium revenues being cut, NFL television ratings “are down about 10 percent — not nearly as drastic as the N.B.A.’s and M.L.B.’s.[12] Global sports sponsorships rights fees will fall nearly 40 percent to $28.9 billion in 2020 from $46.1 billion in 2019[13]”. As such, many professional sports players will be forced to take a pay cut for several years to come in order to satisfy the impacts of these fees.
Back in May, Sports Value asked economist Mônica de Bolle how the economic effects of the pandemic could be mitigated. She responded that “[Governments] will need to give direct support to the sectors most affected by the epidemic. Among them are: sports, entertainment and tourism, both leisure and business.”[14] Considering the verifiable numbers showing the impact of COVID on the sports economy, it is clear that the U.S. government did not appropriately support these sectors affected by the pandemic.
These predictions back in May were terrifying, but among other things these days, the dramatic decrease in revenue and the implications of these losses aren’t even headline news with everything else going on. Though dire, looking at these numbers puts into perspective the state that our nation’s sports industry is in because of this virus. The impact will not go away even when the virus subsides. Industries such as the sports industry will be impacted for many years to come and the recovery process has not even begun.
Appendix
[1] Gough, Christina. “NFL Revenue by Year.” Statista, 9 Oct. 2020, www.statista.com/statistics/193457/total-league-revenue-of-the-nfl-since-2005/.
[2] Somoggi, Amir. “Coronavirus’s Economic Impact on the Sports Industry.” Português – PT, www.sportsvalue.com.br/en/coronaviruss-economic-impact-on-the-sports-industry/.
[3] Somoggi, Amir. “Coronavirus’s Economic Impact on the Sports Industry.” Português – PT, www.sportsvalue.com.br/en/coronaviruss-economic-impact-on-the-sports-industry/.
[4] Somoggi, Amir. “Coronavirus’s Economic Impact on the Sports Industry.” Português – PT, www.sportsvalue.com.br/en/coronaviruss-economic-impact-on-the-sports-industry/.
[5]“The Economic Impact of COVID-19 on US Sports.” Emsi, 20 July 2020, www.economicmodeling.com/2020/05/28/the-economic-impact-of-covid-19-on-us-sports-up-to-92-6k-lost-every-minute/.
[6]“The Economic Impact of COVID-19 on US Sports.” Emsi, 20 July 2020, www.economicmodeling.com/2020/05/28/the-economic-impact-of-covid-19-on-us-sports-up-to-92-6k-lost-every-minute/.
[7]“Sudden Vanishing of Sports Due to Coronavirus Will Cost at Least $12 Billion, Analysis Says.” ESPN, ESPN Internet Ventures, 1 May 2020, www.espn.com/espn/otl/story/_/id/29110487/sudden-vanishing-sports-due-coronavirus-cost-least-12-billion-analysis-says.
[8]“Sudden Vanishing of Sports Due to Coronavirus Will Cost at Least $12 Billion, Analysis Says.” ESPN, ESPN Internet Ventures, 1 May 2020, www.espn.com/espn/otl/story/_/id/29110487/sudden-vanishing-sports-due-coronavirus-cost-least-12-billion-analysis-says.
[9]“AP: MLB Anticipates Losing $640K Per Game With No Attendance.” Sports Illustrated, Sports Illustrated, 16 May 2020, www.si.com/mlb/2020/05/16/mlb-anticipating-losing-640-thousand-per-game-no-fans-coronavirus.
[10] Drape, Joe, et al. “2020: The Year in Sports When Everybody Lost.” The New York Times, The New York Times, 14 Dec. 2020, www.nytimes.com/interactive/2020/12/13/sports/coronavirus-sports-economy-wisconsin.html.
[11] Drape, Joe, et al. “2020: The Year in Sports When Everybody Lost.” The New York Times, The New York Times, 14 Dec. 2020, www.nytimes.com/interactive/2020/12/13/sports/coronavirus-sports-economy-wisconsin.html.
[12] Drape, Joe, et al. “2020: The Year in Sports When Everybody Lost.” The New York Times, The New York Times, 14 Dec. 2020, www.nytimes.com/interactive/2020/12/13/sports/coronavirus-sports-economy-wisconsin.html.
[13] “Sponsorship Spend to Fall $17.2bn; Financial Services by $5.7bn.” Two Circles (US), 18 May 2020, twocircles.com/us-en/articles/projections-sponsorship-spend-to-fall-17-2bn/.
[14] Somoggi, Amir. “Coronavirus’s Economic Impact on the Sports Industry.” Português – PT, www.sportsvalue.com.br/en/coronaviruss-economic-impact-on-the-sports-industry/.