• Jonathan Brannan

SPORTS INDUSTRY & THE CORONAVIRUS

Updated: Mar 9

This article was originally published on March 18th, 2020.


The COVID-19 pandemic wiped out most of the world's major sporting events in an unprecedented 24 hours, last week.

"Thursday -- March 12, 2020 -- was the day sports died, or at least the day they went into temporary hibernation. ... Thursday was when the lights went off for good, when the men and women who control sports in the United States finally understood it was time to reach for the red phone, the nuclear option," wrote Mike Vaccaro (@MikeVacc), in his New York Post column.

"This is time for big events like March Madness, big events like these big sports arena things to take a pause for the next four to six to eight weeks," Centers for Disease Control and Prevention Director Robert Redfield (@CDCDirector) said at a House Oversight Committee hearing in Washington, "while we see what happens with this outbreak in this nation."


COVID-19


The world of sports is feeling the weight of COVID-19, which has spread to almost every corner of the world from China. So far the virus has infected well over 100,000 people and killing nearly 5,000 globally so far.

Last week, the World Health Organization officially declared the outbreak as a global pandemic. Causing global stock markets to crash and seeing the U.S. implement sweeping travel restrictions.


Every sport has seen some form of disruption. The NHL is "going on hiatus" said NHL Commissioner Gary Bettman in a statement, "when things get back to normal and it's safe and it's prudent, that we can go back and resume the season and ultimately have the Stanley Cup awarded."

The NBA had planned to play games without supporters in the arenas temporarily. After the NBA's Board of Governors met, Commissioner Adam Silver announced that they have "reached a consensus to move forward playing games without fans and behind closed doors."


However, the decision to cancel events was finally reached, after recommendations from public health officials called to slow the spread of the virus.


Europe


In Europe, all soccer matches have been suspended for the foreseeable future. For Europe's top five soccer leagues, it is likely that they will be able to ride out the financial shortfalls due to the fact that broadcasting income makes up the majority of their revenue.

However, the smaller leagues which rely on ticket sales for most of their revenue, the next few months could see some clubs face financial uncertainty.


One country that is likely to notice a dent in its finances is Scotland. According to Uefa's latest benchmark report, 43% of the Scottish top flight's revenue was made up of ticket sales. That figure is almost three times the European average of 15%.


Scottish soccer is among the best attended in Europe per head of population. A total of $108 million was made from ticket sales in 2018, far more than countries of a comparable population, such as Norway ($23 million) and Denmark ($15 million).

SPFL chief executive Neil Doncaster has admitted that COVID-19 could have "dire consequences" for teams across Scotland. Teams now have to find a way to pay for their fixed costs, despite no income coming in.

Scottish teams are not the only ones concerned about the lack of ticket sales income. Mark Catlin, CEO of English League 1 team Portsmouth says the inability to rely on ticket sales may see lower-level teams in England "tip others over the edge."


Catlin, whose Portsmouth team has 14,500 season ticket holders, estimates that losses would amount to $122,700 a game. In addition, if games are played without crowds, the club faces the potential of compensating or crediting its season ticket holders.


Accrington Stanley owner Andy Holt says "I am really concerned [by the financial impact] but not as concerned as I would be about getting a grip on this coronavirus crisis. I think we need to get on top of it.

"It is OK talking about financial ramifications. If I lose half of my fans to this disease, I have long-term financial ramifications that may be far more critical."


Insurance


For sports organizations and their facilities, they pay for insurance in case an event cannot take place. With the proper insurance, sports teams will be able to stave off the substantial losses, associated with the missed events.


In most cases, coverage will be dictated by a policy holder’s event cancellation coverage, and the exclusions are written into it. Some policies cover cancellations due to an outbreak, but exclude specific diseases, such as SARS, for example.


One law firm that represents policyholders in disputes with insurers advises event operators and facilities to review not only their event cancellation policies but also those covering property damage, civil unrest, and even political risk.


“One of the things we’re cautioning policyholders is, because this language is so different from policy to policy, don’t assume you don’t have coverage,” said Mikaela Whitman, a partner and founding member of the insurance recovery team at New York law firm Pasich LLP. “It can depend on how disease is defined. Is [COVID-19] a disease or a virus? Does it fit into the special language of the policy? It will really come down on a case-by-case basis.”

In motorsports, variations stem not only from policies but also from race formats.


Darren Hickey, sports and entertainment adviser for Hub International said that many races do not have event cancellation insurance, because so many of the events are held at permanent venues, where the events can simply be postponed until a later date.

However, temporary street circuits like the ones seen in IndyCar and Formula 1 often involve contracts with cities that stipulate the precise window when a race must be held, so any postponements by those organizers could lead to outright cancellation.


“Some tracks will buy event cancellation coverage to indemnify themselves in the event that the race doesn’t happen to protect income from the TV broadcast, concessions, tickets they’ll have to refund and [revenue from] VIP suites and motorhome rentals,” said Hickey. Unfortunately, he said, “in 2020, it’s not a prevalent purchase.”