Brands and league owners are now in a fix. Not carrying on with the action could mean they will forego a large sum that is assured as earnings from TV rights.
It has all the ingredients that sports teams would love – an audience sitting at home, no rival professional sport distracting the audience, brands would love to reach out to consumers and fans can spend enough time watching the action. Unfortunately, the spread of the virus is keeping all the players out of action.
All the action, unfortunately, has been confined outside the playing arena. Last week, Major League Baseball (MLB) announced in a statement that of the 185 samples collected, 38, including 31 players, have tested positive. Individuals from 19 different clubs have tested positive for the virus.
If all goes well, action could resume for the National Basketball Association (NBA) by the end of the month. There are rumblings about reduced salary for players. Some players have chosen to opt out while others have tested positive and will have to be out of action.
Brands and league owners are now in a fix. Not carrying on with the action could mean they will forego a large sum that is assured as earnings from TV rights. Even with no fans in the stadiums, carrying on with the league could endanger the health of players.
Neither, realistically, is an option they would prefer.
$$$ that’ll be foregone
The global sports industry is estimated to be worth $471 billion in 2018, according to the World Economic Forum. It has seen a 45 percent jump since 2011, highlighting the importance it has for brands. Nearly 60 percent of that revenue is accounted for by the top 10 sporting events.
The action organised by National Football League (NFL), Major League Baseball (MLB), National Basketball Association (NBA) and the National Hockey League (NHL) earn the highest revenues among the top five sports leagues.
Revenues of top sports leagues
The television contracts by the team are driving their rich valuation. NBA, for example, signed a $24 billion contract with TNT and ESPN beginning 2016-17. The deal will be good for nine years. Despite a lucrative deal like that, the NBA will be missing out the 20-25 percent of its revenue it makes due to gate receipts. The stakes are juicier as leagues head towards their final stages.
That is just the big picture. As food, entertainment, earnings from vendors, merchandise sales are all added up, the losses can keep piling up. Leagues like the NHL, which earn far lesser than NBA or MLB could be squeezed harder.
A number of players across professional leagues are dropping out of the season, making the professional leagues less attractive for brands. Players testing positive has made it a difficult choice for their teammates to continue.
Brands on the sidelines
Companies that are closely associated with professional sports leagues are among the best ones to keep an eye on. For example, the NFL has Walt Disney (DIS), Nike (NKE) and Under Armour (UA) among their brand partners. Nike (NKE) and PepsiCo (PEP) and Take Two Software (TTWO) which work closely with the NBA. If it resumes, the focus will be on Nike and Under Armour among the various brands that MLB has partnership with. For NHL, the focus could be on Electronic Arts (EA), Comcast (CMCSA) and others.
World Wrestling Entertainment (NYSE: WWE) has lost nearly a third of its value since February. For Manchester United (MANU) the resumption of Premier League has helped the stock recover from the low.
Others like Madison Square Garden (MSG), owner of NBA team New York Knicks, would love the action to resume. Its stock has halved since February and the action could do it some good.
While companies are missing their earnings, fans miss their thrill.