Can Sports come back from COVID19 pandemic?
A sports economist thinks professional leagues around the world will get back to financial normality at some point after COVID-19 subsides, but there’s no telling when that might be.
Jeff Borland, who is the Truby Williams Professor of Economics at the University of Melbourne said it’s hard to know to what extent the professional sporting landscape will be altered by the global pandemic.
“The things it’s going to depend a lot on are still unknown. I think we know kind of what it will depend on, we just don’t know how bad those things will be,” he said.
Professor Borland thinks the number-one factor is when leagues can resume.
Almost every single professional competition in the world has been suspended or cancelled because of COVID-19, with the Chinese Taipei Basketball League and football leagues in Belarus and Nicaragua among the very few leagues still running.
“It’s gonna restart, we don’t know I guess exactly when or under what conditions at the moment,” the professor said.
“There’s obviously going to be a really, really big difference in revenue for the competitions if they get to play again this year versus if they don’t. Even if the Australia Football League or rugby came back for sort of 10-week seasons with a couple of finals, they’re going to end up this year in a much better financial position than if they don’t get to play at all.”
With competitions shut down amid COVID-19 restrictions, clubs and leagues aren’t making any money through matchday incomes from tickets and concessions sales.
Depending on the contracts they negotiated with broadcasters, some leagues are also losing out on income from licensing rights.
Even when sport returns, it’s unclear how freely those crucial revenue streams begin to flow again.
“Is sponsorship sort of adversely affected very, very quickly because lots of companies, they’re just not in a position to offer sponsorship? What happens to the broadcast rights?,” Professor Borland said.
Those particular revenue streams have been key to massive growth in professional sport along with globalisation.
French football club Paris Saint Germain paid FC Barcelona 750 million tala for the right to sign Brazilian striker Neymar to a 200 million tala-per-year contract in 2017.
The same year American basketball franchise the Houston Rockets were sold for over 6 billion tala, slightly over what Forbes considers to be the average value of teams in the National Basketball Association.
“The increase in broadcast revenue, the international exposure you can get by being a sponsor of one of the major teams has meant that companies have been increasingly keen to be associated with clubs,” Borland said.
“I think in the short term I’d be surprised if you saw the record fees and sales that you’ve seen, but I think after a while we’ll resume that path because I don’t think anything’s happened to people’s basic love of sport, and I don’t think anything’s going to change about that human desire to win, and to throw everything into winning.
“It’s pushed us off the path for a while, rather than necessarily changed what path we’re on.”
Borland said by-and-large sports clubs are ‘win-maximisers’ – they’re trying to win the championship or premiership rather than make a profit.
“Essentially every dollar they get, and often a bit more than that, they’re putting in to try and win,” he said.
“So that means that when you have some sort of negative impact on revenue, sports teams tend to be very vulnerable, even the most professional, because they’re all following the same model of spending as much money as they can, it’s just they happen to have more money to spend.
“Then it really depends on how well the league has provisioned itself for some type of downturn like this.”