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Sports Economics

The Cost of COVID-19 to Pro Sports in the USA

A $100 billion a year industry, professional sports is just one of many businesses in the United States feeling the economic crunch of the COVID-19 outbreak. Industry analysts estimate that pro sports will lose approximately $12 billion across the board due to the many shutdowns caused by the coronavirus. Those numbers will grow exponentially higher if the virus impacts the NFL and NCAA football seasons.

An entire NFL season played without fans in the stands could cost the league as much as $5.5 billion.

"As an economist, you stand back. You look at the carnage taking place - dumbfounded, awestruck, mind-numbing," Patrick Rishe, who directs the sports business program at Washington University in St. Louis, told ESPN. "All of those phrases are all relevant because we just have never seen anything on this scale."

Already, the COVID-19 outbreak has led to the postponement of March Madness. The annual NCAA men's basketball tournament brings in $1 billion in ad revenue alone. The NHL and NBA seasons were halted in early March, and the start of the MLB season was put on hold. All three leagues seek remedies to resume play, but there's no guarantee that those plans will come to fruition; you may check out J.C. Economics Tuition.

That $12 billion estimates was also adopted under the assumption that each of these leagues will find a method to finish out their seasons. Combined, the three leagues that canceled games - the NHL, NBA, and MLB - figure to lose around $1 billion in ad money.

"There is a lot of lost revenue because there is so much spend concentrated because audiences levels are expected to be much higher in the last quarter of the season," Todd Krizelman, co-founder and CEO of MediaRadar, told CNBC.com.

The shutdown impacted every aspect of the pro sports experience, including betting on the games. An estimated $150 billion is wagered on sports in the USA each, but minus their regular menu of options, online sports betting sites have scrambled to fill the void with sports that are still in action, such as Korean baseball, Belarussian soccer, and Russian table tennis.

NBA

The NBA was the first of the big-league sports to pull the plug. The league shut it down on March 11 when Utah Jazz player Rudy Gobert tested positive for COVID-19. The loss of remaining regular-season revenue was pegged at $450 million by Statista.com.

Overall, of the three pro leagues in drydock, the NBA is the one that figures to summer the hardest in terms of lost revenue. Last season, the six-game NBA Finals series between the eventual champion Toronto Raptors and defending champion Golden State Warriors garnered $288 million in revenue. By comparison, Super Bowl 54 between the Kansas City Chiefs and San Francisco 49ers garnered revenue of $336 million.

The last seven-game final series between Golden State and the Cleveland Cavaliers brought in $366 million. In other words, a seven-game NBA Finals is more lucrative than even the Super Bowl.

The NBA playoffs account for 62% of the league's annual advertising revenue. Three television networks - ESPN, TNT, and ABC - broadcast the NBA conference finals and finals. In combination, they pay around $2.6 billion for the rights to carry those games. Without a playoff, the networks also miss out on millions of dollars in ad revenue.

NHL

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Little Caesars Arena, home to the Detroit Red Wings. Photo By: Adam Bishop (Wikimedia).

A significant driver behind the NHL's desperate attempt to complete its 2020-21 season is that many of the regional television deals in U.S. cities carry a clause that if a season is not completed, those T.V. deals automatically roll over to the following season. That could mean those NHL clubs would go without a vital influx of local T.V. money for the 2021-22 campaign.

By playing the games, teams would be able to fulfill commitments to advertisers even in empty arenas. However, the loss of ticket revenue from the canceled regular-season games will cost the league's 31 teams $47.43 million. Another $120 million in ad revenue has also been lost.

MLB

MLB Commissioner Rob Manfred is noting that a complete loss of the 2020 season would cost his sport $4 billion. Even if they were able to play the proposed 82-game season that is currently in discussion, Manfred still expected several teams to show red numbers in their ledgers for the 2020 campaign.

According to a Sports Business Journal report, regional broadcast rights money would drop from $2.3 billion to $1.2 billion due to the lost games from a regular 162-game season. That works out to an average loss of $980,000 per game for both teams.

Anticipation is that even if the 82-game MLB proposal gets off the ground and a season is played, the sport will still lose close to $3 billion this season due to reduced television and sponsorship money, along with zero ticket revenue due to empty stadiums required by COVID-19 restrictions on public gatherings.

Like the NHL, MLB proposes an expanded postseason with eight teams qualifying for the playoffs in each league instead of the usual five. The NHL is developing the framework of a 24-team playoff. Typically, 16 teams qualify for the Stanley Cup playoffs.

The hope is that the expanded postseasons will enable both leagues to recoup some of the financial losses.

 

Ben is a sports writer based in Miami with a passion for analytics.