The story of international sports over the past decade was one of unlimited growth, unrestrained spending and unwavering popularity. Coronavirus brought the sports business to an immediate standstill. The boom times went bust overnight.
Now, for the investors who plowed their fortunes into team ownership and the leagues that have gotten used to a gusher of money, the crisis risks turning into a reckoning.
The cancellation of the March Madness college-basketball tournament already has caused the NCAA to reduce its annual distribution to member institutions by nearly two-thirds, from $600 million to $225 million. Amateur sports bodies in the U.S. tried unsuccessfully to join the congressional bailout because their losses from the delay of the Olympics could be in the range of $800 million.
Some team owners believe the biggest problem facing sports is more philosophical than financial. It is the idea that public interaction is now associated with fear.
The consequences across the business are only beginning to come into focus. Every day without sports costs the leagues and broadcasting networks huge sums of money that even savvy financial officers can't wrap their minds around.
National Basketball Association teams have closed the doors to their practice gyms, leaving the most talented players on the planet stuck in their homes with nowhere to work out, as the league office braces for an incalculable financial hit. Major League Baseball on Friday agreed to float players a $170 million advance on their salaries as they come to grips with a potentially long shutdown. The leagues are examining how to come back and play even before fans are reintroduced to the equation--possibly ushering in an era of empty arenas as sound stages for sports broadcasts.
That might not fly with the players.
"I just don't know how we can imagine a sporting event without fans," Los Angeles Lakers superstar LeBron James said on a podcast last week. "There's no excitement. There's no crying. There's no joy."
Mr. James also balked at the concept of a neutral-site postseason with players quarantined in a bubble at the same hotel, and scoffed at the possibility of plowing ahead to the playoffs without completing the regular season.
When soccer's English Premier League shut down with Liverpool just two wins from clinching the title, team star Virgil van Dijk sounded a similar note: "If we won it in an empty stadium and the fans weren't there, I'd be gutted for them. No one wants to play games without the fans."
That approach hasn't worked in countries that were hit hard by the virus before the U.S. South Korea's basketball league was suspended on Feb. 29 and canceled last week, while Japan played a weekend of basketball games without spectators before deciding to cancel. The Chinese Basketball Association went dark in January and still hasn't returned.
The National Football League has been mostly spared, for now, by sheer accident of timing, but that will change if sheltering in place remains the norm or the virus is still roaring in the fall. English soccer went from beaming live games worth more than $8 billion in broadcast rights into 190 countries to zero in the space of a weekend.
The last sports domino to fall was this summer's Olympics. After weeks of wobbling, it finally tipped last week, when the International Olympic Committee begrudgingly agreed to postpone the Tokyo Games until next year. The costs of maintaining Olympic infrastructure during what could be a global recession will almost certainly tax a budget that already had swelled to $25 billion.
Media analyst Michael Nathanson forecast that if the NBA were to shut down the season and cancel the playoffs, it would cost Walt Disney Co.'s ESPN and ABC $481 million and WarnerMedia's TNT $211 million in lost ad revenue--and that comes in a season when the NBA itself was already bracing for a $400 million hit from a standoff with China over a tweet from a team executive that supported protesters in Hong Kong.
The financial effects on teams could be felt for far longer than the pandemic. Even with serious challenges to the sports-business model, including the shrinking cable-television market, the industry as a whole had grown over the last decade. Driven by skyrocketing media rights, team valuations had traveled in only one direction: up.
In no league is there a neater trend line than the NBA. The six teams sold between 2011 and May 2014 went for the average price of roughly $400 million. The four teams that have changed hands since then sold for an average of $1.85 billion.
Those astronomical valuations were driven almost completely by huge increases in the price of television rights over the past 15 years. The NFL sold its annual broadcast rights from 2007 to 2013 for an average of $1.9 billion a season. From 2014 to 2022, that number is $3.1 billion. The NBA isn't far behind, with broadcasters spending about $2.7 billion annually for the rights.
Television executives are scrambling to figure out how to protect that investment if their prized asset stays off the air.
There is widespread agreement among TV programmers that the coronavirus pandemic qualifies as an "act of God" and meets the requirements for a force majeure clause. But it is unlikely that TV programmers will invoke such clauses, for two reasons, according to people familiar with executives' thinking. Major networks don't want to damage their relationships with leagues, which are long-running and serve as one of the few remaining linchpins for the cable bundle. And with rights deals expiring soon, including the NFL's, TV programmers are eager to preserve as much goodwill as possible going into those negotiations.
The majority of owners in the major American leagues are wealthy enough that they will be able to absorb a hit without having to dump assets. "I don't think we should be having a bake sale for the owners," said the former chairman of Fox Sports, David Hill.
Experts aren't expecting a fire sale of franchises valued in the billions. But for anyone who was considering cashing out in the near term, the uncertainty created by the coronavirus could be a powerful argument against it.
"I don't know if there will be any inventory going forward," said Steve Horowitz, a partner at a leading sports investment bank, Inner Circle Sports. "But if an NFL or NBA team came on the market tomorrow, the list of interested people would still be long--and none of them would look back with any regret."
That could be a different story across the Atlantic, where there is so much professional soccer that many teams were clinging to survival even before the pandemic. Lower-tier clubs already have called on the lavishly funded Premier League to organize a bailout. At least a dozen teams operating on paper-thin margins could face bankruptcy without one. In a letter to club heads around Europe on Thursday, Andrea Agnelli, chairman of Italian giant Juventus, called the situation "the biggest challenge our game and industry has ever faced."
"We are all football executives responsible for the well-being and sustainability of the clubs we manage, which are faced with a real existential threat," he said. "No one is immune, and timing is of the essence."
Women's sports also could be among the biggest losers. After a banner 12 months that saw female athletes command record television audiences and make big strides in their fight for equal pay, this is the worst possible time to go dark. The U.S. women's national soccer team planned to capitalize on its 2019 World Cup victory by seizing the spotlight at the Tokyo Olympics and building a more sustainable domestic professional league.
As baseball, basketball and hockey try to figure out what the rest of 2020 looks like, so far it is business as usual for the NFL. The heavyweight American sports league struck a new long-term labor agreement with its players earlier this month and now turns its attention toward new TV deals, even though the current pacts still have a few seasons left on them.
While talks between the networks and their current rights holders are still in the preliminary stage, the NFL doesn't believe the current health crisis will have any impact on its future contracts, one network executive said. These conversations are continuing apart from the threat poised to disrupt the 2020-21 season and the potential financial impact of lost games. These rights deals are seen as post-pandemic business by the NFL--at least for now.
One lesson of the pandemic, however, is how quickly things change. Hours before the NBA suspended its season, ESPN President Jimmy Pitaro met with the company's executives to discuss how the virus might disrupt the network's schedule. Then, they found out the season was on hold when they read the news on their own network. The next day, ESPN's programming team scrawled various hypotheticals on a white board to fill the gaps in the schedule. Could they get the rights to air WrestleMania from World Wrestling Entertainment Inc.? What about airing a seven-hour marathon of Tom Brady game footage? Was the network's new documentary on Michael Jordan ready to release early?
NBA Commissioner Adam Silver has spoken several times with Mr. Pitaro and WarnerMedia News and Sports Chairman Jeff Zucker since then, and some network executives are optimistic that the NBA season can still be concluded this year. One scenario floated in conversations is the possibility of televising the NBA playoffs without spectators to protect players and fans from contracting the coronavirus.
Dallas Mavericks owner Mark Cuban predicts there will be a premium on content from sports leagues like the NBA when there are games again. As people around the world exhaust their Netflix queues, and with the production of movies and television shows effectively shut down, he expects there will be enormous demand for something new to watch. NBA games could help solve that problem.
"People will literally be doing anything to watch us," he said in an email. "They won't even necessarily be basketball fans. They just will be starving for new content, and we will be there to feed them."
For now, the broadcasters' pain is obvious in their threadbare TV schedules. CBS had been gearing up for its two showpiece events of the spring in the NCAA Tournament and the Masters. Now it is offering viewers the cold comfort of police procedurals. NBC Sports' weekend schedule would normally be packed with live English soccer. Instead it aired reruns of dog shows.
The networks might have the opposite problem in the fall: too much inventory. The Kentucky Derby has been delayed from the first Saturday in May to September. The French Open was moved from June to October. The NBA playoffs could last until the late summer and overlap with the start of the NFL and college-football seasons. All that is based on speculative assumptions that severe control measures will be effective, transmission will slow in the summer and the virus won't wreak havoc in the fall.
There is a growing sense that the global sports hiatus could be an opportunity to do things differently when the games return. Some are asking whether the baseball season really needs to be 162 games long or if the NBA calendar should be pushed back two months so that it doesn't conflict with the NFL's.
One innovative idea came from Wayne Rooney, the former Manchester United forward, who proposed shifting the entire European soccer calendar to operate January to October instead of August to May for a couple of seasons. The idea would be to better line up with the next World Cup, which will be held starting November 2022 in Qatar.
The shutdown of sports when Utah Jazz center Rudy Gobert tested positive for the virus and the NBA suspended its season on March 11 was the moment when it hit many Americans that life was about to be very different. The restart of sports might be a signal that the worst is over and the new normal is finally about to begin.
"We need sports," Mr. Cuban said, "as much as sports needs fans."
Benjamin Mullin contributed to this article.
