The Global Sports Market Faces Financial Drought Due to COVID-19... Struggling to Resume Games

by Jeong Hyunjin

Published 15 Apr.2020 10:43(KST)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The novel coronavirus disease (COVID-19) pandemic is impacting the global sports market, valued at 573 trillion won. With the Tokyo Olympics in Japan postponed by one year, along with world championships in various sports, the English Premier League, and the U.S. professional basketball league (NBA) all being mostly postponed or canceled due to COVID-19, economic losses are becoming a reality.

According to the World Economic Forum (WEF) on the 15th, the global sports industry's value was approximately $471 billion (about 573.4 trillion won) as of 2018. This represents a 45% increase compared to 2011, and the industry had been steadily growing until the COVID-19 outbreak. A foreign media outlet reported, "Many sports business models are under threat," adding, "With events canceled or postponed, revenues have significantly decreased."

The sports market operates on three business models for funding: revenue from ticket sales and other income generated by holding games, broadcasting revenue from selling media rights, and income from sponsors and advertisements. Especially in professional sports, annual revenues are generated based on a fixed schedule known as the regular league. Even for world championships, each sport's association generates revenue through these three models.

In professional sports, broadcasting rights revenue accounts for the largest share of income. Looking at major sports leagues such as the Premier League, NBA, and Major League Baseball (MLB), about half of the revenue earned over the past five years came from broadcasting rights. The National Football League (NFL) in the U.S. earned an average of $13 billion over the past five years, with more than $9 billion coming from broadcasting rights. Similarly, the Premier League earned about $3.5 billion out of $6 billion from broadcasting rights.

Due to the COVID-19 pandemic, all games have been postponed or canceled, effectively cutting off the sports market's "money flow." Broadcasters have begun reassessing the value of current contracts, and companies sponsoring sports have drastically reduced their investments, fearing expanded economic damage from COVID-19. Since games are not being held, revenue from games is also impossible to generate.

Mike Garlick, chairman of Burnley, a team in the English Premier League, recently stated, "If the league does not resume by August, our club will go bankrupt," adding, "This is an unforeseen situation. It is not just Burnley's problem but an issue faced by each club and the entire football ecosystem of the Premier League." Spain's professional football league, La Liga, also announced that lockdown measures could cause damage amounting to up to 1 billion euros.

[Image source=AP Yonhap News]

As the COVID-19 crisis prolongs and losses increase, the sports market is hoping for a quick resumption of games. The longer the current situation of cancellations continues, the more athletes, coaches, teams, associations, and broadcasters involved in sports will inevitably face economic difficulties. However, even if lockdown measures are lifted after COVID-19, since no vaccine has been developed yet, caution must be maintained for the time being, deepening concerns among stakeholders.

The German Bundesliga announced plans to resume games next month, stating that if the season is canceled, some teams in the first and second divisions could face bankruptcy, according to foreign media. However, as COVID-19 continues to spread, games are expected to be held without spectators. Italy's Serie A has recently begun reviewing plans to resume the season, and Spain's La Liga is also discussing a spectator-free restart by the end of next month. The English Premier League is also considering a possible restart in June.

The U.S. NFL stated that games will resume once state-level lockdown measures related to COVID-19 are lifted. Although U.S. President Donald Trump said during a video conference with professional sports officials on the 4th that "I hope sports resume by August," the rapid spread of COVID-19 in the U.S. means the outlook cannot be entirely optimistic.