€300 Million in Debt, Olympics in Question and Brilliant Bubble amid COVID-19
The pandemic and the sports industry
Coronavirus is seemingly everywhere in the world at the moment. Not just among us, but everywhere in the media and virtually in every industry. One of the industries massively impacted by the global pandemic is the sports industry. From leaving franchises in enormous debt to the postponement of the greatest celebration of the human competitive spirit, the virus outbreak has left and is still leaving a massive mark on sporting. In June it was estimated that the sports industries worldwide annual revenue would be 73 Billion US Dollars in 2020 due to COVID-19. Comparing to the 129 Billion US Dollars in 2019, the revenue is a mere 61% of the previous years revenue. This is a colossal loss but not just the economy suffered. Back in May it was estimated that already 1.3 Million Jobs were impacted in the United States alone. Coronavirus has affected many sports, many events, many franchises and organizations in many countries.
Tokyo Olympics 2̶0̶2̶0̶, 2021
The Olympics is the biggest, most popular sporting event in the world. This time around the location of the Olympics would have been Tokyo, Japan during this summer. In March the International Olympics Committee (IOC ) and Japan’s Prime Minister Shinzo Abe postponed the event to the summer of 2021. The Modern Olympic Games have only been postponed or canceled previously due to WW1 and WW2. This goes to show the scale of the issues the pandemic has created.
Approximately 10,000 athletes’ summer plans were altered in 2020 and so was the budget. Japan predicted the budget to be US$7.3 Billion in 2013, however it is estimated that Japan has already spent over US$15 Billion on hosting the summer games. The economic loss for the country is estimated to be between US$5.42 Billion– US$6.32 Billion (600–700 Billion Yen). This raises the question if hosting the Olympics is even profitable for a country. Japan has been dealt a very bad hand, however even the 2016 Olympics were unbeneficial for the hosts. Brazil lost a lot throughout the process of the Sporting Event. We will have to keep an eye out for the outcome of the next Olympics to see how profitable the games really are for the country.
Big Trouble Births Brilliant Solution in the USA
The United States of America has taken the biggest blow from COVID-19 without a doubt.
Out of any country, the virus has infected and killed the most people in US. Americans also have the biggest yearly revenue in the sports industry, meaning Commissioners, Franchise and Board of Directors had and still have their work cut out. In March most professional sports leagues were suspended and major losses were on the horizon.
The NBA seemed to be in very big trouble, because it was looking like the so fruitful playoffs would be cancelled. Commissioner Adam Silver was under immense pressure to make the right call. He had to limit the loss of the league while ensuring the safety of those involved. They often say diamonds are formed under pressure, and the solution Adam Silver and the NBA came up with is definitely a gem.
Disney World Orlando decided to partner with the NBA and host the NBA playoffs creating a ‘bubble’. The players and staff lived and worked in the bubble, in theory isolating themselves and creating a corona free space. This idea worked brilliantly. The move saved the NBA approximately $US1.5 Billion and there were no positive tests throughout the months the bubble operated. Lebron James (4x NBA Champion) praised the idea, even tough he publicly stated he did not like the isolation. Not only was the solution extremely cost-effective, it was also perfectly safe. “We’ve accomplished this against many obstacles. And at a time also when I think people needed to see this.” stated the Commissioner after the NBA season ended. Indeed a success story is rare this year, but they are necessary to keep people motivated.
Bankruptcy for the Blaugranes?
The Catalonian football club FC Barcelona just might go bankrupt. The giants of the European sport are in €300–400 Million in debt at the moment. This team is on the verge of bankruptcy. You may ask yourself how they got to this point, and the answer is not only the pandemic. Over the course of the last couple of years the board of the club has absolutely failed at creating a sustainable business plan. The club uses up around 70% of its revenue on its player wages, which is the highest accross the sport in Europe. The club also made aggressive summer signings, spending enormous amounts of money on bringing in new players. The way Josep Maria Bartomeu (the former club president) managed the club was just simply reckless and unsustainable. Bartomeu was always aiming to survive the next year, not the next ten years creating a failing business in the process. Corona was just the final nail in the coffin for the club. Barcelona missed out on a hefty amount of revenue by not being able to sell tickets and profit off of tourism, further piling on debt.
Even though Bartomeu stepped down, the club is not any better off, the damage is already done. The temporary board of directors cannot make any major decisions until the board is elected in December. The issue is that bankruptcy can be as soon as January. According to Catalonian newspapers the club has to agree a 30% pay cut with their players to survive. Whether the players are willing to make the sacrifice is up to them, and they have already taken a pay cut back in April. Moving forward the club will probably get through this rough period, but the quality in their football will possibly drop as they will most likely have to sell their current players and opt to pay players with lower salaries.
The traveling circus of speed
The motorsport known as Formula 1 is arguably the most global sport. 10 teams travel around the globe, racing at 20 different locations around the globe every year. This is obviously not feasible during a global pandemic and the formula 1 season, which usually begins in March, instantly got canceled. As the year went on and Corona Cases started to drop again, plans were in full swing. Directors at Formula 1 decided that they must hold races to limit loss. Just in the period with an absence of events (March to June), the franchise had a 96% revenue loss.
From the summer onwards races are being held across Europe. To ensure safety, daily coronavirus tests are done throughout every race weekend, and drivers and staff follow strict quarantine rules when away from a race circuit. This seems to be working okay, however 2 drivers did contract coronavirus.
Moving Forward
The sports industry is coping and surviving this period, but not without major economical losses. COVID-19 exposed and magnified problems in the management of different teams, businesses and franchises. The pandemic is still around and the second wave is bigger than expected so the struggle continues for now. Directors, Commissioners and leaders will have to continue to innovate to sustain their business until the vaccine is here.
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