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US Pro Sports Prove Big Enough to Handle $13 Billion Sales Hit From COVID

US Pro Sports Prove Big Enough to Handle $13 Billion Sales Hit From COVID
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Thursday, 05 November 2020 02:53 PM

Baseball’s World Series and basketball’s championship finals were both compelling events to watch. What’s not so compelling are the huge revenue hits professional sports incurred in their pandemic-ravaged seasons.

If you add in football, whose season is ongoing, the three leagues may see their sales fall by about $13 billion, according to various accounts. The drops are unprecedented, but if there’s any good news it’s that debt holders needn’t worry about their investments --not yet, anyway. The ratings firms have so far remained confident in the leagues’ and teams’ abilities to service their debt.

The National Basketball Association saw revenue plunge by $1.2 billion or about 10% from the prior year. The league lost $800 million in ticket revenue after moving its season to a spectator-free bubble at Walt Disney World and saw sponsorships and merchandise sales drop by $400 million, according to a report from ESPN citing financial numbers provided to teams that the outlet obtained.

A yearlong standoff with China didn’t help the deficit. That stemmed from a tweet by then-Houston Rockets General Manager Daryl Morey that expressed his support for protesters in Hong Kong. In response, the Chinese government prohibited NBA games from being broadcast within its borders. The feud cost the league $200 million in all.

The NBA’s hit came even though it had already completed most of its season before the virus spread across the U.S. It stands to lose much more -- up to $4 billion -- if it starts its next season without fans. The league hasn’t set a start date for the 2020-2021 season. A proposal by players to begin in mid-January, rather than the December start date preferred by the league office, could slice revenue by $500 million to $1 billion, according to ESPN.

The NBA didn’t respond to requests for comment.

In baseball, a report from the Athletic cited a Major League Baseball official as saying the league saw revenue fall to $3 billion in 2020, down from $10.7 billion in 2019. Expenses were reported to be more than $6 billion, leading to about a $3 billion deficit on the year.

MLB will have operating losses of $2.7 billion to $3 billion, Commissioner Rob Manfred said in an interview with Sports Business Daily. “I’m talking about cash losses,” he said. “When you lose $3 billion in cash in one year, that’s pretty rough.”

As with the NBA, little is publicly known about baseball’s finances, but the publicly traded Atlanta Braves provide a clue. The Braves, owned by billionaire John Malone’s Liberty Media empire, reported a 95% plunge in second-quarter revenue on a year-over-year basis.

While its season is about half over, the National Football League’s revenue was estimated to fall by as much as $4 billion in 2020, according to the Wall Street Journal in July. For the 2019 season, the Green Bay Packers reported local revenue -- which includes tickets and other stadium sales -- of $204 million. The Packers, the only NFL team to publicly report their financials, have yet to allow fans back to Lambeau Field.

The NFL declined to comment through a spokesman.

The decline in revenue has pushed league leverage ratios beyond historical norms, but Fitch Ratings Inc. remains optimistic that the setback is temporary and will be mitigated by current and future media-rights deals. In a series of notes, it has retained stable outlooks for each league’s debt. Moody’s Investors Service, in an Oct. 1 report, said that most municipally owned stadiums have “sound available liquidity” to weather losses brought on by the pandemic.

“The surge in sports fees continues unabated despite market uncertainty created by Covid-19,” wrote Bloomberg Intelligence media analyst Geetha Ranganathan. “A 65% jump in average annual fees in Major League Baseball’s new deal with Turner Sports underscores how live sports are becoming even more valuable to TV networks as cord cutting accelerates.”

The safety net of television rights deals may be weakening, however. Viewership for this year’s World Series plummeted 30% compared with 2019 while the NBA finals saw a 51% decline, making some question whether watching habits have been permanently altered by the pandemic.

But Ranganathan wrote that those statistics could be an aberration and that it “may be premature to press the panic button on the ratings power.”

© Copyright 2020 Bloomberg News. All rights reserved.

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The three U.S. pro sports leagues may see their sales fall by about $13 billion due to the coronavirus pandemic. The drops are unprecedented, but if there’s any good news it’s that debt holders needn’t worry about their investments --not yet, anyway.
sports, leagues, 13 billion, covid
Thursday, 05 November 2020 02:53 PM
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