The Economics of Sports Without Live Audiences
Sport faces some huge economic challenges over the next few months that have the potential to transform how the industry operates in the long term.
Playing professional sports behind closed doors or with limited stadium capacities leaves organizations with a huge financial void to fill.
Clubs and leagues are now tasked with finding different streams of income that will allow them to safely navigate through these unprecedented times.
Read on as we take a look at some of the main economic problems that sport faces without live audiences in attendance.
The Digital Income Conundrum
Matchday revenue has historically been an important contributor to annual turnover for clubs and leagues across the sporting spectrum.
For instance, it has been estimated that Premier League clubs could lose around £350 million if fans are unable to return to matches during the 2020/21 season.
Former Sky Sports MD, Barney Francis, says that organizations must quickly learn how they can monetize direct-to-consumer media to boost their income.
“There was always going to be a leveling-off point, maybe even a dip, to find a new way to drive additional revenue,” he told SportsPro.
“Projecting ahead, the value of sport will continue to increase but it will have bumps in the road – it is bound to. The way to get out of those bumps is for companies to find new ways to indulge the passion of sports fans.”
Ratings Drop Creates Sponsorship Issue
The first weekend of the new NFL season further highlighted the economic issues that sport will face over the next few months.
On the plus side, the sports betting sector reported a spike in interest, with many fans using BetMGM bonus offers to wager on the first round of fixtures.
However, viewership of the kick-off game between Kansas City Chiefs and Houston Texans fell by more than 12 percent when compared with the 2019 season opener.
The drop has the potential to seriously impact sponsorship revenues, with brands unlikely to keep pumping huge sums into the NFL if fan interest wanes.
Maintaining fan engagement in a purely digital environment is a difficult task and is a problem that sport simply has to resolve if it is to flourish in the future.
Staying Relevant Without Fans
While some leagues have been able to return to action over the past few weeks without fans in attendance, this has not been the case across the board.
The Elite Ice Hockey League in the United Kingdom is one such example, with league bosses recently announcing the indefinite suspension of the 2020/21 season.
The 10-team league says it is not financially viable to consider returning to the ice until venues can operate at a minimum of three-quarters of capacity.
"We've been very open that we need to have fans back in our arenas for us to begin playing again," said league chairman Tony Smith.
"We operate around 75% to 100% capacity at our venues and this is the level of crowds we would need in order to go ahead at any point, which isn't a realistic option right now."
Tapping into Other Markets
One area where the sport could capitalize financially in the future is by exploring new rights deals with huge potential markets in Asia.
The Premier League is currently exploring the possibility of launching its own over-the-top (OTT) streaming service in China, although there are hurdles to overcome.
Live soccer streams would be tremendously popular with fans there and the income they generate would help clubs to fill the financial gap created by playing in empty stadiums.
“The China situation is fascinating,” added Francis. “It does cross over into geo-politics, but what won’t have changed is the amount of football fans in China who want to watch Manchester United (and other teams).
“It’s no longer bound by the same rules as the rest of the world. I don’t know what the answer is but the one key thing is that Premier League fans still exist in China and they will still want to find a way to watch the games.
“It depends on whether international and state politics intervene and deny them that, which the Premier League will of course be hoping is not the case. They will have an answer to it.”
This article does not necessarily reflect the opinions of the editors or management of EconoTimes