By: Lily Fontenot
While the ongoing COVID-19 pandemic is affecting athletes, coaches, leagues, and fans, the suspension of all major athletics is particularly impacting sports media. Specifically, the pandemic is highlighting the interdependence between the media and sports. All of the major sports leagues and events, including the NBA, Olympics, NCAA, MLB, NHL, and NFL, rely on mutually beneficial relationships with media companies to produce revenue and content. TV deals are the top revenue source for sports leagues, and the leagues’ games provide the networks with live, unique content that is highly profitable. Consequently, the current absence of live sports is severely impacting sports leagues and media companies.
For example, the NBA, which suspended its season in March, receives about $2.6 billion annually from its broadcast deals with ESPN and Turner. To make up for missed games, the league must offer the networks concessions, called “make-goods.” Negotiations involving make-goods could include refunds, extra programming, or extension of deals without a price increase. These negotiations also need to consider the rescheduled games and post-season that the NBA recently voted on. The NBA’s recently approved 22-team format, which restarts on July 31 in Orlando, Florida, will help mitigate some of the revenue losses from this season.
Furthermore, the postponement of the Tokyo 2020 Olympics will heavily impact NBC, which paid about $1.1 billion for the U.S. broadcast rights to the games. The network had already sold more than $1.25 billion in ads for the Tokyo Olympics. Also, NBC had originally planned on launching its new streaming service, ‘Peacock,’ during its Olympic broadcast. Now, the network and sponsors must renegotiate these ad deals to reflect postponing the games until 2021. To show the pandemic’s massive impact, this postponement marked the first time that the Olympic games have been cancelled for something other than the world wars during 1916, 1940 and 1944.
Additionally, the cancellation of March Madness has led to a dramatic decrease in the NCAA and member schools’ revenue. CBS and Turner mutually pay the NCAA $785 million a year to broadcast the men’s tournament, a striking $330,000 per minute of game action. Because this year’s tournament was cancelled, the networks will likely renegotiate their deals with the NCAA instead of receiving a cash refund. The networks will be hit hardest by the loss of ad revenue related to March Madness, which totaled around $1 billion two years ago. The NCAA and member schools will also be greatly impacted as 72 percent of the NCAA’s annual revenue comes from the CBS-Turner deal.
Regional sports networks (RSNs), such as Sinclair’s Diamond Sports Group, make up the primary broadcast vehicles for local MLB and NHL markets. Sinclair, which recently bought the regional sports networks for $10.6 billion, will have to wait to see any return on investment due to the loss of revenue. The MLB, which postponed its 2020 season, also has a lucrative deal with Fox Sports. The network paid $500 million for the 2020 rights to many MLB games, including the World Series. Although Fox will likely recover the fees from MLB games that are not played, the network will still lose a large amount of ad revenue.
Overall, the pandemic has caused an estimated $12 billion loss in sports revenue and thousands of jobs. And, if the NFL and college football schedules are cancelled or severely impacted this fall, these numbers will likely double. According to Patrick Rishe, director of the sports business program at Washington University in St. Louis, each NFL regular-season game is worth almost $24 million in revenue from TV rights alone. In addition, the 65 college football programs in the Power 5 bring in about $4 billion in revenue each season. Consequently, if the upcoming professional and college football seasons are cancelled, the economic impact would be devastating. Luckily, the NFL is planning to kick off its season on time with the first game scheduled for Thursday, September 10, 2020.
Due to the current shutdown of sports, the leagues and TV networks must renegotiate their current deals to keep both entities functioning during the pandemic. Hopefully, as leagues like the NBA and MLS restart their seasons, rescheduled games can make up for some lost revenue and can diminish economic losses related to sports media rights.