If and when U.S. pro sports leagues are able to resume this year after shutting down in March due to the coronavirus, most leagues expect to play their games in empty stadiums with no fans present, at least at first.
That will be particularly damaging for Major League Soccer, which gets a “vast vast vast majority of our income” from game day revenues like ticket sales and concessions, according to MLS Commissioner Don Garber, and for MLB, which is also heavily reliant on ticket sales. It will be less of a problem for the NFL, which gets a lion’s share of its revenue from broadcast deals and TV ads. Still, empty stadiums are an unappealing scenario for all the leagues.
But even once the U.S. economy has fully reopened after the coronavirus, some sports industry veterans foresee a prolonged hit to sports ticket sales from this time period.
“I think it probably takes 12 to 36 months for live gate [receipts] to get back to where it was,” says George Pyne, the former president of IMG and former COO of Nascar who now invests in sports businesses through his VC firm Bruin Sports Capital. “That's not a switch that just goes back on. NFL and MLB both had their lowest ticket-selling seasons in a long time, so coronavirus came at a time when it was already becoming harder to sell tickets to live events.”
Indeed, NFL and MLB attendance hit 15-year lows in their most recent seasons. Being forced to play games this summer and fall with zero fans has the potential to accelerate the pre-existing trend. Still, Pyne expects the leagues will come through fine, because, “They’re in the media business, and their media rights are so valuable.”
On the other hand, if ticket demand does take a sustained hit beyond the coronavirus, it could spell trouble for some franchise owners. “You could see individual team ownership have some issues if they had difficult financial situations going into it,” says Pyne. “Some of the team owners who are in certain industries—cruise lines, hotels, restaurants—that could impact it.”
Houston Rockets owner Tilman Fertitta, who just bought the team in 2017, is one example: Fertitta is hemorrhaging money from his non-Rockets businesses (including Golden Nugget casinos and Landry’s, which owns Morton’s Steakhouse and Bubba Gump Shrimp) and is reportedly seeking a $200 million loan. He furloughed 40,000 workers from his casinos and restaurants, and said in March that his businesses were losing $1 million per day. If sports can’t fully return soon, you might see some teams come up for sale in 2021.
“In the long run, I think sports teams have proven to be a great investment: double-digit CAGR for 20 years, and there’s not any business I know that can make the same statement,” Pyne says. “In the short run, I think it's choppy and challenging.”
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Daniel Roberts is an editor-at-large at Yahoo Finance. Follow him on Twitter at @readDanwrite.
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