COVID-19 makes it clear that sport is far more than entertainment
As part of its ongoing series of virtual conversations about business-related impacts of COVID-19, the VCU School of Business on May 19, welcomed Carrie LeCrom for a discussion on “The Effect of COVID-19 on Sport.” LeCrom is executive director of the VCU Center for Sport Leadership.
The Center celebrated its 20th anniversary last year and currently is ranked among the Top 10 postgraduate sports business programs in the world.
LeCrom addressed the state of the industry and then took questions from the virtual audience. These highlights have been condensed and edited for clarity.
The sports industry wasn’t prepared for the pandemic: Until this pandemic, many considered the sport industry to be recession proof. Even in economic downturns, the industry remained central to people’s lives and generated revenue. In recent years, for example, the sport industry was able to successfully navigate the transition to streaming services. People prefer to watch sports in real time, giving the industry a huge advantage when it comes to sponsors and other dollars.
The sport industry was on a great growth path when the pandemic hit. No one had anticipated a time without sport. We went from a thriving growth market to nothing.
Understanding the finances of sport: Sport in the U.S. represents a $100 billion industry with four revenue streams: merchandising, sponsorship, media rights, and gate receipts/ticketing. As a result of the pandemic, three of these four revenue streams vanished immediately. The fourth, merchandising, also was hurt because, in a recession, people buy less.
Estimates suggest the sport industry took an immediate $12 billion hit. If the National Football League season and college football are cancelled, those losses are expected to double. After all, the broadcast of just one NFL game brings in $24 million in television rights alone.
There are an estimated three million jobs in sport. Many are in jeopardy if not already lost. The National Basketball Association recently reported that 80 percent of its paid staff are “game day” workers. These individuals are all out of work now. And without a return to play with fans in stadiums, many jobs will be delayed in coming back.
It’s not just games: “Sport” isn’t just professional sports and college athletics. The industry includes sport tourism, youth sports, all events hosted in arenas and recreation. Each area is taking a financial hit. Consider that sport tourism is a $32 billion-dollar industry. College football brings in about $4 billion annually and that revenue carries many athletic departments through the rest of the year.
Growing recognition that sport is not just entertainment: Many saw the sport industry as an entertainment market and presumed there was a substitution effect – that if someone didn’t attend a sporting event, they would spend that money elsewhere. I think the pandemic is showing us that maybe that’s not the case.
We are also seeing the reactions of fans and how central sports is to them and their identity. Additionally, cities and municipalities are realizing how dependent they were on sport tourism to fill hotel rooms and restaurants. Sport is much bigger than people realized and the need for sport to return is even more important.
How sport is changing and what to expect
Creativity critical as sport returns: In response to the pandemic, sports organizations are innovating. Youth organizations are making plans to return to play. We aren’t likely to see full-on contact sports, but kids are going to be returning to the fields. Just this past weekend, we saw a return to sport for NASCAR, German Bundesliga and Korean baseball and people are watching. There is a hunger for sports to return in some capacity.
Youth sports could look different after this. High contact sports may take a while to rebound. We may see alternative sports emerge as a result of the pandemic, such as skateboarding, golf, and tennis.
In youth sports, parents will decide if they feel safe putting their kids back on the field. In addition, as a result of shelter-at-home orders, families will fall into two categories: One group is desperate for social interaction and excited to be back with friends and teammates as long as there are safety protocols. But other families may not want to relinquish their new family time and bonds. People also might not return to sport for financial reasons.
Changes at the Atlantic 10: Last week, the Atlantic 10 Conference decided that, in seven fall and spring sports, the sports schedule is going to be reduced by 25 percent. There will be a shorter season with fewer games. In most sports, only four teams will make the final conference tournament. Some coaches will not be happy with this, but it makes sense. Less money will be spent on travel and students will be in class more. A shorter season allows for a push back to the start of the season, if we need an additional month of social distancing.
VCU is in a uniquely strong position because we don’t have college football. Schools with football programs are desperate for that season to happen because it generates revenue for a majority of their athletic programs.
The National Collegiate Athletic Association president recently said that if campuses are closed, you can’t have college athletic seasons, but commissioners pushed back on that saying that if some students are back, then athletes can also be back.
I feel there will be college athletics in the fall, but I would be very hesitant to say that fans will be attending.
Complex financial decisions facing colleges: The two biggest drivers in college sports right now – the safety of athletes and the need to make money – are sometimes at odds. There are also many trickledown decisions that college athletic directors and presidents have to make.
How do schools properly support international athletes who were not able to return home or will not be able to return from their home country? What if campuses are open but an individual athlete does not feel comfortable coming back? What happens to their scholarship or their position on the team? There are hundreds of decisions that need to be made and athletic directors will need a strong staff, properly prepared as leaders, to help as they consult university presidents on these decisions.
Extra year of eligibility results could worsen disparities: Spring sport athletes whose seasons were cancelled have been granted an extra year of eligibility. The NCAA is granting universities extra funding to offer scholarships to incoming freshmen while still honoring the scholarships promised to “fifth-year seniors.” Unfortunately, not all athletic departments have that extra money. Some Mid-Major and smaller athletic departments simply can’t afford it and it will put them in an even tougher position to compete with the Majors and Power Fives.
Changes and innovations on the horizon: Athletes returning to empty stadiums will face as big an adjustment as anyone. At the college and professional level, they will need more training on how to self-motivate or pump up their teammates since they will not have the crowd atmosphere.
From business side, “ticket and gate” is one of the biggest revenue streams for sports. Now you don’t have that.
I think some teams have been hesitant to invest in technology to enhance the at-home experience because they wanted fans in the arena. As a result of the pandemic, we may see a greater investment in technology, including augmented reality and virtual reality. Technology will be our biggest growth area. The industry will invest more to keep fans watching until they can get back in stadiums.
Some effects of a shrinking sport marketplace: In the short-term the sport marketplace will shrink. Professional teams have the safety issue: Can we come back and what does that look like? U.S. leagues are looking at the “bubble” or “biosphere” model. Major League Soccer, for example, is heavily considering a scenario where they will bring all 26 teams to the Wide World of Sport complex in Orlando, all athletes will stay in the same hotels with no fans or families and high levels of testing, so they are protected.
There is also discussion about player salaries. There is potential delay of some teams coming back because of arbitration discussions like the ones they are having now in Major League Baseball.
It’s my opinion that this downturn will not be permanent. We are seeing that people are desperate for sports. I think the industry will bounce back, but it may take a few years before we were back to pre-pandemic levels.
What the pandemic has meant to CSL graduates
Preaching patience and positivity to CSL graduates: Faced with a dismal job market, CSL leaders are recommending patience and positivity to our graduates. We are reaching out to students to understand how they are managing through this and asking, “What different skills are you developing right now that can serve you well in the future?” All CSL students have access to the Adobe creative suite and we are encouraging them to get better at Photoshop®, InDesign® and take advantage of other free learning resources. We added another summer course to continue to be present in their lives.
We have also connected each graduate with two alumni to support their networking efforts. We are trying to make sure our students are the most ready to capitalize on jobs as soon as they open up again.
A core value of the CSL program is global mindednesses. The sport industry is global. Before the pandemic, the Center was in conversations to offer sport strategy training to members of the sport industry in Saudi Arabia. We are still excited to deliver that program and may do it remotely.
An increasing need for leadership in sport: Most sport business programs are called “sport administration” or “sport management,” but we embrace the name “sport leadership. Now, more than ever, we are seeing how important it is to educate students about leadership, analytics and decision-making in the sport context.
We need people who understand business, negotiation, strategic decision making, the importance of collaboration, emotional intelligence and empathy. These qualities will help ensure their success.
Watch the full conversation and Q&A below or on YouTube.