Covid-19s Impact On The Sports Industry

The sports industry was one of the fastest expanding industries before the coronavirus pandemic caused a major public health crisis and the shutting down on all public events. The total value of the entire sports industry is 756 billion dollars (an increase of 50% since 2011). This trajectory was expected to attain new heights until the coronavirus pandemic broke lose. Now the sports industry is passing through a major turmoil and economic crisis.

In the EU only the sports sector is comparable to the forestry, fisheries and agriculture industries combined. The GDP of the sports industry is 2.12% of the total GDP of the EU, which goes to show the enormity of sports as an industry or in more simple words every 47th euro, is churned out by the sports industry. The sports industry helps in generating employment for millions of people (5.76 million, which is nearly 2.72% of total employment). According to my calculations, this means that every 37th employed EU citizen works in this industry. These stats show the enormity of the problem should the sports industry dissolve.

The coronavirus pandemic has sent aftershocks to the micro and small businesses in sport. Grassroots sport, Fitness clubs, gyms, retailers, event organizers, marketing agencies, sport equipment providers and producers and small sports clubs and associations which play a major hand in making sport accessible to the average European citizen, are facing bankruptcy.

Major football clubs are on the verge of sinking in debt. Tottenham Hotspur, an English Football Club, has taken a loan of 175 million pounds to ease the coronavirus impact and repay pre-existing loans. Meanwhile, in the southern hemisphere, Cricket Australia has offloaded 40 workers and introduced a cost reduction of USD 40 million in a year. Furthermore, they stand to lose 174 million dollars if India cancels or postpone their tour to Australia during the winter. EPL team Arsenal has asked players to take pay cuts, cut the wages of head coach Mikel Arteta and offloaded 55 support staff members. Arsenal has also made club mascot Gunnersaurus redundant by also offloading Jerry Quy, after a contractual relationship of 27 years. The leagues were on a break until June, the Olympics were cancelled. Domestic leagues and players have nearly been made destitute and many boards have flatly cut out their contracts, while trying to limit the economic damage done by the coronavirus.

These were only small signs of an economic crisis-taking place in sport. In the simplest terms, there are three main income streams for sports leagues: broadcasting (sales of media rights), commercial (sponsorship and advertising partnerships) and match day revenue (ticketing and hospitality). The major sports are all reliant on broadcasting income, as demonstrated by revenue data from the biggest leagues over the last five years. the worldwide value of sports media rights is around $50bn – but 60% of that’s accounted for by just 10 sports leagues. Each sport monetizes differently, but the principle is that the organizing body distributes its total income between its participating clubs. this is often often usually structured as minimum guaranteed payment with performance- and/or competition-related bonuses on top. Individual clubs are of course able to generate their own income, by competing in other tournaments, signing their own sponsorship agreements or developing their own direct-to-consumer media subscriptions. But fundamentally, the financial success of any club relies on its involvement in an overarching league.
However the leagues are now unable to meet their commitments to broadcasters, limiting their ability to distribute income back to the clubs. The impact on the industry would be dramatic: no games would mean no TV deals and no matchday income; no income means no clubs. Along with this the governments are actively preventing any public activity and thus the whole income generated by spectators has been cut down. This means that most teams and sporting boards are gradually being drained of their economic stability and are desperately trying to ensure a normalcy in the sporting world and generate revenue.

The sports industry might not be considered one of the greatest victims of the coronavirus pandemic but the toll it has taken has been far more than that of other industries. It has left thousands of people destitute and taken away the economic stability of the rich. While some are being conservative in their resources to prepare for the worst, some are just hoping for the best and spending their frugal money resources on players in a bid to boost their teams. And for the moment no solution seems to be in sight when it comes to sport industry. It will take a long time for the industry to make a comeback from this setback.

The Guardian
BBC Sport
The Hindu

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