How the Sports Industry Will Bounce Back, According to Experts
It’s clear that no industry has gone unscathed by the coronavirus pandemic, but sports is one sector that has been hit the hardest, having to cancel or significantly push back whole seasons, not to mention having to reschedule the Olympics for next year. While many have transitioned to working from home, athletes, coaches, team owners and stakeholders have had to seek out new opportunities and ways of doing business in this unexpected off-season.
“I don’t use ‘unprecedented’ anymore. It’s ‘unimaginable.’ You could not even imagine that we would be all living through this in real time,” Major League Soccer Commissioner Don Garber said.
“I’ve been trying to force myself and others to spend 20 percent of our time a week not thinking about what we have to do today, because you could spend 500 percent of your time doing that, but think about how this crisis can create opportunity,” Garber continued. “And we do that within our business; I think everybody can do that in their businesses and in their lives.”
On Thursday, Worth hosted its fourth session of its weekly live series The Next Normal, focusing on the topic ‘What the Future of Sports Will Look Like for Fans, Teams & Owners’ with MLS Commissioner Don Garber, managing director at PJT Partners Joe Lenehan and private wealth advisor Kathleen Entwistle. With Worth CEO Juliet Scott-Croxford moderating, the panel discussed the challenges teams are now facing and what the future holds in store for fans, players and owners alike.
“It’s been really quite difficult. I don’t know whether it’s worse to have started and then had to pause like us, or being in baseball’s case, where they’re just trying to figure out how do they get going, or even in the NBA or the NHL, where they’re almost completed but the most important part of their season’s their playoffs—NBA finals and the Stanley Cup are still sort of uncertain,” Garber said. “It just has the entire industry, whether it’s the U.S. Major Leagues or it’s the international football leagues or it’s amateur sport, just trying to figure out what we need to do to return to train and then return to play, and all of that, as everybody knows, is centered around the availability of testing and testing protocols and local regulations and then federal regulations and all these enormously challenging new normals, things that we had no idea we’d ever be managing through.”
Here’s what you need to know about where the sports industry stands right now and where it’s going, according to our guest speakers.
1. How Have Players Been Impacted?
The pandemic has made it complicated for players to train, especially ones who don’t have the equipment they need where they live. But according to Garber, it largely has to do with where players live right now. Some are able to train again in places like Nashville and Miami, but for players living in New York, for example, where the stay-at-home order is still in effect, it can be more challenging. And aside from the challenge of training in these times, players are faced with the difficulty of just managing day-to-day, like all of us.
“Most of them are just like everybody else, they’re going to deal with their families or maybe more complicated, deal with isolation, if they’re living alone,” Garber said. “Thirty, 40 percent of our players are international players. They’re coming here, they’re all by themselves, some of them don’t speak English, so imagine the enormous challenges of being in a foreign country being forced to stay at home and having to think about things like ‘how am I going to get food? How am I going to train? How am I going to manage my own mental health?’ For the most part, they’re young, tough guys, and they’re managing it as effectively as they can. Some of them are trying to have fun, and the MLS is empowering some of that energy, but most of all we’re just keeping in touch with them and getting through each day.”
2. How Have Team Owners Been Impacted?
“I’m speaking to owners every single day,” Garber said. “So many of their businesses are under enormous stress. That stress kind of affects their thinking. Sports are generally long-term holds, so it doesn’t put short-term pressure on our business in terms of viability, but it certainly affects their mood, at the very least. And perhaps it affects their decision-making…It is a very, very, very challenging dynamic from start to finish, no different for our industry than any other industry really.”
Owners undoubtedly face much stress and pressure now both in terms of their own businesses and their stake in sports. Major League Baseball team owners are making news right now for the latest economic proposal that they will present to players on Tuesday, May 26, which would further cut players’ salaries. While owners are certainly being tasked with tough decisions, Lenehan is encouraged by the interest he’s seeing in investing in sports right now.
“As we speak with owners and managers of sports assets, there’s much more of an operational focus day-to-day for any one of these clubs,” Lenehan said. “What’s really encouraging to some extent, and where we spend more of our time of late, is helping teams and leagues in today’s environment think about what corporate capital structure and liquidity should look like. I guess we’ve been encouraged, in a way, to see a lot of outside institutional capital looking for opportunities to invest within sport—whether that be at teams, leagues, other sports assets in the ecosystem.”
3. What Can We Expect From Televised Games Now?
It’s clear it will take some time before we can sit in a stadium or arena again—and according to Garber, there will be quite a few operational changes when we are allowed back— but that doesn’t mean games won’t be played in the meantime. In this “next normal,” games will be played without fans physically present, which will give way to a new method of broadcasting games.
“We’re calling them ‘studio games,’ we’re not calling them ‘games without fans’ or in Europe, they call them ‘ghost games,'” Garber said. “When we do get our format approved, it will be something that will have more broadcast technology, more audio, more special effects, more virtual environments from an advertising perspective as opposed to virtual crowds, where we can be more creative with the screen, if you will, because frankly, the screen is not going to have fans in it. So, what else can we do beyond that picture of the players on the field that can drive revenue and maybe even drive some fan engagement?”
Although this appears to be our immediate “next normal,” Garber and Entwistle agree that enjoying games live and in-person is sure to come back into view.
“This too shall pass, and we will be back in a situation where we can enjoy, we can gather—whatever that means—and we can move forward, and it will be a great moment for sports again,” Entwistle said.
4. How Will This Pandemic Affect Team Valuations?
“I don’t think it will affect them in the long-term,” Garber said. “Most people that are investing in sports do so almost with an eye toward generational wealth, as opposed to short-term return on cash, and sports have been great investments over time. Even during bumps along the economy, they continue to go up in value. I don’t think I can even remember a team that has, in the major leagues, sold at less for the money that’s been invested in it over the last period of time that I can recall.”
“I agree completely. These investments that people are making are long-term,” Entwistle said. “This is an investment, a family investment, multigenerational.”
While team valuations are in a good place, Garber does advise that there are certain actions that should be avoided right now.
“I don’t think now is the time we would want to be going out and selling an expansion team,” Garber said. “I don’t know that now would be a time when any owner would want to be selling their team. But clearly people need to be thinking, how do they drive liquidity, and there will be all sorts of very interesting opportunities.”
5. How Has the Pandemic Affected Esports?
With games having been on hold for the last couple of months, it seems only natural that investors and fans alike would turn their attention to esports.
“Esports is an exploding category. I think it’s going to continue to grow. I think the pandemic will allow it to have even more energy,” Garber said. “We in the soccer business have got a very, very, very active e-MLS business—every team has a professional e-gamer—and I think it’s going to continue to grow, continue to be monetized.”
“I don’t think the pandemic’s going to have any negative effect on it; frankly, I think [it will] probably stimulate some growth,” Garber concluded.
And this potential growth could mean good news for investors, as esports is estimated to bring in over $1 billion in revenue this year, according to Newzoo. In fact, Twitch, the top live-streaming platform for gamers worldwide, saw 23 percent more viewership in March.
“It’s clearly a sport that is played on a global basis, has a massive audience both locally and globally, has a very young audience, and I think that’s what entices a lot of teams and leagues to think about it, as well as institutional investors and other people thinking about sport,” Lenehan said. “I think the trick is, how do you grow and further popularize a sport like this without real capital flowing into it? It costs hundreds of millions of dollars to develop an IP around some of these games. It costs hundreds of millions of dollars to be able to deliver these games from platforms like Twitch and YouTube and the like in an efficient manner so it can grow in popularity. Yet, you don’t want to take the individual spirit out of it.”
While live sports are working on making their comeback, esports presents a way to drive fan engagement and satiate consumers’ hunger for sports content right now.
“I think sports has done a really great job in the last few years of engaging fans and that interaction has been really strong, but again, anytime we have a disruption anywhere, we need to go back and look at how to move through that disruption and find different ways to move forward,” Entwistle said. “In the digital transformation, anything that has an ‘e’ in front of it—e-commerce, etcetera—is really where we think things are going to go, but at the same time, I think that as humans, we crave human interaction, and there’s never going to be a replacement for going to a stadium and seeing people on the field playing. And hopefully in the next 12 months, in a year from now, we’ll look back at this and say, ‘thank God, we’re back in the stadiums again, and we’re moving forward,’ but in the meantime, there’s ways to get better and be more efficient and find ways to engage people in that respect, too.”