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COVID-19: How Will Sports And Live Entertainment Find A New Normal?

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In almost every difficult period of our lifetime, sports and entertainment has been part of the healing process, from Whitney Houston’s national anthem during the Gulf War, to President Bush’s World Series first pitch after 9/11, to the NHL’s Las Vegas Golden Knights helping the city recover from the 2017 shooting. But with COVID-19, sports and entertainment are on the sidelines with us.

Here we analyze sports teams, entertainers, and venues, and the unique hurdles these groups face bridging from our current stay-at-home situation to a new normal environment.

Sports teams
The impact of COVID-19 on long-term team valuations is unknown, but most teams in U.S. professional leagues don’t operate with significant positive cash flow, so owners may need to take short-term actions to bolster liquidity. Immediate income loss from lack of in-game spending for teams across 4 of the 5 major sports (NBA, NHL, MLB, and MLS) is estimated at $3.4B, and that’s only through the end of May (according to the Sports Business Journal).1

The risk to ongoing profitability will be COVID-19’s impact on fan confidence and attendance return rates to games, once public health restrictions are lifted.

Media is a driving force behind the contingency planning leagues are developing to possibly play in empty venues. An event on TV could draw even more viewership than normal due to the current lack of live TV events, help meet obligations in media deals, and enable the leagues and broadcasters to drive advertising revenue. Working with sponsors on creative solutions in light of their financial situations will be another focus area for sports teams.

Could fans come back sooner than later?

According to research by MMGY Global, less than 20% of consumers would feel safe attending an outdoor sporting event, and the percentage drops below 15% for indoor events and concerts2. While the pause in sporting events may be longer if fans aren’t comfortable returning to the venues in the near-term, the rate of recovery may accelerate rapidly once fans come back as the desire to experience sports in person is high, according to the Sports and Leisure Research Group in their Back to Normal Barometer.3

Keeping core fans engaged – whether in physical attendance or consuming virtually if games resume without fans – will be pivotal. Taking advantage of social and digital channels could help broaden fan bases for the future and drive much-needed alternative revenue streams.

Artists and other entertainers
Unlike professional sports teams, the business model for production companies, promoters and artists does not include significant sponsorship or media revenue streams. Therefore, fan attendance is an even greater business component.

More than 20,000 live events have been suspended in the last few weeks due to social distancing mandates, and consumers might continue to avoid mass gatherings after COVID-19 restrictions are lifted4. One trade publication estimates the concert industry could lose nearly $9B if events remained on pause for the rest of the year, which seems to be the predominant sentiment among promoters and artists5.

They seem ready to focus on a U-shaped recovery in 2021, rather than try to play to socially-distanced capacities in 2020, or make other changes to a business model that is notorious for razor-thin margins to begin with. Depending on how and when these events return, the many stakeholders in the live entertainment business will have to work out how to pay for the likely increased safety protocols at all stages of the event.

Venues
Venues have numerous challenges to recovery. Their customers are not only in close proximity while viewing the event, but also in concession lines, restrooms, and security and ticketing lines. Venues run on extremely thin margins, so initiatives to keep guests safe will have an outsized impact on profitability, and may simply be futile if social distancing requirements are in place.

Additional protocols around health and safety will become the norm, likely including health screening of employees, heightened cleaning standards, and personal protective equipment. Assessments and certifications around these additional measures may be expected, which could be the key to building fan confidence and a differentiator in a competitive and crowded marketplace.

It is possible that COVID-19 could accelerate the move towards the digital venue of the future, and the timing is right given the advent of 5G and the wave of new and remodeled venues over the past 10 years in the U.S. Digital tickets should become standard now, and we should see more attempts at mobile ordering of food and merchandise, along with quick (contactless) pick-up options.

Implementing new health and safety protocols, including touchless and digital technologies takes time. However, with the current pause in events, venues have time to affect changes and differentiate themselves for the future.

In conclusion
While the near-term prospects may be more challenging for the sports and live entertainment industry as compared to others, the requirement to have a true pause in activity may ultimately be a strategic advantage. Companies can use this opportunity to re-think business models, implement digital solutions that may ultimately be more cost effective, and plan to engage fans in whole new ways. If they do, their long-term prospects could be even brighter than they were before.

Learn more about how technology, media and telecommunication companies are playing a crucial role in addressing the COVID-19 challenge.
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