Major League Financial Preparations for the Post Pandemic Reality

The COVID-19 pandemic has halted professional team sports in most parts of the world, and we’re eagerly waiting for the return of all of the major leagues here in the US. Nobody quite knows how and when that will happen, but all of the leagues are making preparations, with the intention of coming back immediately when it’s safe to do so.

Right now, the leagues have to assume that they might have to play without fans in arenas for the foreseeable future. Income from tickets and in-arena purchases will be drastically lower than usual. Besides that, some of the leagues will probably not be able to play full seasons, which means fewer games on TV, which will in turn cause another hit in revenues.  

In this article, we’ll take a look at how this new reality affects the business of sports and how leagues are preparing for that.

NFL

The football season is currently being planned to start on the 10th of September as originally scheduled, but the NFL is preparing for the possibility of having to play a full season without fans. To help teams manage the massive loss of revenue that prospect entails, the league and NFL club executives have agreed to raise the debt limit of each franchise by $150 million.  

An analysis conducted for ESPN estimates a loss of about $2.3 billion in game-day revenues for the league if no fans are allowed in stadiums for the full season. That amounts to about $72 million in potential losses per team, although the reality is probably different between each team.

NBA

The NBA has not yet made any decisions on whether or not to resume the suspended 2019-2020 season. All options are on the table according to league commissioner Adam Silver, who held a conference call with members of the NBPA earlier in May and discussed the financial realities that lie ahead.

With 40% of the NBA’s revenues coming from game night related income in arenas, the commissioner pointed out that the collective bargaining agreement of the league was not built for these types of situations. And with the potential of having to play next season without fans in the stands, the owners and the players will surely have to negotiate some type of a deal on how to move forward.

Besides having to consider how to finish the current campaign, the NBA is currently contemplating on a December start for the 2020-21 season.

MLB

On the 16th of May, MLB sent teams and players a 67-page plan that outlines the details needed for the baseball season to start. The plan is basically an incredibly detailed health and safety protocol, which the league and its players now have to agree on for the season to happen. 

It will be a hard negotiation due to the difficult relationship between the league and the players association, but surely none of the parties want to miss out on the season, with billions of dollars of potentially lost revenue and income on the line. 

MLB is currently targeting the start of the season in July. According to Forbes, the league would be looking at making a $4 billion loss with the proposed plan if no agreement can be reached with the players. 

But we’re hopeful that some kind of mutually beneficial deal can be found. As our Head Trader, John Todora, just recently wrote on his column:

”The one thing I also know is that greed is the motivator of all men, which means a deal will get done, and I think it will get done soon. It will simply come down to this: Do the players want to make money this year or not? Because I can’t see the owners going forward with a plan that does not include a significant pay reduction of some kind.”

We’ll just have to wait and see what that deal will look like.

Conclusion

Nobody currently knows how the situation with the pandemic will develop, or how and when sports can actually resume. The spread of the virus needs to continue to be contained, local governments and health officials need to be on board with the plans, and players and owners will have to find common ground on how to operate in this environment.  

It sounds like a daunting task for the leagues to resume play, but all parties are working hard towards making that happen. Sports will be back in some form sooner rather than later. 

And when they return, our systems will be ready to kick ass and generate great profits once more.

To learn all you need to know about building winning sports trading systems, don’t forget to check out John Todora’s new book – “Zero Correlation Investing – The Score Metrics Secret”. It’s currently on sale for a limited time, so go get your copy now!

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