What will economic hit be for Bay Area pro teams?
The Warriors, Sharks and Quakes are already looking at losses in the millions; fate unknown for Giants, A’s
Professional sports teams in the Bay Area and around the country stand to lose millions of dollars because of the cancellation of games in the wake of the coronavirus pandemic.
But the overall economic impact will depend on how long events remain on hold and the kinds of media and sponsorship deals teams and leagues have in place, according to analysts who follow sports business.
Locally, the Golden State Warriors would lose about $3.5 million per game according to data provided by Team Marketing Report, a data and information company based in Chicago. A league source familiar with NBA operations corroborated the figure.
The San Francisco Giants made about $2.44 million per game in 2019, Team Marketing Report calculations show. The Sharks made $1.6 million, a figure a source with knowledge of the NHL team’s operations confirmed.
The San Jose Earthquakes averaged $1.24 million per match over 17 Major League Soccer home dates in 2019 while the Oakland Athletics took home $1.1 million per game.
Professional sports teams do not release financial information per league policies. The calculations by this news organization are based on average attendance divided by the Team Marketing Report’s Fan Cost Index that includes average costs of tickets, beer, hotdogs and parking.
“If this is something that we can all bounce back from in a matter of weeks, the impact will be a speedbump,” said Chris Hartweg, CEO and publisher of Team Marketing Report.
But Hartweg said Saturday that it is impossible to gauge what the financial fallout will be because of the uncertainty about the health crisis.
At least 50 people have reportedly died from the virus in the United States where there have been 2,100 confirmed cases. On Saturday, President Donald Trump told reporters that he had been tested for the COVID-19, or coronavirus, a day after declaring a national state of emergency. The federal government also extended its European travel ban to include the United Kingdom and Ireland.
On Friday, Anthony S. Fauci, the director of the National Institute of Allergies and Infectious Diseases, said the pandemic could disrupt American life for at least two more months.
So far, the PGA Championship, set for May 1117 at Harding Park in San Francisco, remains on the schedule. The golf tournament contributes more than $100 million in direct and indirect economic impact for host cities above normal tourism dollars, PGA executive Everett Jacobs said on the San Francisco Chamber of Commerce website.
The cancelation of the NCAA men’s and women’s basketball tournaments
Thursday potentially will have a major financial impact on schools. About 90 percent of the NCAA’s revenue derives from March Madness according to economic impact studies. The payout for each participating men’s program is worth hundreds of thousands for schools and conferences who qualify for the tournament.
However, the financial distribution for women is minuscule by comparison, sports economists have said. As a result, Stanford and the rest of the Pac-12 women’s teams that had expected to qualify for the tournament will not suffer a big monetary hit.
The financial and legal ramifications of the crisis remain unclear, however.
“The economic impact of all this is monumental,” Warriors owner Joe Lacob said last week in an interview with The Athletic. “We just lost virtually all of our revenues for the foreseeable future. But we have huge expenses that aren’t going away.”
Irwin Kishner, co-chair of the Sports Law Group at New York firm Herrick, Feinstein, said most teams are well diversified, with much of their income coming from the league’s big television deals and sponsorships. He added that those deals usually are made on a long-term basis.
“Assuming that this pandemic doesn’t last too long one would think that this will be a disruption but ultimately teams in the major leagues should be able to weather the storm,” Kishner said.
The NBA has postponed the Warriors’ final seven home games at Chase Center. The NHL postponed the Sharks’ last five home games this season at SAP Center. MLB pushed back season openers by two weeks and Major League Soccer also has postponed games. Officials cannot say how many, if any, of those games will ever be held.
Kent Schmidt, a partner at the international law firm Dorsey & Whitney in Costa Mesa, said it could take years to resolve legal questions around the unprecedented events that have unfolded in the past week.
“These issues come down to contract questions including the language in agreements, and applying contractual doctrines,” he said in a statement. “But equitable considerations will also predominate. Particularly for situations in which one party is better able to absorb the loss, the courts will apply a fairness principle.”
One of the major legal questions is a concept known as force majeure, a legal term meaning it is beyond the control of anybody, Kishner said.
“What are the obligations of a sponsor, paying X amount of dollars but you promised me a full stadium for the next 120 games and you only had 46 of them?” Kishner said. “Is this covered by the exclusion or not? Is this business interruption or not?”
Insurance and legal experts said teams and leagues are not guaranteed coverage of lost income because of the complicated way individual policies are written. They said there is no off-the-shelf event cancellation policy, particularly for COVID-19.
“The insurance industry is not going to be responding in a meaningful way,” said Christian Ryan, managing director of Hospitality, Sports & Gaming at Marsh, a global insurance company.
Marsh does not share its client list but a spokeswoman said it handles policies for some of the most recognizable global sporting events, teams and leagues.
The company representatives said most sports teams and leagues consider purchasing event cancellation insurance. However, specific coverage for communicable diseases is a separate cost in a cancellation program.
A Marsh spokeswoman said Friday coronavirus was “explicitly excluded” from communicable disease coverage. Diseases such as SARS, MERS, and Avian flu already were excluded from that coverage, she added.
Ryan said the “line of demarcation” for paying for lost income at a sports event involves a business interruption because of physical damage to a building.
“Since the virus is not having any physical impact on the building what we’re finding is that business interruption will not apply,” he said.
None of the experts could predict what the actual cost to teams and league might be.
David J. Berri, a professor of economics at Southern Utah University, said sports teams eventually will recover when quarantines are lifted and the competitions resume. He said sports teams are immune to fluctuations that face restaurants, which might lose patrons for good if they shut down for months.