Kevin Roberts | Sports are still trying to figure out what the ‘new normal’ looks like

SportBusiness Group editorial director on sport’s efforts to establish a new normal and the role of the new SportBusiness finance and Law Portal

It looks as though this period in history will come to be defined by the term ‘new normal’, just as previous eras have been by ‘Cold War’ or ‘Austerity’.

But while those two words may be a convenient label for a changed world, they come up short as a definition. The fact is that we all face a different new normal and sport, like more or less every other area of human life and endeavour, is trying to discover exactly what its new normal will look like.

What we do know is that, after months when the news was dominated by cancellations, sport is taking tentative steps towards resumption. Top football has returned with Germany’s Bundesliga, some of golf’s big names have also been back on the course – albeit in a charity event – while pro bull riding and the UFC have both delivered live events to feed their TV audiences.

With plans for the Premier League and LaLiga to get their respective shows back on the road and Formula 1 also looking to a return, there appears reason to be optimistic about the future.

But we must be realistic. In a recent report, Gareth Balch, chief executive of Two Circles, cited research showing that, as more and more events fell casualty to Covid-19, global sports revenues would likely fall to less than half the expected level. And he warned us not to expect that, as the sporting machine cranks back into action, it will be like pressing a reset button.

Sport may be coming back but it is coming back behind closed doors, without the fans who provide its visual backdrop and soundtrack and whose spend on tickets, F&B, hospitality and merchandising is such an important part of overall revenues.

Other research suggests Covid-19 is likely to cost top European football clubs a combined figure in the region of £3.5bn (€3.9bn/$4.2bn) even if they can complete the current season and get the 2020-21 programme under way. If anything prevents a restart, the picture looks even bleaker.

According to Charlie Marshall, chief executive of the European Clubs Association, absence of match day revenue is “the big scare at the moment”. That’s hardly surprising as empty stadiums will cost millions, with the proportional impact felt by those with the biggest grounds: Manchester United stand to lose £140m and Arsenal £122m.

It’s not just football of course – every sport will suffer. Major League Baseball stands to lose up to $600,000 for every game played behind closed doors and, when you consider clubs play 81 home games in the regular season, that is one hell of a hit.

But at least clubs in the major football leagues and top US sports do have significant media revenues which, one assumes, will continues to roll-in so long as games continue to be played.

That’s not true of many second- or third-tier sports and properties that rely almost entirely on their event day revenues and associated sponsorships. They face a genuine existential crisis and the sad fact is that not all are likely to survive.

These are the factors contributing to a major cash crisis in sport. Media companies won’t pay for rights that can’t be delivered, and lack of match revenue is hitting everybody. Add uncertainty over the appeal of television coverage of sports behind closed doors and the potential impact on rights fees and the scale of the problems becomes even more apparent.

The long and the short of it is that the sports economy looks to be at its most vulnerable right now. Clubs are naturally geared towards anticipated revenues, which have simply dried up, while the cost of keeping their businesses ticking over remain cripplingly high even when players have agreed to take pay cuts.

In many cases there is a desperate need for an influx of cash, and we have already seen what appears to be an upturn in private equity interest in new areas. While CVC, for example, has a track record in sport with its interests in F1 and rugby, they have been eyeing up the potential of Italian football’s Serie A for a long-term rights deal.

And they are not alone. Blackstone is also reportedly interested in Serie A, with the potential carrot of a cash injection for clubs – many of which have already borrowed against projected TV revenues – as part of the package.

There are others who may step up to invest in sport and, in doing so, help clubs and others to ride-out the current crisis. But logic suggests they will only be interested in properties where future contracted revenues are likely to be significant and that they would, in any case, drive a hard bargain. This is now a buyers’ market.

For those unlikely to ever be on the radar of potential investors, the situation is made even worse by the near certain devaluation of other assets, in particular players. The football transfer market is likely to look very different going forward and those for whom transfer fees are factored into the P&L as a significant revenue stream are likely to be left floundering.

These are some of the factors shaping the new normal, factors which also gave us the impetus to launch the SportBusiness Finance and Law Portal which debuts today.

In the most testing times ever experienced by the industry, the insight of financial and legal professionals is more important than ever as businesses across the sector look to ways of dealing with current issues and plan for a future in a changed environment.

The SportBusiness Finance and Law Portal is designed to become the go-to digital destination for those seeking critical information, expert insight and the best informed opinion about the key finance and legal issues and opportunities facing clubs, leagues, Federations and other governing bodies worldwide.

It will provide an opportunity for major players in the sports finance and legal communities worldwide to contribute to an ever-growing library of specialist content and benefit from an exciting new channel between those offering high value professional services and those who need them.

The Finance and Law Portal is the gateway to a carefully curated collection of high-value content drawing largely on the expertise of the leading specialists in sports law and finance around the world together with that of the SportBusiness editorial team.

The Portal will be the access point to a raft of written and video content delivering business critical insight on themes including:

  • Post Covid-19 sources and conditions of finance for sport
  • Piracy and Intellectual Property protection
  • Acquisitions
  • Private Equity
  • Venture Capital
  • Data privacy and data protection
  • Sports insurance

While the content of the new Portal is designed to help stakeholders in sport to navigate the choppy waters ahead we also understand that many of the key factors shaping our new normal are outside the control of those who run the business of sport.

The return of sport will be decided not in the boardrooms of pro sports leagues and clubs but by politicians with broader concerns and different imperatives.

And in truth, it is only when the teams of scientists working night and day have discovered an effective vaccine that the uncertainty crippling sport will truly come to an end.

We wish them every success in their work.

To visit the Finance and Law Portal, click here.

To read SportBusiness Review, click here.

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