NBA an example of revenue impact
The NBA’s unprecedented decision to indefinitely suspend its season due to the coronavirus carries an immense cost as the league’s clubs could collectively lose as much as $185 million in game-day revenue for games canceled in the first week alone.
While the NBA cites player and fan safety as its utmost concerns, the suspension will send shock waves through every aspect of a team’s business if the games are not rescheduled or if teams are not covered by some form of cancellation insurance.
While revenue varies greatly depending on individual markets, sources estimate that the average ticket revenue per game ranges between $1 million and $2.5 million, though big-market teams such as the Golden State Warriors, Los Angeles Lakers and New York Knicks are outliers with between $3 million and $4 million in per-game ticket revenue, according to sources.
The cost of not playing
While no time frame has been set for how long NBA games will be suspended, here’s what’s at stake in the first week of missed games:
A total loss of 57 games, (including games suspended the night the NBA announced the decision)
$86 million to $185 million in overall revenue, according to industry sources, covering tickets and other in-venue revenue such as food and beverage
National broadcasts: 8 on ESPN, 5 on NBA TV, 2 on TNT, 2 on ABC
70% of the games lost were set for arenas where Levy Restaurants is the concessionaire (Levy, 40 games; Aramark, 8 games; Delaware North, 3; Legends, 3; Centerplate, 2; and Bon Appétit, 1. Some NBA team concessions operations are handled in-house.)
Source: Sports Business Journal research
Add another $500,000 to $750,000 per game in non-ticket revenue, including food and beverage, parking and merchandise sold inside arenas, sources said.
A source said that NBA per caps for food and beverage purchases typically range between $14 and $22.
“To any home team this is significant,” said Milwaukee Bucks President Peter Feigin. “You lose momentum and you jeopardize your fan base. But priority one is how do we create a safe environment for our employees and fans and react responsibly to the pandemic.”
Through March 19 alone, the league will lose 57 games. If those games are not rescheduled, teams collectively would combine to lose between $86 million in total game-night revenue on the low end and up to $185 million on the high end, according to SBJ research.
“The ripple effects are unbelievable and this will have dramatic effects everywhere,” said Bill Sutton, principal of Sutton & Associates, a sports consultancy that counts a number of NBA teams as clients.
How long the NBA games are suspended will determine the impact from sponsorships, with added-value programs expected to be offered to both sponsors and fans.
“As a fan, I should be getting a lot of value added from my sports and its sponsors,” said David Schreff, former president of the NBA’s global media and marketing group and current CEO of the digital ad tech firm ACTV8me. “You have to make sure your core fans — the ones who are buying your best seats and suites — are shored up with extra offers, longer term deals, discounts, merchandise or a combination of those. I’d be out there selling next season today. Same thing for sponsors. I would be offering extensions to corporate sponsors but at discounted rates.”
Chris Weil, chairman of Momentum Worldwide, which represents NBA league sponsors AmEx and SAP, said sponsors may hold back media spending.
“I feel like those dollars will get parked,” he said. “We don’t know the extent of the economic impact yet. So if I can hoard cash and keep my powder dry, that’s what they will do.”