SBJ Unpacks: Coronavirus -- What's Next For Olympic Decision Makers?
The biggest sports business story for today deals with the Olympics postponement, which, of course, is again our top story tonight and is a topic that will dominate our coverage for months.
My focus today, though, was on a couple of stories about sports properties that lost control of their message during the virus outbreak. Now is not the time to be tone deaf.
76ers and Devils owner Harris Blitzer Sports & Entertainment caught a lot of bad press when it told staff that it was cutting salaries temporarily by up to 20% depending on salary level and moving to a four-day work week. The ownership group reversed course today: “After listening to our staff and players, it’s clear that was the wrong decision.”
The NHL was bashed on mainstream and social media outlets after it was revealed that the league will cut its employees' pay by 25% starting April 1. Canadiens owner Groupe CH said it was temporarily laying off 60% of its employees.
These moves were viewed as too draconian and too soon, hitting lay people and daily staff when ownership is still paying players at least through mid-April. I can understand why these stories upset so many. Sports organizations need to be more conscious of the timing of these types of decisions. They need to assume that all their moves will be made public.
Bottom line: Public nerves are frayed, anxious and sensitive. Management must tread carefully as they try to weather this storm.
Closer to home, Mecklenburg County, N.C., which is home to SBJ’s Charlotte HQ, will be under “stay at home” orders starting Thursday morning and running for at least three weeks. This should have no impact on our service as our staff has been working remotely for more than a week.
Stay safe, everybody.
-- John Ourand
OLYMPIC POSTPONEMENT RAISES BIG QUESTIONS
- Postponing the Tokyo Olympics was the easy decision, writes SBJ’s Ben Fischer, and now comes the hard part: Shifting the world’s largest peacetime gathering nearly a year into the future after nearly seven years of planning. Here are the five most urgent questions that came through on a day of calls around the Olympics industry:
- Cash flow: Without the largesse generated by the Summer Games for nearly another year, Olympic sports federations globally will feel the pinch. The USOPC and many of its governing bodies run deficits or narrow margins in non-Olympic years with the expectation of making it back in the Olympic years. Belt tightening already started as revenue-producing domestic events were canceled earlier this month. We took a look at the topic in this week's magazine.
- What about sponsors? All 19 USOPC sponsors’ current contracts expire Dec. 31, and many were on the cusp of launching Olympic promotional campaigns when the pandemic hit. Do they get an extension? Also complicating things: Effective Jan. 1, all Team USA rights transfer from the USOPC to U.S. Olympic & Paralympic Properties, the joint venture of LA28 and USOPC. Meanwhile, what about conflicts? Liberty Mutual and The Hartford are both sponsors now, but the IOC sold global insurance category exclusivity to Allianz beginning Jan. 1. United Airlines is the USOPC sponsor for now, but the LA28 joint venture sold it to Delta starting in January.
- When are the Games? The IOC and Japanese government gave themselves a nine-month window to hold the 2021 Olympics: after 2020 but before the end of summer 2021. Precisely one year later would appear to involve the fewest scheduling difficulties, but is this a chance to right old wrongs? Tokyo had been working feverishly to mitigate the severe summertime heat and humidity; what if they schedule the Games for June, or even earlier? Global sports schedules can’t adjust until they know. The future of track & field's World Championship, currently slated for August 2021 at the Univ. of Oregon’s Hayward Field, depends on this, along with the competition schedule of every Olympic sport until then.
- What do NBC and advertisers do? There is now a 17-day hole in the middle of summer programming for NBC's family of networks, not to mention around $1.25 billion in advertising commitments to consider. NBCUniversal is “actively working with our advertising partners” and “exploring all options to best serve their brands and our consumers,” according to a statement. In 2011, NBC agreed to pay the IOC $1.41 billion for the Olympic rights that included the 2020 Games, and continues to hold Olympic rights through 2032.
- Tickets & hospitality: Tokyo was already the highest-demand Olympics, with demand outstripping the supply of 7.8 million tickets by wide margins in Japanese and U.S. sales. Interest in corporate VIP guest trips organized by sponsors, the USOPC and other groups was extraordinary. Even if the tickets are simply rolled over in 2021, scores of hotel arrangements must be changed, flights must be re-booked, and there could be lasting effects on consumer attitudes toward crowds. Buyers will want certainty faster than organizers can give it.
- What of the promotional spending? The pandemic comes as Olympic sponsors and advertisers were on the cusp of major expenditures: final deposits on showcasing space, shipping, ad buys, retail buy-ins and more. What of that can be stopped before the cost is incurred? What creative can be held and repurposed for 2021, and what must be re-shot? Will messages carefully crafted for a good-economy 2020 still work for a post-pandemic 2021? What will 2021 marketing budgets look like? Every one of 66 local Japanese sponsors, 14 global Olympic sponsors and 19 domestic U.S. sponsors must figure that out.
GOVERNING BODIES SEEK TO MANAGE CASH FLOW
- Across four-year Olympic cycles, national governing bodies tend to rely most on the year of the Games for revenue, SBJ's Chris Smith writes. A delay will push much of that cash flow back to 2021, but NGBs are still on the hook for most of this year’s budgeted expenses. That means NGBs need to find cost savings elsewhere, and those pressures are already impacting staffing decisions.
- USA Weightlifting CEO Phil Andrews says his NGB has reviewed every cost obligation for 2020, which includes freelance and contract workers. “Most of those have already been furloughed or canceled,” said Andrews, who also said he’s requested a 90-day pay reduction to provide some spending relief. At present, there are no plans in place for staff layoffs. “Our first priority is the athlete stipend, and the second priority is maintaining staff,” said Andrews. “It’s possible there might be layoffs down the road, but in our case we already … run lean enough where there isn’t much you can cut without impacting the business. It will likely mean we are able to protect people more than we normally would.”
- USA Cycling CEO Rob DeMartini says the most urgent problem is cash flow lost because of day-to-day competitions. About 120 cycling races have already been canceled and the NGB doesn't expect any until the end of June. That means some "pretty aggressive organizational interventions to bridge that gap” are coming this week, DeMartini said.
- USA Team Handball CEO Barry Siff runs one of the smaller NGBs. He doesn’t expect any layoffs, but there’s already been an impact on the freelance level. “I was supposed to have five part-time regional ambassadors starting today, and I have postponed those hires,” said Siff.
DECISIONS COMING FOR MLB TICKETING, LONDON SERIES
- As MLB inches closer to what was scheduled to be Opening Day on Thursday, Cardinals President Bill DeWitt III said he expects a league-wide ticket policy to be introduced in the coming days pertaining to games that either will be rescheduled whenever the season starts or outright canceled, SBJ's Eric Prisbell reports.
- "For the most part, and this is across the league, we've been saying that nothing has been decided yet regarding how the season is going to look, so it's hard to refund something if we don't know if it's actually being canceled or rescheduled," DeWitt told SBJ. "But once we get past Thursday, the urgency of the response will pick up and I think you'll see a league-wide approach to that issue get resolved here in the next few days, at least an initial approach to this. Thursday will come and go and games won't be played. Are they being rescheduled? Are they being canceled? Those decisions need to be made and therefore refund policies would flow from those decisions."
- Among other MLB issues is the fate of the second installment of the London Series, this one scheduled to match the Cardinals against the Cubs on June 13-14. Several sources said even before the Olympics were postponed on Tuesday that it was unlikely that the London Series would be played as scheduled this June. "If it's still wildly uncertain in a few weeks, you might have to see some sort of an announcement to move it or delay it or cancel -- or whatever that looks like, I don't know," DeWitt said. "With London, we were looking forward to it as a major highlight of our summer, and the outcome is certainly in doubt."
USTA FOCUSING ON GRASS ROOTS DURING PANDEMIC
- America's signature tennis event, the U.S. Open, is increasingly under pressure from the pandemic, but the USTA is still focused on its bread and butter -- grassroots tennis, SBJ's Bret McCormick reports. With families across the country quarantined, the USTA is sending a newsletter called “Tennis at Home” to parents three times a week that includes activities to get kids moving, video content and drawing contests. The newsletter is going to those already on the USTA's mailing list for its youth tennis brand, Net Generation, but it can be accessed by anyone at NetGeneration.com. The USTA currently has over 400,000 registered Net Generation accounts.
- USTA Chief Executive for Community Tennis Craig Morris is working from home in Orlando alongside three kids between the ages of 8 and 15. “It’s an extraordinary time,” he said. “Whatever support we can give to the parents of the world who are trying to cope, working from home as well as keeping the kids in a level of school and trying to do some physical activity, it’s paramount right now just for the health and wellness of the country.”
- Morris said that Net Generation had steadily accumulated content since its 2017 creation, some through a partnership with GoNoodle, which produces kid-centered videos focused on movement and mindfulness. When the stay-at-home orders began to come down across the U.S., it became clear that this was a time to put the content, which features prominent American tennis players, to use. “For us to be able to adapt to the crisis and really be able to create value for parents was the critical thing for us,” Morris said.
BUSINESS EXECS TURNING EARLY & OFTEN TO ZOOM
- As long as people are working from home, Zoom has greater value. But when the White House started talking about shortening the time that we're locked down, that lead to a decrease in Zoom's stock price today (-15%). The popular video conferencing software has become the communications tool of choice for many businesses that meet remotely, but still want that face-to-face connection. Zoom’s stock price had lived up to the company’s name throughout the pandemic with gains of 39% over the last five weeks, making it one of the few companies that bucked the stock market’s downward trend. Zoom shares increased 117% going back three months, according to The Motley Fool.
- Paciolan President & CEO Kim Damron is among the leaders who has been starting her day on Zoom, SBJ’s Michael Smith reports. Since last week, Damron and 23 members of her leadership team connect via Zoom every morning. Damron: “There is a difference of feeling connected when you can see people smile and laugh and you feel like you're part of the team. All of our management teams have moved to that. We’re using Zoom for video conferencing and Slack for instant messaging, and everybody's posting pictures of their daily meetings with their team. We really have moved to a video-first culture.”
- A coronavirus testing center has been set up at zMAX Dragway -- normally used for NHRA races -- thanks to a partnership between Atrium Health and Charlotte Motor Speedway, which owns the facility. Charlotte-based radio station WFAE notes the track is "apparently the first pro sports venue in the U.S. to do so."
- SI’s Jon Wertheim found one silver lining for tennis in the Tokyo Games postponement. “There are a number of players who are nearing the end of their career who have pinpointed this event as a real capstone. Maybe this will have the effect of prolonging some careers. … Venus Williams will be in her 40's this time next year. Roger Federer will be 39. Serena will be 39.”
- YouTube will be "setting the video quality for all viewers to 'standard' (480p) in order to relieve some of the bandwidth stress being placed on the world’s internet connections," Esports Observer's Kevin Hitt reports. YouTube last month entered into a $160 million deal with Activision Blizzard Esports that gives the platform exclusive streaming rights to both Overwatch League and Call of Duty League, among others.
- Fighter Daniel Cormier is steadfast in his belief that UFC will return sooner rather than later. Cormier told ESPN’s Ariel Helwani, “All these main events that were supposed to happen, have to happen. They just start doing super-card after super-card after super-card. Because if you’re the UFC, don’t you have to stack the cards to make all the money that you’re going to miss going forward? People will watch. … The longer this thing goes, the more of a chance the UFC becomes just massive pay-per-views all through the end of the year. … The moment [Dana White] sees a window to get this thing back going, he’s going to do it.”
- Brenna Greene, the sports director at Spokane-based KREM2 News, said she and the station’s management decided this week to forge ahead with coverage because it "gives people a respite.” For Greene, that means seeking out human interest stories, like a piece last week on a pair of Iowa sisters who realized they’d just played their last high school soccer match together. “We’re looking for something unique. We’re trying to mix it up a little bit.” Greene also said she feels a responsibility to fill a community void after Gonzaga basketball teams were denied trips to the NCAA Tournament.
- Yahoo Sports’ Dan Wetzel noted college athletics has been “virtually recession-proof for 100 years,” but athletic departments should be preparing for lean times ahead should universities see a decline in things like student applications and booster donations. Wetzel, appearing on the “Yahoo Sports College Podcast," said, “The schools can’t bail out the athletic departments, and the schools are in a lot of trouble. How many people are going to go college next fall? How many people can afford it? … Everything could change. And these schools were already operating on a very thin margin in some cases. … Nobody could have predicted this, but here it is.”
- The return of touring events such as Monster Energy Supercross and Monster Jam may be in doubt after Feld Entertainment, which operates those series, laid off a “large percentage of its staff.” The Tampa Bay Business Journal notes an “estimated 900 to 1,200 employees were let go due to the coronavirus pandemic causing shows to be canceled.”
- Commissioner Greg Sankey said he and his team at SEC HQ have a “responsibility to prepare for a set of unknowns” concerning athletics and the well-being of student-athletes during the sports shutdown. Sankey told SEC Network’s Paul Finebaum, “‘I don’t know’ is a perfectly good answer right now.” Sankey said his daily call with athletic directors begins with an update from him on the conference’s thinking. "Then I update them on what’s happening nationally to the extent I know,” Sankey said. “We go through what’s happening on each campus. … Our athletic directors share a little bit on how our student-athletes are being supported academically. We then go into what kind of needs are being met on campuses -- how many people might be there, what’s happening with local emergency planning.”
- Woodbine Entertainment, which operates Woodbine Racetrack in the Toronto area, announced that it is postponing the start of its thoroughbred season until further notice, SBJ's Liz Mullen reports. The delay was prompted by the government of Ontario's mandate that all non-essential businesses be closed by 11:59pm tonight. The race meet had been scheduled to open on April 18.
SBJ UNPACKS -- WEATHERING COVID-19
- ICYMI: Check out the most recent editions of our "SBJ Unpacks" podcasts around COVID-19:
- Venue Solutions Group’s Russ Simons discusses how the coronavirus has impacted the facilities industry.
- Tom Farrey of the Aspen Institute's Sport & Society Program talks about the impact of a pandemic on youth sports.
- SBJ examines the pandemic's impact on sports sponsorships with AJ Maestas of Navigate Research.
- Attorney Mikaela Whitman talks about how sports businesses are answering the question, “Am I covered?” and what the insurance market will look like when events return.
Something related to coronavirus and sports business catch your eye? Tell us about it. Reach out to Austin Karp (email@example.com) and we'll share the best of it.