CHENNAI: The coronavirus is laying waste to industries, both big and small. One of the hardest hit could be sports, which is conservatively valued at $500 billion. With many events cancelled or indefinitely postponed, losses may quickly compound. Academic Simon Chadwick, who has been in the domain for 25 years, says the industry as we know it could cease to exist. “It is looking like it will be incalculably decimated.”
That does sound like a doomsday scenario, but it’s not an exaggeration. Various reports have already indicated that the losses have already run into billions. With the pandemic showing no signs of slowing down, that’s only set to increase.
Chadwick refuses to even give a ballpark estimate. “Who knows? It’s a difficult question to answer. The effects are deep and far reaching. And estimated losses imply that we are assessing the industry as it was. The new reality is that the industry as it was no longer exists, and may never exist again in that form.”
One precaution that may have saved parts of the industry is a contractual instrument meant to mitigate losses during pandemics. Curiously enough, not many sporting bodies — including International Olympic Committee (IOC) — opted for that life jacket.
Reports indicate that All England Lawn Tennis Club (AELTC) had opted for a specific, virus-related insurance package (they reportedly paid $2 million per year as premium since the SARS outbreak in 2003). Thus, the body stood to receive substantial monies after the cancellation of Wimbledon. Though that still won’t make up for the entire sunk cost, they won’t suffer as much as the rest.
So, why didn’t others bodies take preemptive steps like AELTC? Chadwick labels this as “strategic myopia”. “One reason is that many in sport already faced massive financial constraints. That’s now been exacerbated by their lack of vigilance for strategic and existential threats.”
“Many sports and organisations are focused on short, medium-term operations. They often don’t account for long-term — and sometimes profound — changes that may impact them.”
Another sporting meet that reportedly has a financial parachute meant solely for such situations is The Open, one of golf’s four Majors. Like Wimbledon, they will likely recover most of the losses incurred after cancellation.
Chadwick feels this situation will catalyse an evolution in the financial dynamics of sports.“Most people and organisations around the world previously didn’t think that a pandemic would impact their operations to such an extent. This says something about how little they pay attention to the interconnectedness of our globalised world, and how they don’t future-gaze to identify alternative scenarios and strategies for managing their trajectories.
“It’s likely that there will be an upsurge in pandemic coverage. Inevitably, this will increase demand and drive up prices. Clubs will likely have to factor a pandemic premium into their financial projections.”