Forbes is starting to focus on the all-important question of whether the coronavirus, in addition to killing tens of thousands of people, will harm the bank balances of some of your favorite multibillion-dollar sports franchises. Let’s give them a read and see if they make any damn sense and/or are affronts against humanity!
First up, because it beat the other one by a few hours, is “senior contributor” Patrick Murray’s essay on the Golden State Warriors, who had the misfortune to open their new San Francisco arena the same year as sports came to a grinding halt (and before that, the same year as its vaunted starting lineup suffered a sudden and gratuitous total existence failure). Take it away, Patrick:
The Athletic’s Anthony Slater has reported that cancelling the remaining seven home games would cost the Warriors in the region of $25m. That’s on top of the money they might have expected back in the fall from a potential playoff run, before Stephen Curry got injured. They might not have been hotly tipped to make a deep run with Klay Thompson out, but most people were expecting a team led by Curry to at least make the postseason. And that would have meant more revenue flowing in. Tim Kawakami previously reported that at Oracle Arena in recent years the Warriors received $4-5m gross per home game in the early playoff rounds. At Chase Center that figure would have been even higher.
Oh noes, the Warriors are missing out on all the playoff money they would have earned … if they’d been in the playoffs, which they weren’t going to be? So maybe it’s just that $25 million for seven home games that is at risk — Forbes has the Warriors’ gate receipts at $178 million per year, so the per-game figure pencils out.
And, of course, the Chase Center isn’t just about basketball, it’s about concerts and other arena events, so how will that work out?
It’s unknown just how much that will cost the Warriors, but in Forbes’ latest franchise valuations just under a quarter of their $4.3bn valuation was attributed to their arena.
Thanks for the math, Mr. Senior Contributor! You’re totally worth every penny of that $250 a month you’re being paid!
The second article is by Mike Ozanian, who is an actual Forbes staffer and the magazine’s longtime sports valuation guru, even if he’s had his own occasional problems with basic math. Ozanian takes on the finances of the Atlanta Braves, and discovers (according to “John Tinker of G.research LLC,” which is apparently a thing that a financial analysis firm has actually decided to call and punctuate itself) that playing only half a season of baseball will, amazingly, cause fewer people to go to baseball games:
Tinker reckons the Braves’ revenue would drop to $174 million, from $438 million in 2019, with attendance dropping to 630,000, from last year’s 2.65 million. The drop in attendance would cut revenue from the gate and concessions to about $55 million in 2020, from $202 million the prior year, and halve the broadcast and sponsor revenue to $118 million, from $236 million.
Player expenses, meanwhile, were lowered by only 50%, to $86 million, and operating expenses and SG&A costs by 40%, to $146 million. Bottom line: Tinker estimates the team will post an operating loss of $59 million, versus an operating profit of $24 million in 2019.
There’s some weirdness here: Why would attendance drop by three-quarters if the number of games is cut in half? (Not that playing games in front of fans is even that likely, but if it does happen wouldn’t you expect there to be some pent-up demand? Especially since games would be played in the summer, when ticket sales are normally the highest? Unless the G.research study assumes that by summer fans will be too afraid to leave the house, which is certainly possible.) And how would broadcast and sponsor revenue fall by $118 million when the Braves’ TV deals with Fox Sports South and Fox Sports Southeast only gets them $83 million a year in the first place? And does Ozanian know for sure that the Braves’ TV and sponsorship contracts would be canceled (or scaled down) if a full schedule isn’t played? Who can say!
If there’s a takeaway here, it’s that while the sports stoppage will almost certainly cost sports team owners big time, the actual bottom-line numbers are going to depend on myriad picayune contractual details that probably can’t be figured out just by looking at profit and loss summaries. And also, in case anyone might think otherwise, that whether a team is paying for their own building (the Warriors are, the Braves mostly aren’t) shouldn’t play at all into financial impact assessments, because stadium and arena expenses are sunk costs that don’t change the calculus of how much added red ink teams will see.
(This is true for local governments that are paying for sports venues, too, incidentally: If your state was counting on hotel-tax revenues to pay off a stadium and hotel-tax revenues are in the toilet because no one is leaving their houses anytime soon, that’s bad, but no worse than if hotel-tax revenues were being counted on to pay for other public expenses. Maybe if you were counting on hotel-tax revenues to soar as the result of people coming to see your new team, but that probably wasn’t a safe bet anyway.)
And, of course, that owning a major pro sports team is so fabulously lucrative that even skipping most or all of a season isn’t likely to bring anyone to their knees. The Warriors turned an estimate $109 million profit in 2019, according to Forbes figures, while the Braves’ Liberty Media ownership group made $54 million. So while losing a season could wipe out an entire year’s worth of profits — that’s not good! — the other way of looking at this is that teams could regain their losses in just the first season of resumed play, whenever that might be. Starting to get why sports leagues are so willing to shut down over labor contract disputes? If you’re a team owner doing this right, you’re playing the long game, or at least the medium-term game, and if COVID-19 is still affecting things like sports attendance in the medium term, we’re going to have way bigger things to worry about than the Braves’ bottom line.