The Economy of Sports
It was almost a year ago that all professional sports canceled or postponed their seasons in response to the COVID-19 pandemic. However, not long after these cancellations, leagues around the globe were working to figure out ways to play amidst the pandemic. The reason for that was simple: money.
When professional sports stop, the revenue stops too, and in traditional circumstances, sports are big business. In this episode of Catalyst, Jeremy Jordan, associate dean of Temple University’s School of Sport, Tourism and Hospitality Management (STHM), illustrates how COVID-19 has taken its toll on sports, affecting everyone from high-ranking team officials to concession workers.
Jeremy also reminds listeners that sports are a fabric of our culture–and they’re not going anywhere. Several industry innovations like virtual crowds, remote drafts and new apps have come out of the pandemic with more likely on the way. Coupled with the industry’s inevitable recovery, Jeremy explains that now might actually be the perfect time for students to explore working sports.
Catalyst is a podcast from Temple University’s Fox School of Business about the pivotal moments that shape business and the global economy. We interview experts and dig deep into today’s most pressing issues. Season two will answer questions like: How will COVID-19 impact my financial future? Why hasn’t the #MeToo movement reached the professional sports industry? And what makes a leader credible? We explore these questions so you can spark change in your work. Episodes are timely, provocative and designed to help you solve today’s biggest challenges. Subscribe today.
- Jeremy Jordan, PhD
- Major sporting events, like the Super Bowl, require big investment from host cities
- State College’s hospitality, souvenir businesses take first sack of missing Big Ten fall sports season
- Penn State football holds a local economy on its shoulders. What happens if the season never comes?
Full Episode Transcript
Host: Welcome to Catalyst, the podcast from Temple University’s Fox School of Business. I’m your host Tiffany Sumner. Today, we’re joined by Jeremy Jordan, associate dean of the School of Sport, Tourism and Hospitality Management at Temple University. In this episode, Jeremy discusses one of our favorite past times: sports. Sports and the way we consume them have looked a bit [00:01:00] different since the beginning of the COVID-19 pandemic. Stadiums and arenas are practically empty and some leagues have even canceled their entire seasons. In normal circumstances, professional and collegiate sports are a big business—but that has changed over the past several months. Today, we tap into Jeremy’s expertise with regard to the economic impact of sporting events. Jeremy illustrates a broad picture of just how much the pandemic has affected this industry, while also providing a blueprint for the road to recovery. Hey, Jeremy, thank you for joining me in the studio today.
Jeremy: You’re welcome. I’m excited to be here.
Host: We’re excited to have you, you’re actually like the third dean from the dean’s office that has let me into your schedule—and your mind—so I appreciate that. [00:02:00]
Jeremy: I thought when Tiffany said to show up at this time and thought we were supposed to do that.
Host: I mean I like to think so I don’t know I don’t if that’s how other people view this.
Jeremy: I’m excited to be here. This is obviously an area that I spend a lot of time studying. I’m very passionate about it, and it’s very timely given everything that’s going on so thanks for allowing us to have this discussion.
Host: A good portion of your research examines the economic impact of sporting events. In traditional circumstances, sports are big businesses but all that has come to a halt as a result of the pandemic. Broadly speaking, how do sports leagues and teams make money and how has the pandemic impacted their ability to do that?
Jeremy: Well, they’re definitely not making the same level of revenue they did before, I mean if you look at the four major sports leagues: the NBA, the NFL, Major League Baseball and the National Hockey League. Revenue across all four leagues is down and down significantly, so if you think about the traditional [00:03:00] ways that professional sports teams make money, the number one revenue source is obviously TV and media rights. Then it’s corporate sponsorships, then you have more local revenue streams: ticketing, local corporate sponsorship, concessions, parking—all the things that are required for someone to attend a game and enjoy the experience. So all of those local revenue sources. Again, the hot dogs, Cokes, the beers, the parking, buying the merchandise—that’s all gone. Obviously, ticketing is not available right now because we’re not letting people in the stands, or if we are, it’s a very limited amount. So what they’re relying on is television money, media rights and also actually sponsorship, which may be surprising to some people that sponsorship spend is actually up year-over-year. A reason for that is because sport is still able to deliver a very desirable market for organizations and connect them to consumers [00:04:00] so as long as you’re able to broadcast sport games and be able to sell commercials, it seems like organizations are willing to purchase those and then also sponsor the events even if no one’s in the stadium.
Host: I can imagine some teams, leagues and college programs have been hit harder than others. Can you elaborate?
Jeremy: Yeah so, if you separate professional sport from collegiate sport, let’s look at it that way. You have some sports like baseball, for example, they have the largest schedule: 162 games. So the ticket revenue that they’re losing is significant. Now, their stadiums are generally smaller than, like, an NFL football stadium but an NFL team is going to have eight regular-season home games and maybe two or three pre-season games. So I think baseball has been hit very significantly. They also had to shorten their season, one of the things that’s a little bit unique about the NFL is they got to play all of their [00:05:00] games they didn’t cancel any games and it’s one of the only leagues that was able to do that so again, that has value especially if you think of the TV deal because basically if you’re not playing a full season you’re not going to receive the full revenue amount. Collegiate is different. If you look at it from the NCAA level they have one primary source of revenue and that’s the men’s basketball tournament that takes place every March. About 85 to 90% of the revenue that’s generated is from that source. That got cancelled last year and so that revenue source goes away or at least the full revenue source goes away. So that’s why this year, I think it’s very likely that there’s some form of the tournament that will be played because it’s such an important source of revenue for the NCAA, and that money doesn’t stay with the NCAA. It’s spread out to its membership, which is all of the schools and conferences that comprise the NCAA. So yeah I think, it’s hit leagues differently, it’s definitely hit collegiate [00:06:00] sport differently and then if you drill down to the the team level, if you think of like a Penn State that’s really not able to host anyone at their home football games and the impact that not only has on Penn State and their inability to sell tickets and concessions and parking but all of the local businesses, hotels, restaurants, retail that rely on those games as a primary source of revenue for their whole fiscal year. All that went away, and so teams have been hit hard and all of the kind of ancillary businesses that are connected to these events have also been hit hard.
Host: Early on, we saw some leagues like the NBA, WNBA and NHL adopt a bubble format but that cost them a large amount of money and has since been abandoned. Is that because that model is not sustainable?
Jeremy: Yeah, I don’t think it’s sustainable for a couple of reasons; number one, it’s expensive and number two, you’re asking your employees, your athletes to live in this [00:07:00] bubble and a bubble essentially means that we’re going to bring all the teams, all of the support staff to one geographic location. We’re going to put them in hotels, probably no one else is staying in those hotels, we’re going to use a very limited number of venues, all the games are going to be in the same venues and we’re going to do that for six weeks, eight weeks maybe even longer. So it’s very expensive, it’s very disruptive and again, if you think of the athletes as employees to their personal lives. These individuals, a lot of them have families they have other responsibilities and so you’re asking them to essentially go into quarantine for you know eight weeks and then stay away from the family, so I think the cost, the disruption, all of those things made it very challenging to do that on a sustained basis. Now the NCAA is going to do it for their tournament. They’re going to have the whole tournament In Indianapolis, normally [00:08:00] this is spread out across various destinations based on the round of the tournament, but this year the whole thing will be in Indianapolis. They’re going to use again a set number of venues, they’re going to take over five or six or seven hotels, and so really try to build their own bubble so that they can make sure to have the tournament.
Host: And, is the bubble format helpful in illustrating the significance of sporting events?
Jeremy: It is because it’s not an ideal situation for anyone and again if you go back to the NCAA Men’s Basketball Tournament, these destinations bid to host these rounds, these events and so it’s a significant loss. Philadelphia has hosted in the past, and so if you were set to have you know the first couple rounds or the the following rounds at your destination, you’ve lost that and that’s is a significant source of impact for your community. So it is a very difficult thing [00:09:00] to do, but it does identify how important it is, again from a revenue perspective, to make sure these events take place so that they can be broadcast on TV.
Host: The return of live sports would definitely boost many who have been impacted by the pandemic. We’ve seen teams lay off a significant number of employees, concession vendors have been out of work for a year. Just how hard has the pandemic hit those who work within organizations or those who work within the stadiums and arena walls?
Jeremy: Yeah, it’s been devastating, they’ve had zero income coming in. I think for a while organizations whether it be a team or a venue management company did their best to try to retain their employees and support them. But we’re at a year now where we’ve not had live sporting events really with any kind of significant attendance of fans and so you don’t need concessionaires, you don’t need parking, you don’t need a lot of the operations, you don’t need people to sell tickets because there are no tickets to sell. [00:10:00] So these individuals likely have had to find employment in other sectors and so it’s been really, really challenging for them and unfortunately that sometimes the group that we don’t talk enough about, is all the people that rely on these events for their livelihood, not necessarily the athletes or the owners or the leagues but the people that go and sell me my hot dogs and sell me my program and make sure I get a parking spot. Those folks have been really, really been hit hard in and you know the sooner live sports events can come back, the better for them if they choose to come back to this industry.
Host: One positive thing that we’ve talked about on this podcast is innovation. I’m sure that’s actually happening within sports too, even just this idea of games being virtual. I mean, we still had a Super Bowl this year and there was still a halftime performance. Can we see the pandemic leading to new jobs within the industry based on innovation?
Jeremy: Absolutely. [00:11:00] At STHM, we have just recently created a new degree program in the event in entertainment management and it wasn’t because of Covid but one of the things that has happened as a result of COVID is that they estimate that the virtual event industry will go from 78 billion dollars to 780 billion dollars by 2030, and so that’s obviously a very significant increase. It requires a new workforce with certain types of skills and training and experiences so yeah, I mean we’ve seen drafts now that have happened virtually, we’ve seen situations where teams have live fans in the stands but they’re virtual fans, they’re actually at home cheering from home and then we pay for that opportunity, and so I think there are new revenue sources, there are new ways to innovate. [00:12:00] There’s definitely going to be a change in how we consume sport. You won’t necessarily need to be at the game to have that live, in-game experience. I think we’re going to continue to evolve and so that people can maybe get a similar experience but not necessarily be there physically.
Host: Covid has encouraged many industries to hit the reset button. To that point, why should people still explore working in sports?
Jeremy: Sports are not going away. It’s too important to our culture, not just here in the U.S. but globally. I mean sport continues to be some of the highest-rated television if you look at the shows that get the highest viewership. It is something that continues to be in every nightly newscast, it’s something that crosses socio-economic, racial, gender lines, it’s something that builds community, so it’s not an industry that is going [00:13:00] to die off because of Covid. So when it starts to and it’s already in recovery so when it gets more to what maybe we knew of in 2019, there’s going to be a huge opportunity for people that want to work in this industry, not only because a lot of organizations are going to have to rebuild workforce but again, I think these organizations understand that they’re not going to be able to do things the same way and so they’re looking for people that come in with new ideas, new experiences, new ways of doing things so for us again at STHM with our Sports Business program both at the undergrad and grad level and even our tourism and Hospitality program because these things are all related, it’s an opportunity for us to make sure our students are on the forefront and have these new skills and that we’re providing these experiences, so that they can go out and not just help these organizations move through recovery but really thrive on the other side.
Host: Those are fascinating points, and I think you know you’ve already started to hit on this [00:14:00] but I’m sort of curious, how quickly do you think that the sports industry can recover after the pandemic? And I also want to say earlier out of spring semester Dean Ron Anderson, when we were talking about the Biden administration had sort of mentioned that the Roaring Twenties similar to The Roaring Twenties last century is probably going to be a time when post-pandemic, everyone wants to be out of their house. I’m sort of curious how you think sports events will fit into that?
Jeremy: It absolutely will fit into that. You know, they’re estimating that leisure travel will come back before business travel and so obviously sport is connected to leisure travel and so as people become more comfortable, not just attending events but just traveling, in general, it provides sport an opportunity to start to flourish again and so I think there will be increased demand [00:15:00] for sport and sporting events. I think, in all honesty, it is probably 18 to 24 months before we see a full stadium. The vaccination is still ongoing, and I think it’s picking up steam and we’re able to do more of that on a broader scale but until people really sense that they can go and sit next to a stranger and be confident that that’s okay, we probably won’t have these full stadiums but it won’t — I think the sport will be one of the industries that recovers very quickly just because people will want an opportunity to connect with each other and that’s a big part of the sport.
Host: Great and last question, and I promise we will not hold you to this, how long do you think it’ll take the Linc to be filled with 70,000 screaming Eagle fans again?
Jeremy: Well, knowing Eagle fans, I would imagine they’re one of the groups that would be willing to take a little bit more risk [00:16:00] than some others to get back there, so I would be on the forefront of having a full stadium. Again, just in my opinion, and I’m not a health professional or someone who studies that part of COVID, but I think next fall, there will be many more people in the stands. I think the likelihood of a full stadium is still a little bit of a reach, but Fall 2022, I think there’s a much better opportunity for us to have that full event experience, not just being in the stands but the tailgating and the connecting with each other which again I think is a big part—a big thing that people miss right now and sport can really provide that.
Host: Absolutely, any other words of wisdom or silver linings you want to leave us with today?
Jeremy: If you’re interested in working in sport, now is the time because in the next couple of years there’s going to be a lot of jobs, a lot of innovation, a lot of hiring so you know to take advantage of this opportunity to either pivot [00:17:00] and get into the industry or start your academic and professional development, so that you can take advantage of the wave that’s coming.
Host: I want to thank Jeremy for sharing his insights on the sport industry. As Jeremy detailed, COVID-19 has taken its toll on sports—affecting everyone from high-ranking team employees to stadium concession vendors. The road to recovery is only in the beginning stages, however, sports are a fabric of our culture and they’re not going anywhere. We’ve already seen several innovations emerge in the field, such as virtual crowds, remote drafts and interactive apps. More innovations are likely to come in the months ahead. When the dust has finally settled, we may even find that this industry re-emerges [00:18:00] from the pandemic stronger than ever before. This will excite sports fans and makes it the perfect time for students to explore working in the field.
Catalyst is a podcast from Temple University’s Fox School of Business. Visit us on the web at fox.temple.edu/catalyst. We are produced by Milk street Marketing, Megan Alt, Anna Batt, Stephen Orbanek and Karen Naylor. I hope you’ll join us next time. Until then, I’m Tiffany Sumner and this is Catalyst.
Thriving in the Shark Tank
In extraordinary times, typically you’ll try things that you might not have normally tried. Sometimes you get surprised by the outcome. You know, for us, as bad as a pandemic has been and was for our business, it may have forced a focus on what we do in the best way possible. Jared Cannon, CEO […]
Nonprofit Boards and the Path to Diversity
DEI is becoming a louder voice. It’s always been there and it’s been there for decades, but now, I think nonprofits are really being forced to look at how they do things and really do things in a different way. Maureen Cannon, program director, Fox Board Fellows One of the biggest challenges facing nonprofit organizations […]