Layoffs and Losses: Can Sports recover in 2021?

In 2020, the sports industry in North America was projected to generate $75.7 billion, according to PwC, an accounting firm. Instead, it lost more than one-third of its value as leagues suspended play before returning with stripped-down seasons.

TV ratings have tumbled for many top sporting events, and advertising, printing and revenue streams connected to the sports business, like concessions, have practically vanished.

While the coming vaccine in the United States raises hope that fans will be able to return to stadiums by late spring or early summer, the spread of the virus this winter will deepen an already cratered sports economy.

The modern sports industry has never faced such a prolonged, devastating interruption, and it is premature to gauge when sports will return to their pre-pandemic state, or if they ever will.

By one estimate, the cancellation or postponement of every sports event from mid-March to May alone meant that 1.3 million jobs, and $12.3 billion in earnings, were at risk of being eliminated. That figure grew to $28.6 billion through the end of November, according to Emsi, an economic modeling firm that focuses on the labor market.

League commissioners, team owners and broadcast and sponsorship executives know that in a post-pandemic world, they will have to rebuild their audiences, and may face depressed TV contracts and sponsorship agreements.

“We think about our business as two products: We think about our live product separately from our media business,” Rob Manfred, the commissioner of Major League Baseball, said at the Paley International Council Summit in November. “One thing that became really clear to us this year is that when you don’t have that live product, people don’t have that excitement of going to the ballpark, and it affects how many games they watch on TV.”

To assess the effect of losses so far on the industry’s bottom line and workers, The New York Times zoomed in on one place — Wisconsin — that had been slated to host numerous college and pro games on the first weekend of October. Instead of getting to celebrate its sports culture, Wisconsin got canceled events and an estimated $46 million loss of anticipated revenue, the Times found.

The hit was like a series of fragmentation grenades: As coronavirus cases rose over the summer, for example, the company that employs stadium employees and vendors at Lambeau Field furloughed 184 people.

Since then, economists estimate that millions of dollars have been lost in wages, and in sales for surrounding businesses dependent on rabid Packers fans.

“Even a little tweak sends these ripples out — like the butterfly effect,” said Rob Sentz, chief innovation officer of Emsi, which was enlisted by the Times to quantify that effect. “It’s the vendor, the guy who gives haircuts, the police officer.”

About 100 miles south of Green Bay, an estimated 6,838 people involved with sports-related businesses in Milwaukee suffered the same fate.

As a result, $58.9 million could be lost in local, state and federal taxes over the course of the year.

A Baseball Bar Can’t Profit From a Brewers Playoff Game

Thursday, Oct. 1, was supposed to be a big night for the Milwaukee Brewers.

They had made the first round of the playoffs, and their fans were expecting that the second game of the three-game series would be held at home at Miller Park. Instead, with baseball reducing travel, all three games were scheduled to be played without fans at the home field of the higher-seeded team: the Los Angeles Dodgers.

Instead of full hotels, brisk retail sales and crowded bars and restaurants — or more than $3 million in economic impact, according to the city’s sports development board — Milwaukee was left with scenes like this: The 38 big-screen televisions at Kelly’s Bleachers blinked the games to a modest crowd of 100.

Anthony Luchini, one of its owners, saw more than a missed opportunity; he saw a miserable year getting worse. Brewers home games are bread and butter for Kelly’s Bleachers. It operates a free shuttle to Miller Park, encouraging its patrons to park free at the bar and spend that money instead on its beers on tap and pub food.

It is a winning strategy — Luchini says about 300 to 350 people use the shuttle each game.

He slashed his staff to nine people from 28, forcing employees to apply for unemployment. He was closed for three months, and curbside delivery did not gain much traction.

“Last year, their first game, my bar was packed with no seats two hours prior to game time,” Luchini said. “People came in a half-hour before the game; we had a door guy say there’s no space for you. You get a playoff game — it’s a seven- or eight-time difference in revenue, especially if it’s a home game. It makes an unbelievable difference.”

A Big Game That Wasn’t Adds to the Badgers’ Money Woes

On Saturday, Oct. 3, Green Bay would have been a center of the sports universe with two perennial football powers, Notre Dame and Wisconsin, competing in what would have been the most high-profile college game at Lambeau since 2016, when Louisiana State came to town to take on the Badgers. Hotels were certain to surpass the $700-a-night rates they had commanded then.

The matchup was expected to generate robust TV ratings, given the built-in national audience for Notre Dame football and the fact that the Fighting Irish were a top contender for a national title. Case in point: Notre Dame’s double-overtime victory against Clemson on Nov. 7 was the most watched Fighting Irish game in 15 years on NBC.

But the game was canceled in July when the Big Ten announced that its universities would play only conference games. According to Emsi, the cancellation cost about $22.9 million in lost economic activity, including $3.4 million in hotel revenue. The game was expected to generate $8.36 million in ticket sales, with 40,000 tickets slated for Notre Dame, 20,000 for Wisconsin and 20,000 for Packers season-ticket holders, Emsi calculated.

It had an even more profound effect on the University of Wisconsin’s athletic department, whose coffers dwindled as its conference postponed the football season totally in August, only to decide weeks later to play the season in the fall after all.

Wisconsin athletics is facing a revenue drop of $60 million to $70 million in the 2020-21 fiscal year despite instituting a 15% pay cut on its 24 highest-earning employees. About 350 other employees participated in a state work-share program, with reduced hours. The majority of those are now on a tiered furlough plan.

“We are facing the same financial challenges that other organizations across the country are,” Barry Alvarez, the university’s athletic director, said this summer when carrying out the plan. “We are working hard to minimize the impact on our employees while responding to the realities of the situation created by the pandemic.”

Brian Lucas, the university’s director of football brand communications, has worked in Wisconsin athletics for nearly 22 years and appreciates the department’s efforts to mitigate the financial hardship on its employees.

So far, however, the Badgers have canceled two football games amid more than 30 coronavirus cases among players and staff members. One other game was canceled because of positive cases in Minnesota’s football program. How much financial hurt can the department endure before layoffs?

“That uncertainty is harder than the financial hardships,” Lucas said.

When There’s No More Market for the Services of a Marketer

From his office a few blocks from Lambeau Field, Aaron Baer spent many hours a week persuading his clients that they needed his services, which include marketing through search engines, social media and email, as well as content writing, graphic design and public relations. “A lot of people view marketing as an expense, and not as an investment,” said Baer, president of Baer Performance Marketing.

With help from a Paycheck Protection Program loan, he was able to keep the company’s five employees. Several of his sports clients, however, have had their businesses disappear.

The Green Bay Blizzard, an indoor football team that plays across the street from Lambeau, worked with Baer for several years. The team had all of its advertising arranged before the start of its season in March, when the pandemic canceled it.

“All of their sponsorships, everything, that all went away,” Baer said of the tens of thousands of dollars of lost business. “We lost out on all that ad revenue. That’s a bad situation, even for the advertisers, because that’s another opportunity where they won’t get in front of potential customers.”

Another Baer client, Event USA, brought “a nice influx of cash” in late summer and fall as a tailgate party host, away-game travel packager and one of the largest ticket resellers for the Packers. No more. “Our agency lost all of that revenue, but Event USA is getting crushed,” Baer said.

In Grand Chute, Wisconsin, less than an hour’s drive from Green Bay, the Wisconsin Timber Rattlers, a minor league baseball team, canceled their season in July. About 75% of their marketing budget for the year, which would have gone to billboards, radio, television and some digital platforms, was not spent. And although the team cooked up special programs, like takeout dinners for Mother’s Day and Easter, the banquet facility that the team relied on for extra revenue could not host weddings or other events for several months.

“People wanted to help, to support us,” said Hilary Bauer, the Rattlers’ marketing director and assistant general manager. “But baseball is our main revenue source.”

The indirect toll has been pronounced, too. In Milwaukee, Vic Banuelos and her sister, Gaby, an indie pop duo who perform as REYNA, said that no sports had meant no gigs revolving around games. Vic Banuelos is also an Uber driver, but has not driven for it since March.

“In Milwaukee, 2020 was going to be a huge year — there were going to be so many opportunities for events, parties, private events,” Gaby Banuelos, 29, said.

A Furloughed Arena Cook Tries to Keep Busy and Get By

The Bucks’ 2020-21 preseason opener would have drawn a near capacity crowd in downtown Milwaukee on a weekend that would have also featured the preseason opener of the Admirals, a minor league hockey team. Anticipating the NBA would not be in action, Delaware North, which employs vendors at Fiserv Forum, announced furloughs in July that affected more than 1,000 people.

One of them was Anthony Steward, a cook at Fiserv Forum for the last two years. He is one of three cooks who prepare the chicken tenders, lobster tails and tomahawk steaks for 34 corporate suites, feeding about 500 people. Sometimes Steward picked up extra jobs through his union, the Milwaukee Area Service and Hospitality Workers Organization; one of his favorites was cooking for high-end donors at Notre Dame Stadium in 2019.

“I found out about Touchdown Jesus,” he said. “It was so much of an experience.”

On March 11, Steward found out he was furloughed because of the pandemic. What helped, at first, was a pledge by Bucks star Giannis Antetokounmpo to donate $100,000 to help Fiserv’s hourly employees — a pledge that Khris Middleton, and the entire team, also made, and was eventually matched by the Bucks organization. Steward estimated that his share, ultimately, was $375.

“It showed that they cared, and it sure makes you want to support your job more,” said Steward, a Milwaukee native.

But then Steward and his younger son, now 5, contracted the coronavirus. While he did not go to a hospital, he had excruciating back pain, headaches and chills, and he lost his sense of taste and smell.

Since recovering, Steward, 35, has relied on a patchwork of odd jobs and $300 a week in unemployment, while throwing himself into the union’s political and organizing work. He has catered events for friends and worked as a promoter for a dance club. He invited two out-of-work friends to crash at his two-bedroom apartment. Among them, they have enough to pay the $750 monthly rent and feed themselves.

In late August, when the Bucks were battling the Orlando Magic in the NBA playoffs in a bubble environment in Florida, Fiserv Forum hosted an event allowing 250 people to eat inside, on the arena floor, and watch the game on its jumbo screen. With tables spaced appropriately, the six-course meal cost up to $185 a ticket, and Steward was thrilled to be a part of the staff.

“It was fun to be back around work, even though it was with masks on,” he said.

It was a one-off and a reminder of how much Steward had lost.

“Man, it’s hard,” he said. “If I’m not there at the game, it’s crazy. You build a lot of relationships at work. We’re all like family.”

Empty Stands at Lambeau and Not Much Joy in Titletown

The view from the top of the professional sports pyramid is just as bleak. The NFL is now three hours of packaged razzmatazz broadcast from mostly empty stadiums. That was the case on Oct. 5 when the Packers hosted the Atlanta Falcons.

Inside, Lambeau was a messy soundstage. Barricades and trash cans were stacked up. Beer kegs never to be tapped were lined up in rows. The footsteps of a handful of security personnel echoed in the concourse.

It was the first Monday in October, and the state of Wisconsin ranked third in the United States in a New York Times analysis of highest weekly case counts per capita. Green Bay and nearby Appleton were among the top five metropolitan areas in the nation with the highest daily case counts when adjusting for population, according to the analysis.

So Titletown, the entertainment district across from the stadium, was empty, leaves blowing through its promenades. Lodge Kohler, a hotel that usually fetches $700 a night on Packers weekends, had plenty of rooms available for $220. Next door, Kroll’s West, a tavern and institution whose autograph wall of Packers greats is a destination, was nearly empty.

The Packers are a publicly held company, and although the team does not disclose specific revenues, it is clear that its local revenue (more than $210 million in its last fiscal year) — tickets, concessions, parking and sponsorship deals — has significantly diminished. The NFL had to go forward with games for Green Bay to make its payroll. National revenue, mainly broadcast contracts, accounts for $295 million of the team’s operating budget.

“We’re fortunate that we’re able to continue to play games, and with the majority of our revenue coming from our national TV contracts, that helps tremendously,” said Mark Murphy, the team’s president and chief executive. “But without ticket revenue and other revenue that comes with fans in the stadium, we have seen a significant drop in our local revenue.”

While the NFL remains the most popular sport in the United States, its television ratings are down about 10% — not nearly as drastic as the NBA’s and MLB’s, but enough to reset the market. Global sports sponsorships rights fees will fall nearly 40% to $28.9 billion in 2020 from $46.1 billion in 2019, according to estimates from the sports marketing agency Two Circles.

CBS, which is scheduled to broadcast the Super Bowl on Feb. 7, is trying to find advertisers for a few remaining game-time slots as skittish companies continue to mull their options. For last season’s game, Fox sold out of its regular inventory before Thanksgiving.

“You’ve got huge stakes here,” said Kevin Krim, chief executive of EDO, a TV ad measurement platform that works with networks and advertisers. “There are still plenty of people who need to drive their businesses, who are saying that they need this reach, that they need the millions of people who will be watching. But if you have any reason to punt on this year, you’ll wait.”

Murphy, the Packers’ chief executive, understands that every facet of the Green Bay franchise is about to be renegotiated — even players’ salaries.

Over the summer, the players union and the NFL’s team owners anticipated a shortfall in league revenues and set the salary cap at a minimum of $175 million next season. It meant that players would take an 11.6% pay cut for the 2021 season and allowed for the salary cap to shrink even more through the 2023 season.

“We’ll have to see where we finish up, revenue-wise, and how that ultimately affects the cap,” Murphy said. “We’re optimistic on where we’ll be, but we’ll have to see if any adjustments need to be made. Our schedule helps, compared to many other sports.”