Watching 16,000 fans at Arrowhead Stadium for the Chiefs/Titans Week 1 game was a feeling of “mixed emotions”. You usually read that phrase when a manager at work is announcing the departure of an employee who they clearly hated but are forced to utter the most basic of farewells due to corporate policy. For me I couldn’t understand whether this was a victory against the coronavirus, an act of defiance or a necessary financial compromise.
I’m going to go with the financial answer because you always follow the money. The grim scene did make me think about what we have in store for next season. Any hopes that I’d have for a gradual return to “normalcy” were dashed by the recent spikes in Ontario cases. Perhaps at 80 a day you can think about controlling it further and squeezing in people to a live basketball game, but at 500 you’re wondering whether you should stock up on canned tuna. Two very different states of mind.
Not having fans in the seats is a massive financial hit for MLSE. Based on 2018-19 data they’re losing about $110M USD in annual gate revenue and this doesn’t count arena purchases (e.g., food, clothing). That’s a lot of cash to make up by selling 50-50 tickets online so some attempt to extract some percentage of that sweet sum will be underway. In the Chiefs example the team roughly packed 22% of the stadium and observing the six NFL teams who opted to have fans in the stands, they’re targeting around 20-25% of capacity. And all this for an outdoor stadium.
For an indoor venue things are much more dicey. Any examination of whether the Raptors could conceivably think of putting fans in the arena would have to consider Ontario’s re-opening framework:
This graphic is starting to look like that slide everyone on a doomed project ignores because the dates and milestones are so detached from reality that beyond a cursory glance of sadness, it warrants no further comment. However, it is all we have and considering we’re going backwards on that timeline the race to make it to “Phase 3: Recover” by Christmas is grim.
We’re presently pretending we’re in Stage 3 but in reality should be in Stage 2. Even if we were somehow to advance to a real Stage 3 setting, here’s the key clause that would prevent live basketball to be played, let alone seen by fans:
Team sports in which body contact between players is either an integral component of the sport or commonly occurs while engaged in the sport (e.g., wrestling, judo) are not yet permitted, unless the approach can be modified to prevent prolonged or deliberate physical contact.
Even if somehow we got over this little bureaucracy and Ontario was Covid-free by December the other, possibly much larger, issue is that the level of organization and coordination across 30 teams that would require an NBA schedule to be played would be highly risky. Travel is probably the biggest exposure but organizing tests and processing results in a timely manner are also challenges. And if there aren’t even fans in the stands what’s the point of travelling? Why incur the additional risk if only 20% of the revenue can be collected (likely lower as we’re talking an indoor setting).
Even recouping that 20% is suspect because of the fixed costs of keeping the lights on. The fixed costs of keeping an arena open can easily outweigh the gate revenue generated in such a scenario. The hospitality industry may be a good example to look at where low occupancy levels have forced management to reduce fixed costs. Many have preferred to remain shut to avoid dealing with the fixed costs even if they anticipated some levels of occupancy. The general strategy appears to be to slash variable costs and reduce fixed costs from approximately 40% to 20% so that you’re able to scrape by without a loss.
The difference between hospitality and sports is that for the hospitality industry there are no viable options to recoup cash. For the NBA there’s still TV obligations which if fulfilled may generate enough to get by in the short term. Adding a live component to games is a risky proposition that threatens the “guaranteed” revenue from TV deals. Owners may simply choose to play the upcoming season in multiple bubbles across the continent where circumstances can be controlled and monitored, and you’re not dependent on logistical legs which you do not control.
There is a possibility of teams receiving exemptions to play in arenas but these will span across enough red and blue states that consensus will be difficult to muster, and chances are it’ll be highly politicized, especially if the US election produces the ambiguous result that some politicians are promising and working hard to produce. It does not seem worth the risk.
Adam Silver recently spoke about his desire to play games in-arena rather than a bubble:
I continue to believe that we’re going to be better off getting into January. The goal for us next season is to play a standard season … an 82-game season and playoffs. And further, the goal would be to play games in home arenas in front of fans, but there’s still a lot that we need to learn.
This would be tantamount to replicating the Orlando bubble across 30 cities while also having a plan for how to let fans in, something that didn’t happen in Orlando. The learning that Silver is referring to may just be how to go about incorporating fans to start the 2020-21 season, especially since the league hasn’t experimented with that. A much earlier report had stated the NBA might play a March-October season which is far enough into the future that one could conceivably see fans returning amidst mass vaccinations. From a revenue standpoint that might remain the most lucrative option but for now we got:
- Single bubble – proven to work
- Multiple bubbles – very possible as its a question of replicating a setting
- Arenas without fans – high variance in possible outcomes; depends a lot on politicians and city governance; financial benefit may not be there
- Arenas with reduced fans – depends on how well cities are managing the virus; real risk of outbreaks
- Arenas with full fans – forget about it
Your guess is as good as mine but I’d settle for Orlando 2.0 to get me through the cruel winter.