Coronavirus' economic impact on the sports industry

Amir Somoggiin General Interest

The world is witnessing the advance of Coronavirus (COVID-19) and its impacts on a global scale. The effects of COVID-19, which is already considered a global pandemic by the World Health Organisation, are bringing thousands of cases in every part of the world and will cause brutal economic damage.

The negative economic impact of the pandemic and its recessive reflexes scared the financial market. The economic losses will be gigantic, and the stock markets melt daily around the world because of it.

All decisions imply losses. Damages to teams, leagues and players, but also to an entire production chain that is impacted by the high degree of induction to different economic sectors.

We also have the Tokyo Olympic Games, the biggest event on the planet, which at this time has not the slightest condition to be held. The UEFA EURO Championship has already been postponed from 2020 until 2021.

Rio de Janeiro in 2016 received more than 500,000 foreign tourists, not to mention the millions of domestic tourists, athletes, professionals from different sectors and the press. In London, there were more than 590,000 foreign tourists. At this point, the Olympics would be irresponsible.

The more developed markets are closer to this index. It is the multiplier effect that makes sport a single sector.

The sport's greatest strength is to gather interest and drag crowds. This impact that can reach 2.5 times the direct revenue is only possible thanks to its dynamism and emotion, which induces the economy and leverages cities and even countries.

There are impacts on an huge production chain, which includes transportation, food, drink, entertainment, product purchase and government taxes.

What is the economic impact of all this?

According to analysis by Sports Value, the global sports market moves US$756bn annually. This is the direct value moved by industry: the USA are responsible for US$420bn and Europe for another US$250bn.

China, the fastest growing market in global sport, makes about US$150bn annually and projects or projected its sports industry to reach revenues of US$350bn over five years.

The industry's largest revenue source is sports retail, which accounts for more than a third of the global business.

Professional sport, although not the main source of revenue, is undoubtedly the one that most impacts the production chain, with its matchday revenues, sponsorships, TV rights, players' transfers and its high media and employment character. And obviously its indirect and induced impacts.

Thus, a match with closed gates, the cancellation of competitions or calendar changes, directly impacts the entire industry.

Losses will be inevitable. Projected earnings will be nullified, revenues will plummet, there will be less impact to the sponsors' business, less tourist flow, ultimately a heavy recession for all those involved with sport.

You can read the full article from Sports Venue Business HERE

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