As cardboard cutouts occupy the stands at stadiums across the country, sports leagues and teams are dealing with a massive blow to their bottom line. If fans are stuck watching the game from home, it begs the question… how long can sports really be financially viable? Can exclusive, virtual experiences fill the budgetary void left by the absence of ticket sales? Or can the leagues just shoulder the economic consequences until stadiums and arenas are back at full capacity?
- Brian Wright – General Manager, San Antonio Spurs
- Shelly Wilkes – Senior Vice President, Orlando Magic
- Jon Alba – Sports Reporter/Anchor, Spectrum Sports – News 13
- 2:00 – What’s missing from sports in the pandemic
- 4:27 – The media landscape for sports in 2020
- 5:56 – How the NBA is doing during COVID-19
- 7:16 – What the future could hold for sports
- 9:54 – A new model for sports monetization
- 13:01 – Media owned sports leagues?
- 19:50 – Will there be fans in the building next season?
- 26:23 – Final thoughts from the panel
- 30:06 – Dean Jarley’s final thoughts
Jon Alba: The pitcher for the Washington Nationals just knocked this out of the park when he said that sports are like the reward of a functioning society.
Jon Alba: [crosstalk 00:00:08].
Jon Alba: Mr President.
Paul Jarley: If you watched the presidential debate like I did, you might think, well, we don’t deserve sports at all. This show is all about separating height from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show.
Paul Jarley: Life, for me, had a glimmer of normalcy with this.
Paul Jarley: First, it was Korean baseball. Then it was MLS, followed by the NHL, and the NBA. They all started in bubbles. Major League Baseball returned to play in their regular venues, but all these restarts were missing one thing, spectators. The seats were empty. We’ve seen some baby steps towards the return of paying customers and seats in football but the question remains, how long can sports really be a thing if the stadiums are, well, mostly empty?
Paul Jarley: Luckily, I know people on the inside who can help us understand what’s going on in sports today. How long this disruption might last and how sports might look different going forward. Listen in.
Paul Jarley: Is the current arrangement sustainable financially? How long can the leagues operate without spectators before this becomes a real financial problem?
Shelly Wilkes: Well, I can jump in.
Paul Jarley: Shelly Wilkes is a graduate of the DeVos Sports Business Management Program here in the college, and was the president of the Lakeland Magic. Now, she’s a senior VP for the parent club, the Orlando Magic.
Shelly Wilkes: I think this is not really sustainable. I don’t think it’s sustainable from a society standpoint or a team ownership standpoint. I think that we, as sports leagues, really bring fans together, we bring communities together that’s really what we build our businesses upon, is how do we bring a group of people together to cheer for one common cause. I think that in the short term, everyone understands where we are as a country, where we are as a world with the pandemic. We’re making changes and sacrifices where necessary so that we can continue the game on the field or on the courts. I think everyone wants sports to come back in its entirety. We want to have arenas full.
Shelly Wilkes: I mean, you’re seeing even the games that are happening from the NBA standpoint in the bubble. I actually listened to a lot of interviews with the players and though I think everyone’s happy to be playing, it’s not sustainable. You’re missing a sense of energy, you’re missing a sense of comradery and community with the way it’s currently established. Financially, I also don’t think it’s sustainable in the long-term. I know in the NBA, Adam silver has said a few different times that our current financial model has about 40% of our revenues coming from ticket sales and people in the building. So, financially, definitely not a long-term option for us.
Jon Alba: I think one of the biggest things that has to be considered in this is the return on investment that media partners are then going to get.
Paul Jarley: Jon Alba gives us the media angle under discussion. He’s a sports reporter and anchor for Spectrum Sports on News 13, here in Orlando.
Jon Alba: When we had the beginning of this pandemic and there were no sports, there was obviously quite a thirst from spectators. So, they’d be desperate to watch anything. We remember NASCAR went the route of having the iRacing, the electronic racing that fans were turning in, in droves just to watch. Where now… Kind of what Shelly was saying, where you have 40% of the NBA league model set up on spectators actually being in attendance for.
Jon Alba: Well, in the last 10 years, 20 years especially, we’ve seen these huge media rights deals become the main proprietor and driver of these gigantic league revenues that we see. If the media partners aren’t feeling like they’re getting a return on investment, I don’t see how any way there would be any sustainability without fans in the stands.
Paul Jarley: Jon, if I can follow up on that. First, let me admit to watching Korean baseball games-
Jon Alba: There you go.
Paul Jarley: … six o’clock in the morning. Life was desperate for a while. But, is viewership up or down for the leagues? I haven’t actually followed that.
Jon Alba: I think it’s a case-by-case thing where you will see there’s an immediate payoff for some, and then it slowly drags off, whereas some other leagues may not necessarily be experiencing that. The content right now, that people are most interested in, is national news and national news is doing record numbers for a variety of reasons right now. I think that, that has maybe slowed down some sports, but there are also other sports who are thriving tremendously at this time. Right now, especially referring to the NBA, they’ve got a chance to grab a ton of eyes as they march towards the NBA finals here.
Brian Wright: Yeah. I think, as John mentioned, there’s a certain target demographic where ratings are doing extremely well.
Paul Jarley: Brian Wright is the general manager of the San Antonio Spurs. In fact, he’s the youngest GM in the NBA. He’s a graduate of our DeVos Program and is the youngest alumni ever inducted in the College of Business Hall of Fame at UCF.
Brian Wright: I think the NBA has been the most viewed television program, broadcast and cable among adults, 1849 on 20 of the 25 nights of playoff coverage so far. Obviously, it’s at a point in time when we started in the summer where historically, television viewership rates are at a lower place than when they are at other points in time. I think it’s really done well, but again, I think the entire pandemic has disrupted our way of life as a society and it’s disrupted the sports industry.
Brian Wright: I think from that, you’ll see some things that, obviously, to Shelly and Jon’s point, need to change in order for the model to be sustainable. But that disruption probably caused us to look at how we provide content to our fans, to our media partners, et cetera, that create a unique and different experience for those that may not be in the building. And I think there’s a ton to be learned there/
Paul Jarley: Let me play with some alternative versions of the future, if you don’t mind, and tell me whether I’m nuts or not. Let’s go there for a minute.
Paul Jarley: The bubbles seem to work in the sense that they protect the players from the virus, they’re able to sustain the game. Could you imagine traveling bubbles where the teams and the leagues go from city to city perhaps where the virus is low and would have fans there? I’m taking the example of… I know they do this in rugby, some, and I know they do it in lacrosse where the entire league will go to a particular venue and they will make it a carnival atmosphere for the weekend, and they’ll play a variety of games there. Majorly, baseball is doing something sort of similar without the fans for the playoffs. Anybody think that’s a workable idea?
Shelly Wilkes: I think that in the short-term, as a short-term solution, getting to the next phase of what’s playing in a pandemic looks like, I certainly think that, that is probably one of the many options on the table. Again, Jon mentioned this too, I think in the long-term when we go back to the sustainability model of leagues, we do have a lot of revenue and ticket sales but we have a lot of revenue and partnership deals. And when you don’t have people in your stance and you’re not able to take care of your partners within the building with the rights that they have purchased, whatever those marketing rights may be, I think you’re setting yourself up for failure in the long-term again. Based on not having your home game experience, your home right experiences, I just… I think it’s long-term sustainable. I think that it, again, could be a short-term solution to get us past the pandemic, but I can’t imagine that’s going to be something that could live on for years.
Shelly Wilkes: To Brian’s point, it could be something when we talk about spreading the game. I mean, not in a bubble format, but you could almost say that that’s what we do on the international scale on the NBA is we take a couple of teams over to Europe or over to China, and we play in a couple of different cities and in that kind of festival atmosphere, and that’s really for fan building and sand growth. So, not in the bubble atmosphere, but kind of the same model of bringing the sport to different places. But in the pandemic and how we really solve for where we are, I just don’t think that that would be a sustainable model for teams or for leagues.
Paul Jarley: What would be hard to do over 82 games, but if you’re playing an 18 game schedule like the NFL, I don’t know.
Jon Alba: Well, allow me to kind of play devil’s advocate here as the one who covers the sport rather than working on the inside of it. Maybe it comes down to the point where you have to reconsider what your model is for profiting and for how you distribute your money. The reality is, in a lot of sports… I’m not necessarily saying the NBA because I do think the NBA is a relatively affordable fan experience, but there are a lot of sports where you go to a Major League Baseball game, there’s 81 home games a year for a team and the average day at the ballpark for a single person is going to run you well over a 100 bucks if not more, whereas the original model used to be sustainable in that it costs you maybe a grand total of 20 bucks to go to a ball game.
Jon Alba: The average fan has been out priced. So, they’re consuming the sports in a different way where now you get your big TV at home, you got your smartphone, there are different ways they can consume it without having to spend all that money to go to the ballpark, to go to the stadium, to go to the arena. I covered the combat sports industry pretty in depth, including WWE, which has rented out Amway Center here in Orlando for-
Paul Jarley: Good example.
Jon Alba: … a two months day, and they ended up putting all these video screens, even five times more than what the NBA had going. By doing that, they have saved… And I’m not exaggerating when I’m saying this, they’ve saved tens of millions of dollars on production costs that they may reevaluate once things start to become “normal”, where they don’t have to go on the road as much and spend all those production costs because they know that fans can consume the content in a different way and they can cut back on traveling.
Paul Jarley: Brian, thoughts?
Brian Wright: I’m kind of like you, I always just think of why not. Having a regional type of setup, like you mentioned, I think the difficulty with that comes with logistics and costs and how often… How long are you in each city? How many games are you playing? That type of thing. But I do think, just from a plank standpoint, if you look at the performances in the bubble, it’s been an unbelievable playoff run for a magnitude reasons. I think you do start to ask yourself, well, what’s different? What’s changed? What’s caused it to go so well? For the games to be so good, for it to be so competitive. Is it about travel? Is it about rest? Is it… There are a lot of different things that you can factor in, and the one thing you know that you want back are the fans in the building for that energy and environment.
Brian Wright: But I do think there’s a lot of things that you can learn from that five years from now may alter the way that the game is produced or where… How it looks. Some of that, to what you mentioned, could be a cost issue, and also how long are we in this type of pandemic situation. But I do think, again, there’s some learnings that caused you to ask, why not? And then what does… How does that alter the game or the experience for the fans or what have you for the next five to 10 years moving forward.
Paul Jarley: Let me go to my craziest thought on this. If we can do this without fans and we can maintain viewership, when will a network say, “Well, this is just a TV show. Why don’t we own it and eliminate the middlemen?”, which would be the leagues. I mean, the WWE model is an interesting one, Jon.
Jon Alba: Yeah, [crosstalk 00:13:23]-
Paul Jarley: That’s pretty close to it.
Jon Alba: … it is pretty close to it. Right now, WWE is in the middle of it’s most lucrative contracts that it’s ever had with Fox Broadcast and with the USA Network and NBCUniversal. But at the end of the day, we are talking about the leagues are the ones that are providing the service and they are so well-established and ingrained in American sports society that we’ve seen networks attempt to have startups, and they just have not been successful, or with new startups. So, I’m not so sure that that’s something that’s on the immediate horizon.
Paul Jarley: Anyone else have thoughts about?
Shelly Wilkes: I just think that there’s a lot more that goes into the game on the court than the game on the court. I think trying to have a network get into a business that is not really their core business because there are, in Brian’s world alone, just the recruitment of players, the… Keeping people wanting to come to play the cities, which is its own thing, wanting them to be a part of different teams. And maybe in your model there’s not cities, right? There’s broadcast rights and you’re playing for your team regardless of where you live.
Shelly Wilkes: But I think that there’s a lot of pieces that go together to create a culture of winning on the basketball court that has nothing to do with the program of the game, the two and a half hour broadcast, right? There’s a lot more pieces of heart of building a team. I struggled with that one a bit as well. It is a crazy idea and I love that you’re thinking outside the box about how we can sustain sports in what could be a longer term situation here. But I do struggle with that one just because of all the other pieces that go into maintaining a sports team.
Paul Jarley: Yeah, I’m not sure if that it wouldn’t even come down to financial risk sharing. I mean, that would be a lot to take on, right? As a television entity. I don’t know.
Paul Jarley: Yeah. It’s something I… I’m not sure that it’s out of the realm of possibility. I agree with you that I don’t think it’s immediate, but if things continue for a while… Because I’m not sure how much longer this financial sustainability for the leagues is going to be.
Paul Jarley: So, when do you think things are going to get back to normal? Anybody got thoughts on that?
Jon Alba: That’s a loaded question right there. I think you have to determine what is normal, right? That’s kind of where things start.
Jon Alba: I just think this Sean Doolittle, the pitcher for the Washington Nationals, just knocked this out of the park when he said sports are like the reward of a functioning society. And right now, we are just so far from that on so many different levels. You can obviously hope for a vaccine, you can hope for a bunch of other things to fall into place from a health standpoint, but then there are the other things, and we’ve seen how impassioned… Obviously, Brian and Shelly can speak more to this than I can, but the impassion response of these players to what’s happening in American society, I think that’s a real thing and that’s a real tangible effect on their mental psyche. To me, that’s why it’s all the more impressive why you have two teams like the Heat and the Lakers who have managed to get to the NBA finals and make it this far because of the mental toll that this season has taken. So as far as normalcy, I’m really not sure on that.
Paul Jarley: Well, it’s a lot easier to control the players than it is the fans. I mean, witness what happened at Florida State a couple of weekends ago, right? Where mask wearing was not common, if I could put it that way. It’s hard for me to imagine, without an effective vaccine, that we’re going to get back to normal anytime soon.
Paul Jarley: Anybody else have thoughts on that?
Paul Jarley: I think the NBA has got a whole nother season to go through, per example.
Shelly Wilkes: Yeah. I think we… I don’t know what normal looks like either, I don’t know when that happens. I mean, you listen to Dr. [Fouche 00:17:44] and he’s telling you end the next year. Then again, it goes back what’s normal, right? Do we want to go back to normal? I know personally, for me, when we just talk about the work world and where we’re at. We’re still working remotely and it’s kind of changed my perspective on the need for a commute every day and rushing out the door with my two daughters, and really kind of accepting that this is okay, and that we can slow down a little bit. So, I think there’s some good that is coming out of this. I think the social justice movement that has been happening, I think, has had so many eyeballs on it because we were speaking earlier about people really paying attention to the news.
Shelly Wilkes: There’s not a lot else, they’re home. They’re really paying attention to what’s happening and I think that movement is so powerful because people are paying attention, finally. I think again, do we want to go back to normal? What does normal mean? The… When we get back… When we talked about normal, just in sports and having full arenas with 20,000 fans in the NBA, however many in the NFL day-to-day, I do think we have some time still.
Shelly Wilkes: I think we have time. I think even after the vaccine comes out, I think people… There’s going to be just a change in behavior. A comfortability with being around one another, a comfortability of trusting the vaccine and trusting how the medical world is responding. So, I think we’re a solid 9 to 12 months from what we would maybe consider normal. I hope it’s sooner than that. I know the NBA, we’re strongly pushing to play in front of fans and figuring out a way to do that. Whether that’s… If there’s rapid testing opportunities, if there’s shifting how… Capacity levels in buildings, that kind of stuff. So we’re paying very close attention to what college football and the NFL is doing right now, and hopeful that we can find a solution for the 2021 season that allows us to have fans in our buildings.
Paul Jarley: Brian, do you see fans in the building in the upcoming season?
Brian Wright: We hope, and you see it with the NFL where they’re operating in some places with limited fans, same thing in College. I do think, as Shelly said, that’s the goal. I think we’ll get there. I think the biggest thing, and both Jon and Shelly mentioned it, was you’ve got to define your new normal and that’s everything from experiences to interactions and how the game is played. So, I think as long as you’re open to listening, and I think that’s where the NBA has been far and above a lot of sports leagues is… From everything, from the social justice initiatives to creating a bubble and safe environment to thinking about how we move forward. Great organizations that lead through this situation have to be great listening organizations. What do your fans want to feel comfortable? What do your players need to feel comfortable? What does the environment have to be like to have everybody comfortable, but also create an experience that’s fun and exciting and entertainment for everyone?
Brian Wright: So, I think the new normal will start with being a great listening organization and understanding the needs of who you’re serving and building out from there allows us to create what that new normal is. And again, if we think normal will be just going right back to the way it was, I think there’s an opportunity loss to grow. If you look in every industry, disruption is something that changes it for the better, oftentimes, and COVID has definitely been a disruption to this business.
Brian Wright: Some of it is definitely negative, but I do think there’ll be some positive things that we can learn from it. Shelly mentioned the remote work and work from home, and what does that allow you to do when you look at hiring talent and bringing people into your organization. If you have remote work, that expands your landscape and pool that you can choose from. So, there are a lot of different things that we will learn from this situation and hopefully come out better, but it starts with being an incredible listening organization and league, and I think to this point, the NBA has done a amazing job at that.
Jon Alba: Well, isn’t it amazing too that we’ve packed 20,000 people into arenas and never had hand sanitizing stations before? To me, it’s just even starts with things as remedial as that.
Paul Jarley: How do you think, though, it’ll change the fan experience going forward? Brian touched on this a little bit, but if you had two or three things that you might think would fundamentally change going forward, what might it be?
Shelly Wilkes: Well, I think you’re seeing it right now. I mean, in Orlando we’ve moved this way and I know a lot of sport teams are moving this way. Just from the ease of food ordering, and delivery to seats, and entering the building with your mobile device versus printing tickets. I think that the technology advances that are going to happen, I think that that alone will increase… I mean, my husband actually works for Disney and Technology, and they’re seeing… Previously before the pandemic, they had mobile food ordering and they had a minimal amount of people, maybe 9% a day, actually utilizing that experience and now it’s over 90%, are mobile ordering from restaurants. That’s how they’re ensuring safety for capacity numbers and food delivery, et cetera. I think that you’ll start to see a much greater technology adoption, which does create a better fan experience from that standpoint.
Shelly Wilkes: And then I think, to Brian’s earlier point, we’re figuring out how to include people in the game experience who are not actually in the building. I think the WWE has done a fantastic job of that. The NBA has done a great job from the bubble, and I think that we will start to innovate and find new ways to expand the game experience outside of those 18,000 people that are at a game. I think all of those advances will be hugely rewarding for the teams and for the fans as part of the experience. But I’m sure that this is going to have a long-term ripple effect for those positive advances as well.
Paul Jarley: Does that also provide new revenue stream opportunities for you?
Shelly Wilkes: Absolutely, I mean-
Paul Jarley: With those new forms of engagement.
Shelly Wilkes: … yeah. Even if you think about what the league has done with the virtual fans experience. That was a new partner with Michelob ULTRA, they were not a partner of the league. They came on board for that experience. Microsoft came on board and launched that experience within this past six months. So, you’re already seeing, at the league level, how there are business opportunities and business advances because of that.
Paul Jarley: Jon, how do you think sports coverage will change going forward? Do you think there are impacts there?
Jon Alba: Yeah. I think one thing that we’re seeing now is virtual coverage is significantly easier to do than what some others had maybe asserted beforehand. I can even speak personally, the idea of doing a virtual interview for a story that I was putting together would have been absolute last case scenario, if not impossible when putting together pieces whereas now, that’s a very real alternative that I would say has become the norm, more than anything else in this period.
Jon Alba: I could definitely see that opening up a whole new can of worms in terms of who gets access to sporting events because with that, you can now credential bloggers. You could credential people who don’t consistently cover an NBA franchise. Maybe that’s for better, maybe that’s for worse, I’m not really sure how I feel about that, but it definitely creates more accessibility in that regard. But on the flip side of that, I can say that being in a locker room, covering players after games, you pick up on things that maybe the person on the Zoom call wouldn’t be able to pick up on. Whether it’s body language or you hear something, and as a reporter your job is to be that mediator, to provide that link between consumer and product. So, I could see there being some pretty radical changes in that regard.
Paul Jarley: All right then. One last question. I’m going to ask each of you answer this. Is sports without spectators still going to be a thing two years from now? Yes or no? And why.
Jon Alba: What’s funny is I feel like when you have dissenters, people who are like, “Well, let’s be cautious. Let’s be careful”, then you get this whole backlash of, how dare you not be optimistic, how dare you assert that. But I think we’ll have spectators back within the next… I think the timeframe that Shelley gave is perfect, 9 to 12 months. To what degree, I’m not entirely sure.
Jon Alba: I think the more fascinating aspect of all of this will be to see how teams and franchises and entities adapt and bring in these new business models that present sports in a way that we haven’t been familiar with in the past, whether that’s in-person, whether that’s virtually, whether it’s from a media coverage standpoint, and see how we continue to evolve because sports and sports coverage and sports presentation have evolved so much in the last 10, 15 years as is. So, for as terrible as the circumstances have been, maybe it will provide some pretty cool opportunities going forward.
Paul Jarley: Shelly.
Shelly Wilkes: Yeah, it’s my business to be optimistic in this. So, I strongly believe we will have full arenas in two years. I think we will inch our way there over the next 12 months and figure out what’s going to be the safest for our players, our fans, our staff. But I absolutely have to believe that in two years we will be playing in front of spectators and that the sports industry will come back. It’s historically been the thing that brings people back together after tragedy and after issues that have happened in our communities, and we will be there once we’re able to do that as well.
Paul Jarley: Brian, you get the last word, my friend,
Brian Wright: Well, Shelly was ahead of me in the divorce program so I’m just going to follow her lead.
Brian Wright: I’m an eternal optimist as well. So, I do believe that it will happen, but I also believe that we’ll come out better because I think we’re going to have a newfound appreciation for the fan that does not enter the building. What does their experience look like on a daily basis? How are they interacting with your team, your brand as you build out moving forward? And I think that’s only going to make the power of sports, the leagues and the teams that much stronger.
Brian Wright: We’ll understand digital better, we’ll understand virtual fan experiences a lot better. I think how we come out of this on the back end will be that much different. Shelly has always been a leader, so I’ll just continue to follow Shelly’s lead on the optimism. But I do think we will get fans back in the building, and I do think this will create an opportunity for us to build a whole new fan experience that maybe we hadn’t captured prior to the pandemic.
Paul Jarley: Well, thank you all for participating.
Paul Jarley: Brian, you have a future in politics. If that’s the way that you want to go, my friend, but I kind of already knew that.
Paul Jarley: Shelly, I think you hit on the key point here. Consumers are going to decide this, not the leagues.
Shelly Wilkes: Yep. Exactly.
Paul Jarley: I mean, they’ve got to feel safe coming back in huge numbers. That’s going to be the key. It’s kind of hard to know when that will actually be, but I certainly look forward to the day when I can travel to Lakeland for watching my Tigers spring training games. Can’t come soon enough.
Paul Jarley: Hopefully things get back to normal here within the next year. But I do think it’s going to be a year, I do.
Paul Jarley: It’s my podcast, so I get to go last. I think I may have asked the wrong question today. My dad was a Detroit Tiger fan for 83 years. He was a fan long before he was a spectator. In fact, I think he probably only attended a dozen games in his entire life. The Tigers, for him, were Ernie Harwell’s voice on the radio. He listened to every game, every season. He, of course, was not alone. The pandemic has made it painfully clear that there has always been more fans than spectators.
Paul Jarley: Brian used the phrase virtual fan. I know that’s code for how to monetize the fan base, but I’m still not exactly sure I know how the virtual offense experience will be different than my dad’s or the typical television viewer. During this weird year of 2020, it certainly includes fans on electronic screens at NBA and MLS tournament games, but I doubt that’ll last longer than the day stadiums are back to full capacity. If the virtual fan is a long-term thing, they are probably shelling out money for some new subscription service, a social media platform, or maybe both.
Paul Jarley: Maybe 10 years from now, we’ll see 2020 as the birth of the virtual fan and a shift in the revenue base for sports leagues, or just maybe we’ll be back to increasing ticket prices at stadiums filled to capacity. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast.
Paul Jarley: You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach & Engagement here at the UCF College of Business. And thank you for listening. Until next time, charge on.