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Impacts of COVID-19 on MLB
The Team
Rahulan Kyle Claire Julia Zaineb Harry
Muraleetharan Cheng Lee Tu Malik McCourt
Director Managing Director Director Associate Associate Associate
(Project Lead)
rmuraleetharan@aceconsultinggroup.ca kcheng@aceconsultinggroup.ca clee@aceconsultinggroup.ca jtu@aceconsultinggroup.ca zmalik@aceconsultinggroup.ca hmccourt@aceconsultinggroup.ca
linkedin.com/in/rahulanmuraleetharan/ linkedin.com/in/kchengcy/ linkedin.com/in/clairelee7/ linkedin.com/in/juliatu2/ linkedin.com/in/zainebmalik/ linkedin.com/in/harrymccourt/
2
Overview
Areas of Research Key Takeaways Predictions
As technology progresses and COVID-19 will force fans to get
the danger of the pandemic comfortable with viewing games
decreases, the method of from home, potentially reducing
Analysis of prior major global
viewing the sport will change future ticket sales
events
Once the imposed season Based on the US Government’s
begins, the outcome will be approach to COVID-19, baseball
Comparison of responses from dependent on the response to will follow a “quarantine” format
other leagues COVID-19 from the USA for the near future
Losses from the current year will R&D expenses will be on the
accumulate and affect the backburner as current pay
Examining the losses that the league’s revenue structure in the disputes will be the main topic at
league will sustain coming years hand for teams and owners
Table of Contents
1. Global Events that Have Affected Baseball
• Analysis of Events
• Prediction for the Short-Term
• Prediction for the Long-Term
2. Impact of COVID-19 on Baseball Globally
• Taiwan
• Korea
• Japan
3. The Financial Impact of COVID-19 on MLB
• Revenue Structure
• Salary Dispute
• Loss of Revenue
4
How previous historical events impacted MLB Taking a closer look at how the league previously dealt with unprecedented events that share elements of the COVID-19 risk
Spanish Flu & WW1: Set precedent for MLB response to a global pandemic Relation to COVID-19
including reduced consumer spending
Both are global pandemics,
showing safety measures taken
Overview of Event Gov/League Response Consumer Response
Geographic Impact • Umpires, players and • MLB players who did not
• Most affected: New staff had to wear flu enlist were considered
Zealand, Tonga, Fiji masks until safe again “draft dodgers”,
• Least affected: China, • Games were only played negative reputation Reflects negative consumer
Russia, Japan in larger arenas to • The second wave hit sentiment towards health risks
accommodate social following the World resulting from pandemics
Impact on MLB Season distancing Series, so the season was
• 16th season (1918) ended • World Series was one of already finished when
one month early the reasons Boston fear of the flu became
• 17th season (1919) became an epicenter for more widespread
started a week late the virus – approximately • Consumer spending
20% of the population recovered following the
got infected end of the War in the Provides a timeline of how
20s baseball responded to the
various stages of a pandemic
6
Lockouts & Strikes: Prolonged closures are detrimental to league reputation Relation to COVID-19
and reduce attendance even following the continuation of games
Focus was on Canada/USA,
which helps understand the
local effects of game stoppages
Overview of Event Gov/League Response Consumer Response
Geographic Impact • There was no • The final strike resulted
• Mainly centered around government response, as in so much frustration
the USA and Canada the general public was that some fans left the
not at risk/involved sport and never Timeline to resume games may
Impact on MLB Season • Common causes for returned to games, even be further pushed due to
• 1736 games missed in lockouts/strikes were after the league resumed COVID-19 than if pay disputes
total over all the closures over free agency and • Pre-strike record were the only problem
• Some strikes during pay disputes attendance was 31000,
spring training, regular • After the longest strike was not reached again
season games, or post- (1994/1995), the league until after 9-year
season has done its best to recovery period
cooperate to prevent • Average attendance
further strikes dropped 6000 between Expect MLB to respond in a
1994 and 1995 timely fashion to settle
disputes due to impact it has
had on fanbase in the past
7
SARS Outbreak: With the media increasing awareness and fear of the illness, Relation to COVID-19
teams leveraged costly promotions to encourage attendance
Similar response on behalf of
the league, specifically with the
consideration of moving games
to California
Overview of Event Gov/League Response Consumer Response
Geographic Impact • WHO warned against • Individuals took
• Global impact but on a non-essential travel to advantage of the dollar
small scale – most Toronto promotion, positive
countries had ~10 cases • Players asked to avoid sentiment to cheap seats Heightened fear resulting from
• Most affected: Canada, public transit, crowds • Group purchases from modern media decreases
China, Singapore, Taiwan • Rogers bought each seat company sales took a hit, consumer confidence
and resold tickets for $1 however they recovered
Impact on MLB Season to encourage attendance after a few weeks (to
• Only team impacted was at Toronto games protect the company
Blue Jays • League considerations to from liability)
• Resulted in MLB move Toronto games • As a result of the $1
appointing a permanent to California promotion, Rogers
league-wide medical Centre was full Lowered ticket prices will
advisor • Lost $700,000 from the result in lower revenue, which
promotion results in budget cuts
89/11: Massive and permanent increases in spending were required to battle Relation to COVID-19
concerns over safety and the league follows precedent
Increased International and
widespread public fear of risks
associated with crowds
Overview of Event Gov/League Response Consumer Response
Geographic Impact • Support Anti-Terrorism • Experts say sports
• Security and coverage of by Fostering Effective “helped the nation heal”
global affairs increased Technologies (SAFETY) • The patriotism that
internationally act was established to came with baseball was Reflection of 21st century approach
• Most affected: USA, allow DHS to support much needed, resulted to safety threats with increased
Afghanistan, Pakistan, private sector in positive consumer technology and capabilities
Middle East organizations sentiment
• All 15 games scheduled • Following the attack,
Impact on MLB Season for Sept 11th were interest rates dropped,
• MLB took a 6-day hiatus cancelled people used sports as a
out of respect and fear • Reaction to 9/11 was coping mechanism
of large public inspired by response to • Broadcasting increased
gatherings D-Day and start of WW1 as it brought familiarity Assumes the league uses precedent
• Viewership dropped for • SAFETY took 15 years to amidst the fear to make plans, encourages review
6-8 weeks implement fully of MLB history when predicting
COVID-19 response
92008 Financial Crisis: Consumers turn to free sources of entertainment during Relation to COVID-19
economic hardship, the league will see a decrease in seats filled
Make assumptions on financial
strain through various time
frames following COVID-19
Overview of Event Gov/League Response Consumer Response
Geographic Impact • MLB attendance • The psychological
• Most affected: Ukraine, dropped for the first impact of recession
Argentina, Jamaica time in a 5-year span resulted in spending on
• Least affected: China, • Baseball is considered a “needs” rather than Consumers have reduced
Japan, Brazil, India “working class sport,” sports funds for discretionary
making it more recession • Fewer businesses spending
Impact on MLB Season proof than other sports – bought seats, ticket
• Revenue increased by while corporate prices dropped, and
0.34 billion USD between spending reduced, it was some consumers took
2007 and 2008 not severe enough for them
• Average operating league to seek • Most consumers used
income increased by alternative options free streaming sites to
0.28 million USD watch reruns 12.4% 2008 was the last time the markets
between 2007 and 2008 decline in attendance were this low, provides insight on
since 2007 when they will recover
10Predictions for the Short Term
Spanish Flu Lockouts & Strikes 9/11 SARS Outbreak Economic Recession
Social distancing Following pay disputes, Following a global During the current During recessions,
requirements were used fans perceive a negative safety crisis, permanent media age, consumer consumers shift
following the virus, so view of the league and spending changes are fear of virus runs high, spending to “needs”
these measures will this reduces revenue made to increase safety with teams taking and use free methods
likely continue extreme measures to to watch reruns
fill seats
1 year from now 2 years from now
Games only Decisions Reduced budgets Promotions to Reduced
played in larger made based on for discretionary encourage revenue and
stadiums; face precedence spending (ex. R&D) attendance once reduced ticket
masks required conditions improve prices
11Predictions for the Long Term
Spanish Flu Lockouts & Strikes 9/11 SARS Outbreak Economic Recession
In the Roaring 20s Following pay disputes, Technology improved to When the outbreak The economy will
revenue recovered, so fans perceive a negative provide alternative ended, so did the fear expand again, and
the virus does not view of the league and viewing options for of crowded spaces and discretionary spending
impact consumer this reduces revenue those unwilling to go to sports recover within 2 will increase within ~5
choices in the long term public spaces months years
3 years from now 5 years from now
Increased spending on Media budgets will increase to Seat revenue recovers
technology to improve create new revenue streams to to Pre-COVID-19
broadcasting service, as accommodate for more at-home numbers
increased at-home viewing
viewing will be a part of
the new normal
12How baseball leagues around the world were impacted by COVID-19 Analyzing the responses that other leagues around the world took to continue playing the sport
How Baseball Leagues Around the World Were Impacted by COVID-19
Started with airing Started with airing Postponed opening day
games on TV games on TV but did not cancel all
games
Became the first league Re-opened following First league where three
to re-open due to COVID-19 and currently players on a team
reduced COVID- airing games on TV tested positive
19 cases
Currently the only league Have set many safety Provides a good reference
allowing a reduced measures in place to for what measures and
number of fans into mitigate the risk of precautions will be taken
stadiums COVID-19 if a player gets COVID-19
As of May 31st, 2020 14Taiwan Baseball Leagues – General Timeline of Major Events
Regular season was set to start March 14th
April 12 May 8
April 15 May 15
First professional 650,000+ people After receiving 2,000 fans will be
baseball league to watched one game approval from allowed into the ball
open in 2020 online, increasing the Central Epidemic parks and league will
advertisement and Command Center, up provide lunchboxes
sales for companies to 1,000 fans will be due to outside food
selling products allowed into the being banned
stadium for games
15Taiwan Baseball League – A More In-Depth Look
Online airing In-stadium health precautions
• On April 18th, they received over 1.5
Some of the precautions that Taiwan
million views during one of their
leagues have put in place for fans
online streamed games; it seems that
watching in stadium games include:
they are attracting global audiences
• One US fan streamed two Taiwanese
league games simultaneous and
Key Takeaways • Temperature checks
• Wearing face masks
expressed that "[He's] not opposed
If MLB wants to start airing • Seated one meter apart
to watching a bad team. [He finds]
games and potentially allow fans • No food or drink (concession
the sound of the bat to be almost
back into the stadium, they will stands are closed)
therapeutic”
need to consider gaining
government approval and putting
similar health precautions in % of People That Will Avoid Sporting
American consumer sentiment place Events Once COVID-19 Restrictions are
Lifted
Considering the turnout of Taiwan’s in person
57%
baseball games, would American consumers 56%
have similar interest in attending ball games
in person if MLB reached this point?
53%
of 2141 respondents in the US said
56% they would avoid sports events
after COVID-19 restrictions are
lifted Germany United Kingdom United States
16Korean Baseball Leagues – General Timeline of Major Events
Regular season was set to start March 28th
May 8
April 15 May 15
Season scheduled
to finish on
October 18th
KBO announced that 10 times as many fans League re-opened
10 exhibition games than the average with no fans in the
would be cancelled regular season have stadium. 1.5 million
and start of the season been tuning in to people streamed the
would be delayed watch the Giant's play Opening day games on
intra-squad games on Naver (compared to
YouTube last year’s 340,000
audience on Naver)
17Korean Baseball League (KBO) – A More In-depth Look
ESPN dispute/ online presence Player precautions
• In mid-April ESPN and Eclat Media • Fever screening for players
tried to reach an agreement to and coaches
stream KBO games but it fell • Umpires and coaches must
through when ESPN offered a Key Takeaway wear masks during games
percentage of revenue instead of • Players are not allowed to
an up-front payment Due to the increased attention from sign autographs, high-five
• However, they reached an North American baseball fans, many teammates with bare hands,
agreement in May and ESPN is set people view the return of baseball chew tobacco
to stream 6 live regular-season through KBO as a sign of hope for MLB • Players must wear masks
games every week in the U.S. teams. However, there are many and latex gloves at training
• This helped KBO quickly attract precautions that the league needs to facilities
North American baseball fans, take to ensure the players feel safe
with a 77% increase in their including daily COVID-19 testing, player
opening day audience transportation, etc.
18Japanese Baseball Leagues (NPB) – General Timeline of Major Events
Regular season was set to start March 20th
March 26 June 3
March May 15 June 19
Season scheduled
to finish on
November 7th
Season was Three players from Announcement that Two more players Season start with no
announced to be the Hanshin Tigers the season would from the Yomiuri fans in stadium. All
postponed but team tested be further Giants teams has 12 NPB teams
aimed to open on positive for COVID- postponed to June also tested positive scheduled to play
April 24th 19 and were 19th for COVID-19
ordered to self-
isolate
19Japanese Baseball League (NPB) – A More In-Depth Look
Hanshin Tigers Yomiuri Giants
• The first player on the team tested • Two players tested positive on
positive on March 26th June 3rd
• Team activities and practice were • Giants tested about 220 people in
cancelled for the week their organization, and the two
Key Takeaway players were found to have small
• The home field and team offices
was sterilized traces COVID-19
The NPB is a good example of what • Practice game against another
• Dormitories were vacated
can happen if a league tries to start team was cancelled
• Those who had close contact with
the season too early. In the case that • Given that this has happened
the infected players were asked to
MLB reopens even to play in an empty relatively recently, NPB hasn’t
remain home,
stadium, they need to plan for the given any indication that plans to
• Remaining team was allowed to
possibility of a player contracting start the season will be changing
proceed with regular activities with
COVID-19, and how they would work
strict measures including
around a potential 3 week shut down
temperature checks
of the league
Cautionary tale for MLB
• When COVID-19 hit, NPB initially stopped spring training but subsequently resumed exhibition games in empty stadiums
• However they did take precautions like quarantining teams, taking players’ temperatures, etc
• Despite this, the 3 players from Hanshin Tigers still tested positive
20Comparison of League Timelines Throughout COVID-19
March April May June
12 15 09 20 23
MLB shuts down spring First player MLB narrows focus of the Miami Marlins and Tampa MLBPA announces that
training and announces affiliated with MLB beginning of the season to Bay Rays are the first few players will comply with
that regular season start to test positive for around early July and MLB teams to reopen the imposed 60-game
has been pushed back 2 COVID-19 hopes to play a regular facilities for limited season
weeks season of 80 games with individuals workouts
an expanded post season
28 05 > October 18
Regular season League re-opened with no Season scheduled to
start for KBO fans in the stadium. 1.5 finish
million people streamed
the Opening day games on
Naver
09 26 18 26 03 19
Announcement that 3 players from the Announcement Warm-up 2 players from the Season opens with
season will be Hanshin Tigers that season will games begin Yomirui Giants test all 12 NPB leagues
delayed until April team test positive be remain in preparation positive. Exhibition scheduled to play
for COVID - 19 closed for the June game is cancelled
indefinitely 19th season
through May start
21COVID-19 Comparison of Preventative Measures
First Case February 22nd January January 20th
Started with limited testing Not enough testing or test Free drive through
Testing but later established walk- kits and shortage of hospital testing with limited
through testing system capacity contact
Recently launched contact No huge effort in tracing Used app to track
Tracing tracing apps despite privacy or tracking COVID-19 location of where COVID
concerns patients patients have been
New CasesHow the league has been financially impacted Taking a closer look at the revenue structure of the league and how it will be affected by COVID-19 in the long-run
Revenue Structure of MLB: COVID-19 can potentially decrease revenue by 40%
2019 MLB Revenue ($MM)
of the revenue in MLB is received on
game days; assuming games proceed
40% with zero spectators, this can be
Gate Receipts
considered fully lost
30%
National Media
30%
of revenue represented by media
51% contracts (local & national) is entirely
dependent on games played Other Stadium
Revenue
9%
Sponsorships
Media contracts are paid on a per 10% Local Media
game basis, and are thus scaled up or 21%
down based on the reopening date
*Other stadium revenue includes concessions, parking, etc.
*Sponsorships includes team wide corporate sponsorships, not player sponsorships.
24COVID-19’s Impact on Revenue: MLB seeks alternative revenue sources and predicts income after social-
distancing is implemented
Financial Impact of Empty Stadiums
Additional Revenue Sources
During COVID-19
Club-owned 20%
regional sports
networks:
Yankees, Mariners,
Dodgers, Red Sox,
Ballpark villages Usual income expected to $4B
be recovered
and Cubs have Stores and businesses
surrounding the
USD
invested in their
own regional stadiums owned by
40%
sports network MLB will start
Advertisements which are still opening up
on Jerseys: running soon/already have
begun to open,
original plan was bringing in retail
to introduce this Percentage of MLB Revenue MLB’s projected net Free
revenue
in 2022 but then comes from in-stadium activities Cash Flow (FCF) loss
they decided (seats, concession, etc.) without spectators
against it because
of 2020 season
and playoffs at
empty ballparks
25Major disagreements in talks between Players and MLB could lead to a further delayed or
cancelled season
• Previously proposed agreement was to have players Key Takeaways
paid a prorated salary based on games played
• This would lead to player salaries equaling
approximately half of their usual total amount With the 60-game
imposed season being
• MLB claimed this plan would result in a $4B loss in free complied with by the
cash flow MLBPA, it will force
negotiations between
owners and players to
conclude by the time the
• Current proposed agreement by MLB would be a 50-50 season begins
revenue share, which is preferred by owners, and not by
players as it is less rewarding to them
March 16th March 27th May 11th May 31st June 23rd
MLB MLB and the MLBPA Owners approve MLBPA propose MLBPA announces
Commissioner finalize a deal that their plan for a 82 112 game that players will
Rob Manfred establishes a game season and season with comply with the
Suspends the potential framework 50/50 Owner/Player pro-rated imposed 60-game
season for the 2020 season. revenue salaries season
26Fans may be able to return, but only in limited numbers, aggravating ongoing decline in attendance
MLB Total Attendance 1995 to 2018 (Millions)
85
80 12.4% 20%-33%
75 9/11
70
2008 Financial Decrease in attendance League revenue from
Recession
Attendance
since 2007 ticket sales
SARS
65
60
Key Takeaway
3%-4%
55
COVID-19 may
50 Lockout 94/95 exacerbate an
existing decline in
45 Unadjusted loss in an
attendance,
average team’s ticket
reducing future
40 revenue if stadiums are
ticket revenues
empty
1995 2000 2005 2010 2015
Years
27Record revenues and low comparable leverage mean losses are not as dangerous as they look
Projected Impact of COVID-19 on EBITDA by Team
for the 2020 Season vs 2019 Revenue (4 Highest/Lowest) • The mean debt/earnings
ratio of MLB teams is
significantly less than other
benchmark entities and
600
556 industries
519 Revenue (Millions) • With relatively low leverage
500 471 Leverage ratios, teams face a less
severe consequence from
EBITDA Loss (Millions)
reduced cash flow
400
362
300 264 273
256
276 • Individual EBITDA losses
232 among teams would result
214
199 188 in negative EBITDA ranging
200
from $30mm to $150mm
• Based on the mean
91 91 90 84 operating income of $50mm
100
(2019), we can assume it
Bottom Line would take 1 year to 3
0 years for each team to
fully recover
28Conclusion
Areas of Research Key Takeaways Predictions
As technology progresses and COVID-19 will force fans to get
the danger of the pandemic comfortable with viewing games
decreases, the method of from home potentially reducing
Analysis of prior major global
viewing the sport will change future ticket sales
events
Once the imposed season Based on the US Governments
begins, the outcome will be approach to COVID-19, baseball
Comparison of responses from dependent on the response to will follow a “quarantine” format
other leagues COVID-19 from the USA for the near future
Losses from the current year will Team expenses will be on the
accumulate and affect the backburner as current pay
Examining the losses that the league’s revenue structure in the disputes will be the main topic at
league will sustain coming years hand for team and ownersYou can also read
