May 13, 2020

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More than a billion dollars in TV ads may disappear, MLB plans big changes, sports betting continues to wither, and the NFL may raise the debt limit for its teams.

Big Advertisers Set to Cancel

Photo Credit: Kyle Terada-USA TODAY Sports

More than $1 billion in planned spending could be canceled by major advertisers, including Domino’s Pizza, General Mills, General Motors, and PepsiCo, according to the Wall Street Journal.

Impact to date has been limited since the national spots are contractually bound and signed in advance of the new TV season, which starts in September. Despite the advance notice requirements, networks cut deals with hard-hit industries early on, resulting in a $2 billion decline in ad spending from Feb. 17 to April 26. Since May 1, ad buyers have had the option to cancel up to 50% of their third-quarter ad spending. The national TV ad market amounts to $42 billion annually.

Advertisers expressed concern about a lack of new programming and an inability to sell products in an economic downturn, according to WSJ. They are also likely to shift to other mediums including streaming services, social platforms, digital video, and e-commerce.

A major piece of TV programming remains in limbo: sports. Should leagues, including the NFL, return to play, network executives are optimistic ad spends will increase in the third quarter, according to WSJ. Eight of the top 10 TV programs in the past year to drive ad engagement were live sports.

MLB Fighting Two Battles

Photo Credit: Erik Williams-USA TODAY Sports

As talk of starting the season heats up, Major League Baseball is keeping tabs on two different discussions. The league is working with the MLBPA on plans to start in July, but they hinge on team owners’ proposal of a 50/50 revenue split, the Wall Street Journal reported.

Players worry that could set a precedent that ultimately leads to a salary cap. MLB is the only big-four league that doesn’t tie salaries to team revenue. Owners say profit sharing will help offset the expected 40% decline in revenue caused by holding games without fans in a shortened season. Players counter that the proposed expansion of the postseason could help offset losses with more TV money.

MLB vs. MiLB

Meanwhile, MLB’s dust-up with Minor League Baseball could be cooling. MiLB’s fight against a move to cut 42 teams from the system is softening as the pandemic puts a strain on teams across the country, according to the New York Times. Minor League teams rely on spectators to drive their average annual revenue of $5.4 million per team. That mostly goes to paying team employees and rent. Teams pay $65 million in total rent annually, most of which goes to local governments.

Without a season, or fans, the squeeze is on for the 160 affiliated franchises, which are worth between $3 million and $25 million each. Individual MiLB teams might receive money from the Paycheck Protection Program, but the organization hopes to qualify for the Federal Reserve’s $600 billion Main Street Lending Program.

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Sports Betting Dive Continues

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With very few live events, sports betting dollars have continued to dry up. While hopes were high surrounding betting on the NFL Draft, early numbers don’t look promising. Nevada, New Jersey and Pennsylvania haven’t reported yet, but three smaller states saw dramatic declines.

April State Betting Handles:

  • Indiana: $26.3 million, down 64% from March
  • Iowa: $1.6 million, down 92%
  • West Virginia: $2.96 million, down 79.8%

West Virginia reported that the week ending May 2, which contained the NFL Draft, generated $1.06 million in handle, double any of the previous four weeks. While Pennsylvania’s numbers from April aren’t yet reported, Rush Street Interactive said 75% of its April Pennsylvania betting volume came from table tennis.

Though traditional action is limited, some horse racing circuits have managed to remain open during the shutdown, the New York Times reported. Nebraska’s Fonner Park has averaged $2.8 million in bets each day. Its February to April wagers were $71.3 million, up from $7.5 million the same period last year.

Debt Is All the Rage

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The NFL and team executives are looking to raise the team debt limit to $500 million from its current $350 million per team, according to ESPN. The two parties agreed to the proposal on a call earlier this week and owners will vote on May 19.

The potential increase is meant to help bridge whatever troubles might arise from the coronavirus pandemic. Talks have been in the works since last year but gained steam recently when estimates said the league could lose $138 million in revenue each week that games are played without fans. The total loss could amount to $2.3 billion. Last year’s plan to raise the limit to $1 billion was intended to expand the pool of potential franchise owners, according to Bloomberg.

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What We're Covering

Sports betting is coming to the Premier Lacrosse League for the first time this summer.

Sacramento Republic FC isn’t launching in MLS until 2022, but the team is finding ways to connect digitally with the community in the interim.

The Mamba Sports Academy is ‘retiring‘ Mamba from its name out of respect for the late Kobe Bryant, who was a partner in the venture.

Question of the Day

Have you placed a bet on sports in the last month?

 Yes   No 

Tuesday’s Answer

36% of you think a major U.S. sports league will play before July 1.

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