While the rest of the sports world is sustaining huge losses, one organization is well positioned to navigate through the global recession. The AELTC (All English Lawn Tennis & Croquet Club) is the association responsible for hosting and operating the prestigious Wimbledon Championships that were set to take place this June. And while COVID-19 is causing most leagues to scramble to find any salvageable solutions, Wimbledon has had the “luxury” of simply cancelling the tournament, and recouping $141 million in the process.
Despite the fact that Wimbledon was projected to generate more than $300 million in revenue this year, the roughly $150 million loss they will see as a result of the pandemic pales in comparison to those of other major leagues and events. Forbes estimated that the NCAA will see damages of $1 billion, the NBA – $1.2 billion, and the MLB (whose season had not yet even started) – as much as $2 billion. These numbers are all based around an assumption that the leagues will resume sometime over the summer, but given the uncertainty it is possible — even likely — that the true figures will be much higher.
So, how exactly did Wimbledon “ace” its handling of the coronavirus chaos? The story reportedly traces back to 2003, the year in which SARS rattled the world and brought pandemic preparedness to the forefront of international dialogue. Though SARS didn’t uproot the sports world like COVID-19 is doing now, the AELTC understood the potential of a global spread and updated its insurance policy to cover an infectious disease clause. That amendment didn’t come cheap however; it cost the AELTC a whopping $2 million per year to protect its premier event from what most others considered a once-in-a-lifetime fluke that wouldn’t repeat itself.
Until it did.
17 years and $34 million later, AELTC is seeing the worst case scenario (in the sports world, at least) unfold, but its directors can rest easy knowing Wimbledon is covered and well-poised for a 2021 return. The policy is exactly why AELTC didn’t need to postpone or reschedule Wimbledon, in fact, the London-based club reportedly had to cancel by a certain date in order to recoup the insurance premium.
Meanwhile, other leagues and major events are trying to brainstorm any possibility to soften the financial blow each one is facing. Even if the NBA returns late in the summer and skips straight to playoffs, or the MLB’s “quarantine league” comes to fruition, these events will undoubtedly be held without crowds and the leagues will still suffer substantially this year. So, a question many are likely wondering is: why didn’t these organizations have any protections on their events like the AELTC did with Wimbledon? The short answer is that they actually did, just to a limited extent.
Most contracts include force majeure clauses, which excuses certain contractual obligations due to a “superior force”. These forces consist of circumstances that are largely out of both parties’ control such as natural disasters, acts of terrorism or say, a global pandemic like the novel coronavirus. However, while sporting organizations can invoke the force majeure clause, the primary benefit in doing so would derive from these organizations’ ability to withhold pay for missed games.
Accordingly, this contract language (if enforced) only really protects these companies from the costs to their thousands of employees, rather than safeguarding them from losses to the revenue, highlighting the true value of AELTC’s insurance. However, at this point, the money these leagues could save by invoking force majeure is far outweighed by the revenue that any semblance of a season would drive, even if it means fan-less events. The reality is, if leagues are going to see any sort of monetary light at the end of this coronavirus tunnel, the government will likely be the one shining it.
In a summary published by lawyers from White & Case, they believe that governments will be willing to provide financial support to prop up the sports industry as it looks to restart itself. Given both the economic and social impact of sports, the government has a vested interest in doing so, however the report warns to expect some form of lengthy litigation in leagues’ pursuit of federal compensation. In any event, whatever kickback AELTC receives down the line will be icing on Wimbledon’s well-insured cake.
