COVID-19’s Impact on Sports Broadcasting and Salaries

It’s been just over two weeks since the last live broadcast of a professional sporting event and the effects are rippling through the world of sports business. COVID-19’s arrival and subsequent spread across the United States prompted the suspensions of the NBA’s, NHL’s and XFL’s seasons, as well as the delay to the start of the MLB season and countless other disruptions throughout sports. Much like almost every other area of the U.S. economy, sports have taken an enormous hit and while fans and organizations alike are eager to see their favorite athletes return to competition, it is uncertain as to when they will be able to safely, and lucratively, do so.

Between the timing of COVID-19’s lockdown on U.S. sporting events and the ambiguous 2-to-6 month timeframe medical experts are forecasting for a full recovery, each league has tailored its own plan in response to sudden halt of play. Below is a quick summary of just a few of the major sporting organizations’ financial and/or scheduling proposals.

NBA: After announcing that players would receive full salaries on the April 1st due date, the NBA announced earlier this week that it would be reducing the pay of 100 of the leagues’ highest-paid executives by 20% for the duration of the coronavirus crisis. Moreover, the league has extended its credit limit to $1.2 billion for added flexibility in covering its coming expenses. While there is no set plan on when play for the current season will resume, league commissioner Adam Silver has insisted that regardless of timeline, the league would prefer to salvage some portion of the season and crown a champion for the 2019-2020 season. Among the avalanche of proposals of how to “save the season,” Atlanta Hawks CEO Steve Koonin, recommended permanently pushing back the start date of the NBA season to December and concluding with the NBA Finals in late summer, given the current season would optimistically end in August or September. Moreover, Brooklyn Nets point guard Spencer Dinwiddie tweeted out an interesting idea in which the NBA season would resume with a March-Madness style tournament involving all 30 teams.

MLB: The MLB reported this week that it had reached an agreement with the MLBPA on a loose framework of financial and scheduling logistics regarding the upcoming season. Perhaps the most shocking news was the revelation that IF the season is cancelled, players would receive the same amount of service time they received the season prior. This means that players with a year remaining on their contract, such as recently-acquired outfielder Mookie Betts, will hit free agency in 2021 without ever playing a game for the Los Angeles Dodgers who traded valuable assets for his services this year. Also, in the event that the season is cancelled, the MLB made it clear that players would not be able to sue for full salaries, however all players will be receiving a $170 million advance over the next two months. Despite these insurance measures, Commissioner Rob Manfred is hopeful that the MLB resumes play this summer, while he acknowledges that a full 162-game season is likely off the table. The reported contingency plan includes 1) beginning the season once there are no bans on mass gatherings that limit the ability to play in front of fans, 2) no travel restrictions, 3) medical experts determine that games will not pose a risk to the health of teams and fans. Moreover, if/when play resumes, the MLB noted that doubleheaders, a 14-team playoff format, and a neutral, warm-weather location for a November/December World Series are all in serious consideration.

NHL: While the NBA and MLB have quickly pivoted to rescuing their seasons, the NHL has not matched their optimism nor their speed in announcing contingency options. The league has not yet united around a financial agenda, yet both the Dallas Stars President and General Manager have taken voluntary 50% pay cuts. Meanwhile, the Boston Bruins and Montreal Canadiens announced layoffs as their own responses. While many see the cancellation of the rest of the season as the most realistic scenario, others have proposed a timeline similar to that of the NBA with the season picking back up in July/August and ending in August/September. Most notably, star players Alex Ovechkin and Sidney Crosby said that they would be “OK” with skipping straight to the playoffs if and when the season is able to resume, however they acknowledged the question of fair play and keeping the integrity of the sport.

XFL: I really feel for the XFL here. Riding a strong start in its inaugural season, the decision to not only suspend but cancel its remainder must have been decisively more difficult than those of other sporting leagues. The XFL was exactly at the midway point of its season having played through five weeks of its ten week schedule (excluding a two-week playoff in April). Though the eight-team football league had been dealing with declining ratings following its initial excitement, it immediately committed to paying its players’ full salaries and returning refunds or credit to its ticket holders. The XFL also announced that it will be back for a 2021 season and has great reason to do so. Ten former XFL players have already signed contracts with NFL teams for the upcoming season with more likely to follow in the coming days.

MLS: Major League Soccer was in the midst of only the second week of its season when it made the decision to postpone its season for 30 days. As updates of the spread across the U.S. have come in, the Commissioner Don Garber pushed the deadline back to May 10th, but will likely have to do so again under the current climate. Garber, however, is adamant that when soccer returns, the MLS will play a full season’s worth of games even if it means extending the calendar of the season. While there has not been an unanimous response to salary fulfillment across the MLS, one team came under scrutiny for sending an email to its game day staff suggesting they file for unemployment while naming corporate partners who might be hiring.

BIG3…?: I was hesitant to include the Big3 in this rundown of major sporting organizations, however its response to the coronavirus crisis may just elevate its status to that of the leagues listed above. For those who are not familiar with the Big3, it is a 3-on-3 basketball league composed of former NBA and college players such as Amar’e Stoudemire and Joe Johnson. The games are played half-court style with rule oddities that differentiate it from the NBA such as the addition of a 4-point shot and first team to score 60 points as the winner. As for the coronavirus’ impact on the BIG3, originally games were supposed to be played around the country in Memphis, New York and more. However, BIG3 co-founder Ice Cube announced yesterday that the organization will be partnering with the producers of reality TV show “Big Brother” in efforts to air a basketball tournament-reality TV show hybrid to fill the significant void in the sports world. It was reported that the tournament will feature 16-22 players, who be previously tested for COVID-19 and if selected, will be quarantined in a house together for the duration of the season with anyone who breaks quarantine being kicked from the house. It was also reported that some of those selected may even in former top women’s basketball players.

The idea is that the three-person teams would shuffle teams each round and once an individual player accumulates three losses they would be eliminated from contention. Then, the final three players would win cash prizes with the top prize being at least seven figures. The goal is to air the tournament starting in May and given the current sport’s climate, or lack thereof, the BIG3 will surely see a large opportunity to scoop up hungry sports fans across the country craving any form of live competition. There is no word yet on whether or not these fans will be able to bet on these contests, however given the nationwide craving to slowly restart the economy, it wouldn’t a surprise to see Las Vegas announce the lines once the details of the BIG3’s proposal are ironed out. In any event, every other aforementioned league is looking at June start/resume dates in their most optimistic scenarios, so at the very least the BIG3 has at least a month to show us all what it has to offer, and hopefully hold us sports fans over until our favorite teams are back in action.

Jacoby Ellsbury & MLBPA vs. New York Yankees

This week the MLB Players’ Association filed a grievance against the New York Yankees on behalf of the team’s former center fielder Jacoby Ellsbury in an attempt to recoup the remaining $26 million that he argues is owed to him. After winning the World Series with the Red Sox in 2013, Ellsbury signed a seven year, $153 million contract with the Yankees, however went on to miss a staggering 452 games between 2014-2019. For reference, in that same time frame the Yankees played 972 games (excluding playoffs), meaning the speedy outfielder appeared in just over 53% of those contests. If that wasn’t already hard enough to stomach, according to Fangraphs, Ellsbury registered a wRC+ (explanation below)* of 96 as a New York Yankee, so he was roughly 4% worse than league average.

While it is impossible to understate how disappointing Ellsbury’s tenure in the Big Apple was, his contract, like the vast majority of MLB contracts, was fully guaranteed therefore the $153 million was never contingent upon performance or even playing for that matter. However, the Yankees allege that the former silver slugger violated his contract by receiving unauthorized medical treatment which allowed them to convert his contract to “non-guaranteed” and then subsequently release him.

According to the Yankees, the 36-year-old was treated for an injury by Dr. Viktor Bouquette in Atlanta without the team’s consent, yet Ellsbury argues that the treatment was for a non-baseball-related injury, which does not require permission. The CBA essentially states that as long as the “Non-Work-Related Injury does not affect the Player’s ability to provide services,” then the player is exempt from disclosing treatment procedures. However, seeing as Ellsbury had not played a game since the end of 2017, which coincidentally is around the same time it is alleged that he started seeing Dr. Bouquette, it will be tough for the MLBPA to prove that there is no link between the two.

Though Ellsbury’s medical records are protected under medical privacy, if there is truly no causal connection between his NWR injury and the right oblique strain that was the first of his slew of 2018 injuries, then he and the MLBPA could and should release those medicals to prove that they are wholly unrelated.

There is a lot at stake for both sides in this case that will be heard by arbitrator Mark Irvings, who will be making a significant ruling next month in another dispute between player and club. For the Yankees, after the historic Gerrit Cole signing, their 2020 payroll ballooned to $243 million, which carries a significant luxury tax. The tax threshold (number at which team’s must pay extra for every dollar over) for next season is $208 million. The Yankees will pay 30% on ever dollar between $208 million and $228 million, 42% between $228-$248 million, and 75% beyond $248 million. So, the Yankees would stand to gain substantially if they lower that figure from $243 million, which would represent $12.3 million in taxes, to $217 million, which would only tax them $2.7 million.

As for Ellsbury, he is still rehabbing but is looking more like a liability than an asset so this $26 million could represent the last paycheck of his player career. However, for the MLBPA it goes a bit deeper as this case could set a meaningful precedent. It brings to mind a 2010 dispute between Carlos Beltran and the New York Mets over a similar issue that never reached litigation. In any case, the verdict in this conflict between the MLBPA and the Yankees could either be the final insult for foolish free-agent spenders or a sign to those same regretful investors that there are in fact legal ways to wriggle their way out of those abominable contracts.

*wRC+ means weighted Runs Created adjusted. This statistic is meant take external factors (such as ballpark or era) into account to paint a picture of a player’s overall value to any given MLB team. 100 represents league average, so a player with a wRC+ of 150 means that player is 50% better than league average and vice versa. wRC+ is widely regarded as one of the best indicators of a player’s true value.