What Happens When the Sport Bubbles Pop?

MIchael Goldman- Many did not take the threat of an impending global pandemic serious at the beginning of March 2020. That is, until the NBA and NHL made the executive decision to pause their 2019–2020 seasons. While fans turned their attention towards issues of their own health and safety, team executives focused on the financial issues to come. How does a sporting league survive when travel restrictions placed to limit the spread of COVID-19 ground each team in their respective city?

You blow a Bubble.

League executives reinstated both the NHL’s and NBA’s season with the use of the Bubble. The NBA quarantined its players and soon, the season resumed from Orlando, Florida in arenas not open to the public. The NHL also quarantined its players as it continued play in Edmonton and Toronto, Canada. Although returning to play after a five-month pause seems like a victory for the league and team executives, it is merely a band-aid on a much larger wound. What happens once the Bubbles pop?

Teams face an inevitable financial crisis in which no team is exempt. COVID-19 restrictions prohibit the teams from welcoming back a stadium full of fans. These teams stand to lose millions in revenue without having 80,000 people on their premises for four to five hours during the games. Merchandise sales at the stadium will go from record highs in 2019, to nonexistent in 2020. The $9 waters at the concession stand will go unsold. Tickets sales will flatline without the ability to host fans—at least for now that is.

The NFL season looks to kick off Thursday, September 10, 2020, with the Kansas City Chiefs hosting not only the Houston Texans but hosting fans! There is a catch, however. Arrowhead Stadium in Kansas City, Missouri may only be filled to 22% capacity in order to comply with national social distancing requirements. These may be some of the most highly demanded tickets for a regular season sporting event ever—aside from maybe Michael Jordan’s last game, or the final game at Joe Louis Arena in Detroit.

With high demand and a limited, low output across the NFL—an association comprised of individual teams in the same market—we’re faced with the perfect storm for possible antitrust violations under Section 1 of the Sherman Act. As fans return in a limited capacity, team executives will be tempted with the idea of fixing the average price of a ticket across the league. Ideally this would allow teams to recover losses incurred while playing resumes in the 2020 Bubbles. Further, this Bubble would allow teams to avoid the costly expenditures of operating a stadium while accommodating less fans per game.

Antitrust allegations are merely the tip of the iceberg with potential legal claims to arise from teams returning to their home venues. For example, there may be an increase in tort claims for negligent operations of the stadium under new, never before seen guidelines. There could also be a rise in contract disputes between sponsors and arenas. The average value deal for naming rights of an NFL stadium exceeds $8 million. That value is presumably diminished when a stadium with the capacity to hold 80,000 is limited to 17,000. The sponsors may feel as though they have been disadvantaged by the naming rights contract, and, in turn, attempt to recover damages under breach of contract theories.

With money seeping from the leagues’ wounds one has to imagine the product itself may also take a hit. Without billions of dollars in yearly revenues pouring into stadiums across the country, the net value of the leagues will decrease as will the team’s abilities to pay their players the same amounts we’ve seen in the past years. With players getting paid less, they may not want to continue putting their bodies and health at risk to play during a pandemic. Talent leaves and with it goes the fans.

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