Why the survival of sport is imperative for the survival of society: mitigating the impact of COVID-19

Published Mon 13 Apr 2020

The ramifications of COVID-19 will be profound and long lasting, with the true economic and societal cost yet to be counted. Without a doubt, it will take the better part of the next decade for the global economic and cultural powerhouse we have taken for granted to truly recover.

This pandemic has proven to those who watch, participate or work in sport that the ‘lucky, sports-mad’ nation of Australia is not immune. The effects of COVID-19 have forced a full cultural shutdown of the nation.

Before sporting organisations can effectively respond to this crisis, it is necessary to understand the crucial part sport plays in Australia and detail the damage dealt by COVID-19 to date.

The importance of sport within Australia

87% of economists believe that Australia is heading for a recession, with a plethora of stakeholders already clamouring for financial support from all levels of government.

While four in five Australians agree that sport is a significant part of Australian culture, many sceptics argue that the sporting industry is not integral to society. Critics make dangerous generalisations, incorrectly assuming that everyone in sport is as well funded as Cristiano Ronaldo, and that the money invested in the sector goes to waste.

The perennially posed question from critics is:

“why should society worry about sport?”

In truth, sport is fundamental to the fabric of society. It plays a critical role that is undeniable, by almost any measure: engagement, physical health, mental health or financial impact.

Impact on engagement & reach

More than 8.4 million adults and 3 million children participate in sport across Australia each year. In 2017 alone, Australians were spending more than 60 million hours a week watching sport.

Impact on physical health

On the international stage, Australia is considered to punch ‘well above its weight’ when it comes to sport, which is ironic considering that the Australian government classify two-thirds of Australian adults and one-quarter of children as overweight or obese.

The Organisation for Economic Cooperation and Development (OECD) reports that medical issues resulting from overweight or obese individuals accounts for close to 10% of all health expenditure nationally and lowers the labour market by the equivalent of 371,000 full-time employees per year.

Impact on mental health

Countless studies have shown that sport helps shape, teach and reaffirm positive values including teamwork, resilience and respect. For many, the social aspect and sense of community offered by sport is a critical crutch when considering mental health and wellbeing.

With respect to COVID-19, consider the impact of prolonged isolation to millions of Australians who rely on their weekly sport as potentially their only interaction with others in a social setting.

Impact on the Australian economy

The Australian Securities and Investment Commission (ASIC) reports that the sporting sector alone directly employs more than 60,000 people and makes up 2% of Australia’s GDP.

This does not take into account ancillary industries such as construction, manufacturing, logistics, technology, events management, media or tourism.

Furthermore, Sport Australia details that more than 2.3 million Australians volunteer in sport annually, amounting to a staggering 158 million hours of labour or the equivalent of 90,000 full-time jobs.

Even those few Australians with little interest in watching or playing sport cannot deny, sport is a crucial pillar in our society and economy.

With this mind, how is COVID-19 impacting our industry?

Awareness is everything: understanding the true Impact of COVID-19

COVID-19 has caused a debilitating domino effect, decimating not just the economic stability of sport, but Australia as an entire nation. The smallest of clubs to the largest national bodies have been impacted in the most significant way since the second world war.

If sport is to survive it must first understand the far-reaching repercussions, both the discernible and less obvious.

The impact on professional sport

Professional sport has been cancelled globally. With live sport no longer being televised virtually all media rights deals, partnership agreements and scheduling is on hold, sending the largest professional codes to the brink of collapse.

In the last two weeks alone:

Football Federation Australia (FFA) stood down 70% of their staff ;
The Australian Football League (AFL) let go 80% of their staff and players have accepted pay cut ranging from 50-70%;
National Rugby League (NRL) players are due to take an 87% pay cut with the sport losing an estimated $13m for every round not played;
The Australian Netball Players Association have agreed to 2 weeks forced leave and 3 weeks at 70% pay.

The world may never see some of its greatest athletes compete again. Depending on the duration of COVID-19, athletes towards the end of their career are at risk of fading to black. There may not be another chance to watch Bogart ‘don the green and gold’ or see Serena compete in another Grand Slam.

The impact on community sport

The implications of cancelling local, state and national competitions are far more significant than a few local athletes missing out on a sausage sizzle and a trophy.

In addition to sporting organisations being unable to retain staff, regional hubs dependent on championships and events are being heavily impacted by the loss of their biggest revenue generating opportunities. The impact on hotels, restaurants, suppliers, ride share and bus companies alone illustrates the importance of community sport on the Australian economy.

In industries that combine sport and tourism, such as the Australian snowsports industry – the economic cost could be catastrophic with many regional towns such as Jindabyne in New South Wales relying on seasonal tourists for income.

Intangible impacts

The ‘intangibles’ of sport go right to the heart of the industry: community, connections and experiences.

Sport is about learning, and the betterment of one’s self at a discipline –without sport, countless learning opportunities have been lost.

Thousands, if not millions of friendships and relationships that would have been formed this season may never happen. The ‘chance connection’ at a local competition that connects others in a lifelong bond has now been lost.

Life defining experiences that give us character and resilience for other parts of life (from winning a grand final to missing out on a selective team) have been muted.

The result? A more disconnected society that is poorer from a lack of experience and culture.

Global impacts and the 2020 Summer Olympics

It is egregious to consider that the Olympics has been postponed for the first time ever in peacetime.

The International Olympic Committee (IOC) and all competing nations now face the incalculable logistical task of meeting the new date in 2021 with athletes, coaches and officials needing to drastically change plans that have been in place for four years if they are to remain competitive.

To further complicate matters, high-performance budgets were only set to last until July 2020, raising the question: “who is funding officials and athletes for another 12 months?” especially during a recession and when many sporting organisations are now “running on fumes”.

The postponement also means that athletes banned for testing positive to performance enhancing drugs may be eligible to compete as their sentences end, changing the competitive landscape for athletes yet to qualify. Increased pressure has been directed at the World-Anti-Doping Agency (WADA) to ensure anti-doping testing continues, which is almost impossible due to the travel restrictions in place.

The message for sporting organisations could not be clearer: the impact of COVID-19 on this industry runs far deeper than we could have ever imagined just 3 months ago.

The ‘Sport Survival’ Guide

Cash flow is the single biggest concern for most sporting organisations and is currently affected by two key areas: lost revenue streams or refunds.

The following sections contain an array of options to help your sport survive. They are divided into two categories:

Operational: tips, strategies and considerations for your day-to-day operations; and
Transformational: innovative ideas to help your organisation pivot.

This is not an exhaustive list, nor is any one solution a ‘silver bullet’. The context of each sport is different, and we encourage this to start a discussion within your organisation.

Operational strategies

1. Review your Insurances & Policies

The most important step comes first: all sporting organisations, at every level, must review their insurances and policies on refunds.

Policies

Considerations:

What do your policies and membership terms & conditions say about refunds?
Is there a published refunds policy? Does it have a force majeure clause?
Are members entitled to complete or partial refunds?
Is there a grace period before a decision needs to be made?

Example:

Vail Resorts (owner of Perisher , Falls Creek & Mt Hotham Ski Resorts) have announced that they have moved the final payment date for their ‘Epic Pass’ season ticket by a month and will provide partial refunds if they are unable to deliver products for the 2020 snow season.

Insurance

Considerations:

Is your organisation able to recoup funds from insurance?
Does your policy cover major event cancellations? Are force majeure events excluded?
If refunds are not covered, are there any other insurance clauses applicable? (e.g. a refund on expenses paid so far, incurred costs etc)?

Examples:

Numerous resources are already available online pertaining to COVID-19 and force majeure, including:

2. Knowledge is power- cashflow, stimulus packages and assistance

The landscape shifting rapidly, and uncertainty is running rampant throughout the industry. Consequently, it is vital that organisations remain up to date with regulations, assistance packages and industry news.

Considerations:

What is your organisation’s cash burn and what it would cost to ‘mothball’?
Consider a number of scenarios with varying ‘remaining runaways’. If no more income comes in, how many months of operations can you maintain? If 50% comes in, how many months then?
Understand your borrowing power.
Understand liabilities and other debt facilities (e.g. mortgages, lines of credit), etc.

Examples:

3. Grants & Stimulus Packages

Many state and federal departments are releasing stimulus packages. Every organisation should be scouring these daily, and applying for as many as possible, as quickly as possible:

Examples:

Tasmania
South Australia
Western Australia
The federal JobKeeper subsidy allows affected employers to claim up to $1,500 per eligible employee per fortnight in an attempt to keep people employed. Organisations and employees should assess their eligibility immediately, even if redundancies have already occurred.

4. Be Transparent and Communicate Clearly & Often

Most organisations simply do not have the cash reserves to issue complete refunds or continue without regular revenue streams. Consequently, many sporting organisations are at risk of collapsing, leading to even more people losing their jobs.

Because of this, being open and transparent with your stakeholders, especially your members, is imperative. Fear and uncertainty will only exacerbate matters, help them understand your situation and the options being considered.

Examples:

Plan for frequent communications, even if the message is “No update.” or “Continuing to monitor the situation.”
Utilise various communication channels including emails, newsletters, social media, press releases and updates on your website.
Ensure your communication is consistent, clear and concise, avoid confusing or convoluted statements.

5. Suppliers & partners

The relationship between sports and their partners is symbiotic. It does not benefit anyone if your organisation, or your partners go out of business.

Remember: when society returns to normal, members and partners will need their sport there waiting. It is in everyone’s interest for sport to survive.

Considerations:

Encourage open dialogue and do not be afraid to explore every possibility.
Can payment terms be delayed and amortised when things return to normal in exchange for extended contracts or variable terms?
Is there the possibility to leverage value from existing stock or in-kind support rather than cash injections?

Example:

Water Polo New South Wales are running an online trivia competition where members can win a voucher or merchandise from their partner Kap7. This capitalises on a sunk-cost (stock-on-hand) meaning there is no additional outlay of cash. In return both parties benefit from having an engaged member base.

6. Postponed/Revised Competitions

COVID-19 has left many organisations unable to run competitions or events heavily impacting the ability to deliver value for fees already collected or generate expected revenue. However, there are solutions available.

Considerations:

Restrictions in certain states and regional areas may be lifted sooner than metropolitan areas allowing some sports to resume reduced services.
If a regular season is not possible, plan for 2-3 variations of shorter formats. For example, instead of a 20-week competition, what would a 12, 8 or 6 week competition require?
Can you replace weekly competitions with large, multi-game weekend tournaments?
There will be substantial opportunity to leverage support from local councils who will be looking to stimulate their economies when restrictions are relaxed. What financial or logistical assistance can they provide part of a metropolitan competition is moved to a regional town for a weekend?

Example:

FFA have delayed the start of their season twice, requesting members to be patient until more information is available. They, like many organisations are hopeful a revised format is still possible.

7. Credits

If a revised competition is not possible, organisations should seek to incentivise participants to return when operations resume, rather than considering complete refunds.

Considerations:

A 100% credit toward next season may not be viable, but any credit ensures neither the organisation nor the members are entirely losing out.
In this instance, the sport has a better chance of retaining members and avoid becoming insolvent. Members are able to realise the value of their investment without losing their sport.

Example:

Elite Events Triathlon has given participants who registered for events in March 2020 the ability to transfer their entry to another even of equal or lesser value in the future.

8. Refunds

The matter of refunds is extremely complex. Many sports want to return fees already collected for services that they may not be able to deliver as intended, however this may result in the collapse of the organisation.

Considerations:

Seek to develop needs-based assessments, that will protect both the organisation and the most vulnerable members.
Transparency and communication are crucial. It is likely a majority of members will accept this decision rather than risking the death of their club or sport.
It is true, some may become disgruntled and a few may leave the sport. However, the impact of COVID-19 is likely to lead to fewer members returning initially due to financial hardship or a loss of interest in the sport.
Is it better for an organisation to still be standing, albeit with less members, than to collapse entirely?

Transformational strategies

1. Explore alternate sources of value and revenue

Innovation and creativity will be crucial for survival. Fortunately, it is what under-resourced sports are known for.

Value is not always the delivery of a competition or event. People participate in sport for sense of community and variety in their lives.

Considerations:

Does your organisation have additional assets that can be capitalised on?
Is there existing old stock or memorabilia that can be sold?
Promote active listening and encourage ideas from all stakeholders.

Example:

Many gyms are leasing equipment to members to retain some form of revenue.

2. Online training/education

The restrictions resulting from COVID-19 provide organisations with a once-in-a-lifetime opportunity to substantially increase the depth of knowledge and capability within their sport. Additionally, online education provides an alternate source of value to members and keeps them engaged with your sport.

Considerations:

Does your organisation have the capability to deliver coaching and officials courses online?
What is the true cost to deliver these? Can some, or all, of the value of memberships & event entry already received be moved to education opportunities?

Example:

Cycling Australia have launched a number of coaching and officiating courses online, with no charge for participants.

3. Online engagement and sponsor satisfaction

If your organisation is not in a position to deliver online education and accreditation, there are various ways to harness technology to maintain or increase the touchpoints with your members.

Considerations:

What are the opportunities to leverage engagement to deliver value to sponsors, thus retaining or growing financial or in-kind support?

Example:

A number of organisations have launched online hubs for skill development, nutritional information or workout regimes.

FFA Skills hub provides training skills and challenges for members while at home.
Hockey Australia’s ‘HockeyatHome’ by gives members access to content from national athletes and officials including skills development, exercises, game strategy sessions and interviews.
World Archery has launched an online archery league, enabling members to download targets and compete at home. Results are able to be entered online into a global leader board.
Water Polo Australia are showcasing the ‘human’ side of their Olympic Athletes with content such as cooking classes.

4. Untapped opportunities- Live streaming

As evident above, sporting organisations are slowly capitalising on digital platforms to engage their audience and deliver value. However, commercialising live-streaming or pay-per-view content is yet to be fully capitalised on.

This is commonplace in the world of e-sports and given the vast void in sports programming globally, organisations that can tap into this opportunity early and effectively are likely to reap the rewards.

Examples:

A few sporting organisations have started exploring this:

The National Basketball Association (NBA) are hosting an nba2k20 (basketball video game) tournament live on ESPN, played exclusively by their professional athletes.
FormulaOne (F1) are live streaming their professional drivers compete against ‘gamers’ on Codemasters F1 2019 game.

A post COVID-19 world

Just as a survival plan is crucial for sporting organisations, so too is a revival plan.

Members & volunteers will be critical in re-establishing operations. Organisations and administrators will need to be very clear in detailing how and where others can help.

As an industry, we have an obligation to be better prepared next time.

Organisations must establish clear cash reserve policies, seriously consider diversifying revenue streams and identify opportunities for shared resources.

Collectively, our industry needs to identify how to better illustrate the true value sport has in society. This is essential if we are to ‘grow the pie’ in regard to funding and corporate partnerships.

Sport is such a crucial lynchpin within society that the survival of one is certainly contingent on the other.

Article posted by Nicholas Watkins, Chief Operating Officer, RevolutioniseSPORT.

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