I’ve gotten a bit of an education on finance this year due to the pandemic’s continued impact on businesses, especially where I focus a lot of my attention in the world of live entertainment and sports.
In the US, we’ve seen a lot of coverage of ratings that have disappointed and the reality that we don’t have any clue when or if attending an event will go back to normal anytime soon.
As I was looking at the coverage of MLB’s debt load and loss of around 70% of their reported revenue, it got me to thinking about some lessons we’ve learned about the business of live sports, concerts, theatre, and live performances that we should keep top of mind heading toward the future.
These business models were unstable:
There is a quote, attributed to Warren Buffett, that goes something like, “You don’t know who is naked until the tide goes out.”
For years, many of these businesses had lived in this mythical realm where the site of empty seats didn’t matter, the decline in ratings was irrelevant, and nothing mattered because the revenues kept growing.
First, empty seats did matter and continue to matter.
We’ve seen the impact that not having fans in the stands has on the product on the pitch.
But even before the pandemic, we were seeing the reality that fans just weren’t as into going to events in person as they had historically been.
This was a trend that was happening before the pandemic and its roots were laid in the Great Recession when many teams and leagues never found themselves able to recover attendance.
Second, I don’t necessarily trust any private business’s publicly reported numbers.
To be fair, we’ve seen enough dishonesty that if you don’t trust the numbers reported by most public companies, I understand.
But if you do trust MLB’s numbers that they were going to lose money this year if they had fans in the stands in a normal year, it shows that the business is even worse off than one might think.
MLB has seen a decline in participation that has only recently, possibly, been turned around. They have had lower attendance, reported, and I know for sure the real attendance is worse than reported. And, the ratings haven’t been living up to expectations.
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