The National Football League has yet to issue guidelines on fan attendance for the 2020 season (Troy Vincent recently said the league is still planning on playing in full stadiums), but with restrictions on large gatherings bound to remain in effect until a COVID-19 vaccine is found (in at least some states and counties) teams have started to prepare for the possibility that they’ll be playing games in front of less than capacity crowds. The New York Jets made headlines back in early May when the team announced it was delaying the sale of individual game tickets until they had further clarity on “the changing conditions surrounding the [Coronavirus] pandemic” (single game tickets are typically made available for purchase at the time of team’s schedule release) and the Pittsburgh Steelers have since said they would be “holding back 50% of individual game ticket sales inventory because [they’re] preparing for possible social distancing scenarios this year at Heinz Field.” With liquidity “tougher to come by then one would think”, one club President tells JohnWallStreet by Sportico “any scenario that includes no fans or limited fans will create a bad financial situation [for NFL teams].”
Our Take: To be clear, the number of fans in attendance at NFL stadiums this fall is likely to be dictated by the states or counties in which the teams’ venues reside – not the league office. That’s a real concern for teams based in blue states as depressed gameday revenues – which can account for anywhere between 30% to 40% of overall club revenues – would put those organizations at a competitive disadvantage relative to rivals in red states (remember, NFL teams retain their own ticket sales revenue). The league could take a ‘lowest common denominator’ approach (as they’ve done with mini-camps) and declare if stadium capacity is reduced for one team that the balance must face the same limitations, but it would seem as if allowing clubs to operate as permitted and then having everyone share in the local revenues equally would be the optimal economic solution. The team executive we spoke to said that the league is actively considering that approach.
The teams that have opted to delay or limit single game ticket sales have either sold PSLs to their season ticket base (see: Jets, Chargers) or maintain a “really high percentage of season ticket holders” (see: Steelers). They believe “in a reduced fan scenario that it’s going to be difficult enough to take care of those with season tickets (who would obviously have priority) and thus there’s no point in selling single game tickets only to have to refund them later.” But our front-office contact questioned that approach. “What’s the benefit to limiting ticket sales [4 months before the season kicks off, when the possibility of playing in front of capacity crowds still exists?” At this point, no state or county has declared they would limit – or prevent – fans from attending NFL games.
In the event that games are played in front of smaller crowds, look for teams to break up their ten-game slate (includes 2 pre-season games) in an attempt to try and appease as many season ticket holders as possible. The team President we spoke to said his club would “create a bunch of different mini and partial plans [for fans to choose from] and then credit or refund the unused dollars for the games [the season ticket holder] didn’t get to go to.”
It’s logical to assume if stadium capacities are reduced that teams will look to satisfy their club seat and luxury box holders first (i.e. those that spend the most money). But that might not be feasible. Clubs and boxes inherently fail to meet social distancing guidelines and you have to wonder how many of those individuals would be willing to sit in ‘less desirable’ seat locations. “Teams will try and get cute with [seat allocation], but it’s going to be very hard [to please everyone] if there’s an insistence people remain six feet apart.” The league has yet to inform teams if they’ll require six feet between every fan or if their definition of social distancing is six feet between season ticket account holders (i.e. small clusters of people).
While there’s been some speculation that in a reduced capacity scenario teams would increase the cost of tickets to recoup some of the lost revenue, our source believes that “there’s going to be significant pressure from season ticket holders on value creation” and thus pricing is likely to remain flat. Remember, some of the teams’ most ardent fans are already bound to be upset about losing access to some games.
One of the ways NFL teams hope to be able to offset some of the lost ticketing revenue is with the sale of invisible signage (inventory typically reserved for national and broadcast sponsors). Our source said that the league has been actively working with its broadcast partners to pick up additional invisible in-game signage elements for the clubs to leverage in their local markets.
Limiting the amount of fans in attendance will surely hurt teams on the revenue side of things, but it should lead to some OPEX savings. If there are significantly fewer seats to be sold, “ad spends and everything that [teams] do from a hospitality or ticket inventory perspective would go out the window. [Teams] wouldn’t be spending any money on that stuff [if sell-outs weren’t the goal].”
The loss of some or all gameday revenue would be problematic for more NFL teams than one might think. Several clubs would be forced to tap into the recently expanded debt limit and our source suggested there could be multiple owners forced to take on L.P.s in 2021 to solve their cash concerns. Remember, unlike in the NBA, the NFL has a significant number of owners whose primary business is the team. If it’s not making money, neither are they.
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