Monumental Sports & Entertainment and Tepper Sports & Entertainment both announced a series of indefinite furloughs and/or layoffs last week. The two organizations are the latest in a long line of live entertainment companies that have been forced to trim payroll since the novel Coronavirus first upended life as we know it. Most of the sports teams affected to date are relying on skeleton crews of “senior executives to roll up their sleeves and handle communication [with ticket holders and corporate partners]” as the world awaits a vaccine, Scott Carmicheal (Founder and CEO, Prodigy Search) said. But once one emerges, the question becomes, will teams work to backfill the vacated roles or will they outsource their sales and service responsibilities to a third-party agency?
Our Take: There’s an overwhelming consensus amongst sports business professionals that fans will eventually pack stadiums again as they did prior to the pandemic. There’s far less certainty about when that will occur. That’s problematic for live entertainment businesses that don’t have “revenues coming in at the moment and [don’t know] when they’re going to start coming [in again],” said Chris Hibbs (President, Global Partnerships, Legends). Remember, organizations like MSE have been carrying employees—despite the fiscal losses—for almost six months, and they have just slightly more visibility into the future than they did when the sports hiatus began in March.
Pro sports teams are not going to start rehiring until “there’s a definitive edict on fans returning,” Carmichael said. But recruiting talent takes time, so it’s not as if teams are going to be able to flip a switch and be operating on all cylinders again; it reasons that at least a portion of those furloughed or laid off will find other work in the interim. “It’s going to take some time to gear back up—at least one month, probably two,” he said. Of course, with 30 million Americans out of work, there should not be a shortage of qualified prospects available for sports and entertainment properties to choose from when ready.
The ramp-up period could lead some organizations to pursue “short-term outsourcing,” Carmichael surmised. The strategic use of a third-party agency in the immediate wake of the pandemic would allow organizations to hit the ground running with their sales and marketing efforts as they work to fill their internal staffing needs. Hibbs agreed, saying there is seemingly an opportunity for an outfit like Legends to help sports properties “shore up their long-term,” as they “deploy their remaining staff against what is happening [at that moment].” Dave Wakeman (Principal, Wakeman Consulting Group) said conversations he’s had with folks in premium sales lead him to believe “that the [initial] demand may not be as strong as they hoped or assumed. [It] will come back eventually, I just don’t think it is guaranteed to come back immediately.”
Some organizations may even find that it is ultimately easier and more cost-effective to outsource some or all of their sales and service roles long-term than to carry the personnel needed to support them. But neither Carmichael nor Hibbs are anticipating a wholesale shift in how the live entertainment business operates. “There’s always going to be a healthy balance. There are always going to be owners that want their success to be mostly led by the people [inside the building],” Hibbs said.
Owners prefer their ticketing and sponsorship sales teams be in-house because those services are heavily reliant on customer service and delivery, and there’s no guarantee the fan or client is going to receive the same experience if the team outsources the roles. By having people on staff, the organization can ensure everyone representing the company is living its vision and culture. The Chief Business Development Officer at one prominent sports marketing agency said, “Eventually the jobs will come back because the owners always ultimately want control.”
But that does not necessarily mean team head counts are going to return to pre-March totals. Said Carmichael: “Some organizations are going to use [Coronavirus as an] opportunity to right size a bit. There is going to be some trimming.” Expect the bulk of staff reductions moving forward to impact junior employees. The Prodigy CEO explained that senior leadership capable of “leading, generating and running key revenue streams” should remain to ensure the organization isn’t left void of experience.
It should be noted that agency businesses certainly aren’t immune to the greater issues facing pro sports and live entertainment. While they can diversify properties and revenues a bit more easily than a team might be able to (we heard of one sports agency that is now working on a project related to distributing blood tests) and they may have some revenue streams with a longer tail than seats sold to a game, their businesses are hurting too. The marketing agency executive said they wouldn’t be surprised to see “two agencies that have been running on their own merge together. Because they will [eventually] need to put resources together to get through this or to come up with a new skill set that would enable them to go out and get new business.”
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