If MLB and NBA Don't Reopen, There'd Be Drastic Aftershocks for Players, Owners, and TV Business

Over the last couple weeks, some more morsels of optimism have started to emerge about the NBA and MLB opening. While NBA is being characteristically more cautious, there's been clear momentum towards the idea of reopening in a bubble inside Disney World, if only for the playoffs. There have also been talks about if the league would play in Vegas. MLB, meanwhile, is surging ahead to the extent it would be kinda surprising if the regular season has not started by Independence Day.

Last week, ESPN's Adrian Wojnarowski covered where the NBA is at, while ESPN's Jeff Passan, USA Today's Bob Nightengale, and WSJ's Jared Diamond have all provided progress reports on MLB and radical ideas for what the season could look like. "There will be MLB in 2020," read Passan's headline. "It's just a matter of when, where and how."

We know that the leagues will have to have copious amounts of coronavirus testing, and that optically it would look really ugly if they're hoarding tests if the public's supply has not gotten high enough. Furthermore, and this goes without saying, plans to return to play if America's infection and death rates spike uncontrollably in the meantime would be a non-starter.

GO TIME

Nevertheless, we are rapidly approaching a period where it has to be go time or not for both leagues. We can probably forget about fans in venues for at least the next couple months and potentially longer, so at this point the gate is what I'll call a sunk loss. But, much TV money can be salvaged to an amount that capturing it would be worthwhile and losing it would be an unmitigated disaster.

The chain of money is fairly obvious, but it bears drawing out: Cable and satellite subscribers pay the distributors (Comcast, Charter, DirecTV, Dish, Verizon, Altice, etc.), distributors pay the television networks, the TV networks pay the leagues/owners, and the owners pay the players. Sponsors also pay a considerable amount of money to the TV networks, leagues, and teams.

The answer to the question of who gets left holding the bag if MLB and NBA seasons do not resume is everyone, except for the subscribers who could eventually get partial refunds. These refunds may or may not ultimately add up to that much for individuals, but when you add them together it could be a lot of pain for all the other links in the chain.

REFUNDS?

The New York Times and Wall Street Journal have both asked the question about whether cable subscribers should be due refunds for money they spent that went towards their TV package that then went to carriage, retransmission, or reverse retransmission fees for live sports providers (ESPN, FS1, NBCSN, TNT, the league networks, the regional sports networks, CBS, FOX, NBC, ABC, etc.) New York attorney general Letita James is also making noise about the matter, calling it “grossly unfair that cable and satellite television providers would continue to charge fees for services they are not even providing."

Over the weekend, CNBC drew the distinction between games that are postponed and ones that are canceled:

Functionally, this is a mess for everyone. Sports networks, leagues, and distributors all want to be in business with each other for the long run, and whether it comes down to litigation or private agreements the burden is ultimately going to be bore by all of them.

Some of this money is already gone. If the NBA starts the playoffs right away instead of resuming the regular season, they'll have to sacrifice some of their regional sports network (RSN) money. MLB ain't playing 162 games, so a proportion of their RSN money will be dead and gone. But, the NBA playoffs and an MLB schedule that perhaps includes the full or nearly full amount of inventory the national partners (ESPN, FOX, TBS, MLB Network) would've gotten could salvage a lot of pain.

FORCE MAJEURE

The two words we've heard more than we ever have before and hopefully ever will again are "force majeure" -- or superior force. While we'll likely never find out the specifics of how this is covered in the TV contracts, we do know that MLB and NBA players have collective bargaining agreements that would leave them unpaid for canceled games. In the NBA, there would also be ramifications on next season's salary cap. (Pretty fascinatingly, NFL players do not have the force majeure clause in their CBA.)

It could take awhile, but consumers could wind up getting some refunds for NBA and MLB RSN games that weren't delivered (the number would be very slight for NBA purposes). Perhaps too with the NCAA Tournament, which was supposed to air on CBS and Turner networks before it was canceled. However, NBA playoffs and even a partial MLB season could really go a long way in salvaging some of the money across the whole chain of players, owners, TV distributors, and the networks that air live sports.

FOOTBALL, TOO.....

Finally, this story was about the MLB and NBA, but if football season gets canceled it would be an unmitigated disaster for the sports business. An ESPN Outside the Lines story last week said that the sports business has already lost $12 billion over canceled events. You can go ahead and double -- if not triple -- that by itself if coronavirus cancels the football season. Hopefully we can somehow be in a place in a couple months where those fears go unrealized.