The complete financial fallout that the coronavirus and COVID-19 will have on the world, the U.S. and individual industries may not be understood for months, if not years. It could then take additional time for federal legislation regarding potential bailouts to pass and take effect, and for insurance claims to be resolved.
Here's how the Pac-12 – just one conference in just one industry: college athletics – could be affected by the outbreak, based on emails I obtained via public records requests.
The Pac-12 held a 2.5-hour video conference with its CEOs on the morning of Saturday, March 14 to discuss topics including COVID-19 issues, NIL, the Pac-12's position on a one-time transfer recommendation and the Pac-12 Networks' long-range financial planning and expense budgeting process.
"There is no clarity around any of this yet, but thought I would share what I heard," one Pac-12 CEO wrote in an email after the conference call. Another email from a Pac-12 administrator describes the following discussions as "sort of shooting from the hip."
The quotes below were sent in an email by a Pac-12 CEO.
The Pac-12 CEO ended the email with, "Probably won't have full clarity before our spring budget update to Regents but everyone will understand how fluid this is."
There's a lot to take in here, and once again, the situation is admittedly fluid. The biggest financial number, and therefore likely the biggest concern for the conference, is the $30 million in live events on the conference's Pac-12 Networks contracts for the 2019-20 school year.
The conference reportedly has $22.5 million in savings and more than $20 million in credit opportunity, so the $30 million in canceled live events could be mitigated considerably if most, or all, of the savings and credit were used to directly offset that $30 million.
If the conference's reserves and credit opportunity are used to negate potential live rights losses from the spring, the next concern would be if college football season is modified – whether it be a shortened or delayed season, a season played without fans or the worst-case scenario of being canceled entirely – then the conference would hypothetically be facing significant losses from its highest-revenue sport, having just used its savings and available credit to curtail the financial damage from losing almost all of its baseball, softball and other spring sports seasons.
Of course, a fall without college football, or at least a significantly modified season, would be a "break glass in case of emergency" situation. It'd be difficult for any school or conference to maintain the status quo on its balance sheet if college football isn't played in 2020.
Washington reported more than $84 million in total operating revenues for football in 2019 (against $40 million in expenses). Oregon football – $72 million in revenue against $34 million in expenses. UCLA football – $41 million in revenue against $35 million in expenses.
Even the most penny-pinching institution or conference, which may not exist in college athletics – at least prior to the coronavirus outbreak – probably isn't going to have a rainy day fund to potentially replace $20, $50, $100 million in lost revenue from college football.
As the Pac-12 CEO noted, football and men's basketball "value content," meaning regular-season conference TV deals, weren't impacted by the cancellation of the remainder of the 2019-20 athletic calendar. There's obviously no good time for a deadly worldwide virus, but strictly speaking in terms of the financial impact on college sports, the losses could have been much greater if the first cases of coronavirus in the U.S. appeared in, say, October or November.
Other news and nuggets:
Here's how the Pac-12 – just one conference in just one industry: college athletics – could be affected by the outbreak, based on emails I obtained via public records requests.
The Pac-12 held a 2.5-hour video conference with its CEOs on the morning of Saturday, March 14 to discuss topics including COVID-19 issues, NIL, the Pac-12's position on a one-time transfer recommendation and the Pac-12 Networks' long-range financial planning and expense budgeting process.
"There is no clarity around any of this yet, but thought I would share what I heard," one Pac-12 CEO wrote in an email after the conference call. Another email from a Pac-12 administrator describes the following discussions as "sort of shooting from the hip."
The quotes below were sent in an email by a Pac-12 CEO.
- On the NCAA tournament: "The conference was expected to receive 17.5 million...this year from MBB tourney. It's unclear how much of this we will receive at this point...it's fair to say we won't receive this number but will likely receive a portion of this."
- An important note is that the Pac-12 already received its NCAA tournament distribution for this year, according to an email sent by a Pac-12 administrator. To put it simply, NCAA tournament bids and tournament wins prior to the Final Four are given a specific monetary value, called a unit, which are then paid out to conferences, which then divide the units amongst their member institutions. The more NCAA tournament bids and wins by a conference results in more money for the schools. The NCAA tournament distribution for a given year comes from the conference's NCAA tournament performances in the previous six years, so the Pac-12's NCAA tournament distribution for 2020 is from its schools' performances in the 2014-19 NCAA tournaments. The financial impact on the NCAA tournament distributions from the canceled 2020 NCAA Tournament will not be felt until 2021 (and the five years after that).
- On the Pac-12 men's basketball tournament: "I think I heard a number of about $4 million in losses. We do have insurance so the conference hopes to mitigate some of this via insurance."
- The Pac-12 hopes its event cancellation insurance will cover lose revenue from refunds. According to one email I obtained, a Pac-12 administrator wrote, "Whether or not the insurance company agrees to pay out still remains to be seen (since technically we canceled the event vs. it being mandated by some higher authority)."
- ESPN/FOX: "Value content (FB and MBB) weren't impacted because of timing so we don't anticipate significant losses in this area."
- Pac-12 Networks: "Much bigger issue here. We still have 240 live events left via our contracts, estimated 30 million in value. Going to be a battle on this. On a positive note, we will have massive savings, which could help mitigate this number."
- Individual Pac-12 schools get less than $3 million from the Pac-12 Networks for the entire year, according to one email obtained, so schools are hopeful the reserves will be able to cover the shortfall.
- Other conference considerations: "We have 22.5 (million) in reserves. We have 20 plus million in credit opportunity."
- The $22.5 million is in a money market account that wasn't invested and therefore wasn't impacted by the current market.
- Future distributions will be impacted by the Pac-12 needing to contribute to its reserves after they've been depleted by covering for current lost revenue.
The Pac-12 CEO ended the email with, "Probably won't have full clarity before our spring budget update to Regents but everyone will understand how fluid this is."
There's a lot to take in here, and once again, the situation is admittedly fluid. The biggest financial number, and therefore likely the biggest concern for the conference, is the $30 million in live events on the conference's Pac-12 Networks contracts for the 2019-20 school year.
The conference reportedly has $22.5 million in savings and more than $20 million in credit opportunity, so the $30 million in canceled live events could be mitigated considerably if most, or all, of the savings and credit were used to directly offset that $30 million.
If the conference's reserves and credit opportunity are used to negate potential live rights losses from the spring, the next concern would be if college football season is modified – whether it be a shortened or delayed season, a season played without fans or the worst-case scenario of being canceled entirely – then the conference would hypothetically be facing significant losses from its highest-revenue sport, having just used its savings and available credit to curtail the financial damage from losing almost all of its baseball, softball and other spring sports seasons.
Of course, a fall without college football, or at least a significantly modified season, would be a "break glass in case of emergency" situation. It'd be difficult for any school or conference to maintain the status quo on its balance sheet if college football isn't played in 2020.
Washington reported more than $84 million in total operating revenues for football in 2019 (against $40 million in expenses). Oregon football – $72 million in revenue against $34 million in expenses. UCLA football – $41 million in revenue against $35 million in expenses.
Even the most penny-pinching institution or conference, which may not exist in college athletics – at least prior to the coronavirus outbreak – probably isn't going to have a rainy day fund to potentially replace $20, $50, $100 million in lost revenue from college football.
As the Pac-12 CEO noted, football and men's basketball "value content," meaning regular-season conference TV deals, weren't impacted by the cancellation of the remainder of the 2019-20 athletic calendar. There's obviously no good time for a deadly worldwide virus, but strictly speaking in terms of the financial impact on college sports, the losses could have been much greater if the first cases of coronavirus in the U.S. appeared in, say, October or November.
Other news and nuggets:
- On the conference call, the Pac-12 CEOs and athletic directors determined that "in the strongest terms possible, the conference will continue to advocate for...an additional year of eligibility for spring student-athletes who are affected," according to an email sent by one conference AD.
- One Pac-12 school planned to discuss: "Outside training or practice expenses – are we paying for any? (Pac-12 suggested doing this on a reimbursement basis)"
- If current seniors are granted an additional year of eligibility, could their athletic aid be exempt? At least one Pac-12 institution planned to have this discussion within their athletic department.
- On Friday, March 13, the Pac-12 had a call involving universities' council of external communications personnel to present to the conference's CEOs. "Since our call a number of peer conferences (i.e., Big 12, Mtn West, WCC, Big West, etc) have announced they have cancelled all spring competitions altogether, similar to the NCAA. As a result, I am concerned that if we don't follow suit it will appear a bit 'tone deaf' to our CEO's," according to an email sent by a Pac-12 official later that day.
- One Pac-12 AD reached out to someone at the Pac-12 office right after the video conference involving the Pac-12 CEOs, asking, "What is the timeline for announcing the recs that the CEO's just voted on? We have to coordinate messaging on our campuses this am (sic) in reaction to Pac 12 announcement. We didn't talk through any of that before Larry moved on." A Pac-12 official responded saying the conference would share with the council the conference's COVID-19 recommendations before it sent out a media announcement.