From Where We Sit

In the bubble

As the coronavirus disease 2019 (Covid-19) continues to spread across the globe, most of the regular aspects of our lives, including sports and physical activities, have been greatly affected. The various measures implemented to contain the spread of this disease, including physical distancing and community quarantines, have significantly altered the sports landscape. At the onset of the pandemic, notable sporting events, including the 2020 Tokyo Olympics, have been postponed while local and international professional leagues have suspended their seasons to safeguard the health of athletes, coaches, officials and other stakeholders.

Like other industries, the sports industry — estimated to be valued at $756 billion — has grappled with the negative financial effects of the health crisis. The resumption of most sporting events proved to be extremely challenging, with physical contact still reduced to a minimum. Professional sports organizations and leagues have thought of various ways to resume operations while ensuring the safety and welfare of all individuals involved, but the threat of Covid-19 completely changed how sporting activities would now be held and how people would watch them.

Much to the delight of basketball-starved enthusiasts, the National Basketball Association (NBA) recently resumed its season. The resumption was a rousing success, with the seeding games well on their way and the playoffs just around the corner while keeping Covid-19 cases within the NBA bubble (we’ll tackle this in a while) in check. In turn, spectators have been treated to beautiful, exciting basketball: Luka Doncic’s triple-doubles, TJ Warren’s bubble explosion, a compelling race to the West’s eighth seed and a wealth of other stories. Another aspect of the restart piqued my interest, which is how the NBA managed to adapt to the pandemic and eventually resume its games, and how other organizations and industries can emulate or improve the measures the NBA took.

Bubble concept

The NBA bubble involves housing the 22 teams, and essential league and team personnel invited to the restart, in one isolation zone. The concept of the resumption is relatively simple: ensure that all individuals in the bubble are free of Covid-19 by implementing strict health protocols and preventing exposure by not allowing nonessential personnel to enter that bubble. While the solution has been expensive — estimated to be $170 million — it appears to be viable and effective, as the NBA was able to resume without any new transmissions to date.

While the idea of a similar bubble would seem implausible to implement, some measures taken by the NBA can be adopted by other organizations and industries. Fundamental to reopening businesses are safe and healthy working conditions for employees, so strict adherence to policies and guidelines formulated by national authorities for the safe return to work must be ensured. This would also include establishing the tone of promoting safe and healthy work practices from the top of the organization. If work-from-home arrangements are not possible because of the nature of the industry, face masks, disinfectants and, if possible, rapid testing kits should be available to employees returning to on-site work, and workplace protocols and common areas should be revisited to reduce the risk of transmission at work.

Diversification of revenue streams and products

With “real fans” not being allowed inside the bubble, match-day revenues (i.e., ticket sales, hospitality income, food and beverage sales) have been reduced to nil while commercial revenues (i.e., advertising and sponsorships) are expected to decline because of the limited in-game experience for fans and spectators. But since traditional broadcast income (sales of television rights) continues to be the linchpin of NBA revenues, continuing the season was still the most financially viable option for it. To compensate for the lack of match-day and commercial revenues, the NBA hopes to capitalize on two trends to diversify its revenue streams and products: increase in media consumption and developments in virtual technology.

The NBA hopes that the spike in media consumption would lead to more league-pass subscriptions, which it offered for free while the season was postponed to continue to drum up interest while offering it at lower prices (despite better packages) upon the restart. The league is also ramping up its venture into esports, which shows huge demand and viewing reach among Generation Z and millennials and provides a different venue for fan interaction and mileage. Since last year, the NBA has partnered with NBA2K to host online tournaments that are being streamed through Twitch, YouTube and other streaming sites.
Parallels should be drawn by other industries as well, where the prioritization of profitable revenue streams, diversification of products and services, and venturing into digital transformation and development should form part of resiliency and recovery strategies. Companies already bore the brunt of the impact of Covid-19 and the gradual reopening of the economy provides a window for them to reassess their operations for potential efficiencies, realign future plans and priorities, and explore opportunities, particularly in the digital space. With the new normal expected to continue even after this crisis passes, industries should also formulate new ways to distribute products to customers and provide them with flexible payment and consumption options.

Challenges abound

A report by Adrian Wojranowski of ESPN said there had been significant concerns about the uncertainty of the next NBA season, with league owners raising the need to have fans returning to arenas to recover from lost match-day revenues. The possibility that the bubble could burst and we would be left with a canceled NBA season still lingers. Like the NBA, companies and organizations are diving into uncharted waters with the Covid-19 pandemic remaining fluid and unpredictable. Challenges and uncertainties abound, and how companies adapt would show if they would eventually flourish or not. But like in basketball, advanced scouting to identify weaknesses of the adversary, formulating offensive and defensive strategies, adept coaching and, ultimately, the chemistry, skill and execution of players significantly tip the proverbial scales toward winning.

James Paul M. Sevilla is a senior manager of Audit and Assurance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 24 partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, “like” us on Facebook: P&A Grant Thornton, and email your comments to james.sevilla@ph.gt.com or pagrantthornton@ph.gt.com. For more information, visit www.grantthornton.com.ph.

 

As published in The Manila Times, dated 12 August 2020