Threat of Canceled Schedule Weighs on Fall Sports. And Investors.

(Bloomberg) -- The threat of a canceled fall sports schedule is being overlooked by advertising and broadcasting investors as shocks from the coronavirus pandemic put the return of major sports leagues in jeopardy, according to UBS analysts.

Analysts led by John Hodulik wrote that the impact from a potential cancellation of the National Football League and college football would lead to worse-than-expected advertising trends, increased cord cutting from customers and could restart conversations between distributors and programmers about paying fees for unfilled live sports contracts. Fox Corp.’s reliance on the NFL, college football and Major League Baseball make it the most exposed, though ViacomCBS Inc. and Walt Disney Co. also rely on sports advertising.

“The cancellation of sports alongside Covid-related economic weakness (and rate hikes) could be a perfect storm for cord cutting,” the UBS analysts wrote. Live sports attract the largest TV audiences and Nielsen data show viewership seasonally peaks in the fall, they said.

With each professional league laying out plans to return over the coming months -- led by Major League Baseball’s Opening Day on Thursday -- the proposed schedule points to “a virtual cornucopia of sports TV from August - October.” The planned timing for the National Basketball Association and National Hockey League playoffs, paired with a shortened MLB season, means major sports leagues will make up a quarter of Disney’s target demographic viewership in the third quarter. Fox will have roughly 21% of its estimated commercial views exposed to the combination of sports leagues.

But the impact from canceled games doesn’t stop there, according to UBS, as the “lack of live sports could also cause distributors to balk at paying the high affiliate fees for sports nets.”

The analysts warned that any drop in revenue from advertisers who typically flock to the sought-after demographic attracted to live sports would only cause further pain, and jeopardize any hopes for a second-half recovery in television advertising. That said, Wall Street has broadly thrown in the towel on a recovery for advertising firms this year -- broadcasters would see the blow from no sports dented by rebates for unfulfilled programming. The S&P Supercomposite Broadcasting & Cable TV Index is down 36% this year, vastly underperforming the S&P 500, which is up a little more than 1%.

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