Source: Kings face millions in uninsured COVID-19 losses with refund requests looming
A new crisis looms as NBA teams face the growing realization that millions of tickets will have to be refunded and millions more will go unsold due to the coronavirus pandemic.
The NBA still hopes to play out as much of its remaining schedule as possible, but Commissioner Adam Silver is now signaling those games will be played in a centralized location without spectators, if they are played at all. The league could incur major financial losses as teams receive an increasing volume of calls from restless ticket holders who want their money back.
A league source told The Sacramento Bee the coronavirus shutdown has already taken a huge financial toll on the Kings, who are bracing for what might be tens of millions of dollars in uninsured losses. The source said the stoppage in NBA play and live events at Golden 1 Center is having a “tremendous impact to the bottom line,” saying “over half of the team’s revenue is generated from hosting ticketed events in the arena.”
Silver seemingly ruled out the possibility of playing games in home arenas with live audiences during a conference call with the National Basketball Players Association on Friday. According to ESPN, Silver told players it would make more sense to play at one or two potential sites, including Orlando and Las Vegas.
“There’s no point in adding risk for flying all of you city to city if there’s not going to be fans,” Silver said. “We think it would be safer to be in a single location — or two locations — to start.”
Those words will prompt a new wave of refund requests from fans who held on to tickets in hopes the NBA season would resume with some semblance of normalcy. That will not be the case, according to Silver, who reportedly told players, “This could turn out to be the single greatest challenge of all our lives.”
Kings updating refund policy
The Kings issued a statement regarding their ticket policy March 12, a day after the NBA shutdown began, stating: “Tickets already purchased for a postponed Kings home game will be honored when the game is rescheduled. If games are not played or played in an empty arena, fans will have the option to receive a credit for a future game or a refund.”
Under that policy, which is posted on the team’s website, some tickets are eligible for immediate refunds, but refunds for season tickets, half-season tickets and mini-plans are contingent on game cancellations.
Team officials said the Kings plan to release an updated refund policy in the coming days, a portion of which was provided to The Bee. The new policy will apparently make refunds available for all tickets whether games are officially canceled or not.
The Kings said they intend to communicate the following to ticket holders via email by May 18: “While we await more information from the league regarding the 2019-20 season, it is our commitment to provide flexible options to ticket holders regarding impacted games. Tickets already purchased for a postponed Kings home game are eligible to be credited towards the 2020-21 season or a refund is available upon request.”
Projecting NBA revenue losses
There were 259 games remaining in the regular season when the NBA suspended its season after a player tested positive for COVID-19 on March 11. Based on average home attendance figures for teams that would have hosted the games, NBA clubs would have distributed more than 4.6 million tickets for those contests, mostly to paying customers.
Team and league officials explain it is difficult to calculate the average price of an NBA ticket due to multiple factors, but some have attempted to do the math. Barry’s Ticket Service, Inc., an online ticket broker, estimated the average cost of a ticket on the secondary market was $89 during the 2018-19 NBA season. Using those figures, the NBA could lose more than $400 million in regular-season ticket sales.
In March, a high-ranking team official told Tom Haberstroh of NBC Sports the NBA could lose nearly $500 million if the remaining regular-season and playoff schedule is canceled. Just last week, Statista.com, an online portal for statistics, estimated the NBA could lose up to $450 million in gate revenue and $200 million in non-ticket revenue.
Sports marketing executive Marty Conway went even further, telling CNBC the NBA would lose more than $1 billion if it cancels the rest of the season.
‘Manage the economic impact’
NBA teams and league officials were reluctant to address finances in the early stages of the shutdown, choosing instead of focus on the public health crisis, but all sides are beginning to acknowledge the enormous financial implications.
During a conference call with reporters April 17, Silver said: “Our revenue in essence has dropped to zero. That’s having a huge financial impact on the team business and the arena business.”
Many professional sports teams, music promoters and entertainment companies have insurance policies that cover event cancellations due to natural disasters, floods, fires and other unforeseen circumstances. However, an NBA source said insurance does not typically cover business losses as a result of a pandemic.
The Kings alluded to their financial difficulties in a recent statement issued to The Bee.
“These are unprecedented times and, like other companies across all industries, we are constantly evaluating how to manage the economic impact on our business and organization,” the team said. “We continue to work with the NBA as they review all options for return to play in consultation with public health officials and in line with governmental directives and guidance.”
This story was originally published May 11, 2020 at 4:00 AM.
