3 Lessons Pro Sports Has to Offer Crowd-Driven Businesses in the Wake of COVID-19

Watching how pro sports navigate their seasons post-COVID-19 — without the fans in attendance — offers a hint for other crowd-dependent businesses.

By: Katie Dwyer | June 21, 2020

Some businesses have been able to pivot and adapt to physical distancing measures amid the pandemic, performing services and selling products online when possible and introducing additional safety measures when it’s not.

But for industries that rely heavily on the energy of the crowd experience — concerts, festivals, conventions and professional sports to name a few — that shift hasn’t been possible, or at least, not profitable.

It’s unlikely that any event drawing hundreds or thousands of people will be allowed to take place before the development of a vaccine for COVID-19, which isn’t projected to happen until next year at the earliest.

With no clear timeline established and the possibility of waiting the virus out evaporating, these crowd-driven businesses need to think about how to execute events in the current environment if they want to survive.

Currently, pro sports leagues are feeling that pressure most, not only because fans are clamoring for a diversion that will bring a sense of normalcy back to their routines, but also because teams stand to lose millions for every game they don’t play.

The NBA averages between $1 million and $1.5 million in ticket sales per non-playoff game and is projected to lose nearly $500 million this year, including post-season games. MLB teams also generate more than $1 million per home game in sales of tickets, parking passes, concessions and merchandise. For the NFL, these sales constitute 38% of total revenue.

Watching how these leagues navigate the relaunching of their seasons — without the fans who bring in so much cash — may offer hints for other crowd-dependent businesses. Here are some three things to watch for as sports leagues consider their next steps during COVID-19.

1) How to Replace Ticket Revenue

Currently, none of the reopening plans shared by pro sports leagues address the ticket revenue shortfall.

Though some of the loss will be offset by elimination of salaries for stadium employees and lower insurance premiums that reflect reduced exposures of an empty venue, more creative solutions will have to be devised to monetize the spectating experience in other ways.

“Our sports clients are likely in a better position to do this, because while the in-person fan experience is, of course, important, our clients have other ways to bring the product to the fans,” said Marc J. Blumencranz, CPCU, managing director of BWD Sports and Entertainment, an NFP company, which builds custom insurance and risk management programs for sports organizations.

The NBA averages between $1 million and $1.5 million in ticket sales per non-playoff game and is projected to lose nearly $500 million this year, including post-season games. MLB teams also generate more than $1 million per home game in sales of tickets, parking passes, concessions and merchandise. For the NFL, these sales constitute 38% of total revenue.

Some have suggested selling digital tickets to exclusive virtual reality viewing experiences.

Digital ticketing, with tiers that allow fans access to different vantage points (i.e. do you want to watch from the nosebleeds or pay more for a seat behind home plate?) could translate well to events like concerts, plays or other performances.

For events like conferences and conventions, registration fees could likewise be tiered, with certain virtual zones, presentations or forums considered off-limits without a ticket.

2) How to Simulate Crowd Energy

The sound, bustle and collective enthusiasm of the crowd is what makes pro sports games worth attending and worth watching.

Recreating this environment is the biggest challenge facing pro leagues. Without screaming fans, will people be interested enough to keep from changing the channel?

John Scotti, managing director, Team Scotti, an NFP company

Increasing interactive components of the game’s broadcast could potentially supplant crowd energy to keep viewers engaged.

Soliciting fan input and incorporating comments or questions submitted via social media channels can help fans feel more connected.

We’ve already seen organizations in the insurance industry deftly incorporate this interactivity as conferences went virtual.

The Vermont Captive Insurance Association’s annual conference to be held virtually this August, for example, will include chat functions that allow attendees to interact with exhibitors in the virtual exhibit hall and engage with presenters of educational sessions.

Holding virtual events in real-time, along with interactive components, can help to recreate the collegiality of a live, in-person event.

3) How to Retain Interest in Live Events

There has been some speculation that even once it is deemed safe to sell every seat in the house, teams could struggle to generate interest for a couple of reasons.

For one thing, people who lost their jobs or took pay cuts during the pandemic may struggle to afford tickets.

As the world enters into another recession, people may be more frugal when it comes to entertainment-related purchases.

There is also some fear that some fair-weather fans will simply lose interest.

Key to the longevity of any crowd-driven business will be its ability not only to offer meaningful experiences under lockdown but to also bring people back once restrictions lift, and that will depend on their ability to demonstrate that they can operate safely.

If nothing else, professional sports teams have been very detailed and clear in how they intend to keep players, staff and their families safe.

“We work to align our practices so that our office follows similar procedures as our clients,” said John Scotti, Managing Director of Team Scotti, an NFP company, an insurance brokerage dedicated to the life, accident, and health insurance needs of Major League Baseball.

“As an example, recently we wrote a COVID-19 Life and Disability Underwriting Policy and Procedure, which was approved by MLB, in order to assure that our employees follow proper protocol when games resume.”

“We know sports fans are anxious to see their favorite teams return to play in whatever format it takes, and we expect them to return to the stands and keep the teams successful over the long term,” Blumencranz said.

“Nobody would have thought it possible to have professional sporting events taking place outside of teams’ home cities without fans. We are impressed with some of the proposals that have been developing in short order while the course of the pandemic is still uncertain. Sports are important to maintaining some amount of normalcy in a strange new environment, and we are proud to be able to contribute in any way we can.” &

Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.