No College Sports This Fall Would Hurt These 3 Stocks the Most
The widespread cancellation of all collegiate sports in the fall due to COVID-19 would be most damaging for Disney, Fox, and ViacomCBS, according to Guggenheim Securities.
Stocks with the most exposure to NCAA football: Investors tend to focus a lot on the return of professional sports, but the significant amount of live NCAA football content at a lower annual estimated cost leads to outsized risk compared to professional leagues, says Guggenheim. Exposure for ViacomCBS, Disney (ESPN), and Fox is particularly strong.
ViacomCBS: The disruption comes at a time when college football has been attracting a huge audience. SEC games on CBS averaged 7.1 million viewers in 2019, their highest level since 1990, while the SEC championship game on the network had 13.7 million viewers, Guggenheim notes. For comparison, the NFL averaged 16.7 million viewers during the 2019-20 regular season, at an estimated annual cost of around 3x total cost for NCAA football. CBS has contracts with SEC, Mountain West, and Conference USA.
Disney: ESPN broadcasts 35 total bowl games, including the BCS Football Playoff. Guggenheim estimates that the network pays about $100 million a year for the 29 games outside of the playoff. ESPN’s major college football media rights agreements carry an average annual value of $1.275 billion, according to data compiled by the firm.
FOXA: Major college football properties under contract for FOX include Mountain West, Pac 12, Big 12, Big East, and Big Ten, totaling an average annual value of just over $500 million.
Domino effect: The Ivy League made the first move when it announced Wednesday that it will cancel all fall sports due to the virus and won’t consider the return of sports until at least Jan. 1, 2021.The Big Ten conference followed up by cancelling non-conference athletic competitions including football games. For context, the Ivy League generated about $30 million in football revenue in 2019, while the Big Ten generated $1 billion, according to Scott Dochterman of The Athletic.
All eyes on the Power 5: The Ivy League is the first D-I conference to cancel football, and could spark a domino effect like it did with college basketball. The Power 5 conferences include ACC, Big10, Big12, Pac12, SEC, and the group is expected to announce a decision toward the end of July. The Ivy League generated roughly $30 million in football revenue in 2019, while the Big Ten generated $1 billion, per The Athletic's Scott Dochterman.
Big picture: The likelihood of an NCAA football season happening seems to be shrinking rapidly. The large nature of college sports, which has participation from 130 Division 1 teams, will make it difficult for schools and the NCAA to abide by safety guidelines that would require pre-game testing and games played in empty stadiums. While the financial damage will be significant for media networks, the loss of a college football season would be catastrophic for schools and their athletic budgets. Axios sports reporter Kendall Baker notes that 80% of FBS athletic budgets are made up of football revenue, and the cancellation of football could break college sports.
