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March 19, 2020 
By DYLAN BYERS in Los Angeles & AHIZA GARCÍA-HODGES in San Francisco Good morning. 🔥 The coronavirus crisis is "potentially the biggest story I’ll ever cover," my colleague Lester Holt says. "We’ve all covered the burning house, but this time we’re in the house."
🌃 Tonight: Lester will host a coronavirus primetime special in collaboration with Facebook at 10 p.m. ET on NBC, MSNBC, NBC News Now and Telemundo.
Join the Market: 🗞️ Newsletter | 🎙️ Podcast
Maddie Meyer/Getty The Big Picture Coronavirus could upend the entire sports-media business. Here's how.
Moving the Market: In the wake of the coronavirus outbreak, the American television industry may soon be forced to reckon with the possibility that its entire business model could collapse due to the indefinite suspension of live sports. This seemingly far-fetched scenario will only become more likely the longer the outbreak lasts.
• The big picture: Television's stranglehold on sports rights is one of the last things keeping it alive as consumers cut the cord and flock to digital services. A long-term absence of live sports, especially the NFL, could lead to a breakdown in the agreements between sports leagues, broadcasters and distributors and shake the industry to its foundation.
First, a primer: The sports media business relies on a simple economic model. Leagues and associations like the NFL, NBA and MLB sell broadcasting rights to networks like NBC, CBS, Fox and ESPN. The broadcasters then try to recoup that money and turn a profit by charging fees to distributors like AT&T, Comcast and Charter while also selling advertising revenue. (Comcast owns NBCUniversal, the parent company of NBC and NBC News.)
• This arrangement is the bedrock on which the television industry exists. Last year, 41 of the 50 most-watched TV broadcasts were NFL games. The College Football Playoffs and the MLB World Series accounted for another three. When you pay your cable bill, if you still have a cable bill, ESPN gets more of that money than any other network.
• Without sports, and especially without football, fewer consumers would pay for television (too expensive, why not sign up for Netflix?). Distributors would pay significantly less for networks like CBS and ESPN (why should they pay hundreds of millions of dollars every month just for SportsCenter?). The entire television business could, over time, collapse.
Enter coronavirus: The broadcasters now find themselves on the hook for sporting events they'll never get to air. Meanwhile, distributors are paying fees for channels that fewer and fewer consumers are watching. Those consumers are now all the more likely to cut the cord (which also drags down advertising revenue).
• But there's a caveat: As part of their legal arrangements, sports leagues are contractually obligated to provide broadcasters with a certain number of live sporting events. The broadcasters, in turn, are contractually obligated to provide a certain number of hours of live sports to the distributors. In a world without sports, that becomes impossible.
• If the sports suspension continues to the point where the parties fall into breach of contract, distributors could renege on agreements with broadcasters, and broadcasters could renege on agreements with the leagues. The parties might also invoke a "force majeure" clause allowing them to void contracts due to uncontrollable circumstances.
• If that happens, the sports rights deals that have sustained the television industry would be gone. The television networks would be the hardest hit. None more so than ESPN, which built its entire business on the back of live sports. The network presented 24,749 live sporting events last year, according to its website.
What's next: The collapse of the existing system would put sports rights back on the auction block as early as 2021, but in a very different landscape. Traditional buyers, now crippled, would cede the rights to tech and telecom giants who have the ability to deliver live events directly to consumers at scale: Amazon, Apple, AT&T, Comcast, Google, Facebook — and perhaps Netflix, should it ever decide to get into live programming.
• The big question: Does the coronavirus pandemic last so long that it forces the NFL to cancel its 2020-2021 season? The federal government currently anticipates that the pandemic “will last 18 months or longer," in which case the answer would be yes. If that is the case, the television industry should brace for radical change.
🏀 Charity Stripe 🏀
NBA Commissioner Adam Silver told ESPN he isn't ready to cancel the current season, but he did say that the league's calendar might be reshaped.
• Plus: Silver floated the idea of a one-off charity match to provide a creative diversion for people stuck at home.
Thierry Monasse/Getty #AMA Bill Gates talks coronavirus
Sage advice: Bill Gates says that if things go well the coronavirus shutdown will last as long as 10 weeks. "If a country does a good job with testing and ‘shut down’ then within 6-10 weeks they should... be able to open back up,” he said during a Reddit #AMA yesterday.
• "The current phase has a lot of the cases in rich countries. With the right actions including the testing and social distancing (which I call ‘shut down’) within 2-3 months the rich countries should have avoided high levels of infection," he said.
The big picture: Gates said his biggest concern is "the economic damage" that "will affect the developing countries who cannot do the social distancing the same way as rich countries and whose hospital capacity is much lower."
• Gates also said he believes that "the first vaccines" could be available before 18 months and that they "will go to health care workers and critical workers."
• He also predicted that the "economic impact of the ‘shut down’ will be large, but if it is done well... eventually we can open back up."
• The subreddit that Gates did the Q&A session on, /r/coronavirus, has added 1 million subscribers in the last two weeks and now has 60 volunteer moderators running it, our colleague Olivia Solon reports.
Nicholas Kamm/Getty New Realities Drive-ins regain popularity
Talk of Tinseltown: Drive-in theaters are getting a boost as coronavirus continues to spread and social distancing limits other entertainment options, LAT's Daniel Miller writes.
• The big picture: The theaters are giving people a break from the confinement of their homes while still keeping them isolated.
What's next: The boost could be short-lived if movie studios continue to postpone new releases or release films digitally ahead of schedule, further incentivizing people to stay home.
Bloomberg/Getty Fog City Quarantine San Francisco on lockdown
• The big picture: "San Francisco is an early test of what the rest of the U.S. may see in the coming days as mayors and governors curtail daily life to try to slow the spread of the coronavirus," our colleague David Ingram writes.
• "It is the most extreme measure taken nationwide, although New York Mayor Bill de Blasio has said he is considering something similar by the end of the week."
The scene: Streets are quiet as residents obey the shutdown ordinance, which is backed by the threat of jail time. Grocery stores are limiting the number of people who can be inside at any given time. Occupancy in some hotels is down to 10 percent.
• Marijuana dispensaries remain open after cannabis products were declared an essential medicine; joggers keep a 6-foot distance from others and people at an outdoor gym work out wearing gloves.
What's next: "What happens next is anyone's guess."
🎬 What's next: A Hollywood bailout. "The National Association of Theater Owners [has] asked the federal government for loan guarantees to help the industry through a time when strangers cannot gather in the dark to see the latest films," per NYT's Nicole Sperling and Brooks Barnes.
See you tomorrow.
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