By Jonathan Copping, Lawyer, Stone King LLP, London, UK
Since the Covid-19 pandemic led to a national lockdown in the UK in March this year, football matches were initially suspended for over two months. When the 2019-20 season restarted in June, the remainder of the matches were played without fans present.
The late conclusion to the 2019-20 season led to a shortened summer break and the 2020-21 season commenced during the weekend of 12/13 September, again without fans present.
The football authorities had hoped that fans may be allowed back into stadiums in limited numbers in October and a number of ‘pilot’ events took place in September with reduced capacity crowds.
However, on 23 September, with the daily infection rate of Covid-19 increasing, the government announced a range of new restrictions, including those relating to mass gatherings. These restrictions effectively put on hold the return of fans to stadiums, with various sources claiming that March 2021 could be the earliest date that fans would now be allowed into stadiums.
Whilst teams competing in the English Premier League will undoubtedly take a significant financial hit on the loss of matchday revenue - through ticket sales, hospitality and merchandise - the Premier League clubs are likely to be somewhat buffeted from the full financial effect of playing matches without fans due to the vast TV revenues received, which account for a much greater percentage of overall revenue than matchday receipts. In fact, matchday revenue for the Premier League teams is now estimated to be 13% of annual revenue.
Notwithstanding the fact that only 13% of Premier League clubs’ annual revenue is made on matchdays, such is the success of the Premier League, that this figure is now approximately £677 million.
Arsenal, for example, has significant corporate hospitality - as well as the highest ticket prices in the Premier League - and is reported to generate approximately a quarter of their income from matchday sales. It should be fairly clear to see that a reduction in 13% or 25% of annual revenue will either significantly dent the amount of profit made or worse still wipe out any profit so that the business is operating at a loss.
At this stage, there has not been talk of any Premier League clubs hitting financial difficulties if matches are played in empty stadiums for the 2020-21 season, although it is possible that wage reductions may need to be negotiated and much will turn on whether the owners of the clubs will be willing to underwrite the reduction in revenue.
It is the football clubs competing in Leagues below the Premier League, that rely significantly more on matchday revenues, and they will be severely affected by the government’s latest announcement.
Football clubs competing in League One and League Two are estimated to earn approximately 70% of their annual income from matchday sales. Whilst the owners of some clubs will, no doubt, invest funds to keep their clubs alive, any club that was already treading water with fans in attendance, will be particularly vulnerable to continuing in existence.
The Football League, comprised of 72 clubs, has requested a £250 million bailout from the Premier League; however, the Premier League is yet to decide what financial assistance it could provide.
Looking even further below the Football League, The National League tiers five and six of the football pyramid, consisting of a mixture of fulltime professional and semi-professional clubs, is facing an even bleaker outlook and is actively engaging with the government and the English Football Association, to secure a financial support package. Clubs competing in The National League rely even more heavily on matchday revenues to survive as they receive barely any TV revenue or income from player sales.
With the 2020-21 season having only just commenced and clubs now facing the prospect of not receiving matchday revenue for at least twelve months (March 2020 – March 2021), it would not be surprising to see some football clubs becoming insolvent and disappearing.
A bleak picture indeed for these clubs and their fans alike!