By Iacovos Iacovides, APC Sports Consulting, Nicosia, Cyprus
Sport is one of the industries hardest-hit by the Covid-19 Pandemic, due to the fact that it relies on live action and interaction, momentum and the gathering of large crowds in stadia and other venues.
The outbreak of this virus was like Armageddon for sport, which saw most of its revenue streams temporarily blocked and stadia closed indefinitely, whilst clubs still had to pay the enormous salaries to their athletes. For athletes of individual sports, the situation was even grimmer. The Tokyo Olympics and the Euro Championship were not spared either.
Ranked as the best and most entertaining League in the world, as was expected, the English Premier League and its clubs have suffered terribly during the past couple of years. Within the first three months of the virus’ outbreak, revenues dropped by almost 15% and the situation got worse thereafter. Manchester United alone witnessed a 16% rise in their debt.
Whilst across the pond, in the US, leagues, such as the NBA, were able to negotiate with athletes for wage adjustments in the face of the unprecedented Pandemic.
The Premier League, due to its decentralized structure, was not as lucky. Of around 15 clubs, which are considered traditional Premier League clubs, only 6 were able to get their players to agree to wage reductions.
Contrary to conventional wisdom, football remains largely dependent upon matchday revenues as sponsorships and other cross-corporate agreements are nowhere near enough to sustain club finances; and the further you move down the pecking order – from the Premier League to the Championship and League 1 – the dependence of clubs on matchday revenues rises exponentially.
London clubs West Ham United, Tottenham Hotspur and Arsenal were the three worst-hit clubs of the League, which is no coincidence given that their stadia can host around 60,000 fans. Indicatively, Arsenal and Manchester United generate roughly €132m and €114m respectively in matchday revenue per year (pre-Pandemic figures). Tottenham allegedly make around £1m per game in their new stadium which, by the way, cost £1billion and the forgone income could have gone a long way towards those interest payments.
Moreover, like every relationship, distance takes a toll. The inability of fans to see their teams and favourite players live or visit club shops and bars can lead to a temporary drop in interest and engagement, which means fewer shirt and other merchandise sales and reduced online interaction with relevant social media accounts, which can lead to a further drop in revenues.
It seems that English Premier League clubs had not been on a sound financial footing even before the Pandemic hit and the financial shock that it brought about precipitated the crisis. Even the astonishing inequality of the League – with the top 6 clubs accumulating more than 70% of inflows – it is questionable whether their modus operandi is sustainable.
The problem, however, is not exclusive to the English Premier League and it seems that European football, as a whole, is struggling to ensure its long-term financial survival, which is particularly true for the big clubs. It is no coincidence that European juggernauts from the four major leagues tried to break from UEFA (Champions League) and form the infamous European Super League (ESL), citing mainly financial reasons. The ESL move was, of course, killed in its crib by UEFA and the clubs’ own fans - at least for now.
The list of clubs suffering from financial distress keeps growing with no end in sight. European clubs – a lot of them traditional powerhouses – have found themselves deep in debt and will need to restructure operationally and organizationally in order to survive.
The coming years will be tough for the sport and we will, undoubtedly, witness major changes in ‘the beautiful game’!
For more information on this and other sports issues, log onto the APC Sports Consulting website at: ‘www.apc-sport.com’.