The authoritative Swiss Ramble reviews the financial situation of the Premier League in the pandemic. He notes, 'Although England’s top flight may be in a stronger position than lower leagues, it still faces immense financial challenges, due to lost revenue.' He adds, 'The reality is that football did not look like a particularly healthy business even before coronavirus arrived, as the current Premier League clubs posted a combined £330m loss with 12 of them losing money, including two reporting deficits over £100m, namely Everton and Chelsea.
On the face of it, Premier League clubs should be fine, given that they generate an impressive £5.2 bn revenue between them. However, this disguises the fact that the Big Six account for £3 bn of this total, i.e. around 60%, leaving £2.2 bn shared between the other 14 clubs. The highest earning club Manchester United £627m has five times as much revenue as the bottom club Norwich City (estimated) £128m. Furthermore, the gap between the 6th placed club (Arsenal £395m) and 7th placed club (West Ham United £191m) is over £200m.
Premier League CEO Richard Masters told clubs they would lose £1.137 bn revenue if the season is not completed. The Swiss Rambles says, 'My estimate is £1.131 bn, which is almost identical, though my split is a bit different: match day £120m, TV £762m, commercial £249m. Either way, it’s a lot of money.'
Bearing in mind these are just estimates, Premier League clubs would lose between £32m and £111m. The two Manchester clubs would lose the most (United £111m and City £100m), while the rest of the Big Six would also be significantly hit: Liverpool £96m, Chelsea £86m, Spurs £82m and Arsenal £74m. However, revenue loss is also still very much a major issue outside the Big Six, as proportionally the hit is worse. For example, Leicester City £53m and Burnley £41m would lose around 30% of their revenue, while Manchester United £111m is equivalent to 'only' 18% of their revenue.
Match day in the Premier League only accounts for 13% of total revenue, but it is still worth £686m. It is also an important revenue stream at many clubs, e.g. four clubs generate more than £80m here: Manchester United £111m, Arsenal £96m (24% of their total revenue), Liverpool £84m and Spurs £82m.
The major concern for Premier League clubs is a potential £762m loss of TV money (Sky £371m, BT Sport £50m, overseas £341m), which is around 29% of normal payment. Assuming this 29% reduction is applied equally to each club, the loss would range from Liverpool £51m to Norwich City £27m. It is worth noting that 2019/20 TV deal is 8% higher than previous season (domestic down 7%, overseas up 34%), so the loss compared to 2018/19 would be partially offset, especially as overseas increase is based on league position, e.g. Liverpool loss would be £28m (instead of £51m).
The size of the potential TV loss explains why there is so much talk about completing the season by playing games behind closed doors, maybe in a quarantined camp. Also reports that TV companies will not demand repayment, given that they will be bidding for new rights in future. Instead, options under discussion with TV companies include extending the current rights, awarding additional live games next season (for the same money) or allowing them to broadcast all remaining games this season (on top of contracted games) if played behind closed doors.
Commercial revenue losses are difficult to estimate, as contracts are confidential, but likely that sponsors will push for reductions, as marketing budgets among first to be cut in an economic crisis. Based on 17.5% of income (average of 15% and 20%), the loss would be £249m. Using this simple percentage of revenue approach, Manchester United would lose the most with £48m, as they have the highest commercial income of £275m. The Big Six would lose between £19m and £48m, but all other clubs would “only” lose between £2m and £7m, which does not feel overly damaging.
However, there will be a problem at end of season when many shirt sponsorships & kit deals come to an end, so will be up for negotiation in a much tougher market.
The Swiss Ramble warns, 'Any club whose business model relies on player trading must be concerned, as it seems likely that the transfer market will collapse this summer, leading to lower prices.'
Comments
Post a Comment