Impact of COVID-19 on Sports (Football) Industry

Furloughing non- playing staff and then reversing the decision by clubs like Tottenham Hotspur and Liverpool due to criticism shows desperate situation clubs around the globe are in and other clubs in various countries have begun to lay off players and non-playing staffs.

Like all the sectors and industries, the sports industry is no exception to pandemic COVID-19. This might not be the time talking about football or any sports but sports (football) industry is one of the major players in the global economy. Since we are talking every day about the economy and economic crisis, why not talk about the sports industry ($500bn approx.) and assess its current and upcoming situation?

Around $4.5bn, the loss is expected from lost broadcasting, sponsorship, and matchday revenue for “Big five” leagues if the season is not completed.

This is the greatest disruption in sporting events since World War II that has affected the whole world. All of the sporting events have been canceled or postponed. Big sporting events like the Olympics, Euros, Copa and Wimbledon, etc. have not been spared. We will assess the current "Football Industry" focusing on the "Big Five".

Like other sectors, there are millions of lives in football that have been affected due to COVID-19. Generally, when we think about football, we only think about this beautiful game played on a football pitch and the players or managers involved but the bigger picture shows that there are millions of life connected through football. 

Be it a pub owner, restaurant, travel and ticketing agency or staff who work to make the game possible like security, ground staff, driver, cameraman, control system staff, broadcasting unit, cleaning staff, etc all are affected. 

Many unseen or unheard “players” behind the scene contribute in making this beautiful masterpiece.

Most football players outside the elite leagues have earned similar to or below average national income and will have a devastating effect by salary decrease (FIFPRO, 2020) [1].

How does the Football Industry run? (Current Situation)

Generally, three main ways that football or any sporting event generates income are broadcasting, commercial, and matchday revenue. The basic concept is like - if more people are watching, it will become more valuable and generates more cash. More than half of the global population (3.5 billion) people turned over to watch the FIFA World Cup 2018 according to FIFA [2].

World Cup is known as the mega event of football but it takes place only once every four years. Nurturing and developing football every day is carried out by various club systems in various countries across the globe. The popularity of football and the level of affluence on which it operates is very hard to compare with any other sport. Club games satisfy the craving of football fans around the world each year so that waiting for the “big event” World Cup becomes bearable.

Commercial sponsors and advertisers pay large sums of money for the opportunity to associate their brands with Football, and television networks engage in extensive bidding wars for the rights to broadcast the event’s matches.

In the United Kingdom alone, the domestic rights for live television broadcasts of the EPL’s 2016-2017 to 2018-2019 seasons were sold for over $7.3 billion ($2.4 billion per season) to the highest bidders (League, 2015)  [3].

Source: English Premier League

European club football, with Europe’s top five club leagues—the EPL (England), Bundesliga (Germany), La Liga (Spain), Ligue 1 (France), and Serie A (Italy) are considered as “Top five” league of the world because of the playing standard and cash flow.

Current Broadcasting deal (Top five leagues)

League	Broadcasting Worth (Domestic + International – Approx. in billions)
EPL (England)	$3.8bn
La Liga (Spain)	$2.3bn
Bundesliga (Germany)	$1.5bn
Seria A (Italy)	$1.4bn
Ligue 1 (France)	$1.3bn

Source: (Sartori, 2019) [4]

As the interest and viewership numbers continue to rise, so, too, will the payments made through foreign broadcasting deals. This will only pump more money into the pockets of team owners, who will likely then reinvest these revenues in their teams.

Current Shirt sponsorship deals (Europe’s Big Five)

Clubs	Sponsorship deals
Real Madrid	€190m per year(€120m from Adidas, €70m from Emirates)
Manchester United	€161m per year(€86.9m from Adidas, €74.1m from Chevrolet)
Barcelona	€160m per year(€105m from Nike, €55m from Rakuten)
Paris Saint- Germain	€135m per year(€75 from Nike, €60m from Accor Live Limitless)
Manchester City	€127.4m per year(€75.3 from Puma, €52.1m from Etihad)

Source: (Browning, 2019) [5]

Now you know how your club can afford the wage of your favorite star. :)

The biggest or most-watched football league in the world, English Premier League (EPL) recently signed a contract of $12bn with broadcasters for three seasons in 2019 which at the time looked as extraordinary feat but that might change quickly. EPL clubs are bracing themselves for $60-150m in lost revenue due to COVID-19.

Broadcasters are trying to continue to engage customers by showing classic matches, archived contents, documentaries, Esports, and niche competitions during this crisis so that subscription doesn’t drop.

Around $4.5bn, the loss is expected from lost broadcasting, sponsorship, and matchday revenue for “Big five” leagues if the season is not completed.

The sponsors and broadcasters do a lot of reinvestment in large amounts according to sporting potential. The current financial model used has been hit very hard particularly in small and mid-sized leagues. Due to the current scenario, leagues are unlikely to meet their commitments to broadcasters that will limit the distribution of income back to the club. No live games mean no TV deals and no matchday income; no income means no club. This is a scary scenario for all the football associations around the globe (Hall, 2020) [6].

So, What’s next?

These options are considered to deal with this crisis:

• Cancel or void this season: No promotion or relegation and no Champions. Few leagues have already done this and looks the most logical option at the moment. A recent example is Ligue 1 (France) and  the Dutch league knows as Eredivisie to do so [7]. But this option violates the contract with the broadcasters and they might demand huge compensation.

• Finish the league as it is: Many would say this is the fairest option of all but think about the relegation battle. Relegation is not decided yet in most of the leagues so there is a chance for the clubs to avoid it. Further, relegation isn’t just about the league status but a huge amount of money is associated with it which can suck the life out of any club.

• Use a mathematical tool to predict: I am not a fan of this option because we all love football because of its unpredictability. Using a model in simple words is just making a more sophisticated prediction. This method is very unlikely considering the current updates form Associations.

• Playing behind closed doors: Empty stadium with no football fans. I don't know if it will be considered a proper "football match" without fans. However, this is the most likely scenario for EPL, La Liga, Seria A, and Bundesliga. Bundesliga is expected to restart around May 8 and players for other leagues are returning for training. All the games might be played in the area, which is less affected in Neutral ground. Some clubs like Chelsea have provided their hotel for NHS (health workers [8]) so it’s very unlikely that the games will be played in the club’s home stadium. This will result in the isolation of players, staff, and all the people involved for at least a month or two.

The main reason to finish this season in this manner, risking the lives of people (player, staff, and other) is to save money; Associations have to pay back broadcasters for not fulfilling their commitments.

Since everybody is in loss; no one can come victorious in this situation. However, through mutual understanding/clauses that will mitigate the effect like paying broadcasters certain compensation, granting additional rights and extended agreements are some of the measures that might ease the situation (Hall, 2020). If all the bodies (Nations, Clubs, Players, Staff, and People) play their part then it will be easier to survive and avoid unnecessary damage.

Is it a wise decision to take such a high risk of exposing and separating people from their families in this dire situation? Only time can tell.

Next season football is already affected and we can only imagine the consequences it will lead.

The bigger question is ” Will the football we all know change”?

And

"Is it humane to risk life for financial gain?"

Something to hope for

With an ancient origin dating back to the second and third centuries B.C., football has managed to withstand the tests of time and propagate its legacy amidst the rise and fall of empires, the outbreak of deadly diseases, and the conflicts brought forth in back-to-back, world wars. That it has survived in some form or fashion over these 2,000-plus years lends credence to both its inherent durability and its longstanding ability to capture the attention of the masses (Pifer, Wang, Scremin, Pitts, & Zhang, 2018) [9].

I hope it will continue to survive for centuries to come because there is a power in football that brings people together. I wish for everyones safety and good health. We have to be patient. This time will pass and we will be back stronger than before and we'll enjoy this beautiful masterpiece together again.

If you are interested in the Impact of COVID-19 on Supply Chain. Please Click here and for Lock down Stories, Click here.

Thank you for your visit. I hope everything was clear, if not please do not hesitate to contact me for suggestions or queries regarding this topic. Honest feedback is highly appreciated. You can contact me via “ashishworks2020@gmail.com “. Thanks again.

References

Browning, O. (2019, 10 26). The top 10 teams with the most lucrative kit sponsorship deals in world football. Retrieved from Givemesport: https://www.givemesport.com/1516260-the-top-10-teams-with-the-most-lucrative-kit-sponsorship-deals-in-world-football

FIFPRO. (2020, March 27). CORONAVIRUS IMPACT ON PROFESSIONAL FOOTBALL. Retrieved from Football Players Worldwide: https://fifpro.org/es/sector/coronavirus-s-impact-on-professional-football

Hall, S. (2020, April 09). This is how COVID-19 is affecting the world of sports. Retrieved from World Economic Forum: https://www.weforum.org/agenda/2020/04/sports-covid19-coronavirus-excersise-specators-media-coverage/

League, P. (2015, August 21). Premier League awards UK live broadcast rights for 2016/17 to 2018/19. Retrieved from Premier League: https://www.researchgate.net/deref/http%3A%2F%2Fwww.premierleague.com%2Fen-gb%2Fnews%2Fnews%2F2014-15%2Ffeb%2F100215-premier-league-uk-live-broadcasting-rights-announced.html

Pifer, N., Wang, Y., Scremin, G., Pitts, B., & Zhang, J. (2018). Contemporary global football industry: An introduction. 10.4324/9781351117982-1. ResearchGate.

Sartori, A. (2019, 08 06). Broadcasting revenue landscape – big money in the “big five” leagues. Retrieved from Football Benchmark: https://www.footballbenchmark.com/library/broadcasting_revenue_landscape_big_money_in_the_big_five_leagues