By Mark Ollerton: www.markollerton.com
The COVID-19 pandemic has put many people in lockdown and sent shockwaves around the world, leading to a public health emergency and a spiral in the global economy.
As experts research ways to fight the Coronavirus and look for a treatment, many industries are being impacted by global governments’ decisions to lockdown, close international borders and businesses. Football is just another industry that is feeling the heat of the pandemic, as we outline the key impacts this is likely to have on Football both in the short and long term.
In March, many of the European leagues were impacted by COVID-19 with Spain’s La Liga the first major league in Europe to be suspended, followed by the Bundesliga, Serie A and then finally the Premier League after Arsenal manager Mikel Arteta tested positive for the disease. Surprisingly, the Belarus Premier League is the only football league currently ongoing during the crisis.
The suspension of the major European football leagues has many of us wondering what the impacts will be on Football in the long term and whether the Football business model will ever be the same after we are on the other side of this pandemic.
The Business Model of Football
The 3 main income streams of football are Broadcasting (sales of media rights), Commercial (sponsorship and advertising), and Match Day Revenue (ticketing and hospitality). Irrelevant to which league this is, each football team has their own identities, employees and fan base but the rules of the game are set by their respective league. The key here is, the more eyes on the product the more valuable the team and league.
The general principle is that the organizing body distributes its total income between its participating clubs. This is usually structured as a minimum guaranteed payment with a football clubs’ performance. These clubs sign their own sponsorship agreements or develop their own direct-to-consumer (D2C) media subscriptions. But fundamentally, the financial success of any individual club relies on its involvement in an overarching league.
The longer the shutdown goes on, these leagues are unable to meet their commitments to broadcasters like the $12 billion agreement the English Premier League has with broadcasters over 3 years. This has a huge impact on the football industry, it limits the ability for the league to distribute the income back to the clubs. As a result of no games, this means no TV, no matchday income and no clubs.
Football Contract Issues
Footballers contracts in all the major European leagues are typically given a permanent contract based on the calendar football season. So, for this season many contracts will expire June 30 at the end of the typical football season cycle, however, with the current circumstances it doesn’t look like the season will be finished in any league by this date.
To make this more interesting, these players will then become “free agents” and are able to seek contracts with new clubs as their current contract states. Meaning that due to the suspension, many players will be out of contract without the current season finishing which could cause all sorts of problems after June 30.
In the past, players have been able to run down their contracts to become a “free agent” so they are able to command higher wages at their new clubs with no transfer fee. FIFA have suggested extending the contracts of footballers to the revised end of season, but they have no legal power to impose contract extensions. It may be difficult for clubs to convince players to stay and extend when they have more lucrative offers elsewhere.
The impacts of this lower down the leagues of the EFL (English Football League) could be devastating with many clubs not able to afford player extensions to the end of the season. The clubs in the lower leagues, who already operate on a tight budget will be forced to lose players and in some circumstances the livelihood of the club as they only survive on gate receipts for revenue.
The COVID-19 pandemic would raise issues in the transfer window where players are able to move between clubs which is set to open July 1. FIFA’s current proposal is to delay the transfer window until the end of the extended football season. However, the timing of the transfer window is determined by the footballing authorities of the leagues around Europe. Many footballers may find themselves out of contract as of June 30, but then unable to sign for a new club until the extended season is complete.
Lower down the footballing leagues around Europe, this may affect many players with them unable to find work as many clubs are unable to provide contracts given their own financial struggles. As the smaller clubs in the lower league begin to struggle and potentially close, this is going to impact on the options for footballers to find work.
Since many of the football leagues are suspended, it has presented the opportunity for virtual technology to grow in the football industry. Many leagues have used esports to maintain interest in the game, engage fans whilst bringing in revenue. This was an idea that may have been counterintuitive once upon a time, but now seems logical.
The delay of the football season caused by COVID-19 could have far-reaching long-lasting consequences for football. The UEFA European Championships have now been pushed back to the summer of 2021, what impact will this then have on the first winter World Cup set to be in Qatar in 2020?
Typically, these international tournaments are huge commercial machines for all parties involved and it remains to be seen what the long-term impact of the COVID-19 pandemic might have on these tournaments in the future. The public views on travel, mass gatherings and football in general could all be impacted in the long term as a result of the COVID-19 pandemic.
From: Mark Ollerton: www.markollerton.com