European football hit hard by Covid-19
● The Covid-19 global pandemic has caused a revenue decline across European football.
A review released by auditing firm Deloitte based on big five European leagues (Spanish La Liga, English Premier League, German Bundesliga, Italian Serie A and French Ligue 1) reveals that the revenue contracted by 13%.
The review is based on the 2019-20 financial year and highlights a severe shrink for the first time since the revenue losses suffered during the global financial crisis in 2008-09.
The impact of the Covid-19 pandemic on matchday revenue in the 2019-20 financial year is clear but the impact on the two largest revenue streams of the big five leagues, broadcast (which makes up 51% of big five revenue) and commercial (36%), remains uncertain.
The report points out that the combined revenue costs of Premier League clubs fell by 13% from a record $6.7bn in 2018-19 to $5.7bn in 2019-20. It is the first drop in Premier League history. In revenue terms, the Premier League was still 60% larger than the Bundesliga, its nearest competitor, with the gap however decreasing from 73% in 201819.
“Since Covid-19 changed the landscape of the top level European football we have seen developments in the broadcast rights market. The Premier League chose to renew their agreements with existing domestic partners at reportedly the same value in what may prove to be an astute decision,” explained Sam Boor, Deloitte sports business group senior manager.
“Serie A reportedly agreed a 5% reduction in value in their new domestic deal. Other leagues, including Ligue 1, have experienced more turbulence. We will find out over the coming seasons if these examples of flat renewals and declines are a trend that is here to stay or a temporary pause.”
These potential discrepancies are largely driven by two factors.
First, the extent of the delay in completing seasons, excluding for the Bundesliga and Ligue 1, meant the seasons became misaligned with the majority of clubs’ financial reporting periods with a particular impact in respect of recognition of season-long revenue, notably broadcasting revenue, and wage costs between financial years.
Secondly, rebates were requested by broadcasters for the delay, cancellation or behind-closed-doors nature of matches. For example, the majority of Premier League clubs have a financial year ending on June 30, with a half dozen on May 3, which in an uninterrupted season would allow for the season to be completed.
However, as the Premier League season in 2019-20 was not completed until July 26 2020, there was a misalignment.
In Spain, Barcelona is currently unable to register new players due to being in breach of La Liga’s economic controls around squad cost.
As a result, the Catalan club must sell or release players in order to reduce costs to register new signings.
The situation spells the death of super clubs and serves as a stark warning to the rest of European club football to exercise the necessary control over player costs to ensure sustainability. Aggregate operating losses increased in Serie A and Ligue 1 by €257m and €269m respectively.
Total operating profits reduced by 60% and 45% in La Liga and the Bundesliga respectively and fell from £837m to £55m in the Premier League.
The Premier League clubs reported a collective loss of £966m, their largest yet. These financial difficulties, along with the seemingly unshakeable interest in, and appetite for top level football content as evidenced by the historic growth of broadcast and commercial revenue, acted as a trigger for the unprecedented level of interest we have seen in European football from institutional investors over the past 16 months, reads the report.
This interest has also notably been more focused at a league-wide level, rather than the more volatile individual club level, than has historically been the norm.
The report further states that Serie A, Bundesliga and La Liga have been subject to approaches from private equity giants.
In the case of Serie A and the Bundesliga, the proposed investment was in return for a stake, and some level of control over, the league’s commercial rights.
The proposed investment in La Liga was focused on their technology services unit, La Liga Tech. Ligue 1 has taken steps to prepare itself for potential investment through the creation of a commercial subsidiary but this still requires approval from the French government.
All parties across European football have been affected by Covid-19, not least Uefa, with its revenues falling by 21% to €3bn following the postponement of the 2020 European Championships.
Premier League clubs had a collective loss of £966m, their largest yet