Due to COVID-19, Financial Crisis Looms Large Over Football Clubs

As a result of the coronavirus outbreak worldwide, like most other sports, the football world too has come to a standstill.

Amongst the worst hit countries around the globe are Italy and Spain – the two powerhouses of football. Both countries are not only the worst hit zones in Europe but also globally. In fact, domestic club football across much of Europe has been halted completely due to the pandemic.

Along with Italy and Spain, both England and Germany have also suspended any kind of football in the country. UEFA, which is the governing body of football in Europe, have also suspended the Champions League and the Europa League till further notice.

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Juventus star Cristiano Ronaldo.

With this suspension, not only the fans are at the receiving end but the clubs are also staring at a financial meltdown. Though earlier it was decided that matches might go on in front of empty stadiums but that wouldn’t have been enough to prevent the financial misery that the football clubs are facing worldwide.

With a big chunk of income coming from ticketing and match-day hospitality, the clubs would have still suffered a big dent as far as their financial position is concerned.

And now, with no matches taking place at all, the hope of earning revenues from television deals and sale of broadcasting rights has seen a similar fate.

Speaking to AFP, Bayern Munich chairman Karl-Heinz highlighted how the unexpected break due to the COVID-19 has raised a question on sustainability of the football clubs, especially the ones that are not in the top rung.

"“At the end of the day, it’s about financing professional football. If payments due from broadcasters don’t come in, a lot of small and mid-size clubs will have liquidity problems.”" - Bayern Munich Chairman Karl-Heinz

And the first signs of the crack are already emerging.

Bundesliga Paving the Way

Footballers in Bundesliga have reportedly agreed to take pay cuts.

Reportedly, footballers in the Bundesliga have agreed to take pay cuts to help their club survive the economic impact during these tough times.

According to German tabloid newspaper Bild, Bayern Munich players and club officials have already agreed to a pay cut of 20 percent cut in their salaries. Their wage bill reached 336 million euros last year, almost half the club’s turnover.

In fact, it was the players of Borussia Moenchengladbach who were the first to propose a pay cut. German clubs Werder Bremen, Schalke 04 and Borussia Dortmund have followed suit. Bayer Leverkusen is also expected to go for reduced salaries.

Serie A & La Liga Following Suit

Cristiano Ronaldo (L) and Lionel Messi.

Not only Bundesliga, other clubs all cross different leagues in Europe have also not been spared the pay-cut syndrome.

Just like Bayern, Juventus and Barcelona might also announce an across-the-board cut of 30 percent to player wages within the next 24 hours. If Juventus go ahead with the pay cut, superstar Ronaldo is set to lose out on a staggering 9.2 million euros.

Reportedly, Barcelona and its players are close to agreeing to a reduction of wages that will decrease their financial burden. Barcelona’s annual wage costs for the senior squad is over 500 million euros.

But the La Liga clubs are facing an uncertain future. They are expected to lose a total income of over 600 million euros from television rights and ticketing if no more matches are played this season, according to a study by Spanish radio station Cope.

In a country like Spain, where around 2,00,000 people have football-related jobs and the sport represents 1.4 percent of GDP, according to La Liga, this pandemic could have a far impending effect.

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Premier League Still Faring Better

The English Premier League trophy.

Meanwhile, the Premier League clubs are yet to bear the brunt of the novel coronavirus outbreak. Their lucrative television deals should be able to fend them off for few weeks without matches.

But same can’t be said about the other leagues in England. Matches in the Football League – three divisions below the top flight – have been postponed along with the Women's Super League. The smaller clubs depend on ticket sales and commercial activities, with a minuscule part coming from media rights.

“This will have serious financial implications, with some clubs possibly running out of money,” Peter Coates, chairman of second-tier side Stoke City, told the BBC.

Lower Leagues Badly Hit

The situation is similar in both Spain and Italy.

According to AP, a Spanish third-division football team had just started selling a special membership package for the decisive portion of the season, hoping to bring in some extra income.

Meanwhile, Italian third-division club Casertana was one of the many lower-league teams to announce it can no longer pay players’ wages.

We have to keep in mind, in most of these countries, there are no big scale television broadcast deals for teams outside the first and second divisions.

In Scotland, where there are no big broadcast deals to offer a safety net, the situation is worse. Scottish Professional Football League chief executive Neil Doncaster has warned clubs "to examine their insurance arrangements in case of matches being affected."

The only saving grace for the Scottish club is that Article 12 in the standard playing contract used in Scotland allows clubs to take such action in the event of a league shutdown – a practice which might be adopted by clubs across Europe from next season.

What Lies Ahead?

Once the football world overcomes this pandemic, the financial situation might not see a drastic change. In such a scenario, the clubs might need to continue with the wage reduction policy to usher in normalcy in the longer run. Since wages are the most crucial cost line in a club’s budget.

In the meantime, next season, the transfer fees might see a nosedive as the cash reserves would dry up with clubs fighting the coronavirus battle.

(With inputs from AFP and AP)

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