If football gets cancelled long term (it almost certainly will, not one expert predicts this will simply 'die down' in the summer) and revenue dries up, surely there are going to be huge financial ramifications? I imagine transfer budgets will be eaten up by paying wages of existing players, but can clubs really sustain a long period of no income whilst keeping the same outgoings? Are we at risk of losing clubs? Are we at risk ourselves, with the shit ton of debt we have hanging over us?
Are clubs at risk of bankruptcy due to the league cancellations?
- Thread starter SmashedHombre
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You would hope that there are contingencies in place for these types of situations. Clubs would more than likely take insurance policies out on income protection for players which would cover their wage in the event of illness, natural disaster or other. There will also be no bonus payouts so there's recoverable income there.
I believe the tv rights would be set in stone as would existing commercial relationships between the clubs and sponsors.
The loss gate revenue will be the biggest hit to clubs but i'd imagine that the cost to profit ratio of match days isn't all that substantial for a club like United. Accordingly, while we may lose in gross profit, it may not necessarily impact net profit that substantially.
It wont affect premier league sides, but I have a feeling any tier below the championship will feel the burn.
You need only look at the state of the financial markets to know what the risks are. The economy is taking a huge hit and it could easily bankrupt small clubs and other businesses.
Any club that has a significant dependence on match-day income will be at risk.
I wrote a short post yesterday about how revenue works, and how it works in the scale of a short term cancellation like the rest of the season. I've quoted it beneath.
We are so far into the season now that we can state a few things with absolute certainty: No clubs in the Premier League are in danger. Manchester United is absolutely not at risk.The football clubs, players and staff are for now all well and fine, even if the season is cancelled for the reasons stated in my previous post.
I included a third section however that involves all the apparatus around the club, rented third party. Essentially any service that only bills for services rendered. They are all in the risk group now, but they are not football clubs.
The Premier league clubs are fine. For now. We don't really know what the TV deals say in the case of a Force Majeure. If there is any right to pull out if x amount of games cant be played, if the league has to be cancelled or any similiar circumstance that prevents broadcasting from happening. The TV deal cashflow is essential to the PL clubs operating budget.
in the very unlikely IF the TV deals are null and void. This is completely unrealistic but lets just pretend for the sake of discussion. All non-essential club personell will be put on leave. When enough time passes, the players themselves will be asked to enter a solidarity agreement and reduce their salariex by at least 50% while this crisis unfolds. Everyone will accept that. The optics of not agreeing to sometihng like that to help the club is, well, I'd hire security immediately and vacate the city.
The clubs can sustain themselve as long as they have income to match salaries. One option is of course also that the players agree to simply not receive a salary. They are all very wealthy people and can afford to go without salaries for 6 months. (Im deliberately ignoring the fact that many of them will have very large financial obligations, housing loans etc to pay on).
But we're not going to get to that point.
I am much more curiou what the situation will be in the lower leagues. There are teams there that are living matchday to matchday, and they are under serious stress right now. Players cutting salaries might already be a topic they are dicussing. I don't know too much about lowerleague club finances so maybe someone else can chime in on teams in the dangerzone here.
One would hope so. although to be fair, the kind of scenario that sees a business earn no income for an extended period usually means going out of business. It's really hard to plan for beyond having some kind of emergency savings fund for disasters and unforeseeable events
Why did you ignore that fact though? Especially as it would serve as their (the players) biggest reason for not agreeing to a pay cut. You also don't feel it's a big assumption that the tv companies, players, customers and sponsors will be okay with a cancellation where they are the ones having to shoulder the financial burden and let the clubs off the hook? Those 4 are the biggest stakeholders in all of this. You can't just assume what their position will be when talking about their financial interests. Well you can but at least you cant assume they'd all be so generous. Everyone will be out for himself
edit: existing or future deals will likely be renegotiated. Clubs can't just come out of this unscathed financially. Hopefully they can keep the damage to a minimum
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I hate to say it but I reckon the relegation/promotion headaches of a cancelled league will end up sorting themselves out as multiple clubs fold and allow for a natural consolidation around the mid tiers.
The issues currently in discussion is whether this is a force majeure event.
I’ve been asked to advise on it for our client but have yet to start drafting my response.
Is there anyway we average joes can find out? I'd expect if there was one it would have been publicised but there's so much fake information out there
Clubs in the lower leagues are going to miss out on 4-5 homes games.
It's bad news but it could have been a lot worse.
But the big problem is there is no guarantee that next season will start in August. Nightmare scenario that would see loads of them go under.
It's bad news but it could have been a lot worse.
But the big problem is there is no guarantee that next season will start in August. Nightmare scenario that would see loads of them go under.
There’s a huge risk of this happening. It wouldn’t surprise me if a few clubs ended up at risk of going under.
the trouble is a lot of these lower league clubs are close to bankruptcy as it is, living month to month in some of the worst cases
if we don't start next season on time then shit will hit the fan
can't see much transfer action this summer if there is any uncertainty about next season starting
if we don't start next season on time then shit will hit the fan
can't see much transfer action this summer if there is any uncertainty about next season starting
I mean, I've gone over this in my two combined posts
But just to reply to what you comment.Re Players: Because they won't live wage to wage like most people. The majority of them will be able to take paycuts. It will certainly be a consideration, but at the end of the day peer pressure will be the deciding factor to preserve ones standing in the dressing room. Within reason. I avoided using that fact because it's not true for everyone and these kind of paycuts are "Everyone or no one" type of deals. But this scenario is so unlikely and will require many months to reach that it's not really within the realm of plausible right now.
I adress all of the bolded in my first post. Noteably the customers and sponsors. The TV deal I commented in this post. "We don't really know what the TV deals say in the case of a Force Majeure. If there is any right to pull out if x amount of games cant be played, if the league has to be cancelled or any similiar circumstance that prevents broadcasting from happening. The TV deal cashflow is essential to the PL clubs operating budget. The TV deal COULD be null and void after x time, it might not. There will certainly by clauses that address what happens in the case of a league shutdown.
For THIS season, clubs are fine. We won't really see any problems with wage payouts or operation before the TV deal is halted. Sponsors will keep to their agreements. Sponsorships are about longevity and relationship with the entity you sponsor. There is EXCELLENT press in sticking by a team in trouble. Sponsors are going nowhere.
Season card holders will need to be reimbursed. For MUFC this is around 53,000 season card holders with a potential 4 or 5 home games missed at this point.
I work in business and I have a lot of experience in this field. Not football, but finances work the same for a king as it is for a fisherman.
I'll just boil it down very simply:
TV Deals will stay in place if there is a short stop in the game of a few months. Clubs are paid a fixed amount of £95~m each anually. Clubs are also paid out a sum of around £1,2 million for each of their games that are televised. This revenue is potentiall postponed while we wait for the season to start. The loss of TV income represents a cashflow and a fiscal year problem, but its unsurmountable. IF we go into 2021, I'd expect we'll learn more about the contingencies the TV deeal with FA contains. They may or may not be good for the teams. For 2020, we're good. For 2021. We'll see.
Players: Players will collect their salaries until such a team as it is completely neccesary for the players to reduce their salaries to protect the club. These deals are virtually always "Everyone or no one". Everyone wil agree to a % reduction to help out. Alternaively, they can agree that payment is simply moved into the future rather than forfeit.
Customers: MUFC have 53,000 season ticket holders with 100,000 people on a waiting list. Season tickets at OT this year was 950 pounds. That is £50 million pounds. Or roughly 9% of the clubs annual operating income. That is for league games alone. EL and Cup games come with percentage discounts. I've gone over how much MUFC stands to lose in the case of a season cancellation previously.
Sponsors: This is the easiest cabal to sort out. It will take a lot for a big time sponsor to make any sort of fuzz in the situation we are in. Its a global pandemic and everyone are paying very close attention to what's happening in the world right now. Adidas are not going to risk the calamity of bad press by pulling out of shirt deals, financially damaging a club. Sponsors are all about longevity and brand building. It's never an immediate turnover prospect. Sponsorship deals run over multiple years. At worst, the club will extend the deal for the period lost. The wast majority of sponsorate disputes are solved with a handsake, not a legal battle.
TL;DR. We are fine for 2020. But things will certainly become interesting if we stretch into 2021 and the financial bedrock is becoming unstable.
At some point the British Government are going to be forced to implement large financial aid packages to stimulate the economy and keep businesses and critical infrastructure afloat. Airlines need to be protected, etcetera. People have mortages to pay. Banks will surely offer 6+ months of deductible passes, meaning people who have no income wont go into forfeiture if they cant pay their loans that month. The national bank interest will have to be reduced to help a struggling economy. Many, many things are already moving and will be moving for some time now.
The PL alone has cash reserves of £1.5b. I'd hope a degree of that would filter down to support those who clubs further down that struggle.
I might be wrong, but I thought a huge number of players are only on 1 year deals down the ladder. That's really bad for the players as they might not get renewed or signed until there is confirmation that next season will even be happening. At the same time would help the clubs a little by staying non-committal until they know what's going on.
Edit: Not sure if accurate, transermarkt reckon about 200 League One player's contracts are up this summer - https://www.transfermarkt.co.uk/league-one/endendevertraege/wettbewerb/GB3
In League Two it's about 250 - https://www.transfermarkt.co.uk/league-two/endendevertraege/wettbewerb/GB4
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I mean, I've gone over this in my two combined posts
But just to reply to what you comment.Re Players: Because they won't live wage to wage like most people. The majority of them will be able to take paycuts. It will certainly be a consideration, but at the end of the day peer pressure will be the deciding factor to preserve ones standing in the dressing room. Within reason. I avoided using that fact because it's not true for everyone and these kind of paycuts are "Everyone or no one" type of deals. But this scenario is so unlikely and will require many months to reach that it's not really within the realm of plausible right now.
I adress all of the bolded in my first post. Noteably the customers and sponsors. The TV deal I commented in this post. "We don't really know what the TV deals say in the case of a Force Majeure. If there is any right to pull out if x amount of games cant be played, if the league has to be cancelled or any similiar circumstance that prevents broadcasting from happening. The TV deal cashflow is essential to the PL clubs operating budget. The TV deal COULD be null and void after x time, it might not. There will certainly by clauses that address what happens in the case of a league shutdown.
For THIS season, clubs are fine. We won't really see any problems with wage payouts or operation before the TV deal is halted. Sponsors will keep to their agreements. Sponsorships are about longevity and relationship with the entity you sponsor. There is EXCELLENT press in sticking by a team in trouble. Sponsors are going nowhere.
Season card holders will need to be reimbursed. For MUFC this is around 53,000 season card holders with a potential 4 or 5 home games missed at this point.
I work in business and I have a lot of experience in this field. Not football, but finances work the same for a king as it is for a fisherman.
I'll just boil it down very simply:
TV Deals will stay in place if there is a short stop in the game of a few months. Clubs are paid a fixed amount of £95~m each anually. Clubs are also paid out a sum of around £1,2 million for each of their games that are televised. This revenue is potentiall postponed while we wait for the season to start. The loss of TV income represents a cashflow and a fiscal year problem, but its unsurmountable. IF we go into 2021, I'd expect we'll learn more about the contingencies the TV deeal with FA contains. They may or may not be good for the teams. For 2020, we're good. For 2021. We'll see.
Players: Players will collect their salaries until such a team as it is completely neccesary for the players to reduce their salaries to protect the club. These deals are virtually always "Everyone or no one". Everyone wil agree to a % reduction to help out. Alternaively, they can agree that payment is simply moved into the future rather than forfeit.
Customers: MUFC have 53,000 season ticket holders with 100,000 people on a waiting list. Season tickets at OT this year was 950 pounds. That is £50 million pounds. Or roughly 9% of the clubs annual operating income. That is for league games alone. EL and Cup games come with percentage discounts. I've gone over how much MUFC stands to lose in the case of a season cancellation previously.
Sponsors: This is the easiest cabal to sort out. It will take a lot for a big time sponsor to make any sort of fuzz in the situation we are in. Its a global pandemic and everyone are paying very close attention to what's happening in the world right now. Adidas are not going to risk the calamity of bad press by pulling out of shirt deals, financially damaging a club. Sponsors are all about longevity and brand building. It's never an immediate turnover prospect. Sponsorship deals run over multiple years. At worst, the club will extend the deal for the period lost. The wast majority of sponsorate disputes are solved with a handsake, not a legal battle.
.
Well that's a very good question. Is it? Force Majeure can include anything from including the wording of "pandemic" or even "illnes" to governent intervention, hereunder quarantine.
Contracts can even stipiulate that something is NOT. For example illness.
I guess it depends on what the local laws say about an EM event. Civil contracts tend to be a bit more spesific than the local Law
I don't think Covid-19 alone is enough to classify it as a FM. It'd be a very hard case to make most likely considering comparable common diseases. The best argument right now is probably the government action that DOES limit a lot of opertions to be effective. But not all of them.
So yeah, this is actually a tricky one
We are fine most definitely. Most PL clubs also won't go under or anything. As for the players, they have a players association for this kind of thing. Thing is many millionaire athletes have obligations with as many extra zeros proportional to their income. Why many go bankrupt within a few years of retirement. Many can't just cave to take less because of social responsibility. I get that you just put that part as a worst case scenario though. Sponsors will be fine no doubt. They are the least matchday dependent. As for gate receipts we are fine, we're rich, but is the average club fine or could it affect their pockets deeper than we think? Operating expenses, debt obligations. A team like Tottenham will be thanking God they finished their stadium or this would have had them sweating bullets. Will lesser PL clubs now have to face offseasons with diminished transfer budgets?I mean, I've gone over this in my two combined posts
Re Players: Because they won't live wage to wage like most people. The majority of them will be able to take paycuts. It will certainly be a consideration, but at the end of the day peer pressure will be the deciding factor to preserve ones standing in the dressing room. Within reason. I avoided using that fact because it's not true for everyone and these kind of paycuts are "Everyone or no one" type of deals. But this scenario is so unlikely and will require many months to reach that it's not really within the realm of plausible right now.
I adress all of the bolded in my first post. Noteably the customers and sponsors. The TV deal I commented in this post. "We don't really know what the TV deals say in the case of a Force Majeure. If there is any right to pull out if x amount of games cant be played, if the league has to be cancelled or any similiar circumstance that prevents broadcasting from happening. The TV deal cashflow is essential to the PL clubs operating budget. The TV deal COULD be null and void after x time, it might not. There will certainly by clauses that address what happens in the case of a league shutdown.
For THIS season, clubs are fine. We won't really see any problems with wage payouts or operation before the TV deal is halted. Sponsors will keep to their agreements. Sponsorships are about longevity and relationship with the entity you sponsor. There is EXCELLENT press in sticking by a team in trouble. Sponsors are going nowhere.
Season card holders will need to be reimbursed. For MUFC this is around 53,000 season card holders with a potential 4 or 5 home games missed at this point.
I work in business and I have a lot of experience in this field. Not football, but finances work the same for a king as it is for a fisherman.
I'll just boil it down very simply:
TV Deals will stay in place if there is a short stop in the game of a few months. Clubs are paid a fixed amount of £95~m each anually. Clubs are also paid out a sum of around £1,2 million for each of their games that are televised. This revenue is potentiall postponed while we wait for the season to start. The loss of TV income represents a cashflow and a fiscal year problem, but its unsurmountable. IF we go into 2021, I'd expect we'll learn more about the contingencies the TV deeal with FA contains. They may or may not be good for the teams. For 2020, we're good. For 2021. We'll see.
Players: Players will collect their salaries until such a team as it is completely neccesary for the players to reduce their salaries to protect the club. These deals are virtually always "Everyone or no one". Everyone wil agree to a % reduction to help out. Alternaively, they can agree that payment is simply moved into the future rather than forfeit.
Customers: MUFC have 53,000 season ticket holders with 100,000 people on a waiting list. Season tickets at OT this year was 950 pounds. That is £50 million pounds. Or roughly 9% of the clubs annual operating income. That is for league games alone. EL and Cup games come with percentage discounts. I've gone over how much MUFC stands to lose in the case of a season cancellation previously.
Sponsors: This is the easiest cabal to sort out. It will take a lot for a big time sponsor to make any sort of fuzz in the situation we are in. Its a global pandemic and everyone are paying very close attention to what's happening in the world right now. Adidas are not going to risk the calamity of bad press by pulling out of shirt deals, financially damaging a club. Sponsors are all about longevity and brand building. It's never an immediate turnover prospect. Sponsorship deals run over multiple years. At worst, the club will extend the deal for the period lost. The wast majority of sponsorate disputes are solved with a handsake, not a legal battle.
TL;DR. We are fine for 2020. But things will certainly become interesting if we stretch into 2021 and the financial bedrock is becoming unstable.
At some point the British Government are going to be forced to implement large financial aid packages to stimulate the economy and keep businesses and critical infrastructure afloat. Airlines need to be protected, etcetera. People have mortages to pay. Banks will surely offer 6+ months of deductible passes, meaning people who have no income wont go into forfeiture if they cant pay their loans that month. The national bank interest will have to be reduced to help a struggling economy. Many, many things are already moving and will be moving for some time now.
Yes I will agree with you on that. We actually have a term for this called Lifestyle Inflation. Like you say, this is the description of how a person with a high income will remain in debth for perpetuity unless they take drastic changes before their income stream dies ut and they go bankrupt.
regularly google “force majeure” and corona virus over the next few weeks.
Look for articles but highly reputable law firms in your specific region. Most of them will attempt to publish an articles to jump the gun on one another.
I think 10% of the Sky/BT money for this year should go to pay to keep clubs afloat lower down the English football pyramid.
Yeah I think you could be right here. Unless the PL and its clubs come to some agreement to filter cash down the leagues, we could end up losing a whole leagues worth of clubs
Potentially big impact from sponsors and middle East Money.
Airlines won't renew sponsorships if in dire financial stress same goes for lots of other industries.
If oil stays $30 or even less expect middle east money to dry up, could see Qatar, Abu Dhabi etc selling up.
Airlines won't renew sponsorships if in dire financial stress same goes for lots of other industries.
If oil stays $30 or even less expect middle east money to dry up, could see Qatar, Abu Dhabi etc selling up.
Selling to who? There are no takers for risk investments of this scale.
The short summary answer for why prices for oilbarrels are dropping is overproduction from OPEC because of Russian refusal to support deeper cuts in oil productionto help combat the Corona outbreak, and Saudi Arabia increasing its production since the previous Cut agreement has ended. Russian oil companies are planning to increase production in April and have stated they are comfortable with prices under $30.
I made a point about sponsorships earlier in this thread, but short term there are no ramifications. Namely because sponorship money does not come from short term cash. There IS an unprecedented crisis in the airline industry, but the infrastructure is so critical to all nations that the governments will intervene before anything happens. British Airways for example will be saved by Boris if the outbreak was to last for a year.
Oil states like Qatar and UAE are oil reserves tallying over 100 BILLION barrels. There is no magical threshold that says prices under $30 will mean investment money dries up.. I mean, why would it? These money are all investments, they are not gifts they expect no return on.
There is no one that expects this outbreak to last for years. The worst case predictions estimate a full year. Now, that IS bad, very very bad.. But society will not cease to run production. Our technological advancements the last 20 years means that a lot of us can now continue to work from home. And we have to remember that the measurements we are enacting now are purely precautionary to stop the outbreak cold. China and South Korea have managed to get the outbreak under control and it appears as if they are through the worst. Comparable measurements in other countries will ensure that we see the same results as well, as long as people can follow the guidelines and not go to "coronaparties" because school is out.
Because the potential length of the outbreak and measurements in place to stop the spread, there is no realistic chance of this lasting so long that it will have any effect on major sponsorships and similiar arrangements.
My concern would exclusively by pointed towards clubs and organizations that live month to month, because they will be in trouble.
League 1 and lower. ( Was a piece on Sky about it )
I'm not entirely sure of the legal implications behind one club 'filtering money' to another without a player or staff member involved in the deal, but any that do exist would be disregarded considering the circumstances, presumably.
I think your suggestion is by far the most suitable either way. The likes of United, Liverpool, City, and Chelsea, will be more than happy to donate a minor portion of their profits if it meant saving a smaller club, the PR benefits alone would be worth the outlay.
No country is through the worst, all China and SK have done is delay it. Unless a fully comprehensive vaccine is found (12+ months minimum if even possible) they'll still take the virus hit full on as it'll spread back to them from the rest of the world. Unless they plan to permanently lock down their citizens and close borders.
Once sponsorship's come up if the businesses concerned are struggling they'll be chopped as the first priority, saving cash for essential operations. Wouldn't be surprised to big clubs revenues falling by a double digit % this year and next at least.
Middle eastern countries will cut non essential spending and that will ripple down to football, the oil price can go way lower in this crisis wouldn't rule out $10 ish:
https://oilprice.com/Latest-Energy-...Government-Spending-Amid-Oil-Price-Crash.html
Football is a pro cyclical industry, a severe global recession will hit it extremely hard on all revenue fronts. Most clubs struggle to make a profit even in the boom times. If Qatar and Au Dhabi want to offload there would be takers at the right price.
Cancelled long term?
You think this virus will cause long and permanent harm to sport, after this break however long it'll be?
We just disagree on a lot of the principles here. I feel like you're making up a lot here, or embellishing quite a few things, primarily how the oil prices will affect European football short term. Shirt sponsors are not THAT critical to a clubs business. Important yes, not end all be all. Even now there are industries that are literally thriving because of the outbreak that can take over. Amazon can easily sponsor most teams in the Premier League. Their business is up due to the quarantine. Everything has a ripple effect.
In my opinion you are willy overestimating how big an influence the middle east has in modern football. Football clubs are self sustained, they don't need oil money funding as it stands today with the exception of possibly PSG and Monaco. Shirt sponsorates are such a wildly small part of a countrys BNP it doesnt even register.
China reported single digit new cases and fatalities the past 24 hours. They entirely cut off Wuhan and the Hubei province and are taking drastic measures to stem new infections. 65,000 people have been declared infection free in China. Which means Italy now has more active cases. Businesses in Wuhan are allowed to operate again under certain government restrictions and previously closed down infrastructure is running as normal. They have very much stemmed the tide here. I'm not sure why you are arguing otherwise but maybe you can elaborate? The measurements will stay in place until such a time as the Chinese health regulators have determined that the outbreak is over. That may be in a month, that may be in 6 months. But the infection curve has taken a steep turn downwards and so we can safely make the tatement that they have turned the corner and then some.
Europe is now the hotbed of this Pandemic, SK and China ARE very well on their way to curb the spread of the disease. They report the number. If they are going down that means the measures they are taking are working.
Big global recessions are caused by a market collapse in an important sector, like the 2008 finance crisis caused by bad bundles house loans after an airtificial bubble was created. This is not comparable to that. Actions are suspened. Banks and loan institutions will carry the burden by allowing for interest free mortage extension periods, its only a matter of time before these are announced in the UK, they are already starting to take effect in other European countries. The banks will lower the interest rate to burden the blow, and the state will offer huge bailout packages if the quarantines last too long to protect industry and critical infrastructure.
Football is not really as cyclical as you indicate. I'm just adressing the UK now.
Firstly, the premise that lower oil price will hurt the UK economy, is wrong. PWC (PriceWaterhoseCooper) did an extensive revision on this back in 2015. The key findings is that, while the UK who is the EU's (Before you guys did rightwinging and left), largest crude oil and 2nd biggest gasp exporter, lowering oil prices also greatly stimulate other indistries who'se main input comes from the oil sector. Airlines, agricultular industries, refined petroleum sector and oil intensive manfucaturing industries all thrive under lower crude oil prices. It's not a one-way street to recession. Lower oil prices affect countries who primarily rely on oil export as their main income.
Pro cyclical in football means that fans stopped buying TV subscriptions and going to games. That's it. That is their income model. There will always be enormous companies that will be shirt sponsors. Oil money in football IS an actual thing. They are part of European football. Gazprom, Emirate group, Qatar Sports Investment, City Football Group. But they are not crucial. There ARE suitors who can and will step in if there is a opening. Manchester City football club are self sufficient financially and technically no longer need the oil investors to remain as owners unless there is dark money used to pay for cost. They dont pay any executive salaries for example.
Fotball is an escapism. Its the modern day Colloseum where the masses come to forget their problems. The last thing anyone will cancel is their subscription to Sky or BT Sport and miss out on their football games if the economy is struggling.
All this talk about an impending recession over a few months quarantine is not realistic. And football is in no danger of being affected in 2020. If we go into 2021 we might run into problems for the bigger clubs, Force Majeure legal fights (classification, its not a given that this outbreak and quarantine classifies as one), revision of TV deals and potential problems renewing expiring sponsor deals. But its not realistic that we're getting there. Drastic measures are taken everywhere to combat this thing. Like I wrote, China has stopped the tide and its only a matter of days now before they have a very low number of still infected people, the same with South Korea.