The devastating impacts of the COVID-19 pandemic on the football industry: loss of $11 billion

An analysis of the consequences that the pandemic has produced on the most loved sport sector in the world

The effects of COVID-19 were more evident only when we realized its global reach. Indeed, the pandemic has caused economic and social upheaval on a worldwide scale. The negative effects of the crisis have shown themselves in all areas. The professional football sector, with a 11 billion $ loss, was no exception.

The situation in Europe

The report carried out by the sport journalist Tomás Elías González Benítez analyzed the situation of 32 European teams, focusing on the national champions in the 2019/2020 season of the six major European leagues: Juventus (Italy), Paris Saint-Germain (France), Porto (Portugal), Bayern München (Germany), Liverpool (England) and Real Madrid (Spain). Below, some of the most significant data, the full article on the Tomás Elías González Benítez website.

Unlike the previous year, when all the teams reported a positive profit except for Juventus, this year the figures were different:

• FC Bayern München and Real Madrid CF are the only two to record modest profits, 5.9 million and 0.3 million.
• The most significant loss was recorded by PSG, -125.8 million, due to the French championship’s interruption (the only interrupted and not postponed).

Television revenues also decreased for everyone, recording a reduction of 937 million euros (-23%). However, this figure is also related to the results achieved in the UEFA Champions League:

• Finalists Bayern München and Paris Saint-Germain saw only a 4% decrease in television revenues;
• Real Madrid CF, FC Juventus and Liverpool FC, all eliminated in the round of 16, were down by 12%, 19% and 22%, respectively.
• The 63% drop recorded by FC Porto is due to the early elimination from the competition.

Advertising has become the revenue stream that has ensured the highest revenue in five of the six clubs surveyed, while the revenue figures obtained from commercial activities are more varied:

• Liverpool FC, FC Bayern München and Real Madrid CF, increased their revenues by 14%, 4% and 2%, respectively.
• Juventus FC remained stable.
• FC Porto and PSG both recorded a drop of 18%. 

With many canceled matches and empty stadiums, the day’s revenues have plummeted sharply, -17% (a loss of 257 million euros):

• Real Madrid lost the most in absolute terms, -34.9 million €, down 22% on an annual basis;
• The decline of 4.2 million € in Porto represented the highest annual percentage drop (-34%). 

Although several clubs have been able to reduce player salaries, not all have lowered operating costs.

• FC Bayern München and Juventus FC managed to reduce staff costs (by 6% and 13%, respectively) by agreeing on reducing the game staff’s salary.
• In contrast, Real Madrid CF personnel costs increased by 4%, despite players temporarily reducing their wages by 10%.
• The PSG recorded an even more significant increase in personnel costs, +10%.

The last interesting fact concerns the market value of the players:

• Between February 2020 and January 2021, this fell by 9.6% for the 500 most valuable players.
• During the summer market, transactions decreased by 43% compared to 2019 in the top 5 European leagues (3.3 billion € against 5.8 in 2019).
• The percentage of players transferred for free increased from 26.2% to 32.3%.

Towards the resolution of the problem

As we have already seen in part, worldwide governments have responded to the pandemic differently and at different rates. 

More than 150 football associations have already applied for the 1.5 billion $ emergency relief fund set up by FIFA. Therefore, as stated by Olli Rehn, chairman of FIFA’s coronavirus steering committee, this relief fund Covid-19 is not subject to time limits and affects all confederations. While Europe has been the most affected in terms of absolute costs, non-European associations are the ones that have suffered the most due to reduced means.

Here are some examples of how the fund has already been used:

• In Thailand, it served to restart the national championship with the coronavirus’s purchase of tests and the expansion of VAR technology.
• Mexico used all of the 1.5 million $ for the national women’s league.
• In Brazil, the funds are being used to advance testing in women’s competition.
• In Uruguay, thanks to this fund, the federation could take back the staff who had been forced to lay off.

Conclusion

While the previous seasons had shown constant growth for most of the teams in the top leagues, the 2019-2020 season marked a decline. In fact, the pandemic has shown the weaknesses of a widely criticized system. A crisis almost always offers the opportunity to highlight the business model’s main shortcomings and guide innovation and evolution. All that remains is to see how the football industry will react to this crisis.

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