Impact of COVID-19 in the Football Industry

Impact of COVID-19 in the Football Industry

Impact of COVID-19 in the Football Industry
Mohathir Sheikh & Dr. Austin Mardon

    
    The effects of the COVID-19 pandemic can be seen across virtually all regions of the globe and in most areas of public and private life. To reduce the spread of the pandemic, nations decided to implement travel restrictions and isolation mandates. For football, the pandemic created the biggest financial and economic crisis that the industry has ever faced. These restrictions led to postponements of major tournaments and cancelled matches, both of which had widespread effects on the stability of the industry, which are still being felt today. 

Closed Door Matches
    One of the most significant developments in the football industry, to reduce the number of cancelled and postponed matches, was to start playing football matches behind closed doors. Closed door matches refer to not having paying spectators at the game (Football Stadiums, n.d.). In general, this only occurs if a team is being punished for the behaviour of their fans at a previous game. While it is not a novel concept to play matches without spectators over health and safety concerns, the scale and duration that was observed during the COVID-19 pandemic has never been seen before. In 2009, only two matches in Serie D were played behind closed doors over the H1N1 pandemic (Football Stadiums, n.d.). In contrast, the Premier League, which is one of the highest divisions of football, had all games postponed after March 9, 2020 (Smith, n.d.). When the matches resumed in June 2020, all matches played were behind closed door. This had an unprecedented effect on the players, coaches, referees. For the first time in the 132 years of football history, the home team lost their home-field advantage, and the number of away wins surpassed the number of home wins (Smith, n.d.). 


Loss of Revenue
    The effect of closed door matches was also seen in the significant loss of revenue experienced by football clubs (Bancel & Philippe, 2021). Unable to collect revenue from ticket sales and limited sponsors due to stadiums being closed to fans for 15 months, European clubs took on massive amounts of debt and the Premier League’s top clubs posted their biggest collective loss in history. Prior to the pandemic, European football was averaging an annual 8.2% growth in revenue over the last 20 years. The largest part of a football clubs’ revenue is the value of their broadcasting rights that they are able to sell to TV broadcasters. In France, the withdrawal of Mediapro, which held the broadcasting rights to the Ligue 1 and Ligue 2, resulted in a significant loss of revenue to the clubs in those leagues. In England, the Premier League agreed to a three year television deal with broadcasters at a 10% drop in value due to the smaller TV audiences and the damaging impact of COVID-19 (BBC Sport, 2021). This deal was completed in order to reduce uncertainty within the English football pyramid, generate stability, and provide additional funding throughout the pyramid over the next couple of years. 
With record losses in revenue, many football clubs did not have the purchasing power to buy and retain their top players and their salaries (Bancel & Philippe, 2021). In Europe, many major clubs and leagues proposed and implemented salary cuts to help reduce costs (News18, 2020). The English Premier League called for a 30% player salary reduction and allocated 125 million pounds to support the lower divisions that could not weather the loss in revenue. In the Spanish League, the top two teams Barcelona and Real Madrid players and coaching staff took significant salary cuts so their other employees would be able to earn their salaries during the pandemic. In Germany, the larger top football clubs created a solidarity fund to help the other smaller German clubs. Furthermore, the loss of revenue had an impact on a team’s ability to purchase new talent during the transfer window. In the short term, experts suggest we might see clubs start to focus on developing their top young talent instead of participating in the bidding wars to purchase top talent from other clubs. 

Structural Issues
     The pandemic highlighted structural and governance issues that are present in the football industry. Football governance currently operates at several different levels and is structured in a pyramid (Bancel & Philippe, 2021). At the top of the pyramid is FIFA, the international governing body of association football. Below FIFA are continental confederations like UEFA, CONCACAF, and AFC to name a few. Then national associations and finally leagues at the bottom of the pyramid. All the organisations within the pyramid cooperate but also compete with each other to organise competitions. For example, UEFA organises the Champions League, one of the most prestigious football tournaments in the world and the most prestigious club competition in European football, which can be done to the detriment of national championships. Furthermore, first division competitions contribute to financing lower-level clubs and leagues; therefore, the football economy is intricately linked to success of top level football clubs. Structurally, well managed football clubs are not generating profits due to their limited cash flow and are instead focused on preventing losses. External shareholders invest in the industry due to the prediction that as the entirety of the football industry continues to grow and generate more revenue, in the long term, they as shareholders will be able to get a share of the growth. The pandemic crisis disrupted this system and highlighted the disparity in wealth between clubs as many of the larger clubs were forced to create consolidation funds to support the smaller clubs despite also not earning profits. This discontent was further exacerbated by the recent attempt to create the European Super League. The proposed league would contain the top 20 European clubs and five annual qualifiers. The league proposed to keep the profits within the closed league. Allowing the top clubs that generate most of the revenue within the football pyramid, not be obligated to distribute their earnings to other smaller clubs. In the end, the European Super League was met with heavy criticism and was not established. Despite the outcome, many believe this will not be the last time the governing football authorities will be faced with dealing with the discontent of the larger clubs over the current football economic structure.

Conclusion
    The COVID-19 crisis resulted in record losses and highlighted major structural issues and discontent felt by certain parties within the football pyramid. Moving forward, many clubs will need to restructure and may disappear entirely. External shareholders that have lost profits or investments during the pandemic may start to rethink their strategy and we may see the emergence of new proposed leagues in the future. Only time will tell when the football industry will be able to fully recover from the financial losses seen in the past years and if we will see changes in the governance of the football industry. 


About the Authors
Mohathir Sheikh is an article writer for the Antarctic Institute of Canada. He has a Bachelor of Health Sciences and is currently completing a Business Analytics concentration through the Haskayne School of Business at the University of Calgary.

Austin A. Mardon, CM, PhD, FRSC is an adjunct professor in the Faculty of Medicine and Dentistry at the University of Alberta, director of the Antarctic Institute of Canada, an Order of Canada member, and Fellow of the Royal Society of Canada.

References
Bancel, F., & Philippe, H. (2021). COVID-19: How the pandemic has made football’s structural problems worse. World Economic Forum. https://www.weforum.org/agenda/2021/06/covid-euro-2020-how-the-pandemic-has-changed-football/
BBC Sport. (2021). Premier League agrees TV rollover deal. BBC Sport. https://www.bbc.com/sport/football/57098432
Football Stadiums. (n.d.). Why Do Football Teams Play Matches Behind Closed Doors? https://www.football-stadiums.co.uk/articles/playing-behind-closed-doors/
News18. (2020). How Europe’s Biggest Football Clubs and Players are Dealing with Pay Cuts During Coronavirus Pandemic. News18. https://www.news18.com/news/football/how-europes-biggest-football-clubs-and-players-are-dealing-with-pay-cuts-during-coronavirus-pandemic-2572779.html
Smith, P. (n.d.). Behind Closed Doors: Football’s style shift without fans. https://www.skysports.com/football/story-telling/11095/12240810/behind-closed-doors-footballs-style-shift-without-fans

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