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Richard Curran: Financial tsunami of Covid-19 will wash away the business model behind sport

Richard Curran


Cristiano Ronaldo of Juventus

Cristiano Ronaldo of Juventus

Cristiano Ronaldo of Juventus

The financial flood doors finally gave way on the world of sport this week. Events had already been shelved. From GAA matches to the finale of the English Premier League, the world of sport had been put to sleep. This week, the financial tsunami from all of that lack of sport began to hit. In Ireland, the FAI and GAA head office at Croke Park announced pay cuts for 500 employees.

In England, the Rugby Football Union said it stood to lose over £50m (€56m), while Tottenham Hotspur had to furlough 550 staff by sending them home on pay cuts and availing of the state's salary subsidy scheme.

All across Europe, big sporting bodies, giant football clubs and smaller ones too have been waiting and watching to see how long they would need to hold out. Financial reality has now cut through the sporting world in a way that will outlive the duration of the virus. The financial hit to international sport could fundamentally alter the business model which underpins it and impoverish sports organisations and clubs.

The Swiss-based CIES Football Observatory estimated on Tuesday that the coronavirus could wipe €9.3bn from the transfer values of top European football squads.

Players are financial assets for football clubs. As the international transfer window approaches, the market value of those assets will be tested. It is widely expected that transfer prices will be well down, something which would put pressure on the balance sheets of even the bigger clubs.

Juventus is reported to be considering a rapid low-cost sale of Cristiano Ronaldo in order to shore up finances.

He has agreed to forgo his €500,000 per week pay for four months already.

Sport has a supply chain like any other industry, from players and clubs to organisations, TV companies and sponsors.

Rob Wilson, a football finance expert, believes England's Premier League clubs stand to lose £1bn in revenue should this season be scrapped. Meanwhile, TV companies like BT and Sky have shelled out billions for rights on matches that are not happening. Enders Analysis, a sports research firm, estimates Sky and BT stand to lose nearly £1bn if leading sports remain out of action until August.

Big companies like BT and Sky can take that kind of hit, but it will filter through to either the prices they charge their customers in the future, or the amount of money they pay for sports rights. People who have lost their jobs and may need time to get back working again are not likely to renew expensive sports add-ons to TV packages. Even where big European soccer clubs like Manchester City, PSG, Bayern Munich or Real Madrid can ride out a financial storm, smaller clubs cannot.

The English Football League, which governs the three professional tiers below the Premier League, has been asked to urgently address the £50m black hole emerging in the League One and League Two clubs. Two thirds of their income comes from match day gate receipts.

Aside from the big pay-per-view channels, more conventional public service broadcasters stand to lose out massively from the crisis.

Yes, at some point sport will resume, but how financially weakened will TV companies around Europe be?

In a crisis that is leading to millions of job losses around the EU, how many households are ponying up for their TV licence as it falls due? Fewer than normal, I would say.

This will create a knock-on financial crunch for television companies which pay for all kinds of sports rights, from GAA to rugby or basketball.

At home, the GAA at Croke Park had expected its stadium revenues to be down on last year anyway because it had not booked in any concerts.

Last year, it was the Spice Girls and Westlife. A summer without big football and hurling championship matches would not only be a huge blow to the psychological well-being of the nation; it would create a big financial hit for the GAA.

The GAA has the financial muscle to handle something like that. Irish soccer is in a very different place.

On Tuesday, the FAI asked staff to defer wages due for the month of April. Pay cuts were already anticipated but the coronavirus has made a bad financial situation a hell of a lot worse. The FAI entered the crisis in a completely different set of circumstances to the GAA or the IRFU, which has also announced pay cuts of between 10pc and 50pc.

Reeling from the John Delaney saga and crawling with consultants examining its structures and books, the FAI had to renegotiate its multi-million-euro debts with Bank of Ireland just a couple of months ago. It may have to renegotiate them again.

Having cleaned up its act, State funding will return to the FAI, but it needs football to return. It gave little comfort to staff, saying pay deferrals for April would be monitored on an ongoing basis. It added: "The FAI intends to restore full pay and refund all deferrals as soon as the national economic situation improves." Sadly, it could be a long way off.

Irish Independent