- German Bundesliga’s successful return cannot be replicated by every European league
- Clubs in the SPFL and Eredivisie would be crippled by games behind closed doors
- Scottish club Rangers would be hardest hit club in Europe
Behind-closed-doors football matches have already produced enough well-worn clichés to last a lifetime. Chief among them: “We’re just going to have to get used to it.”
Getting used to it is easier for some than others. For most clubs in Europe’s ‘big five’ leagues, television revenues are such a large part of total income that they would much rather play in empty stadia than not play at all.
For clubs in leagues like the Polish Ekstraklasa, there is no one-size-fits-all solution. There is great variation between clubs more reliant on matchday income, such as Lech Poznań; those with a balance between television income, sponsorship and matchday revenue, such as Legia Warsaw; and smaller clubs with lower overall revenue, such as Korona Kielce, which overwhelmingly relies on media rights payments from the league.
Then there is Scotland. Of all the large and medium-sized leagues in Europe, clubs in the Scottish Premiership are the most reliant on matchday income – to the extent that, unlike leagues with significant broadcast deals, it would cost them more to play matches behind closed doors than not all.
On Monday, May 18, the Scottish Professional Football League followed France’s Ligue de Football Professionnel in abandoning the domestic football season and awarding positions based on points-per-game. If the SPFL had decided to finish the Premiership season behind closed doors, most clubs would have gone bankrupt in a matter of weeks.
But even now, Scottish football is particularly vulnerable to the effects of the crisis.
In their eighth annual Football Distress report, corporate insolvency consultants Begbies Traynor said that “without much needed matchday revenues or Government support in the event that isolation measures are extended into the 2020-21 season, it is believed most Scottish clubs could face financial peril.”
The report describes Scottish clubs as being in a “financially-corrosive limbo” with no roadmap for a return.
Aberdeen, one of Scotland’s biggest clubs, will lose up to £6m across the months of March, April, May, June and July, with no matchday, sponsorship or television rights income expected during that period.
Speaking in late March, Aberdeen chairman Dave Cormack said: “Three weeks ago, we were in a healthy financial position; free of external debt with £1.5m in the bank. We had expected income of about £1m from our four home league games and the Scottish Cup semi-final and, potentially, £5m in season ticket sales, seasonal hospitality and new shirt sales coming in through mid-July.”
He continued: “Our monthly running costs are about £1.2m and it’s only prudent to assume that, realistically, there will be no football until July perhaps, at the earliest.”
The prospect of football being played with fans looks unlikely for the remainder of 2020 and with the UK’s government furlough scheme tapering from August to expiration in October, clubs like Aberdeen are now on the brink.
This is not reflective of irresponsibility or poor business practices on the part of Scottish clubs. Last year’s Begbies Traynor report praised Scottish clubs for their prudence and suggested that less reliance on broadcast income and a focus on sustainability provided solid foundations for clubs.
It is simply that, as Cormack also said earlier this year: “No club, whatever their size, scale or level of investment, can withstand a total lack of income over a period of anything between three to six months.”
The bigger they are, the harder they fall
From the top of Scottish professional football to its bottom, clubs will suffer enormously from the crisis. But due to Scottish football’s unique economic circumstances, its biggest clubs would be the most vulnerable should matches be played behind closed doors.
Celtic, Scotland’s richest club, is largely reliant on income from European participation and matchdays to cover its wage bill, which is several times larger than medium-sized top-tier clubs like Aberdeen. After failing to reach the Uefa Champions League group stages in 2018-19, the club’s matchday income accounted for over half its overall revenue.
In a financial year in which the club fails to qualify, overall revenue stands at around £80m to £85m before player sales are factored in. The club’s player wage bill is understood to be about £60m per year and total operational expenses in 2018-19 reached almost £87m. Without matchday income for even half a season, Celtic would be in serious financial trouble without selling much of its first-team squad.
The situation is even worse for Celtic’s crosstown rivals Rangers. In 2018-19, 60 per cent of the club’s overall revenue came from matchday income. The club earned £32m in gate receipts and hospitality while its staff costs stood at £34.5m.
2018-19 was a good season for Rangers as it received £6.4m in Uefa prize money and solidarity payments. In 2017-18, when the club did not qualify for the Uefa Europa League group stage, matchday revenue comprised 70 per cent of the club’s overall revenue in its accounts for the year ended June 30, 2018.
Ken Pattullo, the regional managing partner at Begbies Traynor responsible for Scotland, says: “Our Scottish Premiership clubs are the most reliant on ticket sales of all the top-flight European clubs, which also makes them extremely vulnerable to escalating financial problems, especially if it was decreed that the remainder of the season was to be played behind closed doors.”
He continues: “While I don’t believe we are looking at a doomsday scenario and most Scottish clubs will survive, I’m afraid that some insolvencies are probably inevitable among the hardest-hit clubs.”
The big leagues
For the top-tier leagues in England, Spain, Germany and Italy playing behind closed doors is the most astute option.
In the last season for which complete financial statistics are available, 2017-18, roughly 59 per cent of English clubs’ overall income derived from broadcast and media rights revenue, while sponsorship and other commercial activities accounted for about 27 per cent.
Servicing these deals is the number-one priority for clubs. Matchday revenue accounted for just 14 per cent of total revenue across all 20 Premier league clubs in 2017-18, and for smaller clubs it accounts for a tiny percentage of overall revenues.
For the 2018 financial year, Watford’s matchday income was £8m while its commercial income was roughly £11.5m. The club earned about £109m from media rights.
For English top six clubs, the story is slightly different, but the outcome remains the same. Manchester United will be the most-affected by a loss of matchday and other stadium-related revenue, earning £111m from gate receipts and hospitality in the 2019 financial year.
However, the club earned £241.2m from media rights across domestic and European competitions, meaning that whether a Premier League club earns £100m or £5m from matchday, playing games behind closed doors is the best option.
The story across mainland European leagues is slightly different as the media rights distribution is less equitable. In the Premier League, the top club usually receives just over a third more than the bottom club.
In the German Bundesliga, which returned to behind-closed-doors action on May 16, the disparity between Bayern Munich, the top media rights earner from the domestic league in 2017-18, and the lowest-earning club, RB Leipzig, was about 3.5:1.
Overall media rights revenues in the Bundesliga are lower than in the Premier League, but attendances are higher on average. Despite this, overall media rights income makes up roughly 39 per cent of German clubs’ overall revenue, while matchday revenues are just 17 per cent due to much lower ticket prices.
The situation is similar in Italy, where 58 per cent of all revenue earned by clubs in Serie A during the 2018 financial year came from media rights, compared to just 12 per cent from matchday income.
In France, however, overall revenue is much lower. While the proportions mirror their top-tier counterparts – an average 47 per cent of total income is from media rights and just 11 per cent from matchday – clubs in the lower half of the league are likely to earn between €20m to €25m from media rights revenue over the course of a season.
For club like FC Nantes or RC Strasbourg Alsace, which average around 25,000 fans per home match, matchday income is a much greater consideration. This made it easier for the French government to overrule the Ligue de Football Professionnel and cancel all sporting events until September.
Case by case
From a purely financial standpoint, clubs and leagues should only play behind closed doors if the income received from hosting matches behind closed doors exceeds the cost. There is no one-size-fits-all solution and in leagues like the Polish Ekstraklasa, where clubs’ economic circumstances vary significantly, no choice benefits a majority of clubs.
In the Netherlands, playing behind closed doors isn’t an option for most clubs. Overall matchday income in 2017-18 stood at €120m, while broadcast rights income stood at about €100m as Ajax failed to reach either the Champions League or Europa League.
Without significant government support, it is unlikely the Eredivisie will return in empty stadia.
Behind closed doors matches are not a panacea for the impact of Covid-19, nor are they always better than not playing at all. Whether they choose to play on in empty stadia or mothball operations, clubs in Scotland, the Netherlands, Portugal, Poland and many other non-big-five leagues will have to seek support – from private equity, venture capital and/or government – to survive.