Football’s Coming Back, But Empty Stadiums Could Push Smaller Clubs To The Brink
The physical real estate of football — stadiums — being open but empty has a huge impact on the finances of the game. The Premier League season returning without fans won’t just affect the vibrancy and atmosphere of the remaining matches of the 2019/20 season, it will cost teams about £133M in lost match day revenue, according to an estimate by Deloitte.
But while Premier League clubs will to a large degree be able to absorb this loss, because the vast majority of their revenue comes from broadcast income, for smaller clubs further down the league, the loss of income from fans attending matches has potentially very serious implications.
“On an absolute level, the Premier League clubs will lose the most if stadiums remain empty,” Deloitte Sports Business Group Manager Izzy Wray told Bisnow. “But the impact to Championship and League One and League Two clubs is more significant on overall revenue.”
In its Annual Review of Football Finance 2020 report released last week, Deloitte said that in the 2018/19 season, 13% of the £5.25B in collective revenue generated by Premier League clubs came from match day income: ticket sales, corporate hospitality packages, and food and drink sales. Broadcast revenue accounted for 59% and commercial revenue 28%. The proportion is roughly the same in the top division of other major leagues in Spain, Germany, Italy and France.
That 13% equates to £680M, and before the coronavirus hit, even though it was only a small proportion of the overall pie, match day revenue had never been higher in England’s top division. While most fans now experience football through TV and digital platforms, the “authenticity” of English football’s match day culture — the stadiums full of passionate fans — is part of what draws in those armchair supporters from across the world, Wray said.
Before the season was paused, Premier League grounds were 98% full this season on average, and average attendance rose to 39,500 supporters per game, 3% higher than last season, helped by the opening of Tottenham’s new 61,000-capacity stadium.
As well as the £133M hit Premier League clubs will take this season, Deloitte estimated that the £680M earned on match days in 2018/19 will nearly halve to £350M in 2020/21. That is predicated on a scenario of phased reopening of grounds, with full stadiums by the end of the season. The worst-case scenario of grounds being shut all season would push that figure even further.
But drop further down, and as Wray pointed out, match day revenue takes on a greater importance to smaller clubs. At Championship clubs, it is on average 21% of overall revenue. League One and League Two clubs do not have to provide a breakdown of their revenue, but Wray said the proportion is likely to be higher.
“I think in the short term some of these lower league clubs may struggle,” she said. “The commencement of a new broadcast rights arrangement for 2019/20 [for lower-league clubs] has delivered a c.35% increase in value on the previous deal, but nothing has suggested that this additional revenue isn’t already wholly spent, and then some, on playing talent,” Deloitte’s report said. “As such, this increase will have, unfortunately, done little to support English Football League clubs which have lost their match day income over the past three months.
“Deferrals and temporary wage cuts may be applied to ease the short-term cash implications, but in the long run more meaningful changes are likely, and required.”
Wray pointed to clubs in the Championship as being most under threat from the loss of match day revenue, for a reason that is to a large degree self-inflicted.
While it hasn’t seen quite the same growth as the Premier League, the Championship also has robust attendance figures. On average 18,600 people attended each match in the Championship in 2018/19, by far the highest figure for a second tier anywhere in the world.
But there is an eye-opening statistic in the Deloitte report: In 2018/19, Championship clubs spent 107% of their revenue on wages. So that is more money than they were bringing in spent on players before the other costs of running a club are factored in.
“In no other business would you have a ratio where wages are higher than revenue,” Wray said.
Championship clubs do this as a kind of gamble on reaching the promised land of the Premier League and its vastly increased riches: the £5.25B earned by Premier League clubs in 2018/2019 compares to £785M in the Championship.
The worst-case scenario of a season behind closed doors would see Championship clubs lose out on about £150M of match day revenue, and with many clubs already financially stretched, it could mean they need to raise emergency funds or seek new owners willing to support loss-making teams. Deloitte proposed a salary cap for clubs in the Championship, essentially to save teams from themselves.
In Leagues One and Two, even though clubs would lose a greater proportion of their revenue, things might not actually be quite so dire, because those clubs only pay out around 80% of revenue on clubs’ wages. But clubs in these two divisions still made cumulative losses of £22M and £20M, respectively, so lost revenue will still put teams under increasing pressure.
Back in the top division, though it plays a smaller part in revenues, Premier League clubs are seeking to sweat their real estate assets, with the new Tottenham stadium likely to form something of a blueprint, with its food hall and craft beer brewery.
“If you look at the U.S., generally the fan experience is much more pleasant,” Wray said. “It can be difficult with existing stadiums which aren’t really set up for it, but as clubs in England rebuild and redevelop, you will see them trying to make sure that fans arrive a few hours before the game and stay a few hours afterward. If you can get people staying for an entire day, it increases fan engagement and drives more revenue.”
Here again, though, the pandemic will have an impact, with Deloitte pointing out in its report that clubs including Chelsea, Everton, Watford, Leicester City and Bournemouth all have stadium extensions or redevelopments in the works that could be delayed while clubs try to work out the financial and physical implications of social distancing.