- Loss of TV income and matchday revenue hits hard
- New TV deal from start of next season will soften blow
Premier League clubs should be braced for a collective £500m loss of revenue because of the coronavirus pandemic, Deloitte has warned.
The accountancy group predicted the devastating drop in income will result from rebates to broadcasters and commercial partners and the collapse of matchday revenue with games behind closed doors.
Deloitte expects clubs’ 2019-20 accounts to show a £1bn drop in revenue with half of that to be lost permanently. The unusual receipt of broadcast money for this season’s games in June and July will allow clubs, whose financial years end on 31 May or 30 June, to boost revenues in their 2020-21 accounts, potentially to collective record-breaking levels, particularly as next season marks the start of a new, more lucrative TV deal.
In 2018-19 top-flight revenues exceeded £5bn for the first time, Deloitte said, but Dan Jones, the head of its sports business group, said football’s landscape had been substantially altered, at least in the short term. “We expect significant revenue reduction and operating losses across European football,” he said.
The clubs meet on Thursday to finalise plans for the season resumption next week and were boosted on Wednesday when the latest round of Covid-19 testing returned only one positive result from 1,213 tests on players and staff.
The season’s suspension in March has proved extremely expensive. “Clubs are having to weather multiple financial impacts, including rebates or deferrals of commercial and broadcast incomes, as well as the loss of matchday income and other event-related revenue,” Jones said.
He estimated teams could expect to receive around 50% at most of their normal matchday revenue during the 2020-21 campaign. “That assumes some form of phased opening over time but hopefully by the end of next season being back to having full stadia again. For 2018-19 we had £680m of Premier League matchday revenue. For 2020-21 we have assumed £350m.”
Premier League revenues in 2020-21 could still hit record levels. “We forecast that the restart plans for the Premier League and a number of its peers will cause a rapid recovery in financial results as some 2019-20 broadcast revenues are pushed into the 2020-21 financial year, which may result in a bumper revenue year,” Jones said.
“Much remains uncertain, particularly around the timing and scale of the return of fans to stadiums and the impact on commercial and broadcast partners’ wider businesses. The football industry will be hopeful that a V-shaped recovery and a return to relative financial normality for the 2021-22 season is possible.”
The situation is more perilous in the lower divisions and the Championship particularly. Despite EFL clubs returning unprecedented revenues in 2018-19,collectively breaking £1bn for the first time, closer examination reveals an unhealthy overall picture.
Championship clubs had an alarming 107% average wages-to-turnover ratio last season – the ideal is around 50% – and lost a combined £300m. Accordingly the Deloitte report advocates the imposition of a second-tier salary cap set at 70% of turnover with Jones believing the problem is less about the distribution of money than the way it is invested.
“You’ve got 107% of revenue going on wages and you can see the problem looming,” he said. “A salary cap’s a very blunt instrument, but if you can only spend 70% of revenue on salary you pretty much wipe out the Championship’s £300m 2018-19 loss.
“League One and League Two were doing a lot of the right things already. Yes, you had isolated incidents like Bury but you could say they were down to bad management. Systemically they were in a better place than 10 years previously. But if you take the ability to play in front of crowds away they haven’t got the broadcasting money to fall back on. That’s going to be very painful and very hard for those clubs to manage.”
The latest round of 1,192 coronavirus tests on Championship players and staff brought six positives from four clubs. Two players at Portsmouth, a League One play-off club, have tested positive but League Two’s results were clear.