Covid-19 destroying football business

Bernard Gwarada Special Correspondent
COVID-19 has wreaked havoc across the world and the sporting landscape has not been spared, with football being hit hard, as a result of the indefinite suspension of leagues and events.

The current football business model worldwide, including Zimbabwe, is based on three income streams – broadcasting rights, commercial (sponsorship and advertising around the stadium, catering, partnerships) and match day revenue (ticket sales and promotion items, corporate hospitality services).

Over the years football has evolved from being a mere social activity, into a viable commercial venture.

In countries where it is well managed, it has made some significant economic impact.

Technology, in the form of live streaming of matches, has managed to bring fans closer to action from anywhere in the world.

However, in the midst of this COVID-19, research has shown that focus on sport, and in particular football, may seem to be trivial as Governments are focusing on suppression strategies for the pandemic.

 Cancellations effects

In Zimbabwe, the 2020 PSL season was suspended indefinitely and media reports have revealed local football clubs have been hit hard, economically, by Covid-19.

Footballers Union of Zimbabwe president, Desmond Maringwa, has been raising concerns over players’ welfare.

A number of our clubs are struggling as many are bankrolled by individual business people, whose business operations have been badly hit, because the country is on lockdown.

If the top five major leagues in the world — La Liga (Spain), Serie A  (Italy), Premiership  Premier League (England), Bundesliga (Germany) and Ligue 1 (France) — are counting their losses, as a result of suspension of their seasons, surely the local teams are in a worse situation.

According to KPMG, a combined 501 matches for the Big Five Leagues are yet to be played, with Premier League having 92 matches, LaLiga 74, Bundesliga 110, Serie A 124 and La Liga 101.

It is also stated the Premier League will likely face a gross revenue loss of about € 1,250 million.

Out of the 92 game still to be played, the clubs are set to lose out €170 to €180 million in match-day revenues; €700 to €800 million in broadcast revenues and € 250 to €300 million in sponsorship earnings and performance bonuses.

These are high stakes for the game.

It’s a territory we have never been in since football exploded as a global business power.

 Broadcasting TV Rights

The Daily Telegraph reports that the value of the Premier League’s overseas broadcasting rights for 2019-22 rose by 35 percent to £4.35 billion, making it a cash cow.

However, due to the current football shutdown, the ball game has changed. There are no live matches to broadcast to paying audience.

Some broadcasters had already paid for football coverage which they will not receive and these are legal disputes on the horizon. Experts already predict a sharp TV rights value decline post Covid-19.

For example, monthly SuperSport subscribers, who enjoy sport, have been suspending their DSTV subscription because there is no live sport on TV.

That is the reason why, as reported in Daily Marverick, the PLS in South Africa wanted to influence the government to allow matches to continue being played behind closed doors.

It can be noted that too much concern was on money rather than health issues.

FIFA president, Gianni Infantino, said the football shutdown was necessary as health comes first. The South African PSL is on a five-year R2billion deal with SuperSport while in Zimbabwe, only the national broadcaster ZBC, have the broadcasting rights.

Reports have been circulating that Highlanders received a paltry fee for their TV rights for the 2019 season.

 Match day revenue

Clubs in Zimbabwe rely mostly on match day revenue and, because the football is suspended, clubs are losing money in gate receipts. In European leagues, there are already plans to reimburse season ticket holders for cancelled matches due to Covid-19.

In Zimbabwe, the impact to the football business is massive because of lack of sponsorship, which is the main way of generating income for clubs.

Only a few clubs in the domestic PSL, and almost none in lower divisions, get cushioned through sponsorship.

NetOne have been providing salaries for CAPS United, Highlanders and Black Rhinos (although questions remain whether this will be the case this year).

Some analysts had predicted that the world player transfer market could collapse at some point. Any business venture, where money is poured into a system on speculative purpose as has been the case of Neymar priced being at €222m, and  Kylian Mbappé priced at €145m, will certainly be challenged to the limit when the established order is shaken.

Last week, Orlando Pirates official, Floyd Mbele, warned there are no guarantees the club could return from this crisis in the form, and shape, which people knew in the past.

“Will there even be Pirates after the lockdown? Because, what if the sponsors take the money? Will there be Pirates for me to plan on?’’ he told Kick.Off

‘‘Will SuperSport [MultiChoice] still want to come [and sponsor], because they may feel there’s nothing for the league to show?’’ These are tough questions which we should be asking ourselves, even here in Zimbabwe, because this is a serious crisis and it could change the face of our football, and its business, forever.

 

Bernard Gwarada is a research candidate in International Business at the University of Pretoria’s GIBS Business School. He writes in his personal capacity.

 

You Might Also Like

Comments