Coronavirus shutdown highlights football’s over-reliance on TV cash

A leading financial expert says the coronavirus pandemic has given English football “food for thought” and highlighted how dependent it is on television revenue.

Leeds posted losses of £21.4million in Marcelo Bielsa’s first season, but their revenue streams are much healthier than moist clubs in the Championship (Picture: PA)

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EFL reveals plan to finish 2019-20 season in ‘56 days’

The success of the Premier League has been built on eye-watering broadcast deals at home and abroad, worth billions of pounds a season. That cash then trickles down the pyramid into the divisions below.

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That explains why England’s top division is so anxious to fulfil its contractual obligations by completing the 2019-20 season, with around £762m-worth of televised matches yet to be delivered because of the indefinite suspension of matches due to covid-19.

Chris Wilder'S Sheffield United stand to lose £41.8m in TV revenue if the season is suspended (PIcture: Simon Bellis/Sportimage)

“In a normal football world, if you’re doing well, happy days, but if you have a good year then a bad year, your revenue is going to plummet,” says Chris Winn, a finance academic at the University Campus of Football Business and former co-author of the Deloitte Annual Review of Football Finance.

“We haven’t really had to think about what would happen without television revenue since ITV Digital and Setanta went bust. It seems we’re looking at a £762m black hole if the league can’t fulfil the contract with the broadcasters. Spread across 20 teams, that’s fairly significant.”

It has been estimated Sheffield United could lose £41.9m if the season was suspended, around £38.8m of which would be lost television income.

TV revenue is thought to account for 88 per cent of Bournemouth’s revenue.

The Blades were considering furloughing a small number of non-playing staff earlier this week, but are taking the time to think about it after seeing the angry backlash which forced Liverpool to U-turn on similar plans.

When it became clear the South Yorkshire club would be having an unexpectedly good year in prize money terms, they committed to the £22m signing of Sander Berge.

If the problems are acute in the Premier League, it is arguably worse in the Championship, although Winn believes Leeds United are better equipped than most.

Although they stand to lose more than half a million pounds a game if the Football League completes the season behind closed doors, as it has tentatively planned, of the 19 Championship clubs to have filed accounts for 2018-19, the Whites generate the most revenue when parachute payments are taken out of the equation.

“You can see the effect (owner Andrea) Radrizzani has been having off the pitch, driving revenue up to the £21m mark, and matchday revenue is equally strong,” commented Winn.

“As a result of the work at Leeds on revenue mix, 44 per cent is commercial revenue, 38 per cent is matchday revenue and 19 per cent is broadcast. While 38 per cent is quite a strong number it’s not the most dominant revenue source so there’s less exposure, but of course on the commercial side some partners might be considering asking for some money back if they don’t get the full 46 fixtures in this season.

“Average revenue for the rest of the league is just under £36m, so for Leeds to be just under £49m is pretty decent. Of the clubs whose 2018-19 accounts we have, they’re sixth in terms of revenue. All the clubs with more are receiving parachute payments.

“If you group Leeds’s matchday and commercial revenue alone, they generate the highest amount in the division without broadcast, which is no bad feat, really.

“Looking at operating losses, I’ve stripped out anything to do with player trading and on that basis the average of the 19 clubs is a loss of just over £16m per team. Leeds are at just over £24m, the sixth highest.”

Because of the pandemic, the Government has given businesses three months’ grace to file their accounts, which is why there only 19 sets of figures available for the Championship.

Leeds were also helped when players and coaches quickly agreed a substantial deferral of their wages. Many squads are still in negotiations.

“Approximately two third of Leeds’s cash operating cost basis is wages (in 2018-19), which are £1.3m a week,” explained Winn. “Hence the importance of agreeing to wage deferrals.”

Leeds lost £21.4m last year in increasing their wages to 94 per cent of income. It sounds alarming, but Winn says it must be seen in context.

“The average pre-tax loss for the 19 clubs is just under £14m,” he said. “For Leeds it is just over £21m, the fourth highest. Given that 15 of the 19 are recording losses, it’s part and parcel of life in the Championship.”

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