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Thursday, July 02, 2020

If 2008 was moderator, 2020 is eliminator for sports

The Covid-19 pandemic may sound the death knell for smaller clubs, sports and leagues, says Simon Chadwick.

Written by Mihir Vasavda | New Delhi | Updated: April 28, 2020 8:51:35 am
sports coronavirus, manchester united, ipl, manchester united harry kane, harry kane manchester united, sports economy coronavirus, when sports begin, coronavirus effect sports, coronavirus effect economy The fact that Manchester United, despite facing a loss of £116.4 million if the Premier League season is called off, is still considering to pay a £200 million transfer fee for Harry Kane shows how elite clubs and big sporting entities might remain unaffected by the current crisis. (Reuters Photo)

In the summer of 2013, when Greek football officials submitted the list of licensed football clubs in the country’s top division to UEFA, the name of one of their most storied and prominent clubs was missing: AEK Athens. It wasn’t an error. Instead, amidst mounting debts, wavering sponsors and dwindling stadium attendance, the eight-time champions of Greece had declared bankruptcy and decided to start from scratch, opting to play in the third tier.

AEK weren’t the only side crippled because of the financial meltdown in Greece, which, according to the New York Times, became the ‘centre of Europe’s debt crisis after the Wall Street collapsed in 2008’. Player wages in several countries were halved and clubs went into administration. But AEK were among the worst hit.

Now, with another financial crisis looming due to the coronavirus pandemic, it is feared that this time, many more teams, leagues and countries might be impacted. Simon Chadwick, director of the Centre for Eurasian Sport Industry at Lyon-based Emlyon Business School, foresees a post-pandemic scenario where “big, commercially successful sports will survive but everyone else will suffer.”

Take, for example, Manchester United. The English giants’ revenues in 2008 stood at £324 million. In the decade that followed, while a lot of clubs went through turbulent phases, United’s revenue swelled to £676 million in 2017.

The fact that Manchester United, despite facing a loss of income to the tune of £116.4 million if the Premier League season is called off — according to the website Statista — is still considering to pay a £200 million transfer fee for Tottenham Hotspur’s Harry Kane shows how elite clubs and big sporting entities might remain unaffected by the current crisis.

But at the same time, there are international sports on the verge of collapsing. The world sailing federation has sought a bailout from the International Olympic Committee in order to stay afloat.

Hockey, too, is banking on the IOC for money and same is the story for several other low-profile Olympic sports.

“In other words, Manchester United will survive, the Indian Premier League will survive, the NBA will survive. We’re already seeing, if we take football or Formula One as examples, that the bigger teams are saying we have the resources to sustain ourselves,” Chadwick says, “whereas the smaller clubs, the smaller teams, the smaller organisations, the smallest sports, are saying we’re not in a position to sustain.”

Simon Chadwick

A 2018 World Economic Forum report estimated the global value of the sports industry to be $471 billion, a 45 per cent increase since 2011. There are three key drivers in this surge: broadcast revenue, which has the biggest share, sponsorship and advertising deals, and match-day revenue from ticketing and hospitality.

Financial revolution

The coronavirus outbreak has broken that chain because there is no sport being played at all, which has led some experts to believe it will lead to a ‘financial revolution’ in the sports industry. Yet, there are indications that might not be the case, at an elite level at least.

In the last few weeks, as the world stayed indoors in its war on COVID-19, Saudi Arabia has been on a spending spree. The country’s sovereign wealth fund (Public Investment Fund) has purchased, or been linked to buying, stakes in a cruise operator, an oil group and a football club. Incredibly, it is their impending £300 million takeover of Newcastle United, placed 13th in the English Premier League and a club that has recently furloughed its entire non-playing staff, that is generating much traction.

It is an indication, too, that even though globally play has been suspended, and with economic depression looming, sports business may not have stopped completely. The acquisition, if complete, follows a trend. Following the global financial meltdown in 2008, Manchester City and Paris St Germain found investors in cash-rich Gulf States and it completely transformed the clubs. In Italy, where local companies and families bore the brunt of the crisis, AS Roma became the first foreign-majority-owned team in Serie A.

Chadwick talks about the possible political capital that can be made by owning a football club. “If we look at, for example, Qatar buying PSG, they acquired the club for political as much as for economic and commercial reasons,” he says. “When it comes to Saudi Arabia, Qatar, Abu Dhabi, China, and India, for that matter, there is economic capital to be gained from running a club, but also political and diplomatic capital that might have a huge say in future decisions.”

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There is, however, a growing concern that this time, many sports and teams might not be able to survive the current crisis. Thierry Weil, the chief executive of the International Hockey Federation, had recently pointed out that the biggest difference between 2008 and now is that, back then, sport was still being played.

However, with almost all sport wiped out and, considering that it is likely to stay like that for a major part of the year, Chadwick warns many sports, teams and organisations could be ‘eliminated.’

“If you look at sponsorship, the way in which sponsors spent money in 2007, it was out of control. And so, that became more professional post-2008, it moderated their behaviour,” Chadwick says.

“But now, you don’t have a product on TV, you don’t have gate receipts, sponsors are going out of business and clubs are going out of business. So, if 2008 was the moderator, I think 2020 is the eliminator.”

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