Lhe Covid-19 crisis is a major crisis for football. For more than a year, the revenues of European clubs have been significantly affected by the absence of spectators in the stadiums and weaker television audiences. In France, the withdrawal of the broadcaster Médiapro, which held the rights to Ligue 1 and Ligue 2, deprived the clubs of a significant share of their revenue. To cope, the European teams are in massive debt and their ability to repay this debt remains uncertain. More deeply, the value of football and its attractiveness are today debated in a context where the stadiums will have been deserted for fifteen months.
In the decade leading up to this crisis, football experienced tremendous revenue growth. In the five major European championships, audiovisual rights have increased according to calls for tenders and now represent the largest part of revenue. Other income, such as sponsorship and ticketing, also increased, but to a lesser extent and mainly benefited the big European clubs.
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The first paradox is that this revenue growth has not translated into a significant increase in the financial performance of football clubs. The reason is mainly due to the need for them to prioritize sport risk management. Benefiting from future revenue growth presupposes staying competitive so as not to fall into the lower division. This requires recruiting the best players (who are, by definition, scarce assets) and incurring higher transfer fees and salaries. At least in the short term, the new revenues do not make it possible to offset the charges.
In this “arms race” which has lasted for two decades, players and agents have captured most of the sectoral rent. In this context, some clubs have succeeded in achieving significant capital gains on disposals. But these capital gains depend on the club’s sporting performance and are also linked to the ability of the wealthiest teams to buy players. However, due to the Covid-19 crisis, these clubs may no longer be buyers or focus on the most talented young players.
Structurally, football clubs generate little or no cash flow and their own funds are limited. At best, as was the case before the pandemic, the best-managed teams are making no (or little) losses. This does not exclude the possibility of creating value for investors, but it then assumes that the revenues of the sector are growing. If club revenues increase, an investor may believe that over time some of that growth will come back to them or that they will be able to benefit from greater football coverage, even if most of the value is picked up by players.
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