With the COVID-19 pandemic taking over the world, sport has not been a priority for many, and rightfully so. With thousands of lives lost and many more at stake, athletics have had to be put on the backburner; all major sporting events have been cancelled for the foreseeable future including, perhaps, the Olympics. The current pandemic is going to have effects that are not fathomable to most of us, and football will be no exception.
Most people have not looked to pause and think as to what this may mean for the game as we know it, but it is worth taking a moment and doing so. With the current crisis, there is already a severe demand and supply shock, around the world, with economies being on voluntary shut-down. For football teams, revenue streams have dried up quickly. As per Deloitte’s Football Money League rankings, 44% of revenue (for the top 20 clubs) comes from broadcasting, while 40% comes from commercial deals and 16% from matchday revenue. With no football for the foreseeable future, 60% of total (monthly) revenue is gone. Poof.
For Barça, who topped Deloitte’s list with an annual revenue of €841 million, this is troubling in a number of ways. Although the club goes from strength to strength every year, in terms of its total revenue, its financial standing still remains dubious. And there’s more. Commercial revenue may take a hit too. While Barça’s chief sponsor Rakuten (e-tailer) may come out unscathed, others such as Beko, Caixa Bank, Nike, Estrella, Cupra and Oppo will not. Many of them are facing months of scarce demand and an equally compromised supply chain. With mass layoffs and fat-trimming inevitable, you can expect advertising revenue to be scaled back first.
Now, what does this mean for the Blaugranas?
Mostly bad news. The club has the largest wage bill in Europe, with an annual expenditure of €500 million or so on wages. Players cannot simply be laid off like most other club workers and therefore must be negotiated with. Apparently, these talks have already begun (as per Marçal Lorente). Bartomeu and company are now forced to find ways to stop the leakage of cash, and a reduction in wages is the most logical step. What remains to be seen, however, is the extent to which they can persuade players to take pay cuts. Lay-offs may still prove inevitable, even with the most ambitious wage-cut scheme. Modern football clubs often employ upwards of a thousand people. It remains to be seen whether that will prove sustainable.
Another area at risk is transfers. Barça’s big money transfers may have to wait a while. Prudence is going to be the order of the day very soon, with clubs consolidating and, subsequently, safeguarding their assets. Market adventurism could be gone a while (ahem ahem Neymar). Barça may have to reorient their transfer policy. It may be time to look bottom-up rather than the other way around. Smaller clubs will be looking to cash out in the next transfer window; they are much reliant on matchday revenue and broadcasting than the larger clubs and, therefore, will be hit hardest by the cash crunch. As heartless as that sounds, the choice between a loss of talent and financial security is a relatively easy one for the small clubs. This could be Bartomeu’s chance to pivot from the Galactic facade to a more youth-centric strategy, especially considering the fact that ‘Galactico’ signings usually come with high wages and a plethora of bonuses, apart from the high transfer fee itself.
Clubs are usually tight-lipped about the details of their financial status and, as a consequence, it may take months before we get to grips with the extent of the damage. What you can be sure of is that there will be damage. The recent surge in football money, backdoor or otherwise, is over. Come September, the footballing landscape in Europe may be completely different.
Bring on the ‘roaring twenties’, eh?