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Red carded

21 May 2020 By Christopher Thompson

Soccer clubs across Europe are eying Germany with envy. Teams in England’s Premier League, Spain’s La Liga and elsewhere want to follow the Bundesliga division by restarting matches. That would help recoup lost sales. But less sponsor and matchday revenue after Covid-19 probably means that player wage cuts are the only way to ensure teams’ long-term viability.

Many top clubs are paying players millions even as league suspensions crimp their revenue. English teams such as Liverpool and Manchester United, for example, collectively stand to lose 1.1 billion pounds in combined broadcast and stadium-ticket sales unless the season resumes soon. That’s roughly one-fifth of their projected annual revenue.

Playing behind closed doors, as the Premier League and other top divisions in Spain and Italy hope to start doing in the coming months, could help. English clubs would stand to gain 762 million pounds in TV-rights cash, which they might otherwise have to forfeit.

Assuming the wages of superstar athletes such as Manchester City striker Sergio Aguero account for three-fifths of teams’ sales, as they did during the 2017-2018 season, that would probably be the difference between Premier League clubs making a small operating profit in aggregate or losing money, according to a Breakingviews calculation which uses Deloitte figures and assumes broadly fixed operating costs. By contrast, if the season ends now then players would need to accept an average 7% salary decrease for teams to merely break even.

Clubs in Germany’s Bundesliga have a bigger cost cushion: Salaries there account for just over half of teams’ revenue, the lowest among Europe’s top leagues. The most perilous financial situation is in France’s Ligue 1, which has already been cancelled. Wages of stars such as Paris Saint-Germain’s Kylian Mbappé account for three-quarters of revenue, according to Deloitte, and French clubs have failed to turn a collective profit in nearly a decade.

The pain could get worse. Deutsche Bank analysts reckon top European clubs could see their revenues decline by over one-third in an extended pandemic scenario, as sponsorship money dries up. Broadcasters such as New York-listed Comcast – which owns Sky pay TV stations in Britain, Germany and Italy – may pay less to show matches played in disconcertingly empty stadiums.

That would make more drastic wage reductions a necessity. Soccer’s financial pain may be just beginning.


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