Mounting financial uncertainties

For many reasons, the world is changing. Football is not immune to that

Paul The Esk 28/03/2020 28comments  |  Jump to last

It’s been said before and will continue to be said, that for most there are far more pressing concerns, be it their own health, the well-being of loved ones and friends, their own finances and, if in the health and care sector, how to keep well whilst trying to help all those less fortunate than themselves. Whilst I think it’s important we remain mindful of the impact on the club and the sport we love, I firstly want to wish everyone well, keep safe, and look after each other as much as is possible.

Aside from the potential threat of relegation, football in the Premier League has been a one-way street of ever-increasing revenues, inflated values and, for those involved in the game, increasing rewards wholly out of kilter with reality and certainly value.

Revenues arose from secure sources – broadcasting, matchday revenues, commercial and sponsorship. Fueled by those increasing revenues, the value of players rose, inflating balance sheets, creating player trading profits (often covering operational losses) and proving rich picking grounds for those advisors and agents on the periphery of the sport.

All of this is strikingly similar to the finance sector in the mid-2000s. Many football clubs (like banks then) have grown big on the wave of money entering the industry. Few (like the banks) are prepared for a massive business disruption.

Let’s examine the potential impact of Covid-19:

Season 2019-20

We are three-quarters of the way through a season. There is little or no prospect of the season resuming. There should be little or no prospect. Nothing should deflect public resources until the virus is, as far as possible, eradicated. Until every vulnerable person is back to a position of safety and security, football has no right to even suggest a return.


With no games being played, cashflow is impacted immediately, although given the number of season tickets already sold, the impact is less than we might think.

So, looking at the average revenue per game and removing the season ticket revenues already received, the initial loss of cash flow for selected clubs per game is estimated at:

So potentially lost revenues ranging from £600,000 for Everton to £7.2 million for Liverpool between now and the scheduled end of the Premier League season. Anticipated progress in cup games for those still in competitions add to that figure.

When the Premier League recognises that no games can be played in front of paying spectators, given usual terms and conditions, all clubs will have to issue pro-rata refunds to season ticket holders

For Everton, I estimate that would cost approximately £3 million in refunds, giving a total loss of ticket revenue of £3.6 million. By way of comparison, £17 million refund to season ticket holders (total loss of ticket revenues: £22 million) for Manchester United and near £ 7.0 million for Liverpool (total loss of ticket revenue: £14 million).


Operating costs will fall during the period of inactivity which will obviously have a small positive impact on cash flow. For Everton, as a result of not travelling and no staging of matches, operating cost savings of 25% would amount to £2.5 million per quarter.

Additionally, cash flow will be assisted by a reduction in player wages. All match related bonuses are obviously currently on hold.

Commercial Arrangements and sponsorship

It’s difficult to be accurate forecasting losses from commercial arrangements as each club (obviously) has different agreements with different commercial partners, be they kit manufacturers, merchandising manufacturers and distributors to matchday event organisers, caterers and food and beverage operators.

Almost all of these arrangements will operate under long-term contracts. Most will have a form of force majeure written in but typically such clauses are general by nature. Business interruption insurance may help, but often specific cover for pandemics will be required.

With regards to sponsorship, the position is likely to be a little clearer with the potential for penalty clauses for non-fulfilled matches more obvious. Looking at the likely factors determining loss arising from commercial and sponsorship partners would include, the number of games not played, how many behind closed doors (if played, but unlikely), reduction in sponsor related activities and events including match days, number of appearances on domestic and overseas television and whether European competition is continued. Additionally, for the larger clubs, the cancellation of the usual lucrative end-of-season and pre-season tours to Asia and elsewhere will impact revenues hard – estimated up to £6 million.

Everton, almost counter-intuitively would be less affected than our major competitors given the high proportion of sponsorship income (£12 million pa) provided by USM. Having said that, the timing of looking for a new shirt sponsor could hardly be more challenging.

One of the areas of concern to many clubs must be their reliance on betting company income. Many sectors are being hit hard, but the sports betting industry must be among the most impacted. Shirt sponsorship by betting companies is worth an estimated £68 million pa to Premier League clubs. The triple whammy of reduced name awareness, lack of sporting events, and significant revenue issues for the gambling companies must have their lawyers reaching for the break clause in many cases.

Broadcasting revenues

How this season is concluded (completed behind closed doors or voided) has clear financial impacts for all Premier League Clubs. The Athletic has reported potential penalties/withdrawal of income amounting to £762 million. Split equally, that would amount to £38 million per club.

Swiss Ramble has put forward calculations based on pro-rata share of previous awards showing those that earn more would be penalised more (by virtue of a 28.5% reduction):

© Swiss Ramble

The impact of no Premier League product on broadcasters is worthy of much greater scrutiny than this article, but the longer the absence (quite correctly absent), the more difficult it is for broadcasters to continue drawing subscriptions and, with advertising revenue obviously negligible, cost recovery from the Premier League becomes a real option.

I wonder if the attitude of UK-based broadcaster might differ from overseas broadcasters who have paid a huge price for a product which has not been delivered?

Equally, if – as is expected and feared – we enter a significant global recession, discretionary spending is usually hardest hit. Overseas, what can be more discretionary than subscribing to Premier League football? It’s difficult to imagine a scenario where many broadcasters will see the same levels of subscription, and indeed, broadcasting revenues in the next few years. Advertising and promotion (A&P) is usually hard hit by companies facing their own cash flow issues in times of recession.

Thus the financial impact of Covid-19 will have both short- and longer-term implications for football clubs. Clearly smaller clubs are going to be impacted and many very heavily, but not exclusively.

Premier League clubs, despite their rich revenue streams of recent years, are not likely to be well placed too. The pre-Covid set of accounts for many Premier League clubs are showing a trend of increasing losses. Lost revenues, quite possibly significant at up to 25% or more, will only accelerate that trend.

For Everton, lost revenue of that magnitude (perhaps as high £45 million net) would (as with all other clubs) seriously impact our Profit & Loss (P&L) account.

Without a relaxation of financial regulations either permitting greater losses or allowing new shareholder contributions, many outside of the top 6 will struggle.

Transfer values

Revenue reductions such as those suggested above will see a deflationary effect on asset values across football, especially if future broadcasting revenues remain under pressure. For clubs with a large inventory of players, this is potentially damaging for a number of reasons.

In a deflationary environment, future player contracts may reduce in value, making players more reluctant to move if on highly rewarding existing deals.

Lower transfer values reduce player trading profits, a key component of many clubs’ P&L strategies in recent years.

Finally, a significant reduction in player values might see clubs introducing impairment charges to more accurately reflect the value of players.

Capital Projects

A background of falling revenues, increased losses, potentially the re-valuing of intangibles such as players and more specifically harder economic conditions in the future, in which to fill stadiums with spectators and sell advertising, is not ideal for major capital projects.

The new stadium at Bramley-Moore Dock is to be funded by a combination of equity investment, sponsor/naming rights contributions and, in the large part, by debt. Whilst there is nothing to suggest that Moshiri’s commitment nor that of potential naming rights partners USM has in any way waivered, it has to be recognised that we are in a completely different economic scenario than at the time the planning application was made in late December 2019.

The club has spoken of their desire to use the private placement markets, particularly in the US, to fund their debt requirements. For many years, investors seeking a higher yield than Government bonds, but still relatively high security, have funded many companies in this manner. The most recent example in English football was Tottenham Hotspur’s conversion of bank debt into long-term paper to the value of £525 million through the private placement market – all priced below 2.99%.

The recent crashing market and fear of global recession or worse, has impacted this debt market (as with all other corporate debt markets). The chart below reflects the change in yield. This is a reflection of growing concerns over companies’ inability to service their debt and in future, a requirement for a higher yield for new borrowers to reflect the increased risk to the investors. To be fair, this takes us back to yields seen previously (end of 2018); however, they’re much higher than the end of 2019.

The change in market conditions will almost certainly be reflected in the (as yet to be announced) debt arrangements secured by Everton. It may be that, by the time planning permission is granted, market conditions have improved – equally the reverse is true.

Despite all the uncertainties above, football can’t be rushed back – not until the playing of professional football takes no resources needed elsewhere in the treatment of Covid-19; not until there’s no risk to any individual who would be involved in the playing or staging of the professional game.

Football is not as important as all that’s unfolding around us. Our concerns must be with our loved ones, friends and others in the hope that we all contribute to making Covid-19 as least damaging as possible whilst keeping our own safe. But inevitably we have to look at other matters too, and football, specifically Everton is one of those areas.

Good luck and stay safe!

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Reader Comments (28)

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Andy Crooks
1 Posted 28/03/2020 at 18:36:19
Well done, Paul. You have written a great, illuminating piece while treading on the appropriate eggshells. I would guess that your piece will cause comment and no-one should feel guilty about debating it.

Premier League football matters not a jot. But then, it never did. We all have family we are anxious about. We are all anxious. Mental health is fragile.

This site offers an outlet, someting to do, a diversion. Well done Lyndon and Michael. Very well done.

Mike Gaynes
2 Posted 28/03/2020 at 19:50:12
Andy, that's a good and thoughtful comment.
Paul [The Esk]
3 Posted 28/03/2020 at 21:28:54
Andy - well said mate, thank you. Whilst we need to focus on making sure all those close to us are safe and do the right thing in making others safe, we can't forget what makes us who we are.

Everton are important to us all, not as important as the survival of our loved ones, but important nonetheless.

Stay safe all.

John Raftery
4 Posted 28/03/2020 at 23:36:43
Nobody has a clue if/when/how the current season will end. Moreover, there can be no confidence that a new season could commence in August or September or that, if it did, it would not be interrupted by new peaks in the spread of the virus.

In this climate, is it not bizarre there are still gossip columns with stuff about clubs willing to pay millions for this player or that player?

Derek Thomas
5 Posted 29/03/2020 at 02:11:50
Juventus players to take pay freeze, save the Club €90M.

Here in Australia, NRL and ARL, 70% mandatory pay cuts being bandied about – to much squeals, I might add... If it wasn't for TV money, they'd all be back playing in the local park for 20 quid expenses and an after-game burger and pint.

People are getting laid off left and right, but most, if not all of the Premier League players were to never receive another penny, they'd be made for life.

Uefa saying (probably) all league records to be expunged. Yet, apart from a £50,000 dressing-room whip-round for the local food bank, the sound of silence is deafening from clubs and players... If they're all pouring millions in on the quiet, then I stand corrected.

As for transfers, I wouldn't like us to be the first to dive in the market and splash £30M about on this or that player. especially with our poorish record.

In the grand scheme of things, the world may never be the same again... nor will football.

Disclaimer: This may not be the worst that could happen. Strange days indeed.

Eric Myles
6 Posted 29/03/2020 at 03:00:12
Very well reasoned as usual, Paul.

On the subject of Force Majeure, the clauses are general in nature in order to cover unexpected events and not to exclude anything which would result in a breach of contract. They do include specific examples though, one of which would be outbreaks of disease.

Regarding broadcasting and sponsorship payments, it's unlikely that the huge figures involved would have been paid up front. More likely they're spread over the season so recovery of monies paid would be minimal.

Kieran Kinsella
7 Posted 29/03/2020 at 05:20:17
I think this crisis has shown that we've all lost our way a little bit.

Yes, we feel our blood pressure rising watching Everton. Yes, many of us were a little freaked out at the idea of postponing games. But, now things have developed, it's obvious many of us have had a bit of a reset.

Yes, when the Premier League restarts, we will all be excited and anxious in the matchday forum. But maybe it's time to re-evaluate our priorities. Specifically financially.

So often, I read on TW people talking about cancelling season tickets because of the cost versus the reward. Or good-natured fans giving tickets to folks who can't afford a ticket. All very logical and commendable. But in a wider sense, maybe now is the time to re-evaluate how we reward the players.

We treat them like gods but, in this crisis, we see they're false gods unable to offer us even a game to watch as they, like us, are in fact just mere mortals. I remember in the 80s watching rugby when it was amateur and I don't feel any more invested now that it's a highly paid enterprise.

I just hope, that while we retain our passion, that we collectively realize taking care of family, paying critical bills etc is more important than making every pro obscenely wealthy. I hope the pros also realize that. It won't in any way take the passion out of the game because we all know the real Everton legends, like Dixie Dean, were comparative paupers yet loved and inspiring to millions.

Eric Myles
8 Posted 29/03/2020 at 05:24:21
I've just read that the EPL plan to have a pre-season in May and play the remaining games over six weeks from July.

That will certainly cause them some legal headaches from those leagues that they have voided.

Jerome Shields
9 Posted 30/03/2020 at 06:48:20
Very interesting and informative article.

Obviously football wasn't prepared for this current crisis. Those that invested in football clubs weren't prepared either. Whilst billionaires may be able to take risks and manipulate finances, it appears that they now have to think in terms of the fundamentals of business we are all subject too.

For Everton, it seems their lack of progress has caused the club not to be exposed as much as they could have been, and the new stadium development hasn't started, with limited funds parted with.

As for transfer values, Everton seem to be ahead of the game, sitting with reduced values anyway, which have been thought about, though not worked into the accounts yet. Everton may even benefit from reduced wages and having certain players near the end of their contract.

A lot depends on Moshiri's and Usmanov's views and circumstances. Financial Fair Play rules are really up in the air and I doubt they will be pushed. Everton will be affected badly, but the question is how much in comparison to other clubs? How quickly will they be able to recover?

The Premier League as we know it will certainly change and the impact will play out into the future. But the truth is all this is irrelevant currently when so many people's lives are a stake.

Keep Save.

Dick Fearon
10 Posted 31/03/2020 at 03:44:55
Paul, as with Lyndon and Michael K, myself and many thousand other Blues really appreciate each of your contributions to this supreme among fanzines. We also greatly enjoy the input of the likes of Paul Traill and others.

I was chosen way back in the 50s and, for me, there is no escape. In a post-pandemic world, will the modern fan return to a game that increasingly is disconnected from the ordinary match-goer?

Leighton Baines lost favour with the manager and there was a huge outcry. A large banner of support for him appeared at Goodison that said 'He was one of ours'. With few noticeable exceptions, not many of today's players have earned that kind of connection to supporters.

This pandemic has horrific consequences for many yet it provides an opportunity for players, particularly in Premier League clubs, to show they are still, at heart, one of us.

Eddie Dunn
12 Posted 31/03/2020 at 08:17:30
A very good piece, Paul, you sum it all up perfectly. I notice today that Barca players have accepted a 70% pay cut. I expect more clubs will follow suit.

As this pandemic plays out, the future of football will slowly become clearer. The top of the game was already in a parallel universe and I won't shed a tear for the drop in wages and transfer fees but I do worry for those people working in the lower leagues. Clubs will surely close down, folk will lose their livelihoods.

Perhaps the Premier League will offer to help the rest.

Sam Hoare
13 Posted 31/03/2020 at 09:32:22
Everton have always been a club of firsts. It would be nice if we were the first Premier League club to announce that the players and staff have agreed to a wage cut while there can be no playing, in order to protect the club.
Ray Roche
14 Posted 31/03/2020 at 09:49:11
Sam, players, not staff. Even though Everton were (I think) the first club to introduce the Living Wage, as opposed to the Minimum Wage, the staff shouldn't be expected to take a pay cut, not while Walcott, Schneiderlin and Keane are trousering three times their annual salary per WEEK!

Maybe when this pandemic is over, football will take a long hard look at itself and the likes of Raiola et al and bring some sanity back to the financial side of the game.

Brian Harrison
15 Posted 31/03/2020 at 10:22:38
Sam, I completely agree with the players reducing their salaries but I doubt many of them would even consider doing this. Plus I suspect agents will also, being the parasites they are, be telling their players to do nothing. Then you have players whose contracts finish this year; I can't see them taking a pay cut for the remaining months of their contract.

Seems everyday we hear more calls from players and some managers that the outstanding games will have to be played behind closed doors. Yet nobody has any idea when the government restrictions will allow that to happen. But it seems that come what may the general consensus is we must finish this season. But it all seems to be a case of we must fulfill our obligations to Sky or it will have a major impact on their finances.

I find very little appetite at the moment to even consider watching behind closed doors, maybe I am in the minority but while people's lives and livelihoods will be affected, playing a game of football seems totally insignificant.

I would like to think over time this pandemic will make people reconsider how football should conduct itself, but it won't. When we get back to normality, players will still be paid a fortune, and NHS staff who are putting their lives at risk will still be amongst the lowest paid workers in the country. When you look at the people who are keeping this country running from day to day, it's NHS staff, care workers, supermarket staff, binmen, bus and train drivers, some local government employees. You will notice we don't rely on footballers when it really matters, mainly just low paid workers.

Maybe when this has passed, these people who have looked after us and kept us safe should be the ones who we pledge undying loyalty too and not some over-paid Premier League footballer, who will have been supplied with all the food and goodies they needed when many were struggling.

Sam Hoare
16 Posted 31/03/2020 at 10:30:33
Ray, depends on the staff I guess. Ancelotti is probably getting even more than Walcott! Perhaps anyone at the club can give up 80% of whatever they earn over £50k pa or something like that.

It would be good if this caused some sort of wage correction but I suspect that, once the restrictions are lifted, the business of Premier League football will be back with a bang. It could well be that it's the poorest and smallest clubs who are hit hardest.

Derek Thomas
17 Posted 31/03/2020 at 11:12:30
Anybody who postpones their exorbitant wages is only kicking any financial pain for the Club down the road. Forgoing like Juv, well that won't or shouldn't hurt them for a few months.

Hopefully all the financial pain goes up the line to Sky. If, for instance, EFC...and many others say, sorry we've spent it, were skint, look *pulls trouser pocket linings inside out*... Are they going to sue into bankruptcy the golden egg layers?

Tony Everan
18 Posted 31/03/2020 at 11:12:33
There is a desperation to finish the season by whatever means. The Broadcasting Rights money trumps all and if they can just about lawfully play behind close doors to get that £762m they will do and it will be dressed up as a service or a tonic to the people. Players and agents will be sitting tight, thinking "If they get their TV money in July, why shouldn't I get my share of it?"
Peter Neilson
19 Posted 31/03/2020 at 11:58:01
What a surprise, Newcastle the first Premier League club to put their employees on furlough. It was always a safe bet that Mike Ashley would take full advantage.
Darren Hind
20 Posted 31/03/2020 at 12:28:39
Sam + Ray,

Couldn't agree more.

Brian @15,

A good post making some important points. I would like to think you are wrong regarding the players taking a pay cut... But I don't think you are.

Eric Paul
21 Posted 31/03/2020 at 13:22:41
Sam should that read £50k pw
Jamie Crowley
22 Posted 31/03/2020 at 13:54:01
I think, in the end, this will be good for football. Player movement will be more difficult, which will result in Clubs seriously scouting players and deeply considering whether to sign them, as opposed to the scatter-gun approach many Clubs have employed in the past.

Salaries are going to drop. Valuations will drop. The whole thing is going to adjust to a more reasonable economic model.

Regarding BMD, I’d imagine Everton will already be in the process of re-negotiating some costs. I think the project will be delayed a few years as everyone works together and figures out a financial landscape that works for all parties. My guess would be completion in 2025 now. Could be wrong.

A lot is written about our ownership on these pages. There’s a lot of criticism, and also due praise when warranted. Going into a period of economic adjustment, which clearly will require negotiation and level-headed thinking and compromise by all, ask yourself this question:

Would you rather have Mosh and Bill trying to work with their vendors and players to find a common ground, or someone like Daniel Levy at Spurs who no one likes to negotiate with, and is a man whom everyone knows is shrewd to a definable, palpable fault? In short, and only in a business sense, the dude is an asshole and everyone knows it.

This might be a situation where the good guys win in the end. Clubs run well with excellent outreach programs will find it much easier to adjust their financial landscape with vendors and players - they’ll be trusted and liked, and people will be amenable to working with them.

Wash your hands.

Peter Neilson
23 Posted 31/03/2020 at 14:36:16
Sadly at the moment there is very little sign that the situation is shared by players/managers/boards, in the premier league at least. Spurs has just announced that it will put circa 550 club staff onto furlough i.e. up to 80% or £2500 max gross per month while still paying the players full salaries. The combined salaries of those staff affected over even a 6 month period would be less than 5% of the players salaries. Most of it would even be covered by Daniel Levy's £4M salary. All in it together and game of the working man, yeah right. Barcelona appear to have a better approach.
Ray Roche
24 Posted 31/03/2020 at 16:29:04
Peter, The BBC have stated that Levy was on £7m last year. He’s a twat.
Peter Neilson
25 Posted 31/03/2020 at 17:51:57
Ray, agreed, and Mike Ashley is the unacceptable arse of capitalism.
Brian Harrison
26 Posted 01/04/2020 at 11:11:31
As the days go by, I am still waiting to hear that any of our Premier League players have volunteered to take pay cuts, to help their fellow low-paid workers at their clubs.

Barcelona players took 70% wage cuts, but seems some of our Premier League clubs would rather keep paying their millionaire players their salaries, while putting all of the non-playing staff on furlough payments made by the government. This in my view is abhorrent, the government made the furlough arrangement so people could stay at home and not have to worry about a great loss of income.

This scheme wasn't set up to allow multi-million-pound businesses to offset some of their costs. This scheme was introduced to try and save lives. I think, when things start to get back to something like normality, the fans of these and other clubs won't forget this selfish attitude in a hurry.

Peter Neilson
27 Posted 01/04/2020 at 13:21:17
Brian, I agree, when this is all over I hope the behaviour of these chairmen and their clubs isn't forgotten. In the meantime, I hope someone at HMRC tells Spurs and Newcastle where to go. I then look forward to their public excuses for the “misunderstanding”.

While there are rules around furlough, they seem wide enough to allow this behaviour but it's pretty obvious that it wasn't set up to pay employers salary costs for those predominantly on the minimum/living wage while they still pay out millions to individuals. No shame.

Mike Oates
28 Posted 02/04/2020 at 10:38:43
We've let the game become a monster, we've craved for football to be shown, discussed, 24hrs a day and the people who rule, play, manage the game have enjoyed a life which the common man, cant even dream about, and doesn't enjoy, but puts with as it serves his demand.

The players etc have become greedy, the clubs clamour for success, the fans demand it and the Media, Gambling, companies etc have supported it to increase their own revenues. So we see Neymar getting a bonus of Euro 375000 per month to ensure he claps the fans and behaves himself, and all players getting paid to take an isotonic drink at half time and full time ……..

Yet as the Madrid Health Executive said last week - What type of society have we let develop when we have a huge shortage of nurses, doctors, many of who are losing their lives every day, on paltry salaries of Euro 2000-3000 per month yet we pay our footballers Euro 1,000,000 per month !!

Football has to crash, its obscene.

Hugh Jenkins
29 Posted 05/04/2020 at 10:03:38
Peter (25). I think Mike Ashley is about to have a set back as he is a major shareholder in Debenhams and they have just filed for Administration (for a second time), so I can't really see them coming out of it and Liquidation looms - with a loss of 20,000 jobs.

The ongoing impact of Covid-19 is, I fear, going to be far reaching and long lasting.

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