Report: Pandemic’s “devastating impacts” on European football

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The devastating impacts of the Covid-19 pandemic are clearly reflected by the financial performance indicators of the champions of Europe’s six prominent leagues in the past season, according to The European Champions Report 2021 from consultancy firm KPMG’s Football Benchmark team.

All six champions scrutinised in the report have now recorded a decrease in their operating revenues: Juventus, Paris Saint-Germain and Porto registered a double-digit year-on-year drop, while Bayern München, Liverpool and Real Madrid reported more modest decreases in operating revenues, mainly as a result of their ability to increase commercial income.

The German and the Spanish champions have also been rare exceptions in the entire football industry as they managed to register net profits, while the other clubs saw significant losses for the financial year, which ended in May/June 2020.

The past season was relatively competitive within the scope of the analysis, with three champions – Juventus, Bayern München and Paris Saint-Germain – retaining their domestic title. Newcomers include Liverpool winning the Premier League for the first time in 30 years, Porto reclaiming the Portuguese title from last year’s winners Benfica, and Real Madrid winning their 34th LaLiga trophy by regaining the throne from Barcelona after two years.

“While recent pre-Covid-19 seasons demonstrated constant and stable growth for almost all the champions of Europe’s top leagues, the past season has been distressing for all, albeit to various extents,” notes Andrea Sartori, KPMG’s Global Head of Sports and author of the report. “The coronavirus crisis has questioned the financial sustainability of the football ecosystem as a whole and further exposed its fragility. Even prior to the pandemic, inflated players’ salary, coupled with growing transfer and agent fees, placed a significant strain on clubs’ finances. The crisis has magnified these flaws in the current business model. Football clubs suddenly had to deal with liquidity concerns with all of their income streams affected by the absence of gate receipts, in addition to the renegotiation, suspension or cancellation of payments from media and commercial agreements.”

Key conclusions of the report:

  • Operating revenues (net of transfer proceeds) have decreased for all the champions analysed in the report.
  • Despite an 8 per cent drop in revenues, Real Madrid registered the highest overall income of €681.2 million among the champions.
  • With many games cancelled or played behind closed doors, matchday income suffered the biggest blow for all clubs except for Porto. Real Madrid lost the most in absolute terms (-€34.9 million, a 22 per cent year-on-year drop) while Porto’s €4.2 million decrease constituted the highest annual decline in percentage terms (-34 per cent).
  • Broadcasting income also decreased for all these champions, with UEFA Champions League performance also playing a role: finalists Bayern München and Paris Saint-Germain registered only a 4 per cent decrease in their TV income, while Porto’s 63 per cent drop in TV rights was mainly a consequence of their early exit in the UCL qualifying rounds.
  • Liverpool, Bayern München and Real Madrid could increase their commercial income by 14 per cent, 4 per cent and 2 per cent, respectively.

From a comparability perspective, the delay and/or cancellation of matches, in some cases played after the financial year-end closure, and the uncertainty over potential renegotiations of payments from media and commercial agreements – including UEFA-related income – have posed challenges on how revenues and costs have been accounted for by clubs.

Regarding operating revenues, FC Porto registered the biggest year-on-year decline in percentage terms (-50 per cent), mainly a consequence of its early exit in the Champions League qualifying rounds, while Paris Saint-Germain FC suffered the largest blow in absolute terms (-€95.4 million). FC Bayern München can boast the least severe drop (-€18.3 million, a 3 per cent decline), whereas Real Madrid CF registered the highest operating income (€681.2 million) among the champions, despite an 8 per cent decrease.

With many games cancelled or played behind closed doors, matchday income suffered the biggest blow at almost every club. Two exceptions were Liverpool FC and FC Porto, whose broadcasting revenue diminished most, primarily down to their poorer UEFA Champions League performance compared to the previous season. Real Madrid CF lost the most in matchday income in absolute terms (-€34.9 million, a 22 per cent year-on-year drop), while FC Porto’s €4.2 million decrease constituted the greatest annual decline in percentage terms (-34 per cent) among the champions.

Broadcasting revenues have also been hit, but to various extents. With fewer games played until June in both domestic leagues and UEFA competitions, TV income was reduced accordingly for the past season, while the matches played in July and August, completing the season, in most cases will be accounted for in the current 2020/21 season.

Clubs who progressed further in the Champions League could benefit from higher UEFA contributions: both finalists FC Bayern München and Paris Saint-Germain FC, indeed, registered only 4 per cent decreases in their TV income, while those eliminated in the last-16 (Real Madrid CF, FC Juventus and Liverpool FC) suffered an annual decrease of 12 per cent, 19 per cent and 22 per cent, respectively. In contrast, FC Porto’s 63 per cent drop in TV rights was mainly a result of their poor Champions League performance, and thus missing out on the lucrative media income from the main European club tournament for the first time in eight years.

Commercial income for the champions vary to even greater extent – Liverpool FC, FC Bayern München and Real Madrid CF could even increase their income from commercial activities by 14 per cent, 4 per cent and 2 per cent, respectively, Juventus FC remained stable, while FC Porto and PSG both registered an 18 per cent drop. Nevertheless, commercial has become the income stream with the largest share of total operating revenues at five of the six clubs reviewed, while broadcasting bore the biggest share for most of the champions a year before. Although noticeably smaller than for other champions, broadcasting revenue remained the key source for FC Porto, despite suffering a 63 per cent decrease in TV rights with their subordinate UEFA performance, as the club’s recent, 10-year individual domestic TV deal provides a stable income.

While several clubs managed to reduce players’ wages, not all of them were able to decrease operating costs in proportion to the harsh drop in operating revenues. FC Bayern München and Juventus FC were successful in reducing staff costs (by 6 per cent and 13 per cent respectively), by having agreed a pay cut by the playing staff. In contrast, staff costs at Real Madrid CF increased by 4 per cent, despite players having settled on a 10 per cent temporary wage cut during the season, and thus the club registered the highest staff costs (€411 million) among the champions. PSG registered an even higher (10 per cent) growth in staff costs, mainly as a result of growth in overall wages with some high-profile new signings and high employee social tax charges in France.

While last year, all champions managed to record a profit after tax, with Juventus FC being the only exception, this time FC Bayern München and Real Madrid CF are the only clubs to register a modest profit (€5.9 million and €0.3 million, respectively). On the other end, PSG’s net loss of €125.8 million is the highest, also because the French Ligue 1 was the only top domestic European league to be shortened as opposed to be delayed and completed later.

“A crisis almost always provides the opportunity to highlight major failings in the business model, and also to drive innovation and evolution – so it is encouraging to see football’s governing bodies, associations and clubs discussing reforms regarding competitions calendar, cost control measures, alterations to the economics and governance of domestic and European competitions or in the transfer system, among others,” said Sartori. “Our call at the outbreak of the crisis almost a year ago remains valid: the unprecedented complexity of issues in the new reality requires unprecedented flexibility, wisdom, responsibility and cooperation from all parties at all levels.”


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