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Oliver’s blog: football and business

The Covid-19 crisis is a tough time for everybody: family, friends, business, we’re all suffering in different ways.

Football people and their businesses are also having a struggle. Here you have to differentiate between the bigger professional clubs, such as those in Premier League and Championship and those in lower professional leagues or in the semi-professional divisions.

In all cases the immediate challenge is to get through the next three months or so, during which it is extremely unlikely there will be any competitive football.

Those clubs in Premier League and Championship will find their income streams have suddenly been cut off with one exception: the Sky Sports TV and international media deals.

These deals provide huge sums of money for Premier League clubs and explain why Championship clubs are so keen to break the bank in order to get promoted.

Smaller Premier League clubs like Bournemouth earn some 80% of their annual turnover through media payments. Right now Sky are committed to a deal till 2022, so unless they file for bankruptcy any time soon or the prolonged crisis leads to break clauses in the Sky contract being triggered, the massive income stream to clubs will continue.

Some clubs will find this covers most of their cost base. They will have some long-term commitments to players beyond the season end but in many cases there will be some expensive player contracts terminating this season, so it should be possible to cut costs at that time if necessary.

Most of these top Premier League clubs are financed by owners with very deep pockets so they should be in a position to survive for a good few months.

Moreover, in 2018/19, even the Championship clubs were able to sustain combined losses of more than £300 million so they clearly have means. But you can understand why these club owners are so keen to see the current season extended and finished as soon as is reasonably possible. Even if it means playing matches behind closed doors.

This would mean limiting losses. Money is the driving factor here. Given the fact that for most of them their main income stream is TV rights, you can understand that getting the match played in front of cameras is more important than waiting till fans can once again enjoy going to football and creating an atmosphere.

One can only imagine the clubs are desperate not to allow the cancellation of football for this season to damage their TV rights income streams. As with life in general there will have to be consideration of health issues before any consideration of football business issues, although the two subjects are of course intertwined.

If however these top clubs really start to feel the pinch they could attempt to renegotiate player contracts. There is likely to be some deflation of these going forward, so players might be open to renegotiate lower salaries in return for longer contracts and greater security.

The general public will expect players to support their clubs in this respect and there will be few tears shed for top players, who may have to accept reductions in their £5 million per annum salary packages or say goodbye to one of their Bentleys.

For what it’s worth, the government income support package applies to all these clubs too. However, the ceiling of £2,500 per month of wage support will only really help non-playing staff at these clubs, whose salaries are less astronomical.

There is a totally different picture when you come to consider the smaller clubs, of which my own, Maidstone United, is one. The season has ended not with a bang but a wheeze.

Except that it hasn’t ended yet as far as the National League is concerned. Until yesterday they were still trying to hang on to the notion that it might be possible to finish the season in an attempt to copy what the Premier League and EFL are doing.

This is based on a misguided fear that by not so doing they might be cut off from the established pyramid structure and cast out to sea without as much as a single promotion place.

In reality the National League and the top Premier League and EFL clubs are on different planets. The Premier League and Championship clubs could envisage playing matches ‘safely’ behind closed doors, if the government in its wisdom allowed them to, because of their TV deal.

In the National League there is no meaningful TV deal. Trying to copy the big boys might bankrupt National League clubs, for whom playing behind closed doors would be economic suicide – players to pay but no income.

Additionally trying to complete the season at a date still unknown is hugely challenging because we don’t really know when it will be safe to go outside again, let alone get together in cramped changing rooms and on crowded terraces.

So how do our clubs manage their players’ contracts? In much of non-league football playing staff contracts finish at the end of April. If the current season were to resume in June or July how on earth are we supposed to retain or reassemble a playing squad?

Assuming the current season has already ended how will our clubs now survive? Like all businesses we are eligible for income support. 80% of salary up to £2,500 per month covers most salary costs at non-league level, except for the more ambitious and well-funded clubs in the National League, who might be paying higher wages and might have a shortfall.

Clubs operating with regular deficits, some of which can be astronomical in relative terms, up to £1,500,000 annual loss in at least one case, are often subsidised by local versions of Roman Abramovich, Stan Kroenke and the Glaziers and so it is not unreasonable to expect them to continue supporting their clubs through thin, seeing as they have been happily supporting them through thick.

Certainly the general public would voice strong objections to the public purse being used to give football clubs any sort of better deal than ordinary businesses.

Are the FA or the Premier League prepared to give a financial support package to lower league clubs? My guess is they will, but with a package which gives a basic subsidy to all clubs, division by division, without any additional support for those who might have been spending over the odds, over the years.

Then for the next few months our clubs will have to work out how to make ends meet with the money available from government, local authority and FA/Premier League, if applicable.

As long as they can fund short-term cash-flow over the next few weeks – before the cash comes through from the public purse – most well-run and well-funded clubs, at least those who are not wildly overspending and whose generous owners are not going underwater in their other businesses, should be able to.

From end April, 80% of salary payments should be funded by government and clubs have a few weeks to negotiate with staff whatever might be necessary to ensure survival. Already we have read of some clubs laying off staff, some negotiating 20% or even 50% cuts in April salaries.

For most clubs, in a normal season, that then gives two months breathing space before players salaries become due in July. However, July may be too early for football to start up again and we can no longer accuse this season of being normal.

Let’s assume for the next season we all emerge from our homes in June and that crowd gatherings like football matches are deemed safe from, say, September. The new season could then go ahead.

Clubs will have to try and answer an immediate question in order to prepare for this: what to do with existing player contracts which expire in April? Most will be expiring one-year contracts but some contracts might be for two years and some have options attached.

Clubs will need FA assistance and guidance to be able to use new forms of contract to provide for a new season whose dates are uncertain. Clubs will then have a framework to offer players in April new contracts for an uncertain future season. Clubs will have to take a view on their income streams going forward and many will be cautious and not wish to over spend on playing budgets.

The scars of surviving the crisis will change minds and attitudes.

Clubs will not wish to risk their financial stability. Better reduce the cost of the playing squad radically rather than risk bankruptcy should revenues fall in the new season as sponsors, advertisers and supporters tighten their belts.

There will be a massive reset in football. A new environmental consciousness will take hold too.

Perhaps we shall see the English football authorities, governed by a new ‘football ombudsman’ – there to protect supporters from unscrupulous owners and regulate the game as a whole?

Perhaps we shall see greater financial controls on football clubs everywhere and salary caps to stop some owners overspending and distorting competition, as well as putting their clubs in jeopardy?

Perhaps we will see more clubs allowed to install top quality 3G pitches giving them access to new sustainable income streams?

Perhaps we shall see League 2 of EFL and the National League combined to form two regional divisions in order to save money and reduce wasteful travelling?

I fear the next few weeks could be grim but with luck the future could be rosy.