The Coronavirus could destroy football as we know it – Part 2 The Aftermath

Chapter 2 – The Coronavirus could destroy football as we know it by AndersS

On Sunday I wrote and sent an article to the editor, and it was published Monday with the headline “The CoronaVirus could destroy football as we know it”. Many have taken the time to read it and to discuss it. I thank you for that.

When sending it on Sunday, I actually expected to receive quite a lot of comments deeming me to be certifiable 😊, but that wasn’t the case.

The situation evolves so quickly, it is hard to keep up. Unfortunately, the 2 days, which have gone since I wrote the article, has not shown anything except news that points in the direction of a very bad scenario in many countries.

Those of you, who have read the article will also know that I admit debating the virus’ impact on football can be judged as cynical, and in fact I was glad to see the discussion solely evolved around the seriousness of the illness and a lot of sympathetic points of view were expressed.

However, I did in fact, also try to describe the outlines of a possible scenario for football, and since this part was not discussed, I now try my luck with a follow-up. I assure you, it is not with any intention to insist that football is important right now. Because it is not. On the other hand, I am sure many of us do speculate, what the future will bring to many aspects of life, and these are my thoughts on football in general and on Arsenal’s situation in particular.

The Coronavirus has the potential to unleash a crisis in the world economy which by far could be the worst in modern history. Personally, I think it will happen, and the crisis that followed the “credit crunch crisis” in 2008, will be a dwarf in comparison. It is happening so fast and with such force, it is almost unthinkable. I think, the drastic downturn to world recession is really only days away. What is a bit more uncertain, is how the shape of the crisis will turn out. Will it be “V-shaped” with a reasonable quick recovery for the economy? Will it be “U-shaped” with a period at the bottom, before things recover? Or will it be “L-shaped”, where the recovery at the moment is out of sight? In the first case, we can not only hope for something like a return to something normal in maybe 2-3 months. We can expect it. In the second case, we are looking at something quite a bit more serious with maybe a return to normality in 6-12 months. But in the third case, there is really no way of saying, what the period will be and, in fact, there will be a different/new normal somewhere in the future.

I think it is very unlikely the PL and the European competitions can be played this side of summer. Whether they will be further postponed or called off remains to be seen. The decision on this, I fear, has very little to do with finding a practical and fair solution to end the season from a sporting view. Other things are at stake, and not just the health issues.

At the moment, the FA, the PL and UEFA aren’t delivering the product they have sold the rights to. Broadcast rights, streaming rights, sponsorship rights etc. etc.. Effectively there is a default on the contracts, and all the companies around the world who have bought the rights, will most likely hold back their payments (usually these are in installments), until they again receive the product they are entitled to.

If the current season is called off, they may even be able to claim payments back. Even worse, soon, if not already, they will also be looking to cut their costs in order to survive, and if they can claim a default on the contract, they can get out of future commitments, and they may want to do this, as the market situation is likely to change dramatically. They can not expect advertising sales and subscription sales at anywhere near the current/previous level in the future, so the clubs can’t get anywhere near the same for the rights, as they have been getting until now.

The loss of money from TV rights etc. will hit all commercial football clubs extremely hard.

Now, the clubs themselves are not delivering the product, they have sold to their own sponsors, hospitality, fans etc.. As the crisis takes hold all companies will be looking to slash costs for marketing etc. Some sponsors will have to claim a default on their contracts with the clubs, and maybe not only stop the involvement with immediate effect. In some cases, they can also claim money back, sue for compensation.

Arsenal is heavily involved with Emirates, and you possibly could not find any industry, who is hit harder by the current situation, than the airline industry. Will Emirates be looking to get out soon or immediately? Will they want to continue, albeit at a much lower price?

On top of this clubs will by now have seen their ticket sales suspended or stopped completely.

So basically Arsenal, and other clubs like us, can very soon be in a situation with almost no income.

How long can we sustain this? Not long, I imagine.

Arsenal will have to cut costs as well. Without knowing anything about the details of our business, I think it is safe to assume that salaries to players are a huge part of our costs, and there could be no other way than starting to slash them. This can’t be done by selling players now. Even if the football authorities were to open the transfer window with immediate effect, I would expect almost no clubs being able to invest in new players. On the contrary, all clubs will be looking to offload players as quickly as possible.

Nor can clubs like Arsenal sell their stadiums to get funds to get through the crisis. The value of a stadium is basically made up of 2 things.

1) The value of the land, where it is located. The value being what the land could possibly be sold for-

2) The actual revenue from the stadium as a running business.

The structure in itself, which may have cost billions, is actually of very little value, as there is almost no alternative use. Selling the stadium, i.e. on a sale and lease back contract if at all possible, will only generate limited funds to cover the expenses for a period of time.

As selling players also will be impossible, the only remaining option will be to break the contracts to players by not paying the salaries they are entitled to according to the contracts. What can the players do? They can of course leave and/or sue the club for the contract breach. I can’t predict if they will, and what will happen if they do.

I am not qualified to be the CEO of Arsenal. I have only experience as CEO of much smaller companies and experience from running my own business.

But I will suggest, that the management of Arsenal is already looking at this. Maybe they are already planning talks with the players about postponing salaries. I know, I would, if I was in charge.

If the above becomes reality, all discussions about selling or keeping Auba, and any other player whose contract may be nearing the end, is without meaning. Arsenal will be looking to get rid of him, maybe even to any club that will be willing to pay his salary. All talk about other incoming transfers, starting line-ups etc. etc. are really also completely meaningless.

My bet is, at the moment Arsenal and other clubs are only looking at how can they possibly survive as businesses in the scenario above. It could be approaching, and approaching much quicker, than most people think.

What can prevent this from unfolding?

The most wanted thing is of course, that a cure for the CoronaVirus is discovered quickly. What are the odds of that? Not in favor, I think.

Will the actual impact of the virus be smaller, firstly on us humans and secondly on the economy? Maybe, but only maybe.

We shall see, and in the meantime, I wish all the best.

AndersS

12 Comments

  1. S.J says:

    Nice article, worrying signs for the global economy, basically most business sectors will be at loss. But one thing I know for sure, nothing last forever so no matter when this pandemic will come to an end

  2. Gily says:

    This is no time for politics, if it is at all responsible directly or indirectly for this pandemic; this is time to save humanity, and that being the case, all the countries of the world must put their acts together to find a cure for this terrible virus. This is the very only way forward.

    The global financial crisis also will not be imaginable, as it has already started, and no country will escape it eventually. The only way to reduce the damage again is finding a cure.

    Perhaps this virus has already declared a world war on humanity.

  3. Sean Kane says:

    Enjoyed your article. However I submit that for a club like Arsenal this is most probably a worse case scenario. But for the smaller lower league clubs this is a stark reality as of now. They are run to the penny regarding income from gates, sponsorship and tv money. This has all been put on hold for the foreseeable future.
    How these clubs can survive the current economic climate within football? I don’t know. They might not even have the luxury of selling on their best players.They will most likely have to cancel the contracts of all of their pkayers and regroup using the lowest paid players and the youth team..
    This will most lkkely mean the end of football in the EFL as we know it. Unless the Briyish government steps in and comes up with a financial “saviou” package that would help the clubs stabilise and in the process save what is a way of life in the UK and their national game.
    This financial bail out is required now. Otherwise before the end of the season-whenever that may be- their will be clubs having to shut their gates. Proud clubs with a rich heritage in football. All of these clubs are an endangered species as we speak. It’s not so much the big clubs who will be affected, these small clubs need saving for the benefit and for the integrity of football in the UK.
    Sean K

    1. Gily says:

      There must be a mutual understanting between players and clubs otherwise cancelling contracts is not an option as it will lead to lawsuits and more financial losses.
      Financial bailing by government will also be difficult if there is no fixed time frame for it, as the virus has no cure yet.

  4. GunnerJack says:

    I will ignore the ridulous melodramatic headline, again, and just offer a couple of the latest reports regarding Italy.

    I chose Italy for two reasons: it seems to be the hardest hit country and because Admin asked me a question about it a few days ago. Links are not allowed here but you can follow the guidelines below.

    First please checkout the report found at ‘Wired’ with the title ‘Why the Coronavirus Hit Italy So Hard’. Please note the subhead in particular which neatly encapsulates in one sentence why Italy is suffering: ‘The country has the second-oldest population on earth, and its young mingle more often with elderly loved ones.’

    For more info just read the rest of that article but maybe the main thing to take from it is this – unless it’s necessary to help with shopping, collect prescriptions etc for elderly loved ones please don’t visit them at this time, even if you have no symptoms or have only mild symptoms like MA. If you don’t have symptoms you could still be carrying the virus, which may not have developed in you just yet.

    That article also covers a question I asked in a previous comment – why kids seem to be lucky. Turns out it’s because their lungs are in pristine condition compared to most of us.
    The article also predicts Florida will be hard hit too, with it’s high age population.
    Hope you find the time to read that article. Next:

    ‘According to Italy’s national health institute, the average age of those who have died was 81, and many of the deceased had preexisting health conditions.’
    I took that from business insider – Italy – coronavirus – etc
    My view is that it would be rare for people of that age to have no preexisting conditions and that many of them would have died in the near future anyway, whether or not they contracted the virus. The virus just seemed to flip them over the edge (step forward Jon Fox etc to explain to you all how selfish and callous I am for saying this). BTW Jon if you’re reading this I’ve submitted an article to Admin about my views and if its published you are going to have a fantastic time ripping me to shreds. It’s in ‘story’ format so you’ll be able to castigate me for that also. Good luck – I look forward to our next not to be missed encounter.

    Apart from the two articles above there is a little story at ‘abc news – health – coronavirus – outbreak – europe – Italy which you, like me, may find quite touching.

    To sum up – if you are under 50 and in reasonable health and develop covid-19 your chance of living is extremely high.

    1. Rory johnson says:

      Could you please stop with your ignorant view points… what about the cases in england now of people on ventilators who are under 40 some with no underlying health conditions? I like how you decided not to answer my follow up on the last article you just move on to spouting more nonsense, the fact that you even called out Jon fox leds me to believe your a tually enjoying a bit of light trolling.

      1. GunnerJack says:

        Please let me know where you found this info as I’ve been searching the net but couldn’t find it.
        You can’t put a direct link on here but can you indicate where it is easily e.g. just – arsenal – news – under 40s on ventilators due to covid19.
        Thank you

        Regarding ignorant view points – did you go and read the articles I mentioned? Or was it too difficult for you? These are not my viewpoints of course so where you get the ‘your ignorant view points’ from I don’t know.

        Regarding not answering your earlier comment I must have missed it. When did you comment and under what main Article? Please note that I am 8 hours in front of the UK at the moment so maybe I was in bed at the time you posted e.g. if it’s 4pm in the UK it’s midnight here, and probably missed it the next day. This may happen now as it’s past 11pm here.

        1. Rory johnson says:

          In the part one of this article, you said about data being skewed because most people dont get confirmation that they have the virus, then ignored my follow up.

          Go to sky news main page, scroll to the bottom where it says top 10 articles and you will see one called :

          NHS anaesthetist “I’m seeing under 40s with corona virus on ventilators”

          Aa for the rest of your argument honestly I cant be bothered to engage anymore, keep on with your trolling (only reason I can figure why your so vehement on the subject, going as far as to write a silly story article that was complete nonsense)

          Arguing with a smart person is difficult, arguing with a stupid person is impossible. Good day sir.

  5. Grandad says:

    An excellent article AnderS.As a retired Banker,I concur with your synopsis of the economic impact which will of course affect virtually every type of business on a Global basis.However the economic collapse which we are witnessing has nothing to do with demand, or the lack of it, which is invariably the case in the normal cycles of book and bust.The downturn is directly attributable to a worldwide pandemic which is likely to take at least 6 months to peak, flatten,and tail off.When it does die off I expect a rapid resurgence in business generally with a commensurate uplift on stock markets throughout the world as confidence returns and unemployment rates drop.Having had their lives severely restricted for a prolonged period,most people, certainly in the UK, will be keen to return to their leisure pursuits with vigour.As far as football in the UK is concerned, there will most certainly be a number of casualties, but the vast majority of Clubs will survive , and with the support of their fans , become once again an important part of our lives.

    1. AndersS says:

      @Grandad
      Thank you for your comment. I personally agree and expect the timeframe on the virus, you outline. Although nothing is certain.
      I also think most clubs will survive, if this timeframe is correct. But not without drastic measures.

    2. Ogaraku Bunke says:

      @grandad,

      Interesting comment and I agree with the points laid out. But the real question is, how long will this epidemic last?

      There is a direct correlation between the duration of this epidemic and the survival of businesses.

  6. Ogaraku Bunke says:

    Brilliant article!

    But does anyone know if there is a force majeure clause indicated on the contract?

    Because if there is, I don’t see these businesses suing anyone as this epidemic can provide grounds for a force majeure argument.

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