Cash is king: Covid-19 leaves sports clubs scrutinising their business in pursuit of cash flow

Cash is king: Covid-19 leaves sports clubs scrutinising their business in pursuit of cash flow
Published: Wednesday, 15 July 2020. Written by Mark Warren, Anand Patel 1 Comment

The sports industry has been on an ever-upwards trajectory in recent years, especially at the top of the sports pyramid. KPMG recently valued[1] the top 32 European football clubs at €35.6 billion in aggregate. On the other side of the pond, Forbes values[2] the 32 U.S. National Football League (NFL) franchises at a staggering $91.4 billion. The growth in values has predominantly come from huge increases in income from broadcasting contracts and advertising. This has also been supplemented by an expansion in commercial sponsorship. For instance, 2017 saw the National Basketball Association (NBA) introduce jersey sponsors and the English Premier League (EPL) introduce a second sponsor to players’ shirts.

However, this growth has been predicated on there being sporting action. Income has largely evaporated as a result of Covid-19. This article identifies key weaknesses in the system and examines the potential repercussions, looking specifically at:

  • Income/gate receipts
  • Broadcaster and sponsor revenue
  • Financial support from governing bodies
  • Resisting cash flow insolvency
  • Cutting playing staff costs
  • Raising outside capital/financial fair play
  • The monetary value of goodwill

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About the Author

Mark Warren

Mark Warren

Managing Associate, Linklaters 

Mark Warren is a banking finance lawyer at Linklaters. He is an English law qualified solicitor and has been working in international corporate finance since 2012, having worked in London, Hong Kong, Hamburg and now Amsterdam. He advises domestic and international clients across a range of different financial products, including bank lending, structured finance, securitisation, project finance and derivatives.

Anand Patel

Anand Patel

Associate, Linklaters
 
Anand Patel is a competition/antitrust lawyer at Linklaters and editor of the firm’s sports law blog,SportingLinks. He focuses on all aspects of EU and UK competition law, with experience in London, Brussels and New York. 

Comments (1)

  • Oluwateniola Akeju

    • 25 July 2020 at 20:59
    • #

    This is a fantastic read. Really enjoyed it.

    Do you think there are parallels to be drawn between the financial implications on sports now and the financial implications of the 2008 recession on sports? What lessons can be/have been learnt from the 2008 recession?

    reply

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