<
>

UEFA's biggest challenge of the coronavirus crisis: Easing the economic impact on clubs, nations

play
Why UEFA had no choice but to postpone the Euros (1:27)

Gab Marcotti explains why postponing the Euros was UEFA's only reasonable option, despite a big financial hit. (1:27)

In times of crisis, you want the powers-that-be to get the easy, obvious stuff out of the way quickly. If water is gushing out of your washing machine, find the standpipe, and cut the supply. If sparks are flying out of your electric oven, cut the power supply. Then you worry about how the damage was done and how you're going to fix it. In that spirit, UEFA's decision to postpone Euro 2020 a full year was just that: an immediate decision that no reasonable person was going to oppose, given the coronavirus outbreak.

That was the easy part, and it bought them some time. Now comes the real challenge: figuring out a calendar that works (my colleague Mark Ogden wrote about this here) and assessing and reacting to the economic impact.

-- Coronavirus cancellations and reactions in sports
-- Jones: Soccer's pause makes you appreciate the beautiful game
-- Ogden: UEFA's impossible tasks ahead
-- Karlsen: How the shutdown could impact summer transfers

That is the central sticking point. UEFA say postponing the Euros will cost around 300 million Euros ($327 million), whereas cancelling the event altogether would have cost close to 400 million Euros ($436 million). But here's some simple math. If the tournament is held next summer, it should still generate some 2.1 billion Euros ($2.5 billion). Subtract 300 million from 2.1 billion, and you've still made 1.8 billion. Cancel the tournament, and you're subtracting 400 million from zero, which is what you make when you don't stage the tournament at all.

Why does the money matter? Because UEFA's money isn't really their money. The vast majority of what they make flows straight back out, primarily to clubs, in the form of prize money for the Europa League and Champions League, and federations, in the form of direct support and fees when they play in UEFA competitions.

UEFA's financial accounts are fairly clear. In 2017-18, more than 85% of their revenue went to teams participating in UEFA competitions, contributions to associations and solidarity payments. Event organisation, referees, match officers and technology/broadcast costs came to 9.4%. UEFA employee salary and benefits accounted for less than 3%.

Put differently, there's now a 300 million Euro "hole" in UEFA's finances, and it might grow larger if broadcasters and commercial partners try to claw back some of the money they spent on the Europa League and Champions League. After all, they signed a contract guaranteeing a certain number of games in certain specific slots, and now they'll get less than what was promised if, as appears certain, we get a reduced version of the competition in order to wrap everything up by the end of July.

So the 300 million shortfall could grow even bigger, but as stated above, in real terms, it isn't UEFA's money. The vast majority of it is money that goes to member football associations and clubs. The question is how to divide up those costs: Do you do it proportionally, or do you do it based on need?

play
1:29

Laurens: Dortmund CEO's comments are a disgrace

Julien Laurens reacts to Hans-Joachim Watzke's comments about financial aid during the Bundesliga suspension.

In the 2017-18 accounts, Liechtenstein received 1.14 million Euros ($1.24 million) in yearly solidarity payments for its national team. Moldova received 1.3 million Euros ($1.41 million). Moldova's population is about 70 times higher than Liechtenstein's, and its per capita GDP of $3,400 is nearly 1/30th that of Liechtenstein's. If cuts need to be made, I know who I think is best equipped to handle the deeper cuts.

Of course, it will get trickier with the Champions League and Europa League. Why? Because bigger clubs from wealthier TV markets might argue that they generate most of the cash. It's true, too: Broadcasters from Luxembourg to Lithuania shell out cash for Champions League rights based on delivering their viewers games involving the likes of Real Madrid and Liverpool, not Krasnodar and Dinamo Zagreb. That's why you already have things like the market pool and historical merit to reward the big brands from the big markets, and that's where things will get distinctly hairy.

Many clubs don't particularly like to share in times of plenty. They enjoy it even less when they are hit in the pocketbook in other ways: from lost gate receipts to potentially domestic broadcast holders and sponsors trying to claw back money to the simple fact that if there's a global recession as a result of the pandemic (in case you hadn't noticed, the Dow is down nearly 30%, year over year), everybody is poorer and less likely to spend money.

That means the "working group" set up by UEFA to deal with this have their work cut out for them. Dividing up a much smaller pie when everybody is hungry (and some face starvation) is neither easy nor straightforward. They have big calls to make, including whether to dip into their cash reserves (currently estimated to be around half a billion dollars) or relax Financial Fair Play regulations (this would seem like a no-brainer to me). They'll be doing this against a broader backdrop of every institution, from domestic leagues to FIFA, doing their part to pitch in. For smaller clubs, there will be immediate cash flow issues. In England, Barnet have laid off their entire non-playing staff. Others might follow suit, and in part, that's because many clubs (perhaps too many clubs) live week-to-week, and as soon as you cut off their main means of revenue -- gate receipts -- they risk going off the rails.

"We know how clubs are managed. They're always right at the line or even above the line," FIFPro General Secretary Jonas Baer-Hoffmann said. "There simply aren't a lot of reserves that clubs can bank on. If we don't respond very quickly to stabilise the cash flow of clubs, we'll have a massive problem of liquidity. We need to come up with a system where football helps itself."

play
1:30

Why UEFA set a hard date for leagues to finish the season

Julien Laurens explains why UEFA has set a hard deadline of June 30 for leagues to conclude their seasons.

The problem is that football is by nature a competitive, dog-eat-dog world. Last week, Hans-Joachim Watzke, the Borussia Dortmund chief executive, was very blunt: "At the end of the day, the clubs who have the effort to put a bit of money aside these past years can't reward those who have not ... We're running businesses in a market, and we're in competition."

He might sound like the Grinch, and those who remember back just over a decade will recognise that his club was on the brink of bankruptcy, helped by rivals such as Bayern Munich. But it doesn't mean he that doesn't have a point. Any bailout, whether it's advance payment of TV rights, tax credits or low-interest loans, has to come with strings attached, starting with a commitment to total financial transparency going forward. There has to be serious oversight and tough requirements for liquidity and reserves. You can't have owners borrowing against club assets or making other risky decisions, as happened at Bury and at several other clubs. The best way to guarantee oversight is to crowdsource it. As well as liquidity requirements and a regulatory body with power, have all the books online so that local fans and media can keep a watchful eye.

That's an idea for the future. Right now, the good news is that the main actors are saying the right things. FIFA agreed to move the inaugural 24-team Club World Cup from 2021 to a future date without a peep of protest. They also said they're open to revising both transfer regulations and the international match calendar to help in this emergency situation. That's essential. You want to be hopeful that this sort of diplomacy and solidarity can start at the top and trickle down.

We don't know what lies ahead or for how long. We need diplomacy and selflessness and willingness from FIFA, UEFA and domestic leagues to put their self-interests aside. To paraphrase legendary Miami Sharks coach Tony D'Amato (so legendary, in fact, that he's a fictional character), the institutions that govern the game will either stand collectively and survive, or they will fall as individuals.