Expert on impact of the coronavirus pandemic on the event industry, big-business football, and the small sport clubs
University of Bayreuth, Press release No. 046/2020, 31 March 2020
The consequences of the lockdown for large and small sport clubs, for companies and freelancers in the event business will be serious. "Only when something is going on, will money be earned", says Prof. Dr. Markus Kurscheidt, Chair of Sport Science II - Sport Governance and Event Management at the University of Bayreuth. He sees big problems ahead for amateur competitive sports: He fears that many regional clubs will not survive the crisis. Moreover, according to Kurscheidt, the recovery after the end of the initial restrictions will not be enough for the event industry: "To compensate for the losses, we would have to declare Wednesday a day off until the end of the year.”
Prof. Dr. Markus Kurscheidt, Chair of Sport Science II - Sport Governance and Event Management at the University of Bayreuth © Hans Pastyrik
Will small clubs be able to survive?
The effects of the coronavirus crisis on amateur and leisure sports are difficult to assess at this stage. Some village and suburb clubs will be confronted with insolvable financial situations. Many smaller sponsors will withdraw due to their own economic problems. In the higher amateur divisions, it will no longer be possible to pay recompenses to players. In some cases, match operations could be jeopardised because the clubs will no longer be able to cover travel expenses to away games. A massive consolidation in the many divisions of amateur competitive sports cannot be ruled out. However, the regional sports associations and cities have various instruments to cushion hardship cases in this situation. Nevertheless, I fear that a significant number of clubs will not survive the crisis. One focus should be to save successful youth teams from closure. After all, this is an area where amateur sport clubs do outstanding social work.
How high do you estimate the losses in the sports and event business to be due to the coronavirus crisis?
Everything depends on how long we have to hold out in the lockdown of almost all social and economic activities for medical reasons. The experience in China, where the pandemic began, provides a clue. Then we have to assume a widespread standstill of at least two months. For the German sports industry, worth more than 70 billion euros, the losses should then roughly amount to 15 billion euros or 20%. Unfortunately, there are no reliable figures for the event industry as a whole. However, the percentage slump will be similar. Early forecasts by economic research institutes, however, anticipate a rapid catch-up in the second half of the year, and an exceptional boom in the coming year. In the medium term, the negative and positive growth impulses could even almost balance each other out. For the sports and event business, however, this optimistic expectation is unlikely to materialize. On the one hand, it will take considerably longer for many areas of major events to be permitted again. Numerous events will be fully cancelled and not just postponed. The German Ice Hockey League, for example, abandoned the season very early on, and is forgoing the playoffs.
Who will suffer the hardest?
The situation is even more difficult in the culture and entertainment industry. In general, the number and capacity of events cannot be expanded at will, because people mainly go out on weekends. To compensate for the losses, we would have to declare Wednesday a day off until the end of the year. The event industry, whether in sports or in other areas, is strongly characterized by a large number of small companies, freelancers, and project and service personnel who fill in from event to event. This is in the nature of the product. Concentrated in time and place, crowds of people come together who want to be supplied and entertained. Event business is not a continuous business per se, but has its peaks in demand. Quite a few people move from one job to the next with great enthusiasm and flexibility. Only the sum of events and engagements results in a sustainable business model or profession. Simply put: Only when something is going on, will money be earned. If, as is the case now, everything comes to a standstill, these professional groups have no income or alternative. Retailers can still sell on the Internet or through the shop window, craftsmen work in isolation rather than in teams, and other service providers in the home office. But the event industry is a "people business" – nothing works without human interaction in larger groups. Fortunately, politicians have understood the problem and are providing immediate financial support. Nevertheless, many livelihoods in the industry will be threatened.
Is merchandising at least one reliable source of income?
In professional sports – as in pop culture, for example, on concert tours – the merchandising of licensed clothing and products is not a mainstay of income. Only in individual cases are substantial figures achieved. The importance lies more in brand management and fan identification. The team jersey and the fan scarf are de rigueur when visiting a stadium. The big money is earned in elite sports with media rights and sponsorships. Matchday revenues are also still significant. In lower-level sport, and beyond football and other media sports such as motorsport, ticketing is still crucial. Here, event revenues account for a quarter to a half of all sales, while the Bundesliga generates less than 20% with gate-takings and catering. Moreover, the sporting goods industry is currently experiencing losses similar to those in fashion clothing and retail. For example, adidas's recent announcement that the company would stop paying rent for its stores due to the loss of sales caused a popular outrage. This may seem ethically reprehensible for such a large company. The fact is, however, that sporting goods manufacturers are currently only making a fraction of their usual sales in Internet retail. However, there is a good chance that consumers will make up for this with purchases down the line. This is different from the event business.
Will sport as an entertainment event have changed after coronavirus?
Basically, I don't expect any major changes to the business and entertainment model in professional sports. The trend of so-called eventization will continue unbroken, and fans are already looking forward to it restarting. But the coronavirus crisis is definitely a turning point in elite sport that is used to success. Recently, those responsible in professional sport have spoken unusually often about football as a "cultural asset", whereas previously there was more talk of the "premium product" and the "brand". These days, everyone has to painfully realize that the sports business still starts with competition and sporting values on the pitch – with the ambiance created by the fans and not in games behind closed doors like in a TV studio. I expect and hope that this healing experience will also be reflected in improved relations between sports officials and fans. We should not forget that in German football before the crisis, confrontation between stakeholders dominated the headlines and debates.
Will there still be salaries and transfer payments in the millions?
As a result of the loss of revenue, there will initially be a dampening effect on salaries and transfer payments. The question is how drastic and sustainable this will be. In football, the decisive factor will also be how much Great Britain and thus the English Premier League will continue to suffer from the coronavirus crisis. After all, England's top-selling league has always been the driving force behind development. The rival European leagues from Italy, Spain, and France have already been hit hard. Spain's Primera Division has suspended playing operations indefinitely. In ice hockey and basketball, the particular problem is that many North American players have terminated their contracts and left for home. In some cases, the squad will have to be rebuilt anyway, the outcome of which is still uncertain.
The recent solidarity donation by the big clubs of Leipzig, Bayern, Dortmund, and Leverkusen – is that just PR? Given that the clubs are paying 12.5 of the 20 million not out of their own club coffers, but from DFL reserves.
First of all, I was surprised and also somewhat pleased that the Champions League participants from the Bundesliga voluntarily waived the last instalment of the TV money plus a certain additional payment. At second glance, however, in terms of percentage of total sales, it is not a major waiver for these top clubs. It is also still unclear whether the holders of the TV rights will pay the full amount. After all, the performance they expected for this, namely thrilling matches in front of enthusiastic spectators in the stadium, cannot be fully met. If at all, the remainder of the season will probably have to be played behind closed doors. So, it was not yet the great demonstration of solidarity. To a cynical eye, it was a clever move to proactively meet expected demands for a compensation fund. But taken more positively, it is a laudable step in the right direction.
How do you assess the cancellation of the 2020 Olympic Games and the UEFA European Championship?
Regarding the European Football Championship, I was quite surprised by the prompt decision to postpone until 2021. But there was hardly an alternative. After all, on the occasion of the 60th anniversary of the competition, it would have been held at eleven European and one Asian location (Baku). A mass pilgrimage of fans across Europe would have been completely unrealistic as early as June of this year of coronavirus. In contrast to the negative public response, however, I understood the IOC's wait-and-see attitude towards the Summer Olympics in Tokyo. The postponement of the Games is historically unique and highly complex in both organisational and financial terms. It is not only a question of the costs for the host venue, which are immense, but also of loss of income for the federations of marginal sports, which only receive a lot of attention during the Olympic Games. The IOC's allocations to these worse-off sports federations will be lower this year. This will cause problems for some national federations in the smaller sports. Nevertheless, the IOC and the German president Thomas Bach have not come out of it so well compared to UEFA.
Prof. Dr. Markus Kurscheidt
Chair of Sport Science II -
Sport Governance und Event Management
University of Bayreuth
Phone: +49 (0) 921 / 55 - 3470 and -3471 (Secretary)
Press & PR Manager
University of Bayreuth
Universitätsstr. 30 / ZUV
Phone: +49 (0)921 / 55-5300