Interview: ECA chief urges football ecosystem to embrace flexibility of external funding and outsource core business costs
11 November 2020
The European Club Association's (ECA) CEO, Charlie Marshall, says football should learn from other industries and increasingly employ shared services to make up for Covid-19's uncertainty.
Financial flexibility is essential in an environment where clubs are facing an impact from the pandemic of "well over" €6 billion on bottom line profits.
While football should not leap too quickly towards rescue packages – private or public – external financing can help the industry get back on its now demolished growth trajectory.
The need for reform has been highlighted by the crisis ahead of a crucial 2024 that is certain to upend the football industry.
The European Club Association's (ECA) chief executive officer, Charlie Marshall, has called for football stakeholders to help clubs become more financially flexible and embrace trends which have enabled other industries to stay ahead of the curve in an increasingly competitive global environment.
"The pandemic has been a harsh wake up call for football, but a lot of the underlying trends which are now evidently responsible for the fragility of the football ecosystem were already there before Covid-19," Marshall tells offthepitch.com in an exclusive interview.
The thing that makes football maybe not unique, but certainly different, is the lack of flexibility within the football ecosystem
"Covid-19 did what nothing else could have done other than a major recession and actually shown the football industry what it's like when the revenues start to dry up".
His comments come shortly after the ECA, the body representing the interests of clubs in UEFA, increased its estimate of the financial impact of the pandemic to "well over" €6 billion on bottom line profits across all teams, even after taking the summer's transfer activity into account, and amid resurgent talks that some of Europe's biggest clubs are looking to form a breakaway Super League sure to drive revenues, capitalising on their increasingly global appeal.
Coping with economic downturns
For starters, Marshall says, to make up for the new reality, the industry, commonly described as existing within its own bubble, should look outwards and take lessons from sectors that have already undergone significant transformation – whether it be forced or not.
"The thing that makes football maybe not unique, but certainly different, is the lack of flexibility within the football ecosystem to rapidly account for and adjust the economic levers to be able to cope with downturns," he says.
Unable to adjust due to their in general unsophisticated revenue streams and cost of operations, clubs simply do not have the necessary financial instruments when facing a prolonged period of instability.
If you look at other industries over the past 20 years there's been a huge move towards outsourcing
Marshall, who has a background in media, entertainment and telecoms, gives a comparison:
"A broadcaster can very quickly adjust its programming budget to keep its margins as healthy as possible when revenues dry up. But it's very difficult for clubs to rapidly adjust costs to account for volatility in revenues," he says.
Marshall attributes this fact to a number of reasons but points to one thing in particular: Wages. The wages-to-revenue ratio for clubs in the top five leagues has as a result of the pandemic climbed from 59.6 per cent in the 2018/19 season to 69.3 per cent in the 2020/21 season. He expects it to eventually reach the high seventies.
"Football's cost structure is built on long-term contracts with players and that is very difficult to adjust. But why can't wages track revenues just as in other industries where they are able to rapidly manage costs if there's a decline in revenue?" he ponders, underlying, though, that he is not in favour of simply slashing player salaries.
Getting rid of "unnecessary costs"
There are other ways, however, to adjust to economic downturns. Marshall points to shared services in the form of accounting, HR and IT systems as an example of how other industries have managed to streamline their expenses.
"If you look at other industries over the past 20 years there's been a huge move towards outsourcing. Across the energy or financial services sector for example you'll find a lot of those core business costs are shared across players within the same industry which drives the costs down," he says.
"Football is not great at doing that. Clubs have tended to take on their own cost bases and because they're so used to being competitors on the pitch, they're not great at sharing cost bases off the pitch".
Naturally, this doesn't apply to all clubs and Marshall recognises that the increased professionalisation of management is opening eyes and doors in the industry. But, as he says, Covid-19 has laid bare that clubs "still bear too many unnecessary costs themselves".
Embracing outside money
Marshall also points to financing where he believes clubs have catching up to do. To drive liquidity, he says, it is imprudent to embrace tabooed financial institutions who can offer attractive flows of income when none other are available.
"We've been sensible as an industry not to leap too quickly towards rescue sources of liquidity. It's often the case that in the early stages where industries are in complete panic that's when they're at their weakest in terms of negotiating power," he says.
"But I also think there are seeds of really interesting strategic change in how can funding be made available to the football industry in new ways".
Going forward, clubs should take advantage of grants, loans and distribution of income – already created from within the system – for strategic purposes that can deliver specific objectives. Not to bail them out, but to encourage sound investment.
We know there is a better sporting and commercial outcome post 2024
"It's not the right thing to tar all investment with a brush that says it's the death of football. What clubs need to do is to be able to be in control themselves of how external money comes into the industry. The more it feels like rescuing or bailing out or buying cheap equity that's when we get concerned," he says.
"The more it comes with long-term strategic thinking and an acceptance that in European football there's a lot of risk that needs to be built into any investment model that's right and good".
Reform ahead of 2024
Yet again talks have recently been raised of some clubs breaking out of their domestic leagues to form a so-called European Super League.
Marshall says it speaks to clubs' immediate concerns due to the pandemic in combination with the uncertainty with regards to what happens after 2024 when the renewal of the international match calendar and a new cycle of European club competitions comes into action.
"The different kinds of stories that have been emerging I view them all as part of the same fundamental principle which is reform has been acknowledged by all the stakeholders to be necessary by 2024," he says.
"It's therefore our responsibility from an ECA perspective to maintain those principles which we've had when it comes to reform. We know there is a better sporting and commercial outcome post 2024. Not that there's anything particularly wrong at the moment but we know it can be made better".
Going back to the strategy that drove growth for the past 20 years is not an option, Marshall says, despite it seemingly having proved effective for some time. Staying ahead of the curve, innovating, is crucial if football wants to remain relevant in the future.
"It's entirely the wrong thing to imagine what has worked in the past will continue to work in the future. I was very strong on this pre Covid-19 and I'm even stronger on it now".