Douglas Harmer, Partner at Oakwell Sports Advisory, gives his expert opinion alongside John Shea, Senior Associate at Lewis Silkin and John Mehrzad QC of Littleton Chambers about the legal remedies available to clubs who may be adversely affected by the range of decisions that could be taken to conclude the 2019/20 season.
“In addition to, or instead of, an injunction application, a club may seek damages in a sum to be assessed. Whilst sporting integrity, fair competition and health and safety concerns have been raised as valid reasons why some clubs are against the “Project Restart” proposals, there is also a significant amount at stake financially, particularly for clubs at risk of relegation from the PL as the financial repercussions of relegation would be devastating.
In 2007, Sheffield United instigated a Premier League arbitration against West Ham for losses arising from West Ham’s breach of the then PL Rules regarding third-party ownership of Carlos Tevez. Sheffield United claimed losses of over £30 million for loss of PL status, loss of the opportunity to remain in the PL (given the PL had found Tevez to be worth the equivalent to 3-points, which meant West Ham would have been relegated without him); reduced transfer fees, season ticket sales, merchandising and lost business opportunities. That action settled for apparent an eight-figure sum.
Thirteen years on, relegation from the PL would be more financially devastating to a club. Expert analysis by Oakwell Sports Advisory – which would almost certainly be necessary to prove losses – indicates that a relegated club could see incremental revenue falls of around £75 million in the first year of relegation.
The loss of broadcast receipts accounts for the largest majority of this, with a lower table, non-relegated PL club receiving approximately £105 million of total media revenues. This compares to total Championship distributions (including parachute payments) of something over £40 million in the first year of relegation. On top of this, however, an average PL club might generate an additional £30 million in other commercial and matchday income.
Oakwell’s analysis indicates that a relegated club would expect to see this income fall by around a third, as crowds reduce and commercial partners retrench.
Whilst there are a limited number of PL clubs that would be considered a safe bet to avoid relegation, over a three year period (the maximum timeframe for which a relegated club might continue to receive parachute payments), aggregate incremental losses stemming from relegation could exceed £250 million. Importantly, however, these figures only represent a club’s income losses. Relegated clubs are also likely to see considerable reductions in the value of their playing squads as they look to offload players in order to mitigate high wage costs no longer supported by revenues, conflating the financial pain of relegation.”
Read the full article here.