The Importance of Club Revenues for Player Salaries and Transfer Expenses—How Does the Coronavirus Outbreak (COVID-19) Impact the English Premier League?

Abstract

The COVID-19 pandemic has caused significant disruption in the sports industry and has raised the question of whether the football industry is based on a sustainable business model. Using data from the English Premier League (EPL), we develop a regression model to achieve two objectives. First, we examine the relationship between the different revenue sources (TV revenues, match revenues, and commercial revenues) and the main cost drivers of professional football clubs (player salaries and transfer expenses). Second, we seek to predict the likely impact of a major market downturn such as the COVID-19 pandemic in the EPL. Our results suggest that TV revenues are by far the most important source of income for player salaries and market values, followed by match revenues and commercial revenues. We predict that player salaries, market values, and transfer expenses will all decrease in the forthcoming EPL season, 2020/2021. The magnitude of the reduction depends on the coronavirus scenario and ranges from −20.4% to −9.5% for player salaries and −26.7% to −12.4% for player market values. Our study seeks to explore the relative impact of the three main revenue sources in the EPL on the unprecedented growth of player salaries, market values, and net transfer expenses in the last three decades. In addition, our study adds to the understanding of the pandemic’s expected impact on the EPL.