League clubs in Danish elite sport under intensive financial pressure
April 23, 2020
The league clubs in Danish football, handball and ice hockey are facing some very intensive financial challenges in these weeks. Admittedly, the professional clubs are covered by the two state “aid packages” on salary compensation and compensation for canceled matches, which partially cover the clubs’ costs for salary, rents, insurance and much more. In addition, several of the country’s municipalities have chosen to supplement the state support with municipal grants, which especially benefit the league clubs’ immediate need for liquidity. Public support are thus crucial for the survival of almost all Danish league clubs, but in the coming months everyone – players, coaches, employees, board members, spectators, sponsors and broadcasters – will have to deal with a new situation. And only league clubs with targeted and effective financial management combined with open and credible communication with the outside world will, in my opinion, get through the “COVID-19-crisis” without payment suspension or, in the worst case, insolvent.
Big difference in the Super League clubs’ turnover and composition of income
Based on the economic analysis of recent years, it can be estimated that the total revenue in the Super League (football) in the 2019-2020 season is approx. 2.8 billion DKK. However, there are very large differences between the 14 clubs’ revenues, which vary between DKK 30-35 million for clubs such as Hobro IK A/S and Silkeborg IF A/S to 800-820 million DKK for PARKEN Sport og Entertainment A/S – the enterprise behind FC Copenhagen, which for many years has been supremely highest among the Super League’s clubs, mainly due to non-football-related activities such as the holiday centers Lalandia and the rental of the Parken. FCK, which has won 12 Danish Championships since the turn of the Millennium and has been a “regular participant” in the Champion League and the European League during the same period, is thus behind almost 1/3 of the turnover in Danish football.
Handball and ice hockey are more vulnerable than football
The turnover in the Primo Tours League (Men’s handball) and the HTH League (Women’s handball) can be estimated at approx. 300 million DKK. Also among the 28 league clubs in handball, there are very large variations in relation to the clubs’ turnover. There are variations from a few million in league clubs like EH Aalborg and Ajax to approx. 30 million DKK in clubs such as Aalborg Håndbold A/S, Skjern Håndbold A/S and Bjerringbro-Silkeborg Håndbold A/S. By contrast, the turnover variations in Danish league clubs in ice hockey are far smaller than in both football and handball. The total turnover in Danish ice hockey can be estimated at approx. 80-90 million DKK, distributed between 7-14 million. DKK in the 9 league clubs.
League club revenue is mainly divided into 4 main sources: Matchday revenue (entrance and season tickets, food and beverage sales, merchandise etc.), sponsorship revenue, TV revenue and transfer revenue (purchase and sales of players). The latter is absolutely crucial to the financial success or failure of most super league clubs, while transfer proceeds are virtually non-existent in neither handball nor ice hockey. Of course, there are also variations in the individual league clubs relative proportion of the main sources. The primary source of revenue for handball and ice hockey league clubs is sponsor revenue, which typically accounts for 75-85% of total revenue. Matchday revenue in these two sports typically amounts to 15-20%, while league clubs’ direct revenue from handball and ice hockey television rights is limited to 3-6% of total revenue. However, it is of great importance for the league clubs’ opportunities for sponsorship contracts that sponsors can be exposed through direct television matches.
For the handball and ice hockey league clubs, sponsor income, either as “free funds” or barter agreements, which is a barter of services of equal value between the league club and company rather than paying each other for work done, is by far the largest share of revenue. Most of these league clubs usually have a few main sponsors and a large number of local companies that support the local league club.
TV revenue as well as the purchase and sale of players are paramount for the super league clubs
The composition of sources of income in Danish football is very different from that of handball and ice hockey. The Super League clubs are heavily dependent on TV-rights revenue, totaling 275 million DKK for the current season, or almost DKK 20 million DKK per league club on average. Thus, for some super league clubs, TV revenue represents the largest percentage of the club’s total revenue. The amounts for the individual super league clubs are paid “normally” according to the club’s placement at rounds 13 and 26 and at the end of the season. But today, the last two rates of the TV money have to be paid to the Super League clubs. Therefore, it will be a financial disaster for all super league clubs if the remaining matches of the 2019-2020 season are canceled. All indications then are that the remaining matches in the Super League, both in the primary tournement and the playoffs, will be played – unfortunately – without spectators in May and June.
There is also no doubt that Danish Super League clubs will experience a significant drop in transfer income. In the upcoming transfer windows, it will be much harder to sell players from Danish clubs to foreign clubs, which are also particularly hard hit financially. Likewise, many of the super-league clubs have tied a very large portion of the expenses in long-term contracts with players and coaches. And it can be very difficult to adjust spending as a significant fall in revenue. In this area, the league clubs in handball and especially in ice hockey because of typically one-year contracts with players have some comparative advantages over the super league clubs in football.
Both short and long term financial consequences for all league clubs
Of course, it is difficult to assess how large a fall in sponsorship income Danish league clubs will experience for the upcoming season 2020-2021. My personal bid will be a 20-30 % drop, but with large variations between the individual clubs. I also believe that the handball and ice hockey league clubs will be hit harder financially by the “COVID-19-crisis” than the super league clubs in football, with a very large share of the revenue in handball and ice hockey being based solely on sponsorship revenue. Very few companies and industries, both in Denmark and globally, will not experience significant declines in revenue and earnings in 2020 and possibly. also in subsequent years. Companies and groups in special industries such as airlines, retail and restaurants that have already laid off a large number of employees because of failing sales will naturally be very reluctant to re-sign sponsorships or enter into new agreements with league clubs in Danish football, handball and ice hockey – not for lack of will, but because of lack of… money.