Turkish soccer gears up for return, haunted by financial woes

Turkey’s debt-ridden soccer industry is likely to grow more desperate for government support under the bruising impact of the COVID-19 crisis.

al-monitor A worker in protective gear disinfects the Turk Telekom Stadium in Istanbul, Turkey, March 14, 2020. Photo by REUTERS/Umit Bektas.

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covid-19, coronavirus, sports, turkish economy, football, soccer

Jun 10, 2020

Top-tier clubs in soccer-crazy Turkey are set to return to action June 12 after a three-month pause over COVID-19, but the country’s soccer industry is facing a bleak future as the fallout of the pandemic aggravates its long-running financial troubles.

The industry was already ailing when the novel coronavirus officially arrived in Turkey March 11. It was suffering from financial hardships as well as a decline in sportive success as a result of growing economic and administrative issues in recent years. When the Turkish Soccer Federation (TFF) decided to resume league play behind closed doors, the news was met with vocal objections, especially from club trainers and players, who see the resumption as premature. Yet, money talks.

The risk of financial collapse in a giant industry is seen as the main driver behind the decision of the TFF, which refused to join the basketball and volleyball federations in ending their seasons. Despite a number of COVID-19 cases among players and club staffers, TFF President Nihat Ozdemir has stood firm on resuming the Super League to complete the remaining eight games of the season. The lower First League will follow suit June 19 and three smaller leagues next month. Some 200 teams will be back on the pitch for a game that often brings players into close contact, despite social distancing rules. 

As of June 10, Turkey ranked 11th in the world in the number of COVID-19 cases, which totaled more than 173,000, including over 4,700 fatalities. Officials reported 922 new cases and 17 deaths for the day. Eager to revive the shrinking economy, the government greatly relaxed restrictions on business and travel June 1, maintaining that the pandemic is largely under control. Yet, worries persist that the reopening could trigger a second contagion wave.

While the 18-team Super League will resume without spectators, Digiturk, the Qatari-owned TV station that holds the league’s broadcasting rights, will air the matches and generate revenues from subscriptions.

Among Europe’s heavyweights, the English, Spanish and Italian leagues are scheduled to resume without spectators this month, while the German one already kicked off in mid-May. The Netherlands and France chose to end their seasons after the pandemic hit, crowning current leaders as champions. 

The COVID-19 crisis has had a costly impact on the soccer industry globally, postponing the Euro 2020 championship and disrupting national leagues. Economic losses have extended to related service sectors, chief among them tourism as travel abroad became impossible.

In the soccer industry, the pandemic has dried up various cashflows, from the sale of tickets and branded products to advertising, media and sponsorship revenues. The most crucial loss, however, has been from the end of live broadcasting. In the “Five Big” of world soccer — Britain, Spain, Germany, Italy and France — the losses are estimated to have reached up to 4 billion euros ($4.5 billion), with the English Premier League alone losing 1.25 billion euros ($1.4 billion). In a further financial blow to clubs, the transfer value of players has plummeted. The losses of the European soccer industry are estimated to have hit nearly 5 billion euros ($5.7 billion) and are likely to grow further. The much-feared risk of a second contagion wave threatens to inflict unbearable damages on the industry.

Turkey’s soccer industry is in even worse straits, as it was already facing a financial crisis before the pandemic. Turkey’s economic turmoil since 2018, marked by the dramatic depreciation of the Turkish lira, had badly bruised soccer clubs and companies, leaving them unable to pay their debts.

Like in other sectors, much of the soccer industry’s troubles stem from the slump of the lira, which has meant a spike in foreign-exchange prices and thus aggravated debts denominated in hard currency. In pre-crisis years, when hard currency was cheap, Turkey’s top clubs rushed to attract foreign stars as the limit on foreign players was lifted. Even the contracts of local players were often pegged to hard currency. In 2018, the market value of the Super League reached $600 million, climbing to the top seven in Europe. Though it was rather modest in comparison to counterparts worth nearly $8.3 billion in England and $5.2 billion in Spain, it belonged to the era of cheap hard currency and was not sustainable for Turkey.

And after the lira began to nosedive in mid-2018, the soccer industry found itself saddled with crushing hard-currency burdens that dwarfed its limited hard-currency revenues. Although the clubs sold some star players, their foreign exchange gaps remained unmanageable. The increase in interest rates on the lira in mid-2018, aimed at curbing the slump of the currency, added to the clubs’ troubles. According to sports writer Tugrul Aksar, the debts of the clubs hit 14.5 billion liras in 2018, while their revenues stood at only about 3.5 billion liras. 

When the pandemic hit, the financial profile of Turkey’s soccer industry involved 4.5 billion liras in revenues, 15 billion liras in debt, 5 billion liras in cumulative losses and an equity capital gap of nearly 6 billion liras. The shutdown since March is estimated to have caused 1.5 billion liras in losses to Super League clubs. In other words, the soccer industry’s three-month losses amount to about 30% of its annual revenues. 

The repercussions of financial fragility, worsened by the pandemic, are already showing themselves. On June 3, Trabzonspor, the current Super League leaders, were slapped a one-season ban from European championships for breaching financial rules agreed with UEFA, the governing body of European soccer.

All in all, the clubs are likely to grow more desperate for financial and economic support from the government. And even if they manage to muddle through the current season, the big question remains of whether soccer will return to its old self in packed stadiums or become entertainment watched exclusively on TV.

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