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

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 an empirical model to achieve two objectives: First, we aim to study the importance of club revenues on player salaries and transfer costs. In particular, we examine how changes in the different income sources of football clubs (TV revenues, match revenues, and commercial revenues) affect player salaries, player market values, and net transfer expenses. Second, we seek to estimate the 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. Interestingly, each revenue source seems to have a similar impact on net transfer expenses. We forecast that player salaries, market values, and transfer expenses will all decrease in the forthcoming EPL season 2020/21. 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 adds to the understanding of the effects of COVID-19 on sports and aims at providing new insights to sport management professionals as for the development of the football labor market.