By Serdar Bezen, Yeşim Bezen and Zekican Samlı, Bezen & Partners Law Firm, Istanbul, Turkey
In Turkey, the first patient with COVID-19 was reported on 10 March 2020. There are now more than 125,000 confirmed COVID-19 cases in Turkey and 3,397 COVID-19 patients have died.
Turkey implemented various measures in order to prevent the spread of the virus, including travel restrictions; limited curfews in metropolitan municipalities during weekdays and full curfews during weekends; closures of shopping malls and entertainment facilities; mandatory usage of medical masks outside homes; and prohibition of mass gatherings, including sporting events.
The Turkish Football Federation (TFF) banned the attendance of spectators at the derby match between Beşiktaş and Galatasaray on 15 March 2020. This game could be regarded as the last major sports event in Turkey, as shortly after, on 19 March 2020, all professional leagues and sports activities were indefinitely suspended.
The impact of the COVID-19 pandemic is expected to overrun the recent partial economic recovery. After three consecutive quarters of year-on-year contraction, real GDP growth resumed in the third quarter of 2019 and strengthened in the fourth, bringing the 2019 growth rate to 0.9%. Turkey’s growth is projected at 0.5% in 2020, over three percentage points lower than the pre-COVID-19 estimates. However, it could be worse in case the uncertainties continue. Growth is expected to be supported by a strong government stimulus, which is reported to be running low on cash and cash reserves. Further, due to ongoing travel restrictions, tourism is expected to collapse in 2020, potentially widening the current account deficit.
The COVID-19 pandemic has put also additional stress on an already fragile Turkish football industry, bringing many clubs close to bankruptcy. Prior to the COVID-19 pandemic, the Turkish Super League (the top division of professional football in Turkey) had the highest amount of annual loss amongst the European leagues, with a total loss of EUR 263 million. Although there is no Turkish football club amongst the top 20 revenue generators in Europe, all three major sports clubs in Turkey are amongst the 20 most indebted clubs in Europe with Fenerbahçe at 6th place with a net debt of EUR 334 million, followed by Beşiktaş at 15th place with EUR 183 million and Galatasaray at 17th place with EUR 175 million. Further, the Turkish Super League clubs have the worst “assets to liabilities” ratio in their overall balance sheets, which is barely exceeding 0.5.
The COVID-19 pandemic is not the first crisis which Turkish football clubs are facing during the 2019-2020 season. At the beginning of the season, the broadcaster of the Turkish Super League, Bein Group, declared that it would not pay the first instalment of the broadcasting royalty fees to TFF or the clubs due to increased FX rates and demanded a discount. As the clubs were desperately in need of such payment since the transfer window was coming to a close, they agreed to decrease the annual broadcasting royalty fee from USD 500 million to USD 410 million. Further, it was agreed between the TFF, the clubs and Bein Group that the USD/TL exchange rate would be fixed at USD 1/TL 5.80 (as of today, it is more than USD 1/TL 7). Due to such renegotiation, the loss of the Turkish football clubs in broadcasting revenues is expected to be around TL 1 billion (approximately EUR 130 million). In addition, match day and merchandise revenues of the clubs will decrease significantly for the remainder of the season. Therefore, it is expected that the annual revenue of the Turkish football clubs will decrease by 25%.
Before the COVID-19 pandemic crisis, all major clubs in Turkey were negotiating with a consortium of State-owned banks for the restructuring of their existing debts. It was reported that Galatasaray, Beşiktaş and Trabzonspor agreed terms and signed restructuring agreements. However, Fenerbahçe announced that it would not be signing any restructuring agreement as the terms of such were not acceptable to it. It was reported that the consortium of lenders agreed to provide TL 250 million (approximately EUR 30 million) to each club secured by way of an assignment of around 80% of their available revenue streams. No further details were disclosed.
Due to such economic difficulties, many clubs followed their European peers and started negotiations with their players on pay cuts. Beşiktaş was the first club publicly announcing such negotiations and declared that most of its players agreed to pay cuts. Fenerbahçe and Galatasaray are in the process of negotiating with their players on possible pay cuts.
As football is in the spotlight, it might be the first industry to recover after the COVID-19 pandemic. The Vice President of Galatasaray declared, during a recent interview following his recovery from COVID-19, that the club might need to suspend the activities of “amateur branches” as sponsor support may no longer be available in the future. The reference to so-called “amateur branches” includes basketball and volleyball in Turkey as these branches rely on the revenue generated by the club’s football branch or funds provided by sponsors which are mostly companies owning such clubs. For example, Anadolu Efes, a EuroLeague A Licence holder and the winner of the 1996 FIBA Korac Cup, is owned and operated by a Turkish soft and alcoholic beverages conglomerate, Anadolu Holding.
Fenerbahçe could be following suit. Fenerbahçe men’s basketball team, which qualified for five EuroLeague Final-Fours in a row since 2014 and won the title in 2017 – the only Turkish club winning such title – is reportedly planning on downsizing. It was reported that the annual budget of the team, which is around EUR 30 million, the third-highest in Europe following CSKA Moscow and Real Madrid, would be decreased to EUR 10 million. Similarly, Fenerbahçe women’s volleyball team, which won the FIVB Women’s Club World Championship in 2010 and the CEV European Champions League in 2012, will be downsizing and focusing on young players. Fenerbahçe men’s volleyball team, which won the CEV Challenge Cup in 2014, has already downsized in 2015 due to lack of sponsor support and, consequently, its world-class players left the club.
The timeline for ending the lockdown and the return to sports is still uncertain. The TFF announced that they are working on various scenarios and the target is to complete the remaining match days, as suggested by UEFA. Most of the clubs announced that they would be back to training soon, albeit with certain restrictions, such as dividing the players into various groups and organising different training sessions with each of such groups. No spectators may be present once the season resumes and one of the options is to organise all remaining match days in one city, such as Antalya or Istanbul.
The UEFA Champions League Final, which was supposed to take place in Istanbul on 30 May, is now indefinitely postponed. It is expected that UEFA will render its final decision on European competitions on 27 May.
There is no doubt that we are witnessing history as it is being written and nothing will be the same after the COVID-19 pandemic ends. Sport is no exception and, considering the already bad financial status of Turkish clubs, there could be further drastic changes in Turkish sports. Perhaps one positive outcome of this crisis could be the increased attention on younger talent instead of sought-after players necessitating large golden handshakes. This could pave the way for a new generation of talented young players to secure a spot in the first league team.
Carlo Ancelotti once said that “football is the most important of the less important things in the world.” Today, with time to review our past lives and think about our future, we all are beginning to understand the important things in life. However, football and sports overall returning back into our lives would indeed be “the most important of the less important things”.
We all, therefore, surely are looking forward to going to a football game at our team’s stadium on a Sunday afternoon as we are desperately in need of such a distraction in these unprecedented and trying times!
Serdar Bezen, Yeşim Bezen and Zekican Samlı may be contacted by e-mail respectively at ‘email@example.com’; ‘firstname.lastname@example.org’; and ‘email@example.com’