12 ★ FINANCIAL TIMES Friday13 March 2020

That has led to a focus on the health of

players, so teams can still compete. This

week, clubs such asManchester United

began implementing “social distancing”

measures, such as warning players not

to shake hands or take selfies with fans.

“When people within the first team

bubble become infected, that is what is

going to cause the real disruption to fix-

tures,” said one Premier League club

executive.

Some senior officials are beginning to

discuss what should happen if the sea-

son cannot be completed. “It’s up to the

experts to decide,” said Manchester

United manager Ole Gunnar Solskjaer

this week. “I would understand yes,

under the circumstances [if the season

was to be cut short].”

However, this would set up a battle

between teams over the terms of the

season’s cancellation, with 14 of the 20

member clubs needing to vote in favour

to make changes to the league’s rule

book. The top four clubs qualify for the

next season’s Champions League,

Europe’s top club competition where

€2bn is shared between competing

clubs. The bottom three teams are rele-

gated, losing tens of millions of pounds.

“We don’t have a rule book about hav-

ing to finish, that would have to be dis-

cussed,” said one senior English football

executive. “[Cancelling the season] will

suit some and definitely not suit others.

There will be some teams desperate not

to be relegated.”

proposals to ban public venues from

showing the games.

The plan will probably fall foul of the

UK’s pubs, which pay huge fees to show

football games. Emma McClarkin, chief

executive of the British Beer and Pub

Association, said: “Unless official advice

changes, people can still go and enjoy

the great British pub.”

The Premier League’s crisis plan is

focused on completing the remaining

fixtures left in the season. If the matches

are played, the league’s biggest revenue

source, the £9.2bn it makes from multi-

year domestic and international broad-

casting contracts, would be protected.

There have been discussions about

how Sky could broadcast the games on

free-to-air, potentially using the com-

pany’s Pick and Challenge channels on

the Freeview service. One person in the

industry suggested BT Sport could

broadcast over the company’s app or on

YouTube, as it did for last year’s Cham-

pions League final.

“There are a lot of hypotheticals being

suggested at the moment,” they said.

“But everyone is, so far, resistant to

make any concrete plans.”

In order to avoid fans congregating

outside stadiums during the matches, or

watching in local pubs, there have been

M U R A D A H M E D A N D M A R K D I ST E FA N O
LONDON

Premier League lubs, broadcasters andc
UK pubs face a multimillion-pound hit
to their businesses due to the expected
disruption to the football season caused
by the coronavirus outbreak.
England’s top football competition is
anoutlier n the sport worldwide, insist-i
ing games will continue to be played this
weekend in front of thousands of fans.
Yesterday, Spain’s La Ligapostponed
its competition afterReal Madrid lay-p
ers were placed in quarantine. Uefa,
European football’s governing body, is
holding crisis talks next week where it
will discuss the suspension of continen-
tal tournaments. Italy’s Serie has also
been suspended while games in Ger-
many’s Bundesliga and France’s Ligue 1
arebeing played in empty stadiums.
Yesterday, the UK government said it
is considering banning sporting events
at some point in the future, mainly due
to concern that they cause strain on
public services.
Government officials held meetings
with sports governing bodies and broad-
casters on Monday for “contingency
planning” related to the spread of the
virus, including the practicalities of
“how staging sporting events behind
closed doors could work in practice”.
Club executives, speaking on the con-
dition of anonymity, said most Premier
League teams had insurance policies
against ticketing income, which they
expected to kick in if matches were
forced to be played in empty stadiums.
Premier League clubs made a collective
£720m in annual match-day sales last
season, according to the consultancy
Deloitte, representing about 14 per cent
of all revenues.
One Premier League chief executive
said his club had an insurance policy
covering about £2.5m it receives from
ticketing per match. There are greater
fears for the finances of smaller clubs,
however, such as those that play in pro-
fessional divisions below the Premier
League. These earn a higher proportion
of their income from match day receipts
and often do not have insurance policies
to protect against ticketing losses.
The Premier League has so far been
resistant to calls to waive the television
blackout for football fixtures that kick
off at 3pm on Saturdays, which would
allow broadcasters to screen more
games so people can watch at home. Sky
and BT Sport pay more than £1.3bn
each year to be the competition’s live TV
broadcasters in the UK, with each
match costing up to £9m.

COMPANIES

D

uring the stock market mayhem this week,

you would be forgiven for missing a significant

anniversary.

On Tuesday, it was 20 years since the Nas-

daq reached its dotcom peak. The rot that set

in after that date makes this month’s market correction

look small beer — at least, so far. The main index of tech

stocks fell 77 per cent in the dotcom bust.

Since then, an entire generation of tech entrepreneurs

has come of age without any serious interruption to Silicon

Valley’s long boom. Capital has been abundant. Even the

financial crisis of 2008/9 turned out to be a blip: venture

capital investment dipped in the following 12 months but

quickly came back stronger than ever.

A serious correction has felt overdue for years. But the

low growth, easy money decade turned out to be a perfect

environment for tech start-ups. Among investors, it cre-

ated a hunger for the type of growth that only tech compa-

nies could offer, along with a ready supply of capital to act

as rocket fuel.

So is the Covid-19 scare the moment this finally ends?

The demand shock from the pandemic poses a severe

threat to thinly capitalised companies across the economy,

and tech start-ups, which typically live from one funding

round to the next, are no exception.

Sequoia Capitalsounded the alarm week ago, writinga

to entrepreneurs it had funded to warn them about the

need to reassess. Given the severity of the market gyra-

tions since then, Sequoia’s email has started to look sur-

prisingly mild. Nudging start-ups to trim expenses hardly

looks draconian amid an unprecedented freeze in some

sectors of the economy, and with no way of assessing how

long the crisis will run.

This raises two overriding questions for start-ups. One is

how steeply demand will fall off in the short term.

In the consumer economy, a drastic change in how peo-

ple live their lives, combined with a heightened caution

about making longer term commitments, throws many

business plans in the air. Picking over the pluses and

minuses is complex. The “gig economy”, for instance,

might prove a lifeline for consumers who are practising

social distancing and need to

tap a range of essential serv-

ices. But large parts of it are

also tied to sectors such as

transport and travel that are

suffering the most.

Tech companies that sell

to businesses should be able

to count on more dependa-

ble revenues, particularly

given a shift from transactional sales to subscriptions with

the rise of cloud computing.

But this picture is more complex. Manysoftware-as-a-

service companies have found a ready market among

other start-ups. It makesmore sense for acompany start-

ing with a blank sheet of paper to tap into variable-cost

cloud services, at least compared to an established com-

pany with sunk costs in its existing IT. Moving into the so-

called enterprise market of big business and government

customers takes time and heavy marketing spending.

There are echoes here of the dotcom crash, when much

of the revenue recorded by new internet companies repre-

sented sales to their peers, all of it fuelled by venture capi-

tal dollars. If the start-up economy falters, many of today’s

new business-to-business tech firms will also feel the pain.

The other big question concerns access to capital. Some

recent trends, such as a rise in the use of venture debt, are

likely to come to a screeching halt. Sceptics who warned

that a sudden change in the economy could leave indebted

start-ups exposed have every reason to feel smug.

The steady increase in the size of venture funding

rounds in recent years should be grounds for optimism.

Many founders have justified taking money they didn’t

immediately need with the argument that it made sense to

raise cash while they could.

Unlike the dotcoms, today’s tech start-ups can usually

point to a sound business model and real end-demand for

their services. But they have also been pumped up by

heavy marketing, and the ultimate scale — and value — of

their businesses may be a lot lower than it looks.

Beyond the immediate crisis, it is possible to see a con-

tinuation of the conditions that have served the tech

start-up world so well. With monetary authorities around

the world struggling to contain the crisis, capital is likely to

remain cheap and plentiful. In a world desperate for

growth, investors will be even more dependent on the next

promising start-up unicorn.

But it is impossible to tell how severe the crisis will get, or

how many of today’s promising tech start-ups will make it

to that next sunny upland.

[email protected]

INSIDE BUSINESS

TECHNOLOGY

Richard

Waters

Virus sends chills

through Silicon

Valley start-ups

In a world

desperate for

growth, investors

will be looking for

start-up unicorns

JA M I E S M Y T H —SYDNEY
N E I L H U M E— LONDON

Rio Tinto as agreed to pay a formerh
chief executive millions of dollars in
deferred bonus payments despite con-
tinuing bribery investigations.

The decision yesterday to award Sam
Walsh almost A$7m (US$4.5m) follows
the miner’s 2017postponement f casho
and share payments owed him under
performance-based incentive plans.
Rio had alerted regulators in the US
and UK about a $10.5m payment made
in 2011 to a French consultant working
on the Simandou iron ore project in
Guinea.

At the time of the payment Mr Walsh

had been head of Rio’s iron ore business.

Leaked emailsdetailed Rio executives

including Mr Walsh discussing the fee

and the consultant’s “closeness” to

Alpha Condé, Guinea’s president.

Mr Walsh was appointed chief execu-

tive in 2013 and retiredthree years later,

just before Rio contacted UK and US

authorities about the payment.

Simon Thompson, chairman, said Rio

was making the payments following

“completion of the confidential and

binding dispute resolution process”.

Mr Walsh is due to receive future pay-

ments of up to A$17m under incentive

schemes covering his time as chief.

Rio’s decision to pay the bonus before

the UK’s Serious Fraud Office and the

Australian Federal Police had con-

cluded their inquiries drew criticism.

“The whole point of a deferral system

is that it allows time for negative infor-

mation to come out,” said Elizabeth

Sheedy, a risk management expert at

Macquarie University. “The problem in

this instance seems to be that the defer-

ral period expired before the regulatory

investigation was complete.”

Mr Walsh said: “I am pleased that the

position with my incentive payments

has been resolved in my favour and that

there is no basis for those awards to be

further deferred.”

Mining

Rio to pay bonus in spite of bribery inquiries

K A N A I N AG A K I A N D L E O L E W I S— TOKYO

A Japanese hotel chain at the centre of

an employee revolt and abidding war

between two of thelargest private

equity groups isks a regulatory prober

over allegations it lied to the market.

The prospect of an investigation by

Japan’s Securities and Exchange Surveil-

lance Commission follows eight months

of turmoil at Tokyo-based property

companyUnizo.

Its management has been attempting

to pull off a rare employee buyout with

financing from US private equity firm

Lone Star.

Unizo’s handling of rival bids from

Blackstone nda SoftBank-backedFor-

tress as already facedh strong criticism

from its biggest shareholder,Elliott

Management.

L a s t ye a r t h e a c t i v i s t f u n d

threatened “all available measures” and

criticised Unizo’s board for its opaque

decision-making.

In a letter to the SESC and the Tokyo

Stock Exchange last Friday, a group of

Unizo employees alleged that the Lone

Star bid, which the group was backing,

was in effect amanagement buyout

orchestrated by its chief executive

rather than one by rank-and-file

employees as disclosed to investors.

“We believe there was an extremely

serious falsification in the information

that was disclosed to investors that

could have an impact on their invest-

ment decisions,”the letter read. “If

this EBO is completed, it will clearly

leave a massive stain on Japan’s capital

market.”

Analystssay it raises the chances of a

probe by regulators.

“One cannot have this go up to the

Oversight Committee of the TSE nd toa

the SESC and have them dismiss it with-

out an investigation,” said Travis Lundy,

an analyst at Quiddity Advisors.

The SESC, Japan Exchange Group,

Unizo and Lone Star declined to com-

ment on the allegations.

Financials

Unizo risks probe amid backlash on buyout

TA N YA P OW L E Y A N D A L I C E H A N C O C K
LONDON

Airlines demanded immediate action
from governments to ease the crisis fac-
ing the industry after Donald Trump
banned travel o the US from most Euro-t
pean nations to limit the coronavirus.
Share prices across the European avi-
ation sector tumbled yesterday in
response to the ban that mirrors US
curbs on travel from China and Iran.
The curbs on arrivals from the Schen-
gen area come into effect at midnight,
and the US state department has
advised Americans to reconsider travel-
ling overseas.

Air France-KLM nda Lufthansa, the

German carrier, fell more than 10 per

cent in early trading as the ban dark-

ened an outlook for a sector facing a hit

of at least $100bn from the pandemic.

Although the UK and Ireland are not

affected by the ban, no airline escaped

the declines. Shares inIAG, the owner of

British Airways, were down 10 per cent,

and heavily indebtedNorwegian Air

Shuttle ore than 30 per cent.m

One airline chief executive said the

industry faced the “worst crisis in the

history of aviation”. Mr Trump’s travel

ban was a “very dangerous game to play.

It reminds me of the financial crisis.

There will be failing airlines.”

Thomas Reynaert, managing director

at Airlines for Europe, the trade body,

called for measures includinga suspen-

sion of airport slot rules until the end of

the summer season, a delay to new avia-

tion taxes nd a change to passengera

compensation rules to limit airlines’ lia-

bility in extraordinary circumstances.

Aviation analysts said the US ban

would affect 3,500 flights and up to

800,000 passengers a week and have a

devastating impact on airlines.

Iata, the global airline trade body, last

weekestimated the virus could cost air-

lines as much as $113bn in revenues this

year. Airlines have already cancelled

tens of thousands of flights, withdrawn

earnings guidance and implemented

austerity measures.

Jon Horne, president of the European

Cockpit Association, which represents

40,000 pilots, said: “This crisis is going

to be grim. It is neither a Gulf war nor

Sars, not 9/11, or the 2008 financial cri-

sis, but all of them together.” This was

about “survival”, and staff and manage-

ment had to work together.

The broader travel and leisure sector

was also being hit hard.The index track-

ing sector shares on the Europe-wide

Stoxx 600 fell 8 per cent, leaving it down

36 per cent this year.

The GBTA, the largest business travel

association, which is based in the US,

said 51 per cent of its members reported

their company had cancelled or sus-

pended “all” or “most” travel to Europe

— up from 8 per cent in late February.

While the ban does not restrict US cit-

izens’ movements, it is likely to further

damage sentiment. Bookings from the

US to Europe were already down about

70 per cent, according to data from

ForwardKeys, the travel analytics firm.

Dufry, the duty free retailer, with-

drew its guidance for the year in a sign of

pressure on ancillary services across the

sector.Organic sales across its 2,

stores fell 7.3 per cent in February.

Travel & leisure

Battered airlines put out mayday signal

Carriers in plea for help

as shares tumble after US

ban on European arrivals

Travel & leisure. ootballF

Health scare disrupts play for top clubs

Industry reliant on fans is

forced to deal with financial

impact of quarantines

Crowd control:

games in the

German

Bundesliga are

being played in

empty stadiums

Martin Meissner/AP

,500 3

Estimate of flights

affected by the

White House travel

ban each week

01 %

Fall in the share

price of IAG,

the owner of

British Airways

The US National Basketball Association

has suspended the season after a player

tested positive forcoronavirus, in the

latest sporting casualty of the outbreak.

Just before a Wednesday night game

between the Utah Jazz and the

Oklahoma City Thunder was o begin,t

the NBA said a player on the Utah team

had “preliminarily tested positive for

Covid-19”. The player was not present at

the game. TheNBA aid it would “uses

this hiatus to determine next steps for

moving forward in regard to the

coronavirus pandemic”.

The NBA is the firstbigUS sports

league to suspend its games. The news

deals a blow toTV advertising as well as

Turner and Disney’sESPN, the networks

that air the games.TNT nd ESPN ina

2014 paid $24bn to renew their deals

with the NBA up tothe 2024-25 season.

The NBA made about $8bn in revenue

last year, according to Forbes, with

income coming primarily from TV rights,

ticket sales and merchandising. The

decision comes as other US leagues are

facing similar dilemmas. The Major

League Baseball season is set to start in

a few weeks, while the National Hockey

League has continued playing games.

There is also great uncertainty

hanging over the 2020 Olympics in

Tokyo, the world’s biggest sporting

event. Senior executives of Japan’s

Olympic sponsors have said privately the

Tokyo Games will probably be

postponed because of coronavirus.

Anna Nicolaou and Alice Woodhouse

Game off

NBA halts

season

after player

tests

positive

MARCH 13 2020 Section:Companies Time: 3/202012/ - 18:28 User:jon.wright Page Name:CONEWS1, Part,Page,Edition:USA , 12, 1