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Now that we have been enthralled by the drama of UEFA Champions League football after the coronavirus-induced lull (primarily at the expense of Barcelona) last week, let us deep dive into the business of this beautiful game.

Who owns a club?

The most common legal form of a club is a limited company, although there are many derivations of this. These clubs under ‘private’ ownership can potentially change owners. Almost all of the clubs belonging to the big five leagues - England, Spain, Germany, Italy and France are privately owned. Barcelona FC is completely owned by club members.

How much do clubs make?

Top-division clubs in Europe reported total combined revenues of €28.9 bn in FY2019, up 2% on FY2018. England’s 20 top-tier clubs reported more revenue in 2018 than all 617 clubs in the bottom 50 countries combined, and the top 30 clubs achieved combined revenues of more than €10bn, accounting for 49% of the revenues of all top-division clubs. FC Barcelona are the leading football club in terms of total operating revenues, reaching a record amount of €840.8m in 2018-19

Where do clubs get their money from?

The revenue streams of a club can be split into 4 broad categories:

1. Broadcasting Revenues

  • Domestic TV: These rights are sold to TV channels and streaming platforms for a period of 3 years. This revenue is further split into 3 parts:

    1. Equal Share: 50% of the broadcasting revenues is split among all the teams in the league.

    2. Facility Fees: 25% of the revenue is split based on the number of times the games of each club are aired on TV. Fun fact: due to the overlap in scheduling of matches, not all matches are aired live, leading to the bigger teams getting a higher cut of this revenue.

    3. Merit Payment: The component is decided based on the final ranking of the club at the end of the season. Premier League clubs made €1.9m for every incremental league place in 2019-20 season.

  • Overseas TV: The revenue from broadcasting outside their domestic territories is split equally among all the teams in the league The broadcasting revenue further goes up due to the clubs competing in UEFA events, domestic league cup and super cups. Barcelona earned €298.1m from broadcasting deals in 2018-19.

2. Match Day Revenues

15 clubs in Europe had an aggregate attendance of more than 1 million in 2018-19. FC Barcelona had the highest aggregate attendance of any club with a total of 1,436,400 visitors, surpassing Manchester United FC with a total of 1,415,462 visitors. However, Barcelona only earned €179.4m of its total revenue from matchdays. Camp Nou, Barcelona’s home ground, had a capacity of 99,354 with 76% utilisation rate in 2018-19.

3. Commercial Revenues

Commercial revenues are significantly higher for global brands with large followers base. These have two key components - club sponsorship and merchandise. Club Sponsorship includes:

  • Shirt sponsors: Retail (Fast-moving consumer goods, retail stores and e-shops) is the most-featured industry with 17% share while gambling and sports betting companies have a 13% share. Surprisingly, 21% of shirt sponsorships were from foreign companies. Rakuten paid Barcelona FC €55m per year as the main jersey sponsor.

  • Others: 46% of clubs in Europe have sleeve sponsors, and 29% have shorts sponsors as well. Beko pay Barcelona €57m per year as their sleeve and training sponsor.

  • Kit manufacturers: Nike leads the pack of kit manufacturers with a share of 19%, closely followed by Adidas at 17%. Barcelona’s kit supplier, Nike, pays it €105m per year.

  • Stadium naming rights partners: Stadium naming rights are still the exception rather than the rule with only 15% of all top-division clubs having stadium naming rights partners. A quarter of all stadium naming rights partners are companies in the financial services industry.

Merchandise typically includes jerseys, sports accessories and branded gifts which clubs sell through their websites and club stores. Barcelona FC is directly managing its stores, considerably increasing their merchandising revenues when compared to those of previous seasons, when they received royalties from the kit supplier Barca’s commercial operation generated €383.5m in 2018-19, an increase of €60.9m (19%) over 2017-18.

4. Money from other competitions

The amount of UEFA prize money that a club receives is determined partly by its sporting performance and partly by its national broadcaster’s contribution to the market pool. From 2018/19, a club’s ten-year ranking, taking into account historical titles, is also feeding into the calculation. Barcelona earned €104m by playing in the Champions League in 2019-20. Apart from this, clubs also earn by participating in domestic competitions:

  • Domestic Cup Competitions: A prize money of €250,000 is paid to the Copa del Rey winning team.

  • Super Cup Competitions: Teams can earn €40m by participating in the Spanish Super Cup featuring the La Liga champions, the Copa del Rey winners and the runners-up of each competition.

Where do clubs spend?

Transfer Spending: Transfers are a unique aspect of club football, providing financial rewards and incentives to talent developers. Transfer spending had reached a record €8.0bn across European clubs in FY2018. As a result, transfer spend expressed as a percentage of clubs’ revenues increased to a record high of 38% for UEFA clubs. This is primarily driven by English Premier League clubs who recorded a transfer spending of €2.7 billion in FY2018. This transfer spend is equivalent to a third of all European top division transfer spending. Transfer spend is often the swing factor for turning operating losses of clubs into profits or vice versa. On the back of exceptional transfer profits, AS Monaco FC recorded an all time record net profit of €179m in 2018, while Barcelona recorded a loss of €119.4 m.

Player & Support Staff Wages: Football clubs’ wages (which include playing staff, technical staff and administrative staff) absorb a very large percentage of their revenues – more than in nearly every other industry. The wage-to-revenue ratio, which is widely regarded as one of the key financial indicators for football clubs, went up to 63.9% in 2018, with wage inflation stood at 9.4%. Player share of employee costs edged upwards from 76.0% in 2017 to 76.5% in 2018. FC Barcelona had a wage bill of € 529m with a 69% staff cost to revenue ratio. Clubs need to adhere to loan limits, squad size limits, foreign player limits, home-grown player rules in European domestic club football as well as financial fair play when setting player’s wages.

Other Operating Expenses: Operating costs absorbed 33% of clubs’ revenue in FY2018. However the disparity here is vast again - Outside the top 20 leagues, operating costs often absorb more than 50% of clubs’ revenue. It can be further split into the following major heads:

  • Property, facility and asset related costs: Stadiums: Only 12% of Europe’s top-tier clubs directly own their stadiums and just 18% of clubs’ stadiums are fully included on their balance sheets. England leads the way with 15/20 clubs having their stadiums on their balance sheets while the lowest is France with 1/18 clubs. Training centres: 54% of top division clubs currently use more than one training centre while just over a third of European clubs own their main training facilities with municipal authorities are the most common owner of training facilities.

  • Matchday Expenses

  • Cost of Sales (including Sponsors, and Commercials)

  • Financial and FX expenses

The Bottomline

Clubs in the Spanish League made a profit of €445m in 2018-19 with Barcelona FC posting a €4.5m profit after tax. While a small bottom-line net profit was recorded at an aggregate level, results varied considerably across Europe. The combined operating profit margin of all clubs in the top 20 leagues stood at 5% in FY2018, resulting in a bottom-line profit margin of 1%. Eleven of the top 20 leagues reported profits, and only two reported loss margins of more than 10%. On an aggregate basis across the 397 clubs outside the top 20 leagues in Europe, the operating loss margin was 28% in FY2018. So, it is definitely not an easy business.

However, does the money matter?

While a football club is definitely an economic decision-maker, is profit its primary objective? Throughout the history of English football, profit-making clubs have been the exception and not the rule. Most chairperson and directors of football clubs are individuals who have achieved success in business in other fields. Their motives for investing may include a desire for power or prestige, or simple sporting enthusiasm: a wish to see the local club succeed on the field of play. As per a paper by Sloan, it may be more sensible to view a football club as one of utility maximisation subject to a financial solvency constraints.

About the author: This post is written by Abhirup Roy with relevant edits from our editorial team. Abhirup is a graduate from IIM Ahmedabad and works with Zolo Stays.

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Yash Jajoo
Yash Jajoo
Aug 25, 2020

Wonderful Article for fans! Loved it!

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