Pssst… we can write an original essay just for you.
Any subject. Any type of essay.
We’ll even meet a 3-hour deadline.
121 writers online
Football finance. Where do football clubs generate their income from? How football clubs spend that income? What are the consequences and implications for their financial performance and their profitability? These are just some basic questions that come to mind when we talk about finance in football.
The last 25 years or so have seen an extraordinary transformation in the business and revenues of elite professional football throughout Europe. According to UEFA, club income for 2015 had reached a record aggregate level of 16.9 billion euros, while European club revenues have grown every year over the last two decades at an average rate of 9.3%.
This level of growth is quite extraordinary, particularly given this is quite a mature industry and, more importantly, that this has taken place at a time when European economic growth of only 1.5% per annum has been recorded over the last 25 year period. As has been well-documented, media rights have acted as the catalyst for the transformation of professional football. Here, the English Premier League, has led the way. Its three year domestic rights deal with Sky and BT, which began in 2016 to 2017, is worth 5.1 billion pounds, a 70% increase on the previous deal, which was in turn a 71% increase on the one before that.
In addition, the EPL will generate a further 3 billion pounds, approximately, from overseas rights. And that’s going to increase, too, with a new Chinese deal kicking in from 2019 to 2020. Continued growth in broadcasting income is apparent in other major countries, too, most notably Germany. But it’s important to point out that such escalating media rights are not found in countries like Scotland, Portugal, Russia or The Netherlands.
The challenges faced by clubs and countries out with the big five leagues are due to the way in which competitions like UEFA Champions League operates and the way in which that competition is structured, which tends to prioritise the financial interests of big clubs in major TV markets..
According to UEFA’s 2017 benchmarking report, wages for 2015 represent 63% of the net costs of European clubs. Club wages have grown at an annual equivalent rate of 10% over the last 20 years, compared with European economic growth of just 1.5% per annum over the same 20 year period. To pay high wages, you need to have high levels of income. It’s unsurprising, therefore, that the highest wages in absolute terms are paid in the EPL. With a total wage bill of about 2,690 million euros, it’s now double that of the next highest paying league, the Italian Serie A.
UEFA’s benchmarking report suggests that the top-paying club, however, is Spanish club Barcelona, which pays 340 million euros, is its salary bill, followed by Real Madrid and then Chelsea and then a number of other English clubs. More remarkable still is the burgeoning Chinese market. Last year, Argentinian internationalist Carlos Tevez signed for the Chinese Super League team, Shanghai Shenhua, for a contract worth a reputed 615,000 pounds per week, making him at that point the world’s highest-earning football player.
The question to ask here is, why do clubs invest so much in playing talent, both its acquisition and the associated salaries that go with that talent? Three related factors.
Firstly, structures. Football has a system of open leagues, sporting merit-based promotion and relegation and merit-based transnational competitions.
Secondly, rewards. The elite level of European professional football, domestic and transnational, is characterised by ever higher levels of income.
And thirdly, success factors. Putting this very simply, there is a clear link between wage spending and playing success. All other things being equal, the club with the highest wage bill wins the league more often than not.
One thing that has changed in recent years for top English clubs is increasingly clubs’ dominant owners have come from overseas. For example, Roman Abramovich at Chelsea or Sheikh Mansour at Manchester City. For a long time, accepted wisdom in the business of football was the concentrated ownership model. The so-called benign dictator or benefactor model was the ideal ownership structure for a club. And what could be better than for one football club to be owned and managed by a wealthy business person, motivated not by profit but by non-financial objectives, such as sporting success? Hence in pursuit of sporting success, few clubs are uninfluenced by the behaviour and the decision making of their competitors, which, of course, then has implications for decisions they take and their own behaviour. But it’s also a risky structure, because dominant ownership the stability of a club is a function of the willingness and the ability of the owner to continue to fund the club. In some other countries, clubs are structured as member-owned organisations or mutuals, whereby the shares of the club is effectively owned by the supporters. An example of that would be Barcelona.
A third approach is the hybrid structure found in Germany, where clubs are predominantly structured as companies but where control, 50% plus one of the voting rights, is retained by a club’s members.
we’ve grown accustomed over the last couple of decades or so to a footballing landscape that is dominated by Europe. But it’s becoming ever more apparent that that landscape is being challenged by new markets that are emerging and that we might expect to see radical changes over the medium to long term. Nowhere is this more obvious than China. Keen to fulfil President Xi Jinping’s ambition to turn China into a football powerhouse, and supported by ready financing for acquisitions of overseas assets, Chinese entrepreneurs have embarked on an unprecedented buying spree of foreign clubs. Chinese investment has become increasingly common in foreign football clubs and now exceeds about $2 billion US dollars.
Chinese investors own or have shares in a number of clubs, including the two Milan giants AC and Internazionale, in Manchester City, in Lyon, in Aston Villa, and Athletico Madrid. Many of those buying clubs abroad are also investing big back home in China. You can think of it as a strategic investment. What investors are looking to do is to gain knowledge of how European football clubs operate and then particularly how they develop players, so that can be shared within the Chinese marketplace, the objective being to make the quality of players better, given that for a number of years the standard of Chinese performance on the pitch has been quite disappointing. Chinese money is evident also in the transfer market.
One only has to look at Oscar’s transfer in the summer of 2016 from Chelsea to Shanghai SIPG for a figure about 60 million pounds. That’s one example of that. Another example, of course, is the wages that are paid, and the very, very high level of wages earned by a player like Carlos Tevez when he moved to the Chinese Super League is the perfect example.
Football continues to be an extraordinary business. The levels of income have continued to grow and at the present time show no signs of diminishing. But there are challenges for the football business, too. There are challenges in the way in which income is distributed, in the equity between some of the bigger leagues and some of the smaller leagues. There are also challenges, too, in terms of the salaries that are paid to some of the higher profile players, as well as the leakages that the game to agents and others. There are also challenges, too, for the established European market in terms of the development of the Chinese marketplace.
We provide you with original essay samples, perfect formatting and styling
To export a reference to this article please select a referencing style below:
Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.
Attention! this essay is not unique. You can get 100% plagiarism FREE essay in 30sec
Sorry, we cannot unicalize this essay. You can order Unique paper and our professionals Rewrite it for you
Your essay sample has been sent.
Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.Order now
Are you interested in getting a customized paper?Check it out!