Trends in Cost Management

According to the latest analysis released by UEFA under their Fair Financial Game programme, the average cost split in Europe (734 clubs consulted) is as follows:

• Staff costs:               58%
• Operational Costs:   35%
• Transfer Costs:          4%
• Other Costs:               3% 

Staff costs include in this case salaries, wages, Boni, Social charges, Pension contributions, etc. Under "Operational Costs" we will find a compendium of several cost families of diverse nature, such as stadion costs, materials, depreciations, marketing costs, football schools.... Transfer is here defined as the losses derived from transfer operations. We may believe that inflation is high as far as transfers are concerned, but the truth is that clubs handle that part of the business quite poorly, thus generating losses and not gains. Last season almost one billion € were spent in these operations, a value worth taking into account. Finally, most financial costs and taxes, etc are included in Other costs.

When you have a look at the total picture, UEFA clubs spent in the last season more than 14,4 billion €. Big numbers, particularly when you take into account that they only generated 12,7 billion in revenues, resulting in a total loss of 1,6 billion €.

In light of these catastrophic figures we may think that clubs have been working hard in cutting their losses in recent periods, since you may figure out that these trends do not generate overnight affecting 734 clubs in more than fifty countries at the same time. The answer to that thought is "No, the cost structure of the clubs remains the same at least for the last three seasons, and their expenses grow over after year in a higher amount that their revenues do".

In colloquial terms, we may well speak that the real state bubble we are still suffering from was just a joke.

Costs of a football club

It is often argued that the football players salaries are the highest cost that a club has to fece. Indeed it is a big amount, but there's many other factors to add up to that sum.

The costs of a football club can be divided in four different chapters:

1.- Materials
2.- Staff
3.- Asset Depreciation
4.- Other Costs

Materials is not a big deal: it is just basic expenses that the club needs to face in order to keep on going. It's main activity is not to produce goods, so we cannot really speak of raw materials in this field. Balls, T-Shirts, gym machines, office stationary, etc are included in this concept.

Staff is indeed a big contributor to the costs of the club. We are not speaking of the cost of hiring new players here, since this is a concept that is often described as "other income/loss". This is mainly their salaries and social charges. In many cases players agree to sign contracts where their income is to be calculated free of taxes (net), which means that the club needs to pay for the expenses derived from the IRS willingness to cash a big part of the wealth of this market. In most countries the tax charge ranges between 40%-55%, so that means that a player who makes i.e. 10 million per season costs his club about 25 million, when social security charges are added on top.

Asset depreciation has a lot to do with the money that clubs spend in order to buy the rights of a player to play for them. Those licences are to be considered assets which depreciate over time, in most of the occasions in about four or five years, since the working life of a star football player is definitely shirt and subject to multiple risks due the nature of its use. Take the case where a player like Ibrahimovic left Inter to play for FC Barcelona for 75 million Euro. That involved a year depreciation of ap. 15 Million per season, which pops up in the club accounts not only in the balance sheet but also in the P&L account. If that player is to be sold after one year, the book value of the asset would be around 60 million, but if you only cash 25 million for the operation, that means that you also lost 35 more millions: 15 million (depreciation) + 35 million (sale of asset) makes a total cost for the Ibrahimovic operation of 50 millions in one season only, plus his salary, IRS and social security charges. Since he scored 22 goals in the season, each goal had a cost to FC Barcelona of ca. 3 million €. You need to sell many tickets, T-shirts and TV rights in order to make up for that.

Other costs is a big box where all the remains reside: stadium management cots, travel, social involvement, football academies, foundations, other sports linked to the club.

How much does it cost, to be a top performing football club?

This is a complicated question. FC Barcelona's expenses budget for this season is 390 Mio €, while Montpellier HSC, current leader of the French League, is only 35 Mio €.

So how much does it cost to be someone? Apparently, and if clubs are to follow UEFA's guidelines about Financial Fair Game, "as much as you can earn". The key to success does not stand close to money, but to doing the right thing.


Remarkably enough, Montpellier has been reporting profits in the last seasons, while FC Barcelona has yielded nothing but losses. Barça has therefor something to learn, don't they?

What's left this year to earn?

It's April and the end of the season is over, boosted by the Nations Euro Cup and the Olympics this summer. Out of the Top-5 European Clubs only 3 remain fighting for the Champions League. Manchester Utd was not there from the very beginning, and they actually failed miserably in the Euro Cup after their double defeat against At. Bilbao. The other club missing is actually Arsenal, also leading a poor season.

In the meantime, Real Madrid and FC Barcelona are still in big fight in all competitions, and so is Bayern München. The big newcomer this year will probably be Chelsea. We'll see whether the earnings for ManU derived from winning the Premier League serve to balance the account with their rival. Arsenal will sure remain behind, in light of their recurrent inhability to obtain earnings from their marketing efforts and their lack of success both in the island and the continent this season.

For the big three there's still for sure earnings to be made out of a handful of matches: Liga/Bundesliga and the Champions League. Real and Barça still have 1 more game to play home at the Liga, and another one at the Champions League, maybe two if they make it to the final. Barça still has to play the final of the Spanish Cup, bringing in an advantage over Real Madrid. In the meantime Bayern also has still one more game home to play at the Bundesleague, to add up to their earnings in the semifinal and perhaps the final of the Champions League. However they will lose the earnings derived from winning their local competition in favour of Borussia Dortmund. Again either FC Barcelona or Real Madrid will surely top the table of highest revenue-making football clubs in the world.

And T-shirts, of course: the Champions League winning team will sell plenty of T-shirts, at an averable OTC price of ap. 80 € is a big deal, not to speak of the special prices awarded by UEFA. We'll see how numbers add up at the end. Just a couple of weeks to go and this season will be over.

Who's the best at doing what?

Three sources of income, all of them based upon the same fact: success on the football pitch, but with very different business approach in their execution. What club is the best at doing which? Is there one club who is better than the rest at all three leads?

When we have a look at the financial statements and the management reports of the UEFA Top 5 Clubs at the end of last season we can build up the following chart:

Real Madrid stands out of the rest in what relates to match-day revenues ("Spieltag"), while FC Barcelona leads the other two chapters. It catches your eye how little Bayern München makes out of broadcasting rights ("Übertragung"), and how low Arsenal's income in commercial and marketing efforts is.

The ideal Club would be leading all three business lines, and FC Barcelona appears to be doing well in all but the management of their own fixed assets (income from stadium, basically), despite the fact that Camp Nou with capacity for almost 100.000 fans is by far the biggest sport stadium in Europe. Clearly there's a gap between Real Madrid and FC Barcelona of roughly 40 Mio €/year which FC Barcelona needs to close if they aspire to become the top money making club in the world.

Of course Spanish clubs do need to pay for their fiscal liabilities as well. There were news following a debate at the Parliament earlier this week stating that Spanish football clubs owe more than a billion € to the State in delayed income tax and social security charges. Uli Höneß, president of Bayern München, sauerly complained about this fact claiming for equal competitive conditions across the continent. Real Madrid and FC Barcelona immediately reacted to his words stating that they have no debts, and actually so appears in their balance sheets. When UEFAs Financial Fair Game gets into motion, I wonder how many clubs will stand alive. A revolution in the world of professional football is about to come.

Income strategies

When you talk football income, you talk match-day revenues, broadcasting rights and commercial operations. They all look independent and indeed they are, not just in the way you approach your customers, but also in the products in offering, the prices you negotiate and how they are to be paid for, and the way you market them. However they all have their roots in the same core activity: whatever is happening on the pitch.

Clubs are better at one or two of these fronts than at the other for different reasons. For instance matchday revenues are somehow capped by the fact that a stadium has a certain capacity which is not easy to expand from one day to the next. Indeed demand may be elastic depending on the quality of the match ahead, but maybe only 10% or 20% of the matches in a full season raise such levels of attention. TV rights are in some cases negotiated not by the clubs themselves, but by their associations, such as UEFA for the Champions League or the national leagues, which leaves them little space for negotiation of ability to influence the income to receive from those sources. That is a fact, among others, in the Premier League or in the Bundesliga, and indeed is the competitiveness of those clubs jeopardized by the fact that they cannot negotiate independently as Real Madrid or FC Barcelona do.

These environmental conditions do affect the strategies football clubs follow in order to maximise their revenues, and that's made visible overtime. The charts attached show how the UEFA Top 5 clubs stick to their strategies as long as those surrounding constraints do not change.

Real Madrid and FC Barcelona have a 33-33-33 strategy. While their match day revenues have increased in recent years, it is remarkable to observe how the raise of TV income and merchandising have managed to reach the levels of the traditional income sources: daily and seasonal tickets.

It is my belief we are at a tipping point at this sense, since match day revenues will hardly follow the pace of the other two business activities in the years to come. While big stadia awarded a competitive advantage in the past, the future will be led by those clubs who are able to understand and gain the hearts of their worldwide fans, who will pay for watching their matches online or on TV, and buy their branded products from all remote locations of the planet.

The charts also show how little Bayern München is making out of broadcasting rights. but how well do they traditionally handle their commercial efforts. Whether that customer base holds a worldwide nature or is mainly formed up by extremely loyal local fans is a matter of discussion; in any case the potential for growth is huge, and this club is one of the leaders in this chapter. The opposite case is Arsenal, whose income appears to have stagnated in recent seasons, and strongly depends on the traditional sources filling up their brand new emirates stadium every other weekend. In the mean time and in this same chapter Real Madrid and lately FC Barcelona are undoubtedly the big winners of merchandising coming from below, after more than a century of brand-building activities on and off the pitch it looks like they found the right way and for the first time ever they managed to cash more money than Bayern München last season.

UEFA Top 5 Clubs: how much money they make

Football income is growing at the quick speed of about 10% p.a. as an average for the UEFA space. But who's making more than that?

When you have a look at the evolution of the Top 5 clubs you realise that they have mostly been growing like crazy for the last decade. It is only Arsenal the one that has stagnated in recent years, possibly because of their lack of chances to negotiate broadcasting rights independently (it is the Premier League who does in England, and UEFA for the Champions League) and also because their marketing efforts appear not to be flying. The results being achieved this season will not help them either, and Arsenal may fall out of this elite Top 5 Club next season.

Since 2003 FC Barcelona has grown an year-by-yeart average of 26% beating all their competitors and jumping from the fifth to the second position. In the meantime global companies have not -in most cases- been able to reproduce this growth rate (i.e. IBM 2%; Microsoft: 5%... while almighty Mr. Jobs managed to get a 40% growth for Apple at the other side of the equation).

The chart above shows the income of those Top 5 Clubs in € Million. It is not much when you compare them with other companies whose brands have a similar global impact. Actually, with an average of 500-1000 employees they may be considered Medium-sized Enterprises. So the question is: do they make much, or do they make little? Could the Real Madrid Brand be exploited at a higher level? How come the income is so little for such well known firms?

I'm taking Wolford as an example of a listed company, producing and marketing prime quality lingerie in the high end segment (€100 for a pair of stockings is not what you'd consider a commodity, would you). They made slightly over 150 Million Euro last year in sales around the world, a similar amount to what FC Barcelona or Real Madrid managed to cash in through their commercial, marketing & marchandise business units. My point is: is the Wolford brand so valuable as the FC Barcelona brand? If football clubs are wider known as Wolford, why is it that they cannot make more sales? Do they actually a the proper marketing strategy? I believe there's plenty of room for football clubs to develop their business in this sense.

A second source of income is broadcasting rights. There will be quite a lot of movement in this chapter in this paneuropean space we know in the seasons to come, particularly now that consumers are free to choose their providers across the EU and therefore pick the best satelite-TV package at the lowest possible price, beyond the borders of their own country. Streaming is becoming more and more a viable option, the further the IT develop and there where clubs could only offer their show to their local fans some few decades ago, today the whole world is at reach of a button click.

You finally have stadia and match day revenues, which in a visionary perspective may not be so important in the future as they still are today. While crowds only fill about 75% of the stadia, it makes you wonder whether smaller investments and thus ammortisation costs would make sense in exchange of higher ticket prices. If football has been democratised by media, then watching a game live may well be considered a luxury targetted to a premium segment of the public. But we all like to see stadia at full capacity, and TV has not yet been able to reproduce the feeling of singing together with 100.000 other fans. Let's see what the future brings.

So what's the strategy? Clubs tend nowadays to equate all three sources of revenue at a 1/3 ratio each. Matchday revenues do actually have a physical cap in which stadia can hardly be expanded once they are built, and prices may not succeed in growing if they are hardly ever loaded at full capacity. Trend will be that income from broadcasting will grow if well managed. They may stop to be the cashcow they are today in keeping the liquidity afloat, but may well become a growing source of value for clubs if handled properly. The winner team will be the one developing their branding value in the commercial aspect of the business. I personally believe in a 10% - 25% - 65% ratio in ten years from now, time will say.

Football money: where does it flow in from? - & Excursion

Three sources are most commonly named when analysing the cash inflows in football clubs:

1.- Sport income, or match day revenues: everything resulting from the sport activity, such as day tickets, season tickets, club memberships, also sport prizes and other money achieved in the stadium (VIP lounge, etc). This income is normally of a local nature.

2.- TV rights: the money clubs collect in exchange of their match image rights, either in their national leagues or in the Champions League. Frequently it spans multiple seasons, and in many cases clubs have little to negotiate since it is all agreed upon between broadcasters and the Leagues (i.e. Bundesliga, Premier League... but also UEFA for the Champions League). With the expansion of the streaming technology over the internet, cable or satellite TV, new sources of revenue are appearing for clubs.

3.- Marketing and Merchandise: that's sponsoring, sales of T-shirts, image rights, and other stuff. Normally this is referred to as worldwide sales.

Needless to say this business is about brand management, and that's normally carried out by the clubs piggybacking on their player's own brand management efforts on the pitch (and out of it). This reinforces the idea that football is nowadays a virtuous circle in which the clubs collecting more talent are the ones making more revenue, which brings the ability to bring in more talent.

There always was competitiveness in the national leagues, and it took a great deal of effort every weekend to win the championship and earn the glory of representing the country in the champions league. Due to this virtuous circle the gaps between prime and regular teams in the national divisions has become so big that the chances of having smaller teams winning their leagues is practically non existing. When you have a look at the American professional sports and see that they capped their salaries and introduced a draft system to pull in young players from the lower divisions, you cannot but admit that what they did indeed is to democratise the chances of victory of all teams an therefor multiply the chances of a competitive league which everyone has chances to win. It's a completely different system from its root to its tip, and leaning to it would involve a radical change in the concept of European football as we understand it today.

Excursion:

The Spanish Parliament passed a debate today about the debt of the Spanish football clubs towards the state IRS: 0.75 Billion €, about one half of their total income for one season, and that does not cover the social security charges for players' salaries. The total amount is simply unknown or "not-to-be-disclosed". If you take into account that Spain is currently facing a 35 Billion Euro cut in their public expenditure for this year, cashing in those receivables would certainly help in relieving much of the pain that public services will walk through in the coming months. Alas, history shows that population is more prone to demonstrate in the streets for their football clubs that what they are for economic reasons, unless it gets to an extreme.

FC Barcelona is one of the strongest debtors, by the way, and they may incur into big trouble, should the state insist in their paying back their debt. If FC Barcelona was to disappear as a club for financial reasons, their internal norms mention that the remaining assets after paying out the withstanding debt would pass after dissolution to the hands of the city of Barcelona and the government of Catalonia. And I'm sure that the state (or the city of Barcelona) would be more than happy to become the owner of the Camp Nou stadium and that terrific land plot around they own in one of the richest areas of the city.

Would Barcelonians come up in the streets supporting their football club with their hearts, or the finances of their city with their pockets? I still have a clear answer to this question, but if the social conditions continue deteriorating in the coming months, I would possibly change my mind about this subject.

"Bread and Circus" is what the old roman emperors used to grant their people. But what comes first if you cannot afford both any more?

Why do football players cost so much?

It is often claimed -moreover in times of crisis- that football players make way too much money; some even say that their salaries are immoral. The business-savvy replies that players are nothing but investments which generate more cash than what they cost, and therefore, their salaries are ruled by the invisible hand governing the laws of demand and supply.

Another point into the equation is the payment for transfer rights between clubs. Extraordinary players are scarce, and clubs' fighting takes place not just on the pitch but also in the backstage: it's a fight for resources which are vriso (Valuable, Rare, inImitable, hard to Substitute, easy to fit in the Organisation). In a fast growing industry (about 10% p.a. as an average in the UEFA space) it is somehow frequent to find brave club managers who do not hesitate to anticipate future growth and sign salaries which pay the money of today with the hopes of tomorrow. It is a risky practice which not always yields the expected results: i.e. Ibrahimovic was bougth by FC Barcelona just to be sold out again only one year later losing about 50 million Euros in just one season. Barça is still paying for this loss, which draggs their Profit and Losses accounts to red figures even in the most flourishing of the seasons. Indeed managers are brave, one cannot but wonder how easy it is to be brave with other people's money, mainly when clubs are not usually governed as listed companies and when lots of fan passion and political pressure are exercised to enjoy today what we may not be able to pay for tomorrow.

According to UEFA European Clubs spent about 20% of their budgets in buying new players in 2010. Not only that, another 15% was already standing as payables in their balance sheets derived from similar operations in the previous season. Furthermore, UEFA clubs reported a cummulate loss of ap. 1 Billion € in transfer operations: that is, money received for a transfer related to what they had paid for it before. Who thinks this is a good business? Indeed it is always reported as "income/loss derived from not usual activities" in the Profit and Loss account and little detail is often provided. As if "non-usual activities" had little impact on the bottom line!

It appears as well that players are not regular employees (no wonder at these costs): they cannot really choose the club they want to play for, since they do not normally own their own license, which is the asset which clubs deal with. It is often read about on newspapers that this or that player is not happy in their club, and that they would be happy about a change. The owner of their license may not however be equally happy, since releasing a player means destroying the future cash flows he would normally yield along the life of his contract. The selling club and the acquiring club need therefore to agree in a certain amount of money which bridges the gap between the dreams and the hopes of both parties, even further, their speculative approach to how much the market will grow in the seasons to come, and pray that the bubble does not finally burst.

As we mentioned in previous postings the strongest link in this negotiation is always the player. The acquiring club often appears to forget that they could buy that asset much cheaper, should the player agree that he would change his attitude towards his current employer: not scoring, not talking to the press, not smiling to sell T-shirts and merchandise: an underused asset with no value at all. Whether this is gentle or not is another subject, but if clubs were run under the predating principles of business and the invisible hand of economy, that would be the way to take. However players know that their careers are short and that any unpopular deed would be hard to repay for, so do clubs, and therefore they all prefer to feed the bubble, anticipate the future returns, and pay for the dreams of tomorrow with the debts of today.

What if players owned their licenses? The first conclusion is that they would be as free as any worker in Europe is to choose for which club to play and to negotiate a fair salary for their services to render. The second conclusion would be that there would be no three-side negotations. Trading of transfers would cease to exist, those assets would not be accounted for in the balance sheets and club value accounted for today would be destroyed. Thirdly. there would be constant changes in club membership, and a player scoring goals for Manchester United in the Champions League may play for Bayern München one month later, and end up playing the finals with Real Madrid.

My question is "why not?": is it players who take clubs to the final rounds of competitions or is it the club itself who makes it happen? There's some windows nowadays when players may be transfered, being the process banned thereafter. I do not know of many industries where such constraints exist. I think we should be posing ourselves the "What if" question more often, why not, when we think of football.

Club Value, Market Value, Book Value....

I'm coming back to the idea of how extremely competitive the UEFA Top5 cluster is. In the chart below you will see how the value of these clubs has evolved in recent years, it's million US$ in the Y-axis.

To many the answer to the question "how much is a club worth?" is obvious: "As much as someone is ready to pay for it". Not bad, ain't it?

This answer is not at all banal, since you will see how the value of Manchester United is much higher than the rest. It is true that they own a great Stadium in a cool area of Manchester, but so does Arsenal in London, FC Barcelona or Real Madrid in the most expensive area of the Spanish capital city. It is also true that they own a great set of players, but so do their competitors as well. Debtors? Nothing to mention either. Debt? Under control, better than the Spanish clubs, not so well managed as the Bayern....

So the reason why their club value is up there comes from the fact that the Glazer family bought it not too long ago and therefore they are entitled to introduce a line called "Goodwill" in their balance sheet. And that bridges the gap.

I know, some may rightfully claim that we cannot measure club value based just on their balance sheet, but when clubs are yielding -despite a yearly average of 10% income growth- such low profits and ROIs, it is possibly the value of their assets what makes a club more appealing for any prospective investor. And that means brick and mortar, not free cash flows.

I'm adding here another chart comparing the asset value of the Top5 clubs one to each other at the end of previous season, 2010-2011, and just as a present to you some blue dots pointing at an estimated market value.

In all cases where goodwill is not declared the blue dots are higher than the asset value. For ManU this is not the case, which means that the club has actually destroyed part of its value since the Glazer jumped in. Probably they paid too much, or they did not anticipate the depth of this worldwide money crunch we are still struggling with. Or maybe they found some other good reasons that are not so easy to speak of in monetary terms that made them take the step. Good luck anyway.

I guess the gap between book value and market value comes in this case from tha fact that assets are normally to be reflected in the books according to their acquisition prices, therefore not taking into account the huge inflation that affects not just those brick-and-mortar assets, but also the transfer rights of star players. Clubs do not report any value for their brand either. I'm not quite sure how well do they manage this last chapter, since Marketing and TV income appears to be attached to the image of footballers, rather than Clubs. Are therefore Clubs just a platform for players to bright? Do they take away the income whenever they change clubs? How can a club retain this value for themselves? Would football be the same with star-clubs rather than star-players? Can actually football players ever be considered "anonymous" employees? Would Barça ever sell as many shirts with their brand as Messi does with his name?

Why Barça is the only club reporting negative Equity and what does that mean? That's a hot question, maybe we'll come back to it later on.

The Champions League is also hot these days: within the Top5, the English clubs are struggling quite a lot, and staying out at this stage of the season would mean big losses for them on all fronts (.... more than a 100 Mio. € in turnover for this season only, all chapters included, plus a giant loss in their brand value?). I'm curious, let's see what happens next.

Who's the big guy in Football Town

The UEFA Top20 is quite a hard chart to jump in. Last year only two teams managed to climb into this list of the glorious (Valencia and Napoli), while the rest hardly changed positions. Actually the Top5 list is even more elitist: FC Barcelona, Real Madrid, Bayern München, Arsenal and Manchester United are not likely to leave this group under normal circumstances, unless something weird happens.

And it happens: Arsenal loss against Milan this week and hence their chance gone to cash their involvement in the Champions League may boost their leaving this group of excellence, mainly if we take into account that their income has stagnated in recent years and their turnover in Marketing is quite low compared with the rest.

So if there's little to fear from new entrants, there's even less to fear from substitutes: Football fans tend to be very loyal, and it's quite unconceivable to believe that Español would with fanbase at the expense of FC Barcelona, or Atlético Madrid from Real Madrid's and so on.

A big thing is however to secure the loyalty of your overseas fans. Locals are quite likely to remain attached to their clubs somehow, but when Asian, South American or African fans start to be thrilled by this or that player belonging to another club, you may well start seeing your merchandising sales fall. They quite have a strong bargaining power, haven't they? And with then, the TV stations paying for the broadcasting rights in remote countries. This is no longer an old school boys game, it's become a lovemark branding strategy that needs o be sustained overtime.

Because the big kids in town are actually the football stars. Some teams like Barcelona or Bayern München quite rely on their ability to grow football players from their junior teams, and even send scouts around the world looking for future stars. Others, like Real Madrid trust their checkbooks and the ability of stronghanded technical staff to stick the best together. Both strategies are good, they have displayed similar results in recent seasons, and it's just the type of image you want to project as a club to the outer world in order to improve your sales. I just wonder what would happen if the concept "transfer rights" was deleted from the map, that is, if players were actually allowed -like any other worker in Europe- to switch employer whenever they felt like doing it, without incurring into transactional costs that are a pain in the neck to most elite UEFA clubs nowadays.

All this fight happens within the norms stablished by the national leagues and international associations, not to speak about the EU itself: when the Bosman case went through in 1995 a huge revolution took place in the football industry, since EU players started to move easily up and down good old Europe no matter what country they were coming from, no matter if a team was made up of 11 foreign players. Quite a change, wasn't it. More recently, UEFA's program on Financial Fair Game is putting step by step things under control. Clubs like FC Barcelona could be banned from the Champions Leagues if they repeated the financial practices of the past. Hopefully they are taking things seriously and they'll do well: I would not like to miss Messi scoring five again :-)

UEFA Football: how big is the cake

According to UEFA, the total income of the first league of all its 53 affiliated countries adds up to nearly 12.8 Billion € for the season ending in 2010.

Five countries (Spain, England, Italy, France and Germany) take over two thirds of this amount in more or less equal terms, but that income is not so equally distributed within each national league.

For instance, the Spanish Liga made in that seaon about 1.6 Billion €, out of which Real Madrid and FC Barcelona took over 50% of the revenues, while the other 18 teams in the competition shared the rest.

FC Barcelona scalated to the second position of the UEFA's 734 clubs with a growth over the year of 12% boosted by their wins in the Liga, the Champions League and the Clubs World Cup. Despite this fact, the club reported losses of 9 Million Euro at the end of the season, with increased debt over the previous year. The sport success of their players on the pitch may not be properly backed by their financial contollers sitting in Barcelona, thus jeopardizing their chances of a long-term sustainable leadership in the football industry.

Football Finances

Despite the financial crunch in the old continent football is one of the fastest growing industries in Europe. Success is frequently measured in sport terms and, in the best of the cases, in income terms.

According to UEFA more than one third of all first-division ranked clubs across the continent are however in serious financial distress, reporting negative equity in their balance sheet and with a high probability of not being able to pay back their debt in due time. FC Barcelona and Real Madrid, unarguably the clubs yielding highest sport performance in the competition are to a certain extent subject to this disease, thus putting the sustainability of the current business models into doubt.

UEFA started their Financial Fair Game programm a few years ago with the purpose of putting these practices under control, and underperforming clubs will be banned from the competition in a couple of seasons unless they provide evidence of their commitment to improve. Clubs with severe structural flaws will simply cease to exist.