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.