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.