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.