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.