Today, money is a problem. The easy-credit, reckless-spending party is over. Many of us have to adjust to a more frugal lifestyle. This is the main legacy of the financial and economic crisis. We have to learn how to live within our means. Football clubs included.
Lovers of the beautiful game have long worried that football is losing its soul to business. Recently, Portsmouth FC, a club playing in the world's richest league, was forced into administration after failing to pay the taxman £12 million. Portsmouth may still survive bankruptcy but they will probably be relegated to League Championship football after a nine-point penalty was inflicted on the club.
Manchester United, one of football's top-revenue clubs, has been making headlines for the wrong reasons. The Red Devils, Premier League champions for the last three years, have a debt mountain of £716 million. Last year, United registered a profit of £6.4 million, after having had to sacrifice Christiano Ronaldo for £80 million. The club has now issued a £500 million bond in the effort to cut their £68 million a-year interest charges. Their fans are fuming and want the Glazer family out.
The American owners bought the club in 2005 for £800 million, mostly on borrowed money. Then, thousands of supporters rebelled and set up their own club, FC United of Manchester. Now, a few wealthy "Red Knights" are scheming how to buy back the club. They have the backing of the Manchester Utd Supporters' Trust and its 138,812 members.
Will United follow the example of Real Madrid and Barcelona, both of which are owned and run by their members? Incidentally, the two Spanish clubs are, according to Football Money League, Europe's highest income earners for season 2008/9. This annual report, published by Deloitte, is now in its 13th edition. Still, the Premier League generates the highest revenue (£1.93 billion), with seven of its clubs making it into Europe's Top 20, despite the fall of the sterling against euro. Many English clubs play to full stadia and make good money out of corporate hospitality. This gives them a competitive edge against continental European clubs. Manchester United had the highest match-day revenue (earning an average £3.7 million per game).
The biggest problem with the Premier League is the amount of money going for player salaries, estimated at 55 per cent of total income.
Broadcasting revenue has radically changed the economics of football. The Premier League has a global audience of about 500 million people in 202 countries. The Premier League's sale of its overseas broadcasting rights for 2010-13 will raise around £1.4 billion, more than double the previous level of £625 million.
The biggest earning club from broadcasting is Real Madrid, which rakes in £137 million annually. Like all Spanish clubs, Real Madrid is able to negotiate TV rights on an individual basis. This broadcasting revenue made it possible for Real Madrid to win the Football Money League for the fifth consecutive year. Los Blancos became the first club to register a turnover in excess of £340 million. FC Barcelona, which won every competition they competed in, could only place second in the Money League.
The third revenue stream determining the Money League relates to commercial activities (sponsorships and merchandising). This category is dominated by Bayern Munich with earnings of £136 million. Bayern's £26 million shirt sponsorship deal with Deutsch Telekom is probably the most lucrative in world football. Bayern placed fourth in the Money League. Its revenue was twice that of Hamburger SV, the second highest ranking German club, which made it to the 11th position in the Money League. This indicates the huge (and ever-widening) gap between the few top clubs that dominate European football and the rest.
Despite all this big money, UEFA estimates that half of all European clubs are running at a loss and facing severe financial difficulties. The main culprit is the amount of money being spent on player salaries. The EU Commission has obliged UEFA to strive for better financial management of clubs.
Strict financial regulations, forcing clubs to live on their earned income, shall become effective as from 2015. Clubs running at a loss will be banned from participating in European competitions. Michel Platini, UEFA president, insists that clubs should not remain at the mercy of billionaire sugar-daddies.
The situation of many Maltese football clubs is no better. Their financial situation is made even more problematic due to the limited possibility of raising revenue. Gate-money (especially for the lower divisions) does not even suffice to cover match expenses. Sponsorship is limited as local enterprises do not fully appreciate its value as a marketing tool nor do they have any tax incentives. Merchandising and broadcasting revenue is non-existent.
Were it not for the dedication of committee members, our football clubs would be in real dire straits. Many clubs give a unique service to our society as evidenced by the popularity of their nurseries and youth teams. It is commendable that both the Malta Football Association and UEFA are helping clubs to improve their training facilities. Much more needs to be done. Is government ready to give a helping hand before it is too late?