Billionaire Boys Club : Footballs New Business Model

anon anonContributor IJune 8, 2010

PARIS - APRIL 22:  Counterfeit football shirts seized by customs are displayed outside Ministere des Finances on April 22, 2010 in Paris, France. France's Budget Minister, Francois Baroin attended a press conference there today to announce Customs results for 2009.  (Photo by Pascal Le Segretain/Getty Images)
Pascal Le Segretain/Getty Images

The World of Football, like many a sport related industry, is a business. 

There is an opportunity of growth and financial analysts commissioned by Deloitte show in their statistical findings that this growth seems to be heading towards a negative decline. This has lead to investors, shareholders and committee members being issued with a grave warning that English clubs' and their rising wage bills, reliance on rich benefactors and uncapped bonus' for Players Managers/Agents for Sponsor and Endorsement deals are now fast becoming more and more unsustainable.

“We appear to be seeing a continuing shift from a sustainable ‘not for profit’ model towards one with potentially calamitous consistent and significant loss-making characteristics,” said Dan Jones, of Deloitte's Sport Business Group. The statistics and more can be found in the introduction to the company's Annual Review of Football Finance 2008-09 season.

There is now an urgent need for Clubs Internationally, not just the UK to construct a new, more profitable business model, for Return of Investment, Total Cost Ownership of Assets and True Business Value for Players, Brands and The Club.

“A model of profit maximisation is now pursued by a very limited number of clubs and, whilst some clubs seek to break-even on a consistent basis, the emerging norm for many Premier League and Championship clubs appears to require significant ongoing benefactor support.”

Soaring wage costs have hit profit margins harder than ever, Premier League along with French Ligue 1,  show their joint-most consistent spread of wealth among its clubs of the 'big five' European leagues.

The Premier League's profits of £79 million in 2008-09 were its lowest since 1999-00, primarily due to wage inflation of £132 million.

The scenario is even worse in The Football League, where 86 per cent of club revenues are being spent on wages, leaving £82 million in total to cover the rest of club business, including all operating costs and transfer budgets. The report called this “a huge, and ultimately unsustainable, financial challenge”.

The good news for English football is that the popularity of the sport appears bigger & better than ever, judging by record attendances, Ticket and Merchandise sales.  

Combined Premier League and Football League attendance in 2009-10 was over 30 million, “a level not seen since well before the introduction of all seated stadiums”. The Football League's total attendance in 2009/10 was 17 million for the first time since the Premier League was formed in 1992.

In the rest of Europe, headline figures coming from the report included Germany's Bundesliga overtaking Spain's La Liga to become the second biggest revenue generating league.

Bundesliga revenues grew 10 per cent to €1.575 billion, the highest growth in the big five.

Please review the financial report in Sports Business International E-Zine.