Football Money League - The Climbers and the Sliders (Part 2 of 2)

Article by Robert Elstone, Austin Houlihan, Rich Parkes and Mark Roberts

Grounds for improvement

The Deloitte Football Money League is once again filled by clubs from Western Europe, but only six countries provide all 20 clubs on the list. England has the most (eight clubs), followed by Italy (five), Germany, Spain and Scotland (two each), and France (one club). What is different about the UK market which means that England and Scotland provide half of the Money League representatives?

It's about balanceÖ

Despite the recent realignment of the broadcast market, clubs in†mainland Europe still have a much higher level of dependency on†broadcasting revenue than their UK counterparts. In Italy and Spain†clubs can negotiate individual deals with broadcasters and this has†resulted in a flight to quality, with the largest clubs commanding†phenomenal amounts in broadcasting revenue. This also explains†the disappearance from our top 20 of all bar the biggest Spanish†and Italian clubs. In the 2003/04 season 'signing on bonuses' from†broadcasters to the three big Italian clubs meant that broadcasting†revenues represent as much as 60% of their turnover. By contrast,†UK clubs have a more balanced spread of revenues, with a greater†proportion being derived from matchday and commercial sources, and†some might argue that this creates a more robust business as a result.

The revenue category in which this difference is most pronounced is†'matchday'. The average British (English & Scottish combined) club†in the Money League generates approximately Ä48m (£31.8m) from†matchday revenues, just over a third of the club's total revenue. By†comparison their mainland European counterparts in the top 20†generate, on average, Ä30m (£19.9m) from matchday revenues,†which equates to less than 20% of their total revenue.

The amount of money that British clubs have invested in their stadia†is well documented in the Deloitte Annual Review of Football†Finance (the Premiership has spent over Ä1.5 billion (£1 billion) since†it was formed). Clubs in other countries often have bigger stadia and†bigger crowds but much lower income - why? The key is building†the right stadium to maximise revenue and achieve the best returns.

Öand skillÖ

Clubs need to ensure that they are taking into account the requirements†of their spectators (or "the market"). That means two things -†properly tailoring their estimation of demand by targeted research and†consulting with their market, through whatever forum is the most†appropriate. It should not be about simply replicating someone else's†model because "it feels right" or because the club's President or†Chairman wants to build some sort of monument to his reign.

Football clubs, like hotels and airlines, are selling perishable assets.†If a plane takes off with a seat unsold, it can never be sold. The†same goes for a football club with empty seats. Similarly, a segment†of the market will pay a premium for extra comfort, convenience†and catering that costs less to provide than people are willing to pay.†Yield management, segmentation techniques and packaged ticket†offers (with catering and car parking for instance) are all valuable†improvements clubs can make. This does not require great capital†investment - but it does require some thought, and research. We†have advised a number of clubs on improving operational†performance in existing stadia through our methodologies that†utilise market-based and statistical techniques.

We believe there are further opportunities available for all clubs to†improve their returns from the stadium and increase their level of†matchday income. In some cases these gains could be very dramatic†in terms of increasing from the base levels discussed below.

Öand delivery

Looking at individual clubs, Manchester United generate the highest†matchday revenue, earning Ä92.4m (£61.2m) from this source -†from average attendances at Old Trafford of 67,500. This is almost†50% higher than the best performing Continental European club in†this area - Real Madrid who earned Ä62.0m (£41.1m), from a similar†level of average attendance to Manchester United - see Table 1. In†fact English and Scottish clubs occupy seven of the top ten places in†terms of absolute levels of matchday income.

The club with the lowest matchday income of the 20 - Juventus†(Ä17.6m (£11.7m) - is actually placed fifth overall in the Money†League. This is largely due to two factors - the amount of their†broadcasting income - Ä130.1m (£86.2m) the second highest of all 20†clubs - and their commercial income - Ä67.3m (£44.5m), the fourth†highest in the Money League. Their matchday income represents only†8% of their total and is less than a fifth of the matchday income†being achieved by Manchester United. This is a worrying imbalance†and...