The Political Economy of Football V2

They may share a stadium, butInter Milan and AC Milan have produced contrasting financial results: Opposing fortunes Inter has posted record revenues of €417m ($462m) for the 2018-19 season, representing 20 per-cent-growth over the previous campaign. The current revenue growth is largely attributable to the club’s returning to the Champions League for the last two seasons, having failed to qualify for the competition in the six preceding years. The club did post an overall loss, of €48.4m, though this was largely attributed to investments made into the playing staff ahead of the 2019-20 season. AC Milan, meanwhile, has posted a record loss of €145.9m for the financial year 2018, €20m more than the embattled club posted in the previous year. Overall turnover also fell by 6.1 per cent, to €241m. AC Milan has now accumulated losses of over €500m over the past six seasons, due, like its neighbour Inter, to dropping out of the Champions League over that period.

Chinese conglomerate Fosun International is trying to sell a stake in Wolves as it gauges appetite for an eventual listing of the football club. Listings were popular in the 1990s as a means of raising funds but have fallen out of favour with only a small handful of clubs left with tradeable shares. However, Wolves would be part of a unit containing other sport-related assets. 'It's more to test the market, to see the value of Wolves,' said club chairman Jeff Shi. Wolves, he added, was also looking for an investor to promote the team outside of China. The club is selling a stake valued at £50m - £100m. This would represent about 20 per cent of its equity, valuing Wolves at £350m. The sale has failed to attract a buyer for some months. It is not clear what the attraction of such a minority stake would be, other than capital appreciation, but they may have largely occurred already. Fosun paid £45m for the club in 2016. It faces an undisclosed writedown of its investm...

Only Bristol City and Hull have published their 2018/19 accounts to date in the Championship, but Bristol City have the second highest income total in the division excluding parachute payments after Leeds United, reports Kieran Maguire of the PriceofFootball. Match day income was £6m (down nine per cent). Broadcasting income was £8m (up five per cent). Commercial income was £16m, up by an encouraging 50 per cent. Total income was up 20 per cent at just over £30m. Bristol City made operating losses of £500,000 a week in 2018/19 which was offset by profits on players sales of Bryan, Flint and Reid. The club have racked up losses of over £123 million over the years [but, of course, they have a generous benefactor owner]. Steve Lansdown [of funds supermarket Hargreaves Lansdown] put another £10 million into Bristol City via a share issue. Bristol City generated cash of £17 million from player sales of £40 million. The difference is due to sales being on instalments due from other c...

The authoritative Swiss Ramble reviews the 2018/19 accounts of Real Madrid. Profit before tax increased by €10m from €43m to €53m (profit after tax up €7m to €38m). Revenue was a record €757m, but only rose €6m (less than 1%), while profit on player sales shot up €45m to €99m. Real Madrid are highly profitable, mainly due to their ability to generate revenue. In fact, they have made €222m profit before tax in the last five years, averaging €44m a season. Even though Real Madrid profits have been remarkably consistent, it is evident that they have become increasingly reliant on player sales with average annual profits more than doubling in the last five years to €57m. The 2019/20 budget includes €94m, already achieved by summer sales. The only revenue stream to increase was international competitions and friendlies, up €13m (13%) to €114m, but the others stagnated: broadcasting was down €5m (3%) to €173m; membership fees & stadium revenue down €1m to €173m; while marketing was f...

Liverpool will earn £15m less next season for wearing Nike shirts next season than the New Balance jerseys they are sporting in this campaign. However, the potential for earning more in replica sales thanks to Nike's global marketing was a significant factor in the club winning their High Court battle with New Balance to end their deal in May 2020. A key factor in yesterday's ruling was that New Balance could not match Nike's 6,000 outlets around the world. nor their stable of global superstars. Liverpool spent more than half a million pounds on the court case with 20 per cent of the costs to be paid by New Balance. It is understood that Nike have promised Liverpool 20 per cent of the royalties on net sales of replica shirts and other goods.

The takeover of League One side Wycombe Wanderers by American lawyer Rob Couhig is set to go ahead after members of the club's Trust voted to sell a 75% stake in the club to him. More than three-quarters of members needed to approve Couhig's bid for his firm Feliciana EFL Ltd to take over. Couhig's company will invest £2.2m to settle Wanderers' existing debts and make an additional £1m available. They will also fund a new 15-year lease on Adams Park at £150,000 a year. Under the deal, two directors will remain on the club's board from the Wycombe Wanderers Trust. Couhig was involved in a takeover bid for Yeovil Town, but pulled out after they were relegated to the National League. The more general point that arises here is how far fans running a club offers a sustainable solution to the challenges facing football. Most clubs run at a loss or, if they are put on a very tight budget, they are unlikely to succeed on the pitch. But fans collectively cannot cover c...

Although they have taken out a £50 million loan against future television revenues, Wolves insist that they have never been financially stronger. Their search for more commercial partners is part of an effort to establish the club as a global brand: Wolves finances The club has started discussions with the city council about rebuilding Molineux.

The authoritative Swiss Ramble blogger reviews Ajax's accounts for 2018/19. He notes, 'Their 2018/19 accounts cover their most successful season in years when they won the Dutch league and cup double (for the first time since 2002) and reached the Champions League semi-final with a dazzling brand of football.' Profit before tax shot up from €3m to €69m (€52m after tax), largely due to revenue more than doubling from €93m to a record €199m (thanks to the CL exploits) and profit on player sales rising from €39m to €73m. The price of success was expenses increasing by €74m. The wage bill grew €39m (74%) from €53m to €92m. The club's €106m revenue growth was very largely due to the Champions League run with all three streams increasing: broadcasting surged €76m from €13m to €89m; match day rose €20m (63%) from €31m to €51m; and commercial was €11m (22%) higher at €60m. Few clubs in the Eredivisie make big profits, e.g. in 2017/18 the highest was Feyenoord €16m. Therefor...

Leading football journalist David Conn notes a stark contrast between Liverpool and Manchester United. The Glazers have cost United £1bn while Fenway Sports Group seek to add financial value: United and Liverpool

Norman Hassall has agreed to sell his 51 per cent majority stake in Crewe Alexandra to a group of local businessmen and investors, none of whom will own more than 12.5 per cent of the club. This will ensure continuing local ownership of the club which is relatively unusual these days: Crewe sale

The authoritative Swiss Ramble blogger assesses the 2018/19 accounts of Barcelona. Profit before tax fell €17m to €4m (profit after tax €5m, due to €1m tax credit). Revenue rose €76m (8%) from €914m to a record high of €990m, even though gain on player sales was down €108m. Offset by significant growth in expenses, which were up €69m. The largest growth was in broadcasting €111m (59%) to €298m, followed by marketing and advertising €28m (8%) to €363m. Match day revenue of €145m, including membership fees, was the highest in the world in 2017/18, ahead of Real Madrid €143m. Most La Liga clubs are profitable. Barcelona have reported profits eight years in a row, aggregating around a quarter of a billion pre-tax in this period, though these have now fallen three years in a row. However, they do make losses on other sports such as handball and basketball. Even though Barcelona have made money, they have become increasingly reliant on player sales with huge average annual profits of ...

Derby County chairman Mel Morris rejected a £50m bid from an American consortium over the summer and says that he would want £60m: Rams bid Swansea City's American owners say that they would be prepared to accept a £38m bid for the club, but the sale contract would need to specify a £15m bonus if the Swans went up to the Premier League in the next five years: Swansea City

Leeds owner Andrea Radrizzani has revealed that he is considering an offer from Qatar to take the club to a level where they could compete with Manchester City. Qatari Sports Investment (QSI) is the favoured bidder, but two other investors are being considered. QSI is run by Nasser-el-Khelaifi, the president of Paris Saint-Germain. The other potential investors are a wealthy Leeds fan based in the United States and the owner of an unidentified Italian club. Radrizzani does not rule out selling a majority stake, but whatever happens he hopes to remain involved. 'The most important thing for me is to make this club big again,' he told The Times. He said that he had invested over £90m and with that level of money you could own a Europa League club in most of the European leagues including Italy. Bielsa and his staff cost £6m a year. Over £30m a year is spent on player wages, £33m with Marcelo, creating a bill of nearly £40m when you factor in the coaches.

Manchester United are searching for an alternative shirt sponsor to Chevrolet amid concerns that the American car manufacturer will not renew its deal because of their poor form. General Motors felt that it overpaid for the deal in 2012. Indeed, the executive who brokered the £450m deal left the company shortly afterwards. The company were unhappy when they discovered they would be paying substantially more than United's then sponsor Aon. The deal with Chevrolet runs through to the end of the 2020-2 season, having started in 2014-15. United recently claimed that their global fan base amounted to 1.1 billion people. Despite United's global appeal, companies like to be associated with a club that is succeeding on the pitch.

Partick Thistle have published their 2018/19 results following relegation to the Scottish Championship. Revenue was down a third to £3 million but club managed to break even by reducing costs. Partick Thistle wage bill down 30% and employee numbers fell by 12. Club paid £64 in wages for every £100 of income, a respectable figure. Average wage £23,000 a year for all staff, directors took no pay. Kieran Maguire notes, 'To put Patrick’s wage bill in context, Manchester United were paying Alexis Sanchez each month what Partick paid in wages for all 85 staff, both playing and back office, in a year.' The club had £600,000 in the bank at the end of 2018/19.

Juventus chairman Andrea Agnelli, who also chairs the European Clubs Association, is continuing to press his controversial plans to transform the Champions League. His scheme would involve 24 clubs gaining automatic qualification for next year's Champions League rather than gaining entrance on the basis of performance in national leagues. This would ensure that leading teams would play each other more regularly in the Champions League. Agnelli told the Leaders in Sport conference in London that football must evolve to ensure 'more European matches with higher sporting quality'. If this did not happen they would risk losing the attention of young fans who are being targeted by other entertainment franchises, from streaming services such as Netflix to video games such as Fortnite. Some might think that higher admission prices are a greater deterrent.

It looks as if the takeover of Sunderland by American investors is close to collapse. Apparently they thought that the valuation of majority owner Stewart Donald was too high, but he insists that he has not haggled over price: Takeover collapse

More than 5,200 people have invested in AFC Wimbledon's crowdfunding scheme to help finance their new stadium near their old ground at Plough Lane. The club hopes to raise £2m by this route: Scheme's success

The authoritative Swiss Ramble reviews the 2018/19 accounts of Borussia Dortmund. Profit before tax decreased €13m from €35m to €22m (profit after tax €17m), despite revenue rising €60m (19%) from €317m to €377m, as profit on player sales fell €49m from €126m to €77m and total expenses were up €26m, but net interest payable was €3m lower. Although they have reported solid profits, they are a long way below the leading English clubs. All revenue streams increased, though the largest growth by far was in broadcasting, up €45m (37%) to €167m. In addition, commercial rose €9m (6%) to €157m, match operations €2m (6%) to €45m and other operating income €4m to €8m. The club has been consistently profitable with 2010 being the last time the club reported a (small) loss. In the 9 years since then, they have accumulated €227m profits, averaging €25m a season. The board expects to post another profit in 2019/20. They have become increasingly reliant on player sales with average annual profit...

In April 2017 an unknown Chinese businessman, Li Yonghong, acquired AC Milan for €740m from Silvio Berlusconi, the three times Italian prime minister, who had owned the club for two decades. He hoped to exploit the club's large Chinese fan base. The takeover was funded by €300m of high interest loans from Elliott Asset Management, a $38.2bn hedge fund described by the Financial Times as 'the world's most feared hedge fund.' In July 2018 Mr Li defaulted on the loans, losing €500m in equity overnight. Elliott effectively acquired AC Milan for €400m, just half of what the club had been valued at months earlier. Admittedly, AC Milan had faded from earlier glories. It last won Serie A in 2011 and has failed to qualify for the Champions League for five seasons. Over the past decade its revenues have stagnated at around €200m. Those at Real Madrid have doubled to almost €750m over the same period. Elliott's plan is clear: win matches on the pitch and raise revenue...

Hartlepool United is running a £400,000 annual deficit despite improved season ticket sales and commercial income: Hartlepool United Owner Raj Singh has put in £1.5m since he took over.

Plymouth Argyle made a loss of close to £1.5 million in their 2018/19 League One relegation campaign, according to figures released by the club: Argyle deficit. The Pilgrims’ expenditure of £7,846,000 far exceeded the income of £6,375,800 but the shortfall was made up by owner/chairman Simon Hallett. Argyle expect to make another loss this season, with Hallett again stepping in to provide the funding to cover that. Wages are 64 per cent of income which is not an excessive figure.

This essay originally appeared in Charlton fanzine Voice of the Valley. The Championship has become in effect a Premier League Division 2. In many ways it is the least level playing field of all the divisions, except that it is not dominated by the same six clubs each year. Three factors contribute to its distinctive financial structure. First, the availability of generous parachute payments paid to around a third of its clubs (eight at present). Secondly, the option available to relegated clubs of selling one or two players at a substantial profit. This can be done without compromising the club’s competitiveness. Thirdly, the willingness of benefactor owners to pour substantial funds into the club they own in the hope of gaining promotion to the Premier League. Given that some clubs in any one year are in a relegation battle, they have a 6-1 chance of success, although no doubt each club thinks it can beat those odds. As a consequence, the clubs in the Championship have been l...