The Political Economy of Football V2

Some Liverpool fans are understandably unhappy with their team’s performances this season, identifying a lack of investment as one of the factors, particularly compared to Manchester City. The authoritative Swiss Ramble considers whether this is indeed the case. Liverpool have a net spend of £60m in the last two years, as gross spend of £164m has been partly offset by £104m sales. Manchester City actually had £4m net sales in the last two years, as high player purchases of £266m were compensated by £270m sales. Livepool’s gross and net transfer spend have been steadily falling since 2019, from £223m and £163m respectively, which is partly due to the adverse impact of the COVID pandemic. Zero net spend in 2020 is quite striking, though did not prevent them winning the Premier League that year. Manchester City net spend has also been declining from the £250m peak in 2018 with the club actually making £54m net sales in 2022/23. Gross spend has held up pretty well, though the club...

Barcelona are out of the Champions League at the group stage for the second season in a row.  This was not supposed to be happening after Barcelona’s eventful summer 2022, with the noise of a series of financial levers being pulled and the excitement generated by new signings such as Robert Lewandowski. That was all designed to make sure the club were ready for big nights like this with a rebuilt team that could again compete for the top trophies. A realistic summation of Barcelona’s finances came when the club’s financial vice-president Eduard Romeu admitted last week that “without the income from the “levers”, last year we would have lost €106million, and this year (the loss would be) €210million”. Most obviously, their squad still costs way more than it should. In 2021-22, the total spent on salaries and amortised transfer fees was €518million but the budget confirms that, in 2022-23, it is up by 27 per cent to €656million after the signings of Lewandowski, Raphinha and five...

The authoritative Swiss Ramble reviews Barcelona’s 2021/22 financial results, when they swung from €555m pre-tax loss to €124m profit, mainly thanks to €266m gain from sale of TV rights and no repeat of prior year’s €271m impairment and provisions. Total debt was up to €1.5bln. This was in stark contrast to 2020/21, when Barca posted football’s highest ever loss after tax of €481m. In fairness, UEFA said that accumulated losses of European clubs in 2020 and 2021 were €6 bln, but Barca’s €689m pre-tax deficit was comfortably the worst. Before the large losses in 2020 and 2021, Barca had reported profits 8 years in a row, amounting to a quarter of a billion. Club has budgeted a €366m pre-tax profit in 2022/23 (€274m after tax), thanks to the inclusion of €600m from activating more economic levers. One reason for the financial issues is a steep decrease in profits from player sales, which have fallen from €208m peak in 2018 (mainly Neymar to PSG) to €28m in 2022. Indeed, their €72m ...

The authoritative Swiss Ramble reviews the latest accounts of Norwich City.  They swung from £21m pre-tax profit to £24m loss (£18m after tax), despite revenue surging from £57m to club record £134m following promotion to the Premier League, as profit on player sales fell £60m to zero and operating expenses rose £66m (69%) in the top flight.    Only two English clubs have to date published accounts for 2021/22, but rge £24m pre-tax loss is pretty much the norm for the Premier League. Given the impact of COVID, the Canaries have done very well to break-even over the last 3 years (2020 £2m profit, 2021 £21m profit & 2022 £24m loss). As a rule, this “yo-yo” club tends to be profitable in the Premier League, but loses money in the Championship. The club’s business model is fairly dependent on player sales, where they have made an impressive £158m profit in the last 8 years, including £60m in 2021 and £48m in 2018, mainly due to the big money sales of Maddison to ...

Despite the apparent scarcity of top-end clubs, investors now have two reference points for deciding how much to bid on Inter. This is a club with plenty of pedigree - the first Italian side to win the treble of domestic league and cup plus Uefa Champions League, and a history of great players. But at present, Inter is struggling financially. The club recently reported that it made a loss of €140mn in the 2021/22 financial year on revenues of €440mn. The owners are also under pressure. Nanjing-based electronics retailer  Suning , which has owned the club since 2016, also suffered during the pandemic as consumers switched to online shopping from its brick-and-mortar foundations. Meanwhile, Chinese owners have flooded out of European football since Beijing tightened capital controls. So what is Inter worth? Andrea Sartori, founder of data and analytics platform Football Benchmark, this year estimated that Inter’s enterprise value, including debt, was about €996mn. In ...

Crystal Palace have received updated planning permission for their Main Stand redevelopment which will increase capacity at Selhurst Park to 34,000:  https://londonnewsonline.co.uk/crystal-palace-obtain-planning-permission-for-main-stand-development-which-will-boost-stadium-capacity-to-34000/

A search has begun for a buyer for Inter Milan.  US boutique bank Raine Group, which handled the auction of Chelsea this year, and Goldman Sachs are working on the sale.   Suning would consider selling a minority stake. Inter has been owned since 2016 by Nanjing-based electronics retailer Suning.   The company has been hit by the growth of online retailers and carries a large short-term debt pile at a time when credit is tightening in China. In February last year Suning had to raise new financing to plug the funding gap at Inter caused by the pandemic, resulting in a $275m loan from distressed debt specialist Oaktree Capital. The latest accounts show revenue increasing to €440m and a loss for the 2021/22 financial year of €140m. The fact that Inter shares their stadium is a drawback for potential investors as hosting double the number of games makes ir more difficult to stage other events that generate revenue.

The authoritative Swiss Ramble reviews the latest accounts of Juventus.   The pre-tax loss widened from €208m to €252m (€254m after tax), as revenue dropped €35m (8%) from €450m to €415m and profit on player sales fell €3m (9%) to €28m. Operating expenses rose €1m (6%), while net interest payable increased €5m (49%) to €16m. Unsurprisingly, Juventus huge €254m post-tax loss is the worst in Italy to date for 2021/22, much higher than Inter €140m and Milan €67m. Almost all Italian clubs have posted losses in the past 2 years, influenced by COVID. One exception is Atalanta who made €35m net profit. In fact, the €254m post-tax loss is the highest ever in Italy, ahead of Inter €246m and their own €210m in 2020/21. Their total €289m deficit for 2020 and 2021 was one of the worst in Europe, only surpassed by Barcelona €689m, PSG €350m, Inter €337m and Everton €296m. After four years of profits , Juventus have now made losses five seasons in a row, worsening each year and adding...

The Australian financial services regulator is looking into licensing concerns relating to Fulham’s new sponsor, Titan Capital Markets, and the firm’s website has been blocked to view from the UK and US. Fulham’s Supporters’ Trust has called for greater due diligence around the signing of future deals in light of the Titan partnership but has seen its request to be represented on an ethics committee rejected. In September, Fulham announced they had made an agreement with the Australian-based company Titan Capital Markets to become their Contracts for Difference (CFD) trading partner for the remainder of the 2022-23 season. A CFD trading firm speculates on the underlying price of an asset — such as shares, commodities or foreign exchange markets. The Fulham Supporters’ Trust met with club representatives on Thursday.   The Trust’s chair, Tom Greatrex, said: “It is not at all surprising that Fulham supporters are concerned about how our club found themselves in this posi...

Clearlake Capital’s Jose E. Feliciano says Chelsea has the opportunity to double its revenue.  A study from Deloitte claims Chelsea created £436.6m revenue in 2021 and Feliciano believes the club can increase that figure to £1billion at some point in the future.  He said at Bloomberg’s investment event: “We think we have an incredible opportunity to double revenue. We think we have one of the best media properties and sport properties in the world where we can get to a £1billion of revenue.” Speaking about why Clearlake invested in Chelsea, he added: “We thought we had a really interesting opportunity to buy a business in a very unique situation where there was a forced seller, significant parts of the buyer market were not able to access the transaction and we felt that all the competencies of Clearlake came into play.” “On top of that, we were able to partner with Todd Boehly and his group, a group that has a lot of experience in other significant leagues and...

It is now three and a half years since Tottenham Hotspur moved into their new home, a £1billion state-of-the-art stadium built on top of the old White Hart Lane.  Chairman Daniel Levy confirmed back in 2019 that the club would be interested in securing a “naming-rights deal” with the “right brand, on the right money”,  but no such agreement has been struck. The pandemic held things up.    There has also been a suggestion that Tottenham wanted to keep the stadium free from a sponsor as it might be more attractive for a potential buyer.   A further factor is that Uefa have sponsorship regulations that forbid the stadium being referred to by its sponsor but for certain circumstances. Therefore, for example, Emirates Stadium is known as Arsenal Stadium in Uefa competitions. The north London club have been looking for a long-term deal worth more than £25 million a year and have spoken to a number of big companies including Uber, FedEx and Amazon during ...

The authoritative Swiss Ramble reviews the 2020/21 accounts of Ajax.  Their pre-tax loss widened from €12m to €32m (€24m after tax), despite revenue rising €64m (51%) from €125m to €189m, as profit from player sales fell €48m from €86m to €38m and operating expenses increased €35m (16%). The €32m pre-tax loss is the highest in the Netherlands, even though the most recent accounts for other clubs cover the 2020/21 season, which included a full year of COVID. In 2019/20 (pre-pandemic) no fewer than 11 of the 18 Eredivisie clubs were profitable. Ajax normally run a sustainable business model, but they have posted losses amounting to €43m in the past two years, driven by the pandemic. In the previous eight years, they had accumulated nearly a quarter of a billion Euros profit, averaging €30m a season. In fairness, Ajax have done much better than other leading European clubs during the pandemic, reporting an aggregate pre-tax €15m profit for 2019/20 and 2020/21, which was signific...

Everything has changed at Newcastle United since the takeover in October 2021 — a transformation of ambition and outlook, with serious people in substantive roles and, beyond that, a profound sense of unity. Their form over the past year would put Newcastle sixth in the Premier League table — and that includes the difficult first three months post-takeover — up from 16th for the previous 12 months and 13th between promotion and Ashley’s departure. Their win ratio over 39 league games is 38.5 per cent and loss ratio 30.8 per cent; in the previous 12 months they were 24.3 per cent and 48.8 per cent respectively; from promotion until the takeover, they were 28.9 per cent and 44.6 per cent. The average 1.5 points per match they have collected is 0.4 more than their average over previous seasons. Since the Mike Ashley era became a sour, grey memory, Newcastle have appointed a new board, a new coaching staff, a sporting director, a chief executive, avoided relegation from an unpreceden...

The accounts for Charlton Athletic club holding company Clear Ocean Capital for 2020/21 have been published.   Once interest depreciation and amortisation are taken into account, the loss before taxation for the year was £6.8m on turnover of £6.32m for a 10-month period.   After taxation it was £5.1m.  Football finance guru Kieran Maguire has pointed out that the operating loss was £210,000 a week. 66 per cent  of income (£4.2m) came from Premier League and EFL central distributions.   Commercial (£1.6m) accounted for 25 per cent.  There was a large increase in streaming income, but this was offset by a decrease in sponsorship and non-matchday events.  Other (including Valley Gold, £163k)) was £380k and match day was £232k (Covid). Profit on transfer fees amounted to £5.6m, but amortisation reduced this to a net profit of £3m in the accounts.   Selling on fees were obtained in relation to Lookman, Grant, Dijksteel and Pope. £1....

The authoritative Swiss Ramble reviews Real Madrid’s2021/22 accounts, when they reported €20m pre-tax profit, though figures benefited from €316m once-off gain after selling stadium rights to Sixth Street. Football wages €478m. Financial debt was up to €1 bln due to stadium investment.    Their finances benefited from the effects of COVID “gradually subsiding” and the consequent return of fans to the stadium. They have budgeted for a further increase in revenue to €770m in 2022/23, as the recovery from the pandemic continues. Looking further ahead, the Bernabéu stadium development will represent a major challenge, but also an opportunity to generate more money. Work on the development of Real Madrid’s Santiago Bernabéu stadium continues with €538m investment to date (€259m in 2021/22)). Expected to be fully operational for the 2023/24 season with a revised cost of €800m, but driving a “significant” increase in revenue. Although Florentino Pérez argued that club fina...

After suffering more than £50 million in losses over the last two Covid-impacted years, Liverpool are set for a drastic turnaround. Their total revenue is forecasted to reach an all-time high of £602 million resulting in a projected profit of £76 million before tax. With Liverpool’s resurgence under Klopp over the last few seasons, achieving both domestic and international success has become habitual if not expected by fans. The Reds fulfilled this in 2021/22 by reaching three cup finals in which they secured the FA and EFL cups but were defeated by Real Madrid in the Champions League final. While the near-perfect season may have left the club oddly unfulfilled, their mood should be lightened by an enhanced revenue figure derived from large prize pools from the numerous top-two finishes. Another substantial amplifier for projected revenue is the increased matchday income due to the fact Liverpool played a record 63 competitive games. Finally, as the Reds return to post-Covid comm...