The departures of Lionel Messi and Neymar last summer highlighted a dramatic change in Paris Saint-Germain’s strategy, as they appear to be moving away from the “Galacticos” model, replacing their expensive superstars with younger, hungrier players.
Indeed, the last of PSG’s incredible front three, French
captain Kylian Mbappé, is lined up to join Real Madrid when his contract
expires this summer, which would pretty much mark the end of an era.
Despite the upheaval, PSG could end up winning the treble
this season under Luis Enrique. They are on the verge of winning the league
title, which would be the tenth time in the last 12 years, while they have
reached the final of the Coupe de France and the semi-finals of the Champions
League.
Success in Europe’s leading competition would be the icing
on the cake for the club’s owners, Qatar Sports Investments (QSI), a subsidiary
of Qatar's sovereign wealth fund Qatar Investment Authority (QIA).
They acquired PSG in 2011, instantly making the club by far
the richest in France and one of the wealthiest in the world.
However,
they have posted huge losses in recent years, which means that they have
struggled to comply with UEFA’s Financial Fair Play (FFP) regulations. Indeed,
many fans of other clubs simply don’t understand how the Parisians’ big
spending can possibly be in line with the targets.
PSG’s reported another sizeable pre-tax loss in 2022/23 of
€107m, but this was less than a third of the previous season’s €375m,
representing a massive improvement of €268m.
PSG had actually reported pre-tax profits in four of the
five years before COVID struck, but they have lost an enormous €833m in the
four years since then.
Clearly, 2019/20 and 2020/21 were adversely impact by the
effects of the pandemic, but the massive €375m loss in 2021/22 was more down to
the club’s own decisions around player recruitment.
However, as the saying goes, “the trend is your friend”, and
last season’s loss was the club’s best financial performance since the €32m
profit in 2018/19, even though it was still more than €100m. The expectation is
that the result should be even better this season.
Revenue
Revenue shot up €137m (21%) from €670m to a club record
€807m, while profit from player sales was up €13m (43%) from €32m to €45m. In
addition, operating expenses were cut by €114m (11%), bringing them below the
billion Euros in the prior year.
The main driver of PSG’s steep revenue increase was other
income, which more than doubled, rising €105m from €96m to €201m, mainly due to
the Ligue 1 CVC private equity deal. However,
there was also good growth in broadcasting, up €27m (19%) from €139m to €166m,
and gate receipts, up €11m (18%) from €57m to €68m. Sponsorship and advertising
fell slightly, but this was still very high at €373m.
PSG alone generated over a third of the total revenue in
Ligue 1 – more than the bottom 14 clubs combined. More tellingly, their €807m
was also more than their five closest challengers put together: Marseille
€258m, Lyon €199m, Monaco €111m, Rennes €109m and Lille €107m. PSG’s revenue dominance in France is
underlined by the fact that they benefit from a far higher percentage of
revenue in their domestic league than any other major European country.
Europe
PSG have compensated for low domestic TV rights with money
from the Champions League, where they earned €101m in 2022/23, which was a lot
more than other French clubs, thus increasing the revenue gap.
Even though PSG went out of the Champions League in the
round of the last 16 in both of the last two seasons, their earnings increased
from €92m to €101m last season. This was
because they had a better record in the group, while they also received more
from the TV pool, after wiining Ligue 1 the previous season, as opposed to
finishing second the year before.
In the last five years PSG have earned over half a billion
from Europe (€516m to be precise), which is nearly three times as much as
Lyon’s €179m, thus further increasing the gap to other French clubs.
PSG have earned even more this season after reaching the
Champions League semi-final, where they will face Borussia Dortmund. The
authoritative Swiss Ramble estimates that they have already earned €121m to
date, but this could rise to a staggering €142m is they were to raise the
trophy.
Comparisons
Despite the improvement, PSG’s €107m pre-tax loss was still
the largest in France, just ahead of Lyon’s €99m, followed by Sir Jim
Ratcliffe’s Nice €64m.
French clubs normally strive to maintain a decent bottom
line and 2022/23 was no exception with nine clubs reporting a profit, led by
Lille €35m and Clermont €20m, and another five clubs restricting their losses
to less than €8m.
PSG’s player sales suffered during the pandemic, falling
from €145m in 2017/18 to a €5m loss in 2020/21, but they have been steadily
recovering since then. This will change
for the better this season, as PSG have taken more than €200m in sales
proceeds, including the lucrative €90m sale of Neymar to Saudi club Al-Hilal.
Wages
PSG’s wages were cut by €108m (15%), falling to €621m from
€729m, the highest ever in the football world. However, this has still risen by
quarter of a billion Euros in just four years.
The reduction was driven by getting a few high earners off
the books. Many left on loan (including Icardi, Draxler, Diallo, Paredes,
Wijnaldum, Navas and Kurzawa), while a few were released on free transfers,
such as Di Maria, Herrera and Rafinha.
Even after the reduction, PSG’s €621m wage bill still
covered a third of total Ligue 1 wages, and was also around as much as the next
five clubs combined. However, it will be
lower this season, following last summer’s departures of Messi, Neymar,
Verratti and Sergio Ramos. In particular, the Argentinian World Cup winner and
Brazilian superstar were each reportedly on wages of €25m a year.
Mbappé’s cost will also be removed next season after he
exits stage left this summer. Furthermore, he has given up around €80m of
loyalty bonuses, which was the price of being re-integrated into the squad.
As it stands, PSG’s €621m wage bill is still the highest in
Europe, ahead of Barcelona €571m and Manchester City €486m.
Funding and compliance
PSG have not spent as much in the transfer market as their
European rivals recently (at least until this season). Their €657m gross spend
in the five seasons up to 2022/23 was comfortably outpaced by Chelsea €1.7 bln
and Juventus €1.1 bln. Five other clubs splashed out more than €900m.
PSG have benefited from significant financial support from
their owners, Qatar Sports Investments (QSI), as evidenced by the €200m capital
injection in 2021/22, which took the total funding to over €700m (including
€316m in 2018 and €171m in 2021).
PSG were nowhere near being compliant in 2022, so they had
to accept a settlement with UEFA, which included a €65m fine, the highest in
Europe, though only €10m had to be paid up front. The remaining €55m penalty will only be
payable if the club does not meet its financial targets over the next three
years, i.e. PSG’s adjusted earnings need to be below the maximum loss of €60m
for the 2025/26 assessment (covering the reporting periods ending in 2022/23,
2023/24 and 2024/25).
The crucial point here is that UEFA’s settlement agreement
has effectively wiped the slate clean in terms of PSG’s huge losses in 2020/21
and 2021/22, as the implementation of the new regulations means:
- there
was no assessment for the 2023/24 season
- the
calculation for the next assessment for the 2024/25 season starts with the
2022/23 accounts
Last December QSI sold a minority 12.5% stake to American
private equity firm Arctos Partners, which reportedly valued PSG at €4 bln.
The club said that this deal would help the next phase of
PSG’s global growth and boost the club’s soccer and business operations. The
investment will go towards growing PSG’s operations and supporting strategic
real estate initiatives, including the stadium and training centre at Poissy.
PSG clearly enjoy enormous financial advantages in France,
where their revenue and wages are much higher than their domestic challengers,
but the true test remains the Champions League, so there is a lot riding on
their upcoming semi-final.
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