How do football clubs make money?
- Running a football club is an expensive affair.
Football is without a doubt the most popular sport across the world. And naturally popular football clubs are big brands especially the likes of Manchester United, Real Madrid and FC Barcelona. Like major brands in various industries, these brands have their own style of functioning.
Over the next few weeks, we will be taking a closer look at certain aspects of a football club like the hierarchy in place and also analyze a few roles. In addition we will delve into the commercial side taking into consideration the cost and revenue aspects. Further, it will be interesting to see how big a business football really is and what do businessmen look to obtain by investing their money in such brands.
Running a football club is an expensive affair. Clubs spend money on the wages of players and the management staff. Further, large amounts of cash are needed to facilitate transfers of players. Money is required to expand the stadium and the training complex, improve the medical facilities, advertise the club and so on. In order to meet these costs, it is necessary for a club to have quite a few revenue streams in place.
Domestic and International television rights constitute a key part of a club’s revenue. Most of the European Leagues are viewed across the globe and that brings in money to the teams. The English Premier League leads the pack in this case. Based on reports, the League received a total of £5.14 billion in television rights in 2015 according to the BBC. This was a staggering 71% increase over the amount received last time around.
La Liga received $1.5 billion in television rights for the 2014-15 season. The Bundesliga and the Serie A received huge amounts as well but none have been able to match the amount received by the English Premier League.
Also read: Understanding the Football Club Hierarchy
Further, it is interesting to point out that the revenue distribution is quite equitable in the Premier League as opposed to the La Liga where the likes of Real Madrid and FC Barcelona take home 40% of the revenue leaving the remaining 60% to be shared among the eighteen teams.
Income on matchdays
Matchdays are exciting times for football clubs. The players are in action on the pitch, the fans are enjoying themselves in the stands and the owner is happy to see the latest batch of cash enter his account!
Jokes aside, ticket sales are extremely vital for football clubs. The money coming in from the sale of match and season tickets is needed for the day to day functioning of the club.
Cashing in on the popularity of the game and emotions of the fans, clubs had introduced season tickets a long time back. These tickets benefit both parties. The fan has to pay a relatively lesser amount as compared to the scenario when tickets had to be bought separately for every game. And the club benefits as a certain amount is assured to it.
The Deloitte report for the 2014-15 season showed that Arsenal raked in £101.84 million in matchday revenue surpassing the likes of Real Madrid, Barcelona, Manchester United and Chelsea. It can well be concluded that the ticket prices at the Emirates Stadium are higher than at the Bernabeu or at Old Trafford.
Jersey sales, Sponsorship etc
Commercial essentially covers revenues from the sales of merchandise as well as sponsorship and stadium tours. Amongst these, the money received from sponsorship is by far the most. Top clubs across Europe have a host of sponsors. In the 2014-15 season, Arsenal signed a kit deal with multinational Puma which was worth £30 million a year. Manchester United also signed a lucrative contact with Puma’s close rivals Adidas.
Apart from kit sponsors, clubs receive money from various corporate houses. Emirates Airways has deals with Real Madrid, AC Milan and Arsenal.
Clubs, especially the big ones, also receive huge sums of money by selling jerseys of their marquee players. Back in 2010, exactly a year after Cristiano Ronaldo had made his move to the Spanish capital, a Spanish daily carried a news report claiming Cristiano Ronaldo’s jersey sales have enabled the club to recover the amount spent in bringing him from Manchester United. It might have been an exaggeration back then but it is certainly believable right now.
Why do clubs need to win tournaments?
By winning tournaments, clubs not only make fans happy but also bring in money. However, it is nothing significant. Part of the prize money from winning tournaments is in the form of television rights. And the other part includes matchday revenue. But from a commercial point of view, it is important to win tournaments as that will in a way attract attention and lure some new sponsors who will pump in cash into the football club.
We will be analyzing this commercial angle in winning tournaments in detail in the next few weeks.