How could CAS resolution destabilize clubs’ financials?
On the one hand, football giants like Real Madrid and FC Barcelona asked for loans of about €200 million to cope with the pandemic effects and the latest ECA’s analysis on COVID-19 impact on European clubs estimated a global loss €3.6 billion in lost revenues, mostly from direct matchday income.
On the other hand, Manchester City’s two-year Champions League ban lift by CAS meant the English club will be able to make between £200 million and £250 million over the next two seasons by playing in Europe. Without a doubt, UEFA Financial Fair Play introduction at the beginning of the 2011-12 season has led European football to an impressive financial recover. From a $1.9 billion debt at the start of the 2010s to a remarkable $680 million profit in 2017.
City’s win marked the second time UEFA’s FFP regulations were questioned after Paris Saint-Germain case, where the Court of Arbitration of Sport ruled in favour of the Parisian club over the monitoring of transfer and wage spending. After the failed appeals from UEFA’s FFP regulations, the European football landscape sees how these sentences could represent a threat for clubs with less generous owners that can risk their existence for short-term success.
LaLiga president Javier Tebas described the conduct of clubs like City and PSG as “financial doping”, which challenged rivals to match them or being left behind. In an interview with Inside World Football, William Gaillard, senior advisor to former UEFA president Michel Platini and one of the prime movers in designing FFP, explained how “the whole contest will become basically a tournament in Europe between Saudi Arabia, Qatar and the United Arab Emirates. That’s really the enormous danger that professional club football is facing in Europe”.
Contrary to the vast majority of European clubs and thanks to the US private equity Silver Lake investment of $500 million to buy 10% of the City Football Group in late 2019, Manchester City secured enough cash to face payments until 2021, despite registering record losses of £83.78 million in 2018-19 season. An impressive financial capacity that led the City Football Group add the Belgium club Lommel SK to their holding’s portfolio, which includes Manchester City (England), Girona FC (Spain), New York City (United States), Melbourne City (Australia), Yokohama F. Marinos (Japan), Montevideo City Torque (Uruguay), Sichuan Jiuniu (China) and Mumbai City (India). Now, according to SportsPro, the group is in talks to acquire the French second-tier club Troyes AC.
According to KPMG’s Football Benchmark, Manchester City ranked 4th among the biggest European clubs on their aggregate revenue from main shirt sponsorship deals and kit supplier deals, valued at €51.3 million and €74.1 million, respectively. Ahead of the English club, FC Barcelona, Real Madrid and Manchester United occupied the top positions. €74.1 million were reported to come from Puma, €51.3 million from the main shirt sponsorship with Etihad Airways, a partner who also accounted for the €17.1 million from the stadium naming rights.
With no doubt, the pandemic effects will play a significant role in determining how football stakeholders’ business models and revenue streams will continue evolving in the future. A disrupted industry with more volatile competitiveness within teams where powerful investors are expanding the gap among clubs with more and less economic resources.
Following UEFA’s aspirations, protecting professional club football will become more important than ever for the good of competitions as well as defining financial regulations that allow clubs grow commercially without distorting football’s economics. At the core, the fan will remain as the epicentre for value generation in order to successfully compete in today’s industry.
This article was written by Xavi Bové, sports marketing consultant and member of the SBI marketing team. For more information you can contact him directly at email@example.com
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