UEFA recently released its annual Club Licensing Benchmarking Report which maps the financial development of the European Club Footballing Landscape. The comprehensive report focused on several different issues, with our highlights below.
1. Social media influence
Clubs lag far behind players when it comes to social media following. For example, Cristiano Ronaldo has more followers on Twitter than the two most followed clubs, Real Madrid and Barcelona, combined. This may not be surprising as players can transcend the traditional partisan nature of football but it does represent a potential area of growth for football clubs in terms of attracting sponsorship. Whilst it is a fallacy to suggest more followers equals more fans, if clubs can widen the opportunity for social media “impressions”, it could prove to be an effective tool at the negotiating table with potential sponsors.
One potential method of improvement, which we have seen in the US and sporadically in Europe, is clubs signing esports players or creating esports franchises. Esports have a heavy presence on social media and could enable a club to further commercialise its social media status.
2. Club ownership
Interestingly, Chinese investors were involved in 70% of all foreign takeovers in the top 15 leagues in Europe since 2016. However, whether this continues is doubtful given a clampdown by Chinese authorities on investments in foreign assets such as football clubs.
The report also raises an important issue for regulatory bodies: private investors or entities with interests in more than one club. Some of these situations are obvious, such as Atletico Madrid investing in RC Lens or the City Football Group’s collection of clubs, but the report also gives the much less apparent example of the reported involvement of an agent at a Cypriot club, where he is listed as an investor and a Belgian club where his relatives are listed as the current owners and a member of the board of directors. Regulatory bodies should take stock of this and may need to take steps to preserve competition integrity.
3. Commercial revenue
The detail on club sponsorship lays bare the disparity between the larger and smaller clubs in terms of commercial revenue. For example, Manchester United’s shirt sponsorship deal provides up to 25 times more income than some of the smaller clubs in the Premier League. Indeed, Manchester United’s overall commercial performance, detailed in the report, shows how it can continue to make large player purchases within UEFA’s Financial Fair Play rules.
As further sponsorship opportunities, such as sleeve sponsorship, develop, it is important that clubs draft the exclusivity clauses in sponsorship agreements carefully in order to ‘back-to-back’ its sponsorship portfolio. From a regulatory point of view, it is interesting that the gambling sector continues to play an important role in sport sponsorship, accounting for 19% of shirt sponsor brands. Certain rights holders, such as the FA, have begun to distance themselves from gambling sponsorship and it will be interesting to see whether such moves have an effect on sponsorship over the next few years.
4. English clubs reliance on TV money
The strength of the Premier League as a global product is evidenced by 13 of the top 20 clubs in Europe by broadcast revenue coming from the Premier League. Certain clubs rely on this money, for example, it represents 85% of Bournemouth’s total revenue. The current Premier League TV rights cycle ends at the end of next season, and the new cycle is likely to considerably increase revenue figures and dominance with the rumoured potential introduction of online players such as Amazon and Facebook.
Interestingly, English clubs are second to only Austria in the lowest disparity between clubs of distribution of broadcaster money. However, this may come under threat in the future from a renewed effort by the Premier League’s biggest clubs to distribute a larger portion of foreign TV money according to league performance.
5. Financial Fair Play results
UEFA’s Financial Fair Play (“FFP”) policy seems to be having an effect on the finances of European football. The headline figure is that the combined bottom-line losses of clubs (after transfers) have decreased by 84% since the introduction of financial fair play in 2011. Again, Premier League clubs’ reliance on TV money can be seen by the fact that after reporting financial profitability in the previous financial year, they have reported a significant loss in the 2016/2017 financial year as they bet on increased incoming TV revenue. FFP relies, to a certain extent, on the effectiveness of its punishments and so it will be interesting to see the results of the investigations into clubs such as Paris St Germain after last year’s transfer activity.