How football clubs make money – Complete Guide | Football is a legitimately lucrative sport that benefits all of the major participants. Every year, football is quoted for absurd sums of money, raising concerns about how profitable the round leather game is. This extends beyond match day earnings, merchandise sales, TV broadcasting contracts, player trades, and prize money. How are football teams able to pay exorbitant transfer prices and provide players with mouthwatering contracts year after year? and How these football clubs make money in a variety of ways.
Success on the field also affects a team’s ability to make money, which has an impact on the kind of sponsors that they can entice and thus ultimately influences their commercial appeal. In this article, we will be discussing how a football club makes money.
5 Ways How Football Clubs make money
- Matchday sales
- Shirt sales
- Broadcasting rights
- Transfer Market
Football teams, particularly those in England, make matchdays for supporters a dreamlike experience by providing value in the form of tickets, food, and beverages. The Premier League, a team in the top flight of English football, hosts 19 league games per season. Season tickets offer lower rates for the entire season. A season ticket enables a fan to purchase all home league tickets at once before the start of the season. Additionally, those supporters who cannot afford season tickets can purchase tickets prior to each game day. The cost of an Arsenal premium home ticket is about £97.
When you consider that Arsenal is allotted upwards of 50,000 home seats per game day, you can see how much money they may generate. For the 2018–19 season, Arsenal reported overall matchday revenue of almost £100 million, which also included revenues from food and beverages at the stadium, according to Statista.
This is a significant source of revenue for the major teams in the world. In the form of kit sponsorships, stadium naming rights, shirt sponsorships, sleeve sponsorships, and other sponsorships you can think of. Top brands spend a lot of money to be associated with clubs. Manchester United featured three sponsors on their home uniforms for the 2019–20 season: Adidas, Chevrolet, and Kohler. It receives approximately £75 million from Adidas, £64 million from Chevrolet, and £10 million from Kohler per season.
The typical football fan would be perplexed as to why these firms would spend so much to have their logos shown on these shirts, but from a marketing perspective, it makes sense. An estimated 1.1 billion people follow United on social media worldwide. This is supported by a study that Manchester United themselves conducted in 2019. When compared to the sums these companies pay to support United.
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Fans don’t want to fall behind whenever a club announces a new uniform ahead of a new season, clubs are taking full advantage of shirt sales. The majority of teams, especially the major ones, are aware of how adding a prominent name can increase t-shirt sales. Clubs often earn between 7.5 and 10 percent on average, according to estimates.
Juventus paid Real Madrid almost £100 million to acquire Cristiano Ronaldo in 2018. In just 24 hours, Adidas, the team’s shirt sponsor, sold about 500,000 copies of the jersey featuring Ronaldo on the back. Juventus would have made between £3.6 million and £4.8 million from the sales of these shirts, which, despite appearing little but a significant amount of money. Both the club and the apparel companies benefit from it.
The strain of printing jerseys for millions, if not billions, of fans throughout the world, is too much for clubs to bear. Because they have storefronts around the world, these kit makers support the clubs by carrying out the grunt work and boosting their brands.
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How football clubs make money: Broadcasting rights
For the best European football clubs and leagues, the sale of TV rights accounts for the largest portion of their profit and loss statements. Broadcasters compete for the right to broadcast European Football League matches through a difficult tendering procedure to become the competition’s official rights-holder. Due to their involvement in national and international competitions, the clubs receive a piece of the broadcasting money.
As more fans globally follow their preferred football clubs, players, and competitions, the value of the top European football leagues has surged.
Consider the Premier League, which is now at the top of the rankings. A new era of broadcasting rights began with the establishment of the Premier League in 1992. The Premier League’s debut on Sky Sports marked the beginning of subscription-based broadcasting. This model would be adopted by football leagues all over the world. The Premier League’s early start was crucial in becoming the most popular and valuable league in the world.
In 1992, the Premier League’s international television rights were valued at £40 million. Today, they are reportedly worth £3.83 billion. Every three years, domestic rights for the Premier League are auctioned off and sold in six different packages, with the most costly package costing Sky Sports £9.3 million each game.
The 20 Premier League teams each receive 50% of the UK broadcast revenue, 25% of which goes to “Merit Payments” (prize money based on final league standing), while the remaining 25% goes to “Facility Fees” (fee per game broadcasted).
How football clubs make money: Transfer Market
The reported transfer fees paid for top players are probably the most obvious sign of the outrageous amounts of money in sports. Transfer fees have risen steadily over the years, and are a major factor in requests for tougher financial controls to prevent the market from “exploding.” Giuseppe Savoldi’s transfer from Bologna to Napoli in 1975 was the first £1 million+ signing, and Jean-Pierre Papin’s transfer from Marseille to AC Milan was the first 7 million+ transfer, 17 years later. As more money entered the game in the 1990s, transfer fees began to soar.
Newcastle shattered the record in 1996 by paying £15 million to get Alan Share. Christian Vieri moved from Lazio to Inter Milan for £32 million in 1998.
For eight years, Zinedine Zidane’s £46.6 million transfer to Real Madrid in 2001 held the record. However, in the summer of 2009, with the additions of Kaká and Cristiano Ronaldo, Real Madrid broke that record twice. Just 8 years later, Neymar’s £198 million transfer from Barcelona to PSG broke the previous record for the highest transfer fee.
Transfer values rise along with the value of clubs as their assets are becoming more valuable.
DO FOOTBALL CLUBS MAKE A PROFIT?
The majority of European countries are incorporated into the continent’s financial market systems. A club’s stock price is expected to increase when it performs well and advances to prestigious tournaments like the Champions League.
Many football managers and owners run many organizations and are successful business people in their own right. Chairmen can capitalize on the fame and substantial membership of their club, which will market their business. It ensures more visibility and financial success for their primary business. Only four Premier League teams in the past two years have been able to turn a profit (Chelsea, Liverpool, Newcastle, and Norwich), with two more teams barely breaking even (Aston Villa and Burnley) and which means, that eighty percent of teams have made a loss.
Dutch Eredivisie teams AZ Alkmaar and Ajax were surprisingly listed in the top 10 most lucrative clubs, despite receiving far less television revenue than the top five European Leagues. The majority of the clubs’ reality, however, is extremely different despite rising income, they are barely profitable. Since everything is based on performance and players are the club’s most valuable asset with the ability to make a difference, all revenue is essentially shifted directly to players’ and agents’ inflated salaries and transfer costs.
HOW DOES A CLUB HAVE TO BEHAVE TO MEET ITS BUDGET?
A club’s goals for its on-field performance serve as the foundation for establishing the budget. The best course of action is to define all the criteria (possible revenues and costs), manage the payroll, and maintain the equilibrium of the football market (between sales and purchases).
The sporting director and the club’s CFO are frequently placed in contact with one another to facilitate this process. More than half of European clubs experienced a loss over the previous year, according to a 2009 UEFA review.
Although a small percentage was able to sustain significant losses over the years due to the wealth of their owners. At least 20% of clubs surveyed were thought to be in actual financial peril, which led to the introduction of Financial Fair Play regulations.
The only expenses that will be taken into account over a club’s revenues are from gate receipts, TV revenue, advertising, merchandising, the sale of tangible fixed assets, financing, player sales, and prize money are transfers, wages, amortization of transfers, financial charges, and dividends.
The FFP laws do not apply to any funds spent on infrastructure, training facilities, or youth development. As a result, teams are free to spend as much as they wish in these three areas without fear of facing penalties. Depending on how severely a club has violated the rules, it may receive a warning, a fine, a points deduction, a transfer embargo, UEFA competition income withholding, or even be disqualified.
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The financial world of football is extremely competitive and complex, and the environment is always shifting. Football teams have become too reliant on TV income, but this is no longer sufficient.
To reduce their reliance on star players and begin developing their skills or scouting them sooner, several clubs have adopted a plan that involves investing in shrewd scouting operations and the club academy. By avoiding the need for immediate athletic achievement, they can maintain the club’s financial stability and long-term viability. A balanced approach between star players and shrewd recruitment is required since.
On the other hand, the risk of failure in the field is too high. Relegation or failing to qualify for a competition might financially affect the club even more than expensive players.
On the marketing and business side, the majority of football teams only have the name and ages of their supporters while social media controls all the crucial data, leaving the clubs with only the breadcrumbs. In the modern day, a forward-thinking team should interact with fans using both online and physical touchpoints, gathering and analyzing data more intelligently to create their own CRM and better understand their target.
The football industry’s true potential has not yet been realized, thus the overall picture is not dismal. Most football clubs’ revenue has been restricted to ticket sales and TV broadcasting, although having far greater potential, investor interest in football clubs has continued to rise. To finally go to the next stage of the industry development, football clubs aim to obtain a competitive advantage and must intensify their commercial and sports management activities.
The true game-changer for clubs will be embracing technology in order to create an ecosystem made of efficient management procedures, digitally improved systems, unlocking the value of their data, creating, distributing, monetizing their content, and achieving sustainability.