This year Deloitte has released the 23rd edition of the Deloitte Football Money League, a report about the highest-earning football clubs around the world for the 2018/19 season.
At the top of the list, there is FC Barcelona, from Spain, which has been the first team to ever break the €800m barrier, with a total revenue of €840.8m. Then, in second place, there is another Spanish team, Real Madrid with a total revenue of €757.3m, and in third place, Manchester United with €660.1m in revenue.
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Participation in UEFA competitions
In order to better understand how football clubs make money is important to look at some key statistics. First of all, as noted in the report, no club outside Europe’s “big five” leagues has entered the leaderboard (top 20 earners), and no club from outside Europe is placed in the top 30 revenue generators in global football.
Therefore, it is clear the impact that the participation of clubs to UEFA competitions, and the results they obtain in it have in their final revenue.
The relevance of earnings from participating to UEFA competitions is particularly evident in cases like in North London, with the rise of Spurs to a new record high of eighth in the top 20, driven by reaching the UEFA Champions League Final, whilst Arsenal drop two places as a direct result of not participating in the competition for the second consecutive season.
Or in the case of Lyon, which was the biggest mover in this edition of the Money League, up 11 places, primarily driven by almost doubling broadcast revenue owing to progression to the Champions League Round of 16.
These data show that, for most clubs, even for those of the first category, the broadcast revenue coming from the participation in UEFA competitions, generates revenue that has a great impact on their finances.
The challenge for these clubs is that, given the fact that revenue coming from performance-related broadcast makes up a significantly greater proportion of their total revenue, a subsequent decline in on-pitch performance will typically be associated with a drop in revenue of a similar magnitude.
This could lead to a greater level of polarization, where even between the biggest clubs there could be the creation of so-called “mini-leagues”, as the largest revenue-generating clubs continue to pull away from the rest, establishing a sort of a vicious cycle, while at the same time, for any club to bridge the gap and move into the next tier would require a significant change in operations and/or performance.
However, even though the greatest part of the growth of revenue for football clubs over the past two decades has been driven by a surge in broadcast rights values, the largest football leagues may have already reached a plateau in broadcast rights value.
This is the reason why many clubs and competitions are currently relying on the substantial increase in the value of international broadcast, in order to keep increasing their revenue, but even though international interest may continue to drive growth in the short-to-medium-term, they are likely to mature in the next years.
What they have to do to keep growing their revenue in the future?
Given that even broadcast rights from international markets are likely to provide growth only for a few years, football clubs and competitions will have to find other revenue sources, by focusing on maximizing the revenue streams under their direct control, like matchday and commercial.
This is not an easy task, in fact, most major European clubs already have full stadia which are difficult to expand or replace, and they are also pressured by their fan base to limit the increase in the ticket price. Moreover, in the sponsorship market, all major football clubs are competing not only with each other but also with leading clubs from other sports with global appeal.
Therefore, what this analysis highlight is the importance for clubs to “think creatively and expansively to realize the full value of their fan base”, this will help them improve their revenue for the years to come and to thrive in an ever-changing market.
The positive outcomes created by this approach are visible in the case of FC Barcelona, which has decided to bring much of its commercial operations in-house. This is considered a major key factor for their last year’s record-breaking revenue. In particular, by recognizing the power of the brand, FC Barcelona has taken greater control of its merchandising and licensing operations, rather than relying on third parties for these services.
The greater control over these key factors gives the club the opportunity to clearly define its approach to merchandising and licensing, and in addition to address key target markets and to gather a more significant and profound understanding of the habits of their fans, particularly of those who tend to engage more with other services provided by the club, and to offer a truly personalized end-to-end approach.
The opening of regional offices around the world is not exclusive to the approach of FC Barcelona, in fact, many other top teams have understood the importance of growing their fan base, especially in other continents outside Europe, like for example Manchester City, which has launched an Over The Top (OTT) platform, and is part of a global network of clubs aimed at offering exposure to commercial partners to develop new fan relationships.
From this analysis, it appears clear the fact that now more than ever, present and future revenue growth lies in the hands of clubs, and into their ability to focus and grow revenue streams that are under their direct control, in order to constantly decrease their dependence from earnings coming from broadcasting rights.