Thoughts on Football Wealth

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I haven't had much time to write my thoughts down for a while, but now while watching the match day in the Premier League I would like to discuss briefly on the current economical situation of the European football.

The current economical situation in Europe is challenging. The European Central Bank tries to stimulate the economy with historically low interest rates, a migrant crisis exists currently in the Eurozone and Great-Britain is considering to abandon the EU. Not to mention the debt-crisis of Greece, Portugal, Spain and perhaps Italy very soon.

The European football however blooms. The European football-clubs spend enormous amounts of money into players, stadiums and the wages of the managers. How on earth do the football clubs in Spanish La Liga, England's Premier League and Italy's Serie A have hundereds of millions of euros to spend? Even the administration of FIFA (Fédération Internationale de Football Association) has been allegated of receiveing billions of euros in bribes. FIFA paid $88.6m in salaries in 2014, for just 103 employees!

Has the European football completely lost its sense of reality? Where does the money come from and on what it is used? How long can this continue when the economical situation in Europe is becoming more and more challenging? These are the questions I might be interested to answer more thoroughly for example in my bachelor's thesis. And because of that, I would like to provide an introduction to the topic.

The wealthiest football clubs in Europe are Real Madrid, FC Barcelona and Manchester United. The combined yearly revenue of these clubs is estimated to be more than 1,5bn€. The revenue comes mainly from commercials, broadcasting and also from match days: The Economist has provided a table concerning the revenues of European football clubs in the season 2014-2015 and it's illustrated below.

The games themselves don't bring much wealth to the clubs, but the marketing and other affairs outside the field are crucial sources of revenue. As we can see, the revenue comes mostly from the commercials and broadcasts. Most of us have perhaps seen the Pepsi-ads on TV with Sergio Aguero, Lionel Messi and Alexis Sanchez and Gillette ads with Liverpool FC's players. In the stadiums there exists several ads in the side of the field, and stadiums themselves are named after the most valuable sponsors. (Emirates Stadium, Etihad Stadium etc)

So what do the clubs do with all this revenue? Most of that goes to the wages of the club's staff, managers and of course for the players. The star-players can earn astronomical sums: For instance Real Madrid's Cristiano Ronaldo earns more then 50,000,000€ in a year (over 500,000€ per week).  Other major uses of the revenue is to buy new players for the club: The net spending of the Premier League in the 2015-2016 transfer windows was more than £1bn. This spending grew by £100m.

One of the major concerns concerning this spending is the financial situation of the football clubs. The clubs, leagues and the countries all have lots of debt. For example, the average net debt of the Premier League teams during the season 2013-2014 was roughly £110m and 5 clubs experienced losses of tens of millions of pounds.

It is clear that decent amounts of money flow in the world of football. So what would be the opportunity cost of this spending? With just the £1bn used in buying the players during the transfer window, the Premier League football clubs could have provided over 8 % on the EU's subsidies on competitiveness for growth and jobs.

I've been asked if the next European financial crisis could come from the expenditure of the European football. When the Eurozone is experiencing an economic slowdown and the countries like Great-Britain, Spain and Italy which hold the greatest football-leagues in Europe are in the edge of different kinds of economical crisis, it is clear that something has to be done with the cash-flows in the European football.

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But still I wouldn't think that the next crisis would emerge from football. The economical situation in football is currently relatively stable: The clubs earn great amounts of revenue but mostly make profit in the end of the year. If a firm in some industry does the same, that is considered as good am I right? Modern football is a business as any other business.

But unlike firms, I wouldn't think that the main purpose of the football-clubs is to make profits for the Arabic millionaire owners and for other stockholders. The main purpose of this noble sport is to give the fans and people emotions, excitement and a sense of belonging.

Now if you'll excuse me, I'm off to getting ready for the Reds' match against Newcastle.

Test: SW
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