Ethiopian Business Review

Football Revenue: How Results at Playing Field Reciprocate at Accounts in the Bank – the case of UEFA Competitions

The UEFA (Union of European Football Associations) Champions League is the pinnacle of European club soccer, with teams battling to become the kings of Europe. But there is more at stake than a shiny trophy. The tournament is critical for the clubs financial success and poor performance could have a big impact on a club’s economic health.

Participating in the Champions League is hugely important for clubs. They get the direct financial benefit from central distribution of UEFA for participating. They also earn a substantial amount of money from the home matches and match day revenues from each game. Thirty-two of the world’s best-known soccer clubs, including Real Madrid, Barcelona, Manchester City, Chelsea, Bayern Munich and Juventus, will participate in this year’s tournament, which starts in September. 

 UEFA has set aside more than USD1.2 billion to distribute to the participating clubs, with the champion receiving 46 million Euros[USD62.6 million], not counting the market pool share. Clubs in the Champions League will also get cash from match day ticket sales and other related commercial ventures. In the 2012/13 season, the most successful clubs in the English Premier League in the past two decades, Manchester United bagged 35.5 million Euros [USD48.31 million] from participating in the tournament. Manchester United will not participate in the coming year’s Champions League competition and that means they will lose that amount of income.  Following last season’s dismal performance both at the domestic and the Champions Leagues they are out of the top three clubs in financial standing for the first time since 1997 according to the 2014 Money League report. Clubs can make up around 10 to 15Pct of their annual revenues from this tournament.

RankClubsRevenues (Million Euros)No of positions changed
1 Real Madrid 518.9 No change
2 Barcelona 482.6 No change
3 Bayern Munich 431.2 Up 1
4 Manchester United 423.8 Down 1
5 Paris Saint-Germain 398.8 Up 5
6 Manchester City 316.2 Up 1
7 Chelsea 303.4 Down 2
8 Arsenal 284.3 Down 2
9 Juventus 272.4 Up 4
10 AC Milan 263.5 Down 2

On the contrary, the resurgence of Bayern Munich in its triumph both at the German Bundesliga and the European most prestigious competition, the Champions League, Manchester gave the place in the top three lists of European football clubs in financial standings. Munich’s treble winning – the first for any German club in the modern era – resulted in the Bavarians leapfrogging into third position, their highest placing in 11 years. Bayern Munich’s stellar 2012-13 season, in which the German club won the treble and dominated European football, helped boost their revenues by 17Pct to reach USD618.8 million total revenue. 

Prize money from winning the Champions League (55 million Euros [USD74.8 million]), together with match day income from a sold-out Allianz Arena and commercial deals, including the renewal of a shirt sponsorship deal with Deutsche Telekom, all helped. 

In the long-term, repeated failure to qualify for the Champions League not only decrease the direct income distributed from the UEFA but it would also damage the club’s ability to negotiate the sort of commercial contracts that have been so important to all competing clubs finances in recent years. It may not show on all clubs in the short-term significant risk to commercial revenue from one (or even two) seasons on the sidelines. 

Revenue from the Champions League constituted free cash flow and profit, because clubs create their budgets with their domestic league in mind, and any money from pan-European tournaments is a bonus. For this reason qualification and success in the Champions League has been “critical” for a club’s financial success. If a club doesn’t qualify, a whole lot of cash will go missing and it will eradicate its profitability. The top teams cannot afford not to qualify. For the top teams in Europe, success or failure in the tournament can have a big impact on its ability to attract new talents too . 

Winning attracts star players

The prolific Swedish Striker Zlatan Ibrahimovic once told Robin Van Persie that he should leave Arsenal. “Football is all about winning. If you don’t win you want to go” Ibrahimovic told The Sun about his advice to the Dutch striker. Ibrahimovic does make a valid point when it comes to the aspirations of a professional football player. A professional player wants to make as much money as he can, and be remembered as a winner. 

When clubs win they make a good fortune but they attract the best players which would like to be remembered not as players but winners. The French PSG and the English outfits Manchester City are good examples of attracting players not only for paying a good sum of money but also the determination and potential to win trophies. Therefore winning competitions not only boost the financial revenue of clubs but also make them destination for star players which again will guarantee winning.

Doing well in the Champions League is the difference between sides being able to spend 50 million Euros [USD68 million] in the transfer window or not. If a club doesn’t do so well to make the Champions League, then 10 or 15Pct of revenue will go to the wayside, and they don’t have the capacity to sign players on increase wages. And if they can’t sign star players, then their side is depleted and can’t compete with other teams, and then it becomes a slippery downward slope from there.

StageTEAMMoney in Million
Participation Fee 32 Teams USD1 Million Each
Group Stage(eliminated Teams) 16 USD8
Round of 16 (Losers) 8 USD9
Quarter Finals (Losers) 4 USD14
4th Place team 1 USD18
Third Place Team 1 USD20
Runner Up 1 USD24
Winners 1 USD30

It is not only the participation and the results in the Champions league and the domestic league of clubs that earn teams money. Even in the world cup where nations across the globe play football for both sport reasons – the pride - and more than football reasons – to strengthen the countries and peoples’ relationships – it provides a pretty good sum of money for participants and even far much better for winners. The winner of the 2014 FIFA World Cup held in Brazil will get more than USD30 million while for only participating in the tournament, countries get at least nine million dollars. In an era many things can be analysed in financial terms football games competition and winning too have more than what the games mean to many people – their financial implication.

2nd Year . August 2014 . No.17

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