1.1.2. Business perspective

Inevitably the popularity of the professional game attracted entrepreneurs who were interested in the game as a commercial profit-making exercise, and clubs such as Liverpool, Chelsea and Portsmouth were formed in this manner. Alan Sugar’s Tottenham Hotspur became the first club to float on the stock market in 1985, it wasn’t until the mid 90’s that the rest of football’s chairman saw this as a new way to make money. Sugar managed to by-pass The FA Rule 34 by creating a holding company — Tottenham Hotspur plc — with the club merely a subsidiary whose assets were transferred to the holding company. This model was used by successive clubs. Supporters were no longer seen as fans, merely a ‘captive market’ whose support was ‘inelastic’ as the more a club charged for tickets, the more they would pay. For the 1948 Olympics in London, the broadcasting rights went for somewhere between £1,000 and £1,500—about £40,000 ($60,000) in today’s money. For the Olympics’ return to London in 2012, the rights (in a parcel with the 2010 Winter Olympics) went for £2.5 billion.

Let’s focus on the main sources of income for football clubs nowadays. Firstly, the most important for all main leagues is, certainly, selling the rights for TV broadcast. – up to 50% of income. Most people in the developed world bought a TV set, allowing big sports events into our living rooms; then the space age brought satellites into play, making the pictures live and sharp; then broadcasting was deregulated, adding hundreds of new channels and creating—in certain markets, in selected fields—fierce competition for rights. The rights in most countries to major sporting events are long-term. Sky paid £1,314 million and Setanta paid £392 million for these broadcast rights in 2007-2010. This deal represents approximately £28 million to each Premier League football club per year. UK is the most successful market of TV broadcasts. For instance, TV Rights of the UEFA Champions League, per country in season 2009-2010, according to footbiz is 179 million euros for UK, while only 98 million euros for Italy, which is the 2^nd rank. The British media is dominated by national outlets, with local media playing a much smaller role. Traditionally the BBC played a dominant role in televising sport, providing extensive high-quality advertisement free coverage and free publicity in exchange for being granted broadcast rights for low fees. ITV broadcast a smaller portfolio of events, and Channel 4 broadcast a few events from the 1980s, mainly horse races and so-called minority sports. In the early 1990s this arrangement was shaken up by the arrival of pay-TV in the form of BSkyB. Their dedicated sports channels have since become the only place for some major sports to be seen. Starting in 2006 the Irish company Setanta Sports emerged as a challenger to Sky Sports' dominance of the British pay-TV sports market; however, Setanta's UK channel went into bankruptcy administration and off the air in 2009. There is also a dedicated UK-version of Eurosport, called British Eurosport, as well as a dedicated UK version of ESPN.

Next factor of capitalizing is selling tickets, which gives about 30% of all revenue. In BPL the medium attendance is about 40 000 per match, that helps clubs to earn so much on tickets.

Another way of gaining profit is to sell different kinds of club’s products. The clubs of the top flights in Europe's six top football nations earn an annual total of €615 million from merchandising, according to new research. According to SPORT+MARKT and PR Marketing's European Football Merchandising Report, the 20 English FA Premier League clubs head the ranking with €171 million, equating to merchandising revenue of €8.6 million per club. The Spanish Primera División follows in second position (€145 million in total / €7.3 million per club) ahead of the German Bundesliga (€127 million in total / €7.1 million per club). According to Hartmut Zastrow, Executive Director of SPORT+MARKT, the significant factors behind successful merchandising are sporting success, the size of the domestic market, the number of domestic and international club fans and professional merchandising structures.

Sponsorship is one of the main ways to earn money for football clubs. When chief executive David Gill announced AIG as the new shirt sponsors of Manchester United in 2006 the sum of money certainly caused a stir. It was a British record shirt sponsorship deal of £56.5m to be paid over four years. That equates to £14.1m a year. Manchester United then had the most valuable sponsorship deal in the world, due to the renegotiation of the £15m-a-year deal Juventus had with oil firm Tamoil. Another very famous sponsorship deal was the £100m sponsorship of Arsenal by The Emirates. The stadium is named after its sponsors, the airline company Emirates, with whom the club signed the largest sponsorship deal in English football history. Arsenal fans try to ignore the deal and refer to the ground as Ashburton Grove, or the Grove, as they do not agree with corporate sponsorship of stadium names. Of course, everyone else in the world refers to the ground as The Emirates, so it really doesn’t make much difference. If matchday sponsorship is a bit rich for your tastes then maybe you could consider sponsoring the match ball. Manchester City will take £2,250 from you for the privilege, but that will come in handy for their new owners. Stoke City charge a little less at £1,500, whereas Bournemouth or Aldershot in League Two will only request £550 for the honour of having your company name on the scoreboard and in the programme. Another way of helping your club and advertising your business is to sponsor an individual player’s kit. Premier League Bolton Wanderers will charge you £1,000 for one of their players whilst Stoke City will entertain you for as little as £400. Championship high-flyers Wolves are already looking for £726 whilst struggling Bournemouth can’t give a kit away for £375.

Let’s discuss the main trends that can affect the business strategies of football clubs. Firstly, we should speak about increasing prices for TV rights. Even in the short history of British football’s Premier League, launched in 1992, Sky has gone from paying £38m a season for its package of live matches to £367m a season (from 2010-11 to 2012-13), while the BBC now pays £57m a season just for delayed highlights. Now, with the implementation HDTV & 3D technologies into the everyday life, and using more cameras of better qualities and opportunities on the stadiums, the prices will be only higher. From the other hand, satellite companies build new kind of media infrastructure. They promote sport hard, making it look bigger and whipping up a sense of occasion for something as humdrum as a league match between Blackburn and Stoke. And they have turned football from something that happens once a week, with few games shown live, to something that happens at three different times on Saturday, two on Sunday, and once most other nights: if you’re hooked on football, you can get ten hits a week just from your own country. 

Another situation, which can affect the market very much, is the Financial Fair play, invented by FIFA. The financial fair play rules will require clubs to break even over a rolling three-year period if they want to play in the Champions League or Europa League. There will be some leeway granted for the six years after 2012 but some Premier League clubs, notably Manchester City, Chelsea and Aston Villa, could still fall foul of the rule unless they change their spending habits. Clubs that breach the rules will not be granted a UEFA club license to take part in European competitions. As an initial compromise, clubs will be able to record maximum losses of €45 million (£39.5m) in total over the following three years. That can be subsidized by an owner but only if they invest the money permanently in return for shares. From 2014 to 2017, the overall permitted loss will fall to €30m (£26.3m) for each three-year block monitored by UEFA. After that, UEFA hope clubs will have learned financial balance and be genuinely breaking even. The elite English and Spanish clubs have been the greatest beneficiaries of the global football explosion over the last decade. Using the television revenue from the Champions League and the two most-watched domestic competitions in the world, they have dominated the European scene, splashed out on the best players and become a magnet for billionaires keen for a slice of the action. For instance, Fernando Torres’ £50m January switch from Liverpool to Chelsea would not show up as one lump sum in Chelsea’s 2010-11 accounts – instead it would be an annual amortization of £9m (£50m fee divided by the 5.5 years of his contract). Add in an estimated salary of £8m and the total cost of Torres, as far as UEFA’s accountants are concerned, is £17m per year.