How to Save Real Madrid, Barcelona and Juventus


The disintegration of the European Super League has preserved the integrity of the game, but it has left soccer clubs from Madrid to Macclesfield still facing an enduring problem: how to become financially sustainable.

The predicament is twofold. Because revenue is closely tied to on-field performance, clubs can yo-yo between hefty profits and painful losses from one year to the next. And no matter how much revenue increases, profit is gobbled up by the costs of player acquisitions and salaries, which increase commensurately too.

But there is a potential solution: Teams could sacrifice some revenue in return for more predictable profit. 

Hear me out. The driving forces behind the ESL seem to have been Real Madrid, Barcelona and Juventus Football Club SpA, even if American-owned teams in England such as Manchester United Plc were all too eager to join the ride. Back in the 1990s and 2000s, teams like Real and Barca had a huge financial edge over their regional rivals because they were owned by their fan associations. That meant they could fund player acquisitions with big piles of debt because they didn’t need to worry about posting meaningful profits.

That started to change when the big oil and metals money came into English and French soccer. The Russian billionaire Roman Abramovich acquired Chelsea F.C. in 2003, Abu Dhabi’s Sheikh Mansour bin Zayed Al Mansour bought Manchester City F.C. in 2008 and the Qatar Investment Authority took over Paris Saint-Germain in 2012. These teams could now raise capital with both debt and equity, without needing to worry about posting much profit. Meanwhile, Barca and Real were restricted to being debt-funded, because the fans would never approve the sale of equity stakes. It made for an uneven financial playing field.

The ESL aimed to resolve those issues. For the 15 permanent members, it eliminated the financial risk posed by failing to qualify for Europe’s lucrative top club competition, the Champions League, with its juicy multi-million-euro broadcast royalties. That meant the teams could accurately predict their revenue years into the future. And, just as importantly, the Financial Times reported that the teams had committed to spending no more than 55% of revenue on the playing squads. The tournament therefore fixed both the income and expenditure imbalances between teams.

Of course, it did so only for a select few. The other 1,000 professional teams in the European soccer system would be left to fight over scraps. And if Barcelona, the richest team in the world by revenue, has problems with the sport’s disequilibrium, the difficulties are even more severe for teams lower down the pyramid, in the second- or third-tier divisions.

The threat of the breakaway league may be all but dead, but UEFA, the administrative body for soccer in Europe, still needs to find a way of making the sport economically sustainable for everyone. This is why a workable solution may be for the top teams to sacrifice more revenue to those lower down the food chain, in return for improved profitability.

England’s Premier League has parachute payments for teams that are relegated, meaning they receive tens of millions of pounds in the three years after they drop to the lower division in order to soften the blow to their finances. Doing the same in the Champions League should be considered. Yes, it would be trickier, because it’s impossible to predict how many of the same teams will qualify for the competition each year, but a pool of cash can be set aside and the outlay would even out over time. The top domestic leagues should also share more revenue with those lower down the pyramid on a continuous basis, rather than simply through parachute payments.

Buying into this model is in the top teams’ interest, because it would reduce the risks posed to their businesses by giving them a softer landing if the team falls on hard times. In return, soccer needs a hard cap on the amount that teams can spend on the playing squad. This currently exists as a proportion of income, but a single number for the whole region would be better. That’s how it works in the U.S., where salary limits are set annually based on league income: The NFL had a salary cap of $198 million last year. That’s about half of even the smaller football teams’ annual revenue.

In 2017, Manchester City spent an eye-watering 79% of revenue on salaries, even before it splashed a net 200 million pounds ($279 million) buying players such as French defender Aymeric Laporte and Brazilian goalkeeper Ederson. The net effect of salary caps and improved revenue sharing would be to even out some of the financial peaks and troughs.

None of this would be easy to achieve. It would require buy-in from hundreds of different stakeholders. But for team owners, sacrificing some revenue in return for guaranteeing profitability is a fair exchange. The crumbling of the ESL may appear to have reduced the pressure on UEFA, but it hasn’t resolved any of the sport’s underlying financial problems. Now there’s a greater impetus to fix them.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

©2021 Bloomberg L.P.

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