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Deloitte Football Money League 2007 podcast transcript

Speaker key

MW Mary White
DJ Dan Jones

[Music]

MW Hello, and welcome to this Deloitte podcast. I’m Mary White, and in this interview I’ll be discussing the Deloitte Football Money League 2007 with Dan Jones, head of the Sports Business Group at Deloitte. This is the tenth year of the publication profiling the largest 20 clubs in the world’s most popular sport. The Deloitte Football Money League is the most contemporary and reliable analysis of clubs’ relative financial performance. You can download a copy of the report on Deloitte’s website, at deloitte.co.uk/sportsbusinessgroup, where you can also find reports from previous years. But joining me now on the phone is Dan Jones. So Dan, what’s the big story this year, and who’s significantly moved up the list?

DJ The big story this year is Barcelona, who’ve made it up to number two in the list, having been 13th only a few years ago. That’s really a remarkable achievement, and great testament to the success of their new management team. They’ve done a great job, as have the management team at Real Madrid, in getting the Spanish clubs into the top two positions. Those two Spanish clubs really dominate their competition, and that’s very different to England, who have eight teams in the top 20. In Spain there’s only two teams in the top 20. England have more strength in depth.

MW What’s the reason for Spain’s success?

DJ In the case of Barcelona and Real Madrid, it’s the big TV deals particularly help. They’re able to sell their TV rights individually, they don’t sell collectively with the league. But those clubs have also done very well on other areas of their business, so Real Madrid and Barcelona both had new presidencies in the last few years. Real Madrid have taken a Galactica strategy, recruiting high-profile players, developing their commercial revenues. Barcelona have taken a more rounded approach, developing income across the business.

MW So is this the beginning of a Spanish reign, do you think?

DJ It’ll be interesting to see. The really interesting thing is that Real and Barcelona are so far ahead of their competitors locally in Spain, so that’s really helped them move up the table. England, which has a more collective approach, as I said, has strength in depth, eight teams in the top 20. We think in a couple of years’ time we could see English clubs making up half the top 20. So clubs like Manchester United, Chelsea, Arsenal, Liverpool, in particular, will be gunning for those top two and trying to catch up.

MW You mention Manchester United, who’ve fallen down the money league – they were second last year, and in the previous eight years they were actually top of the list – what’s happened? Why the fall?

DJ Well, there’s a couple of things have happened. One is that Manchester United in the year we’re looking at – 2005/2006 – didn’t have a great season on the pitch, which hurt their revenues a little bit. But 2006/7 they’ve got the fully redeveloped Old Trafford, which will help their revenues grow. They’ve also got in 2007/2008 a new TV deal coming in from the Premier League, which again will help them, and finally, they’re performing a lot better on the pitch right now. And also, they out-sourced a lot of their revenues out to Nike on the commercial side.

MW So will they bounce back, do you think?

DJ I think they will, I think they’ll really be working hard to try and get back into those top two places. It’s worth remembering, Manchester United is still the most profitable football club in the world by quite a distance, so they won’t be too disappointed, and I’m sure they’ll be working hard to get to the top again in revenue.

MW There’ve been a lot of takeovers recently, following on from the Glasers’ takeover of Manchester United 18 months ago. Is this the start of a new trend?

DJ The Glasers do now appear to have set a trend. They came in before this new Premier League TV deal was agreed. Since then we’ve seen West Ham, there’s currently speculation around Liverpool, we’ve also seen Aston Villa taken over. So it is very interesting watching what’s happening in the English game, and the amount of change of ownership. And that’s different, of course, to our top two, Madrid and Barcelona, which are owned by the members.

MW Do you think this is a good or a bad thing for the premiership in England?

DJ I think it’s a good thing. I think it helps to have new perspectives, fresh perspectives on running the business. There are different types of investors. There are some who are investing for the emotion of it, and not necessarily looking to make an immediate economic return. There are others who are clearly investing as a business opportunity. I think either way can be good, as long as it brings better players into the premiership. As long as those investors are there for the long term and are interested in making those businesses more successful, I think that’s got to be good for the fans and good for the premiership. And certainly, from the point of view of our money league, it’s good for English clubs to get themselves more and more representatives within that top 20.

MW You mention the broadcasting deals that are now so important, why are they so important for the clubs now?

DJ Well, broadcasting is a great revenue source for the clubs for the simple reason there’s not a lot of direct costs associated with it. So you get the money from the TV companies, there’s not a lot of direct cost that goes along with that. Of course, the issue in the past has always been the indirect cost that goes with it, and with… by that I mean the amount of broadcasting money that is then spent in the player transfer market and on player wages. And that’s always been the challenge for the clubs: they’re getting a lot more money in at the top, how much more of it can they hold on to, and keep making profits for the investors at the bottom line?

MW And is broadcasting an issue? Is it happening in the rest of Europe as well?

DJ Absolutely. Football is incredibly important content for broadcasters, for new media companies. It’s one of the few things that really unites people in a fragmenting world. Football is something that people rally around. Broadcasters know that, and they… they want that football content. So we’re seeing the huge deals I talked about in Spain, the collective deal of the Premier League, we’re seeing big individual deals done by clubs in Italy. Italy worries me at the moment, because their… their clubs are becoming so reliant on broadcasting income. I’d like to see Italy doing something to sort out its infrastructure, its stadia, in the same way we’ve seen done in England and in Germany, and I really think that’s very, very important for Italian clubs to do that. If that doesn’t happen, I can see Italy continuing to slide back into the pack, because even those biggest clubs in Italy, those dominant clubs in Italy, are starting to struggle a little bit, I think, against their competitors, because of that reliance on broadcasting income.

MW So what about the future? What do you think that’s going to bring?

DJ I think what we’ll see in the future is we will see continued growth. I think it’ll be interesting to watch France and Lyon. I think Lyon have a done a great job over the last few years. I’m really interested to see what Italy does about balancing out that business model, and in the case of England, I think we could see ten clubs in the top 20 in the money league in a couple of years’ time, when that new TV deal comes in. And at the very bottom end, I think to get into this world premier league, if you like, to get into that top 20, I think it’s going to take at least 100 million euros of revenue in a couple of years’ time. We’re already at a barrier of 86 at the bottom, and there’s only four clubs in there with less than 100. In a couple of years’ time I think 100’s going to be the minimum hurdle to get in.

MW Dan, thank you very much.

DJ Thank you.

MW And that’s it for now. Remember you can get your own copy of the Deloitte Football Money League 2007, by going to deloitte.co.uk/sportsbusinessgroup. Until next time, thanks for listening.

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