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Revenue analysis - three pronged attack

Deloitte Football Money League 2011

Three pronged attack Money League clubs vary in terms of both the level and proportion of revenue delivered by each of the three revenue sources – matchday, broadcasting and commercial.

Football clubs generate revenues from day to day football operations from three separate broad sources:

It is desirable for clubs to have a balanced revenue model, whereby each source contributes a relatively equal share of total revenues. This ensures that clubs diversify risk, reducing the potential impact of factors not wholly under the business’ control such as weaker on-pitch performance or adverse conditions in the broadcast or sponsorship market.

All rounder

So, how successful are Money League clubs at operating balanced revenue models? Perhaps surprisingly, Real Madrid and Manchester United are the only Money League clubs that do not rely on one source for at least 40% of their total revenues. Broadcasting revenue is the most dominant source with 14 Money League clubs earning more than 40% of total revenues in this area. This is as a result of it being the key driver behind Money League clubs recent revenue growth. Since 2005/06, the top 20 clubs’ total revenues have increased by €1 billion with broadcasting revenues contributing 54% of this growth, dwarfing the 19% and 27% provided by matchday and commercial revenues respectively.

Proportion of revenues generated from matchday, broadcasting, commercial activities (%)

Proportion of revenues generated from matchday, broadcasting, commercial activities (%)

    Matchday % Broadcasting % Commercial %
1 Real Madrid 30 36 34
2 FC Barcelona 25 44 31
3 Manchester United 35 37 28
4 Bayern Munich 21 26 53
5 Arsenal 42 38 20
6 Chelsea 32 41 27
7 AC Milan 13 60 27
8 Liverpool 23 43 34
9 Internazionale 17 62 21
10 Juventus 8 65 27
11 Manchester City 20 43 37
12 Tottenham Hotspur 31 43 26
13 Hamburger SV 34 23 43
14 Olympique Lyonnais 17 54 29
15 Olympique de Marseille 18 50 32
16 Schalke 04 18 25 57
17 Atlético de Madrid 29 50 21
18 AS Roma 16 53 31
19 VfB Stuttgart 26 42 32
20 Aston Villa 27 58 15

Source: Deloitte analysis.

German clubs’ revenues have a different shape, being more reliant on sponsorship and other commercial income than other Money League clubs, reflecting both the fact that they operate in Europe’s largest commercial market and the relative immaturity of their Pay-TV market. Three of the four German clubs in the Money League top 20 generate at least 40% of revenues from commercial sources. They are the only clubs to do this.

Arsenal are the only Money League club to receive more than 40% of revenues from matchday activities. The move to the Emirates Stadium in 2006/07 provided a step change in the Gunners’ revenue with 2009/10 revenues 69% higher than only five years ago. The increased stadium capacity and premium pricing – and notably the expanded corporate hospitality capacity – have provided more than half of that growth. By contrast, commercial revenues have only provided 11% of the total revenue growth in that same period as the club entered into long term shirt front, kit and naming rights agreements to fund the development, constraining its ability to increase commercial deal values at the same rate.

In this article we go on to consider what the Money League would look like if clubs were ranked on their revenue generation from each individual stream. We also outline the key drivers behind the clubs’ success and identify the barriers which hinder the development of other revenue streams.  

Through the gate

Top 20 matchday revenue generating clubs
Rank Club Revenue (€m) Money League ranking
1 Real Madrid 129.1 1
2 Manchester United 122.4 3
3 Arsenal 114.7 5
4 FC Barcelona 97.8 2
5 Chelsea 82.1 6
6 Bayern Munich 66.7 4
7 Liverpool 52.4 8
8 Hamburger SV 49.3 13
9 Tottenham Hotspur 44.9 12
10 Celtic 43.4 n/a
11 Benfica 40.2 n/a
12 Internazionale 38.6 9
13 Atlético de Madrid 35.9 17
14 Rangers 31.5 n/a
15 AC Milan 31.3 7
16 VfB Stuttgart 30.2 19
17 Aston Villa 29.8 20
18 Manchester City 29.8 11
19 Valencia 28.4 n/a
20 Werder Bremen 27.8 n/a

Source: Deloitte analysis.

Three clubs generate more than €100m (£81.9m) from matchday revenues – Real Madrid, Manchester United and Arsenal, with FC Barcelona just behind at €97.8m (£80.1m). Each of these club’s matchday revenue equates to more than €3.5m (£2.9m) from every home match they play. The seventh ranked club, Liverpool, earn only 53% of Barcelona’s total – and less than €2m (£1.6m) per match – highlighting the stark polarisation that exists, by this measure, between the top few clubs and the rest.

The seven English Money League clubs each feature in the matchday top 20. Each club is able to charge relatively high ticket prices (general admission and corporate hospitality) compared with their European peers, whilst attracting average attendances second only to the Bundesliga.

The stadia redevelopment programme for the 2006 FIFA World Cup continues to benefit German clubs who provide four of the matchday top 20. The Bundesliga’s high quality new, or redeveloped, stadia helped to attract the world’s highest average league attendance of 41,800 – 22% higher than the Premier League. However, significantly lower average ticket prices than their English counterparts ensured that Schalke 04 – who were 16th in the Money League – and Borussia Dortmund do not make the matchday top 20 despite average home league attendances of 61,300 and 77,200 respectively.

Most strikingly, only three clubs from outside Europe’s ‘big five’ leagues feature in any of our rankings. The Glasgow giants, Celtic and Rangers have not appeared in the Money League since 2006/07 and 2005/06 respectively but they still generated the 10th and 14th highest matchday revenues owing to their phenomenal support. Each club has average league attendances in excess of 45,000. However, the limited size of their domestic broadcast market means that, barring UEFA Champions League success, neither club is likely to reappear in the Money League top 20 in the foreseeable future.

The other club from a non-‘big five’ league to feature, Benfica, generated the 11th highest matchday revenue. Participation in the Champions League and Europa League in 2010/11 may see them return to the Money League for the first time since 2005/06.

Matchday revenue is a direct function of the number of matches played, therefore extended cup runs can provide a significant boost to clubs’ top line. The UEFA Europa League campaign for Atlético de Madrid and Valencia (Atlético knocked out Valencia in the quarter finals en route to winning the inaugural edition) saw each club playing 31 and 28 home matches respectively, joining Real Madrid and Barcelona in the matchday top 20.

Four of the five Money League clubs who did not make the matchday top 20 – AS Roma, Juventus, Olympique Lyonnais and Olympique de Marseille – are progressing with stadium (re)developments. Such projects are vital as each club only generates between 8% and 18% of revenues from matchday activities. Whilst market factors – including location, demographics etc. – may limit the actual growth potential, each club could realistically expect to significantly reduce the matchday revenue gap to the clubs above them should they complete such developments.  

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Top 20 broadcast revenue generating clubs
Rank Club Revenue (€m) Money League ranking
1 FC Barcelona 178.1 2
2 Real Madrid 158.7 1
3 AC Milan 141.1 7
4 Internazionale 137.9 9
5 Juventus 132.5 10
6 Manchester United 128.0 3
7 Arsenal 105.7 5
8 Chelsea 105.0 6
9 Liverpool 97.1 8
10 Bayern Munich 83.4 4
11 Olympique Lyonnais 78.4 14
12 Olympique de Marseille 70.8 15
13 ACF Fiorentina 69.7 n/a
14 Manchester City 66.0 11
15 AS Roma 65.6 18
16 FC Girondins de Bordeaux 65.4 n/a
17 Aston Villa 63.6 20
18 Tottenham Hotspur 62.9 12
19 Atlético de Madrid 62.2 17
20 Fulham 62.0 n/a

Source: Deloitte analysis.

Clubs primarily receive broadcasting revenues from two sources – domestic competitions and UEFA competitions. In Spain and Italy clubs are able to market their own broadcast rights for domestic competitions (although Italian clubs have moved to a collective model in 2010/11 and in Spain a method of redistributing revenues more equally is being considered – see TV Times for more details). Individual selling allows larger clubs in each territory to collect the majority of broadcast revenue in that market, leading to significant polarisation between the “haves” and the “have-nots”. This competitive advantage extends across European borders with all of the top five coming from Spain and Italy. Both Barcelona and Real Madrid generated more than €130m (£106.4m) of broadcast revenue, excluding distributions received from UEFA – c.€50m (£40.9m) more than Manchester United from the same source, a significant advantage.

The five Italian clubs in the broadcasting top 20 each receive between 53% and 65% of total revenues from this source. An over-reliance on broadcast revenue, to the neglect of other revenue streams, in particular matchday revenue – only the Milan clubs were in the matchday top 20 – will present a significant challenge to clubs from 2010/11 when they will not be able to market their own rights. It is critical that Italian clubs focus on other revenue streams to keep pace with their European peers.

The Premier League’s three year £2.8 billion (€3.4 billion) broadcasting contracts provided clubs with distributions of between £31.8m (€38.8m) and £53m (€64.7m) in 2009/10, enabling eight of the broadcasting top 20 to come from England. The Premier League’s broadcast revenue distribution model is the most equal of the ‘big five’ leagues – the club which received the highest distribution (Manchester United £53m, €64.7m) received 1.7x the revenue of the club which received the lowest distribution (Portsmouth £31.8m, €38.8m). A new set of broadcasting deals come online in 2010/11 – which will increase the three year value to £3.6 billion (€4.4 billion) – will not be sufficient to bridge the gulf in broadcast revenues received by the top English clubs compared with Barcelona and Real Madrid, but will widen the advantage that clubs outside of the Champions League qualifying places enjoy over their European peers.

Clubs’ other main source of broadcasting revenue comes from UEFA distributions for the Champions League and Europa League. All but three clubs in the broadcasting top 20 participated in the group phases of either the Champions League or Europa League, 15 clubs received Champions League distributions of between €15.1m (£12.4m, Atlético de Madrid) and €48.8m (£40m, Internazionale). These distributions typically provide around 20% of broadcasting revenue to the largest clubs who sell their domestic rights individually. This proportion increases to more than 30% of broadcasting revenue for clubs whose domestic rights are sold collectively. The highest proportion is the 54% of broadcasting revenues that UEFA distributions contributed to Bayern Munich, the sole German club in the broadcasting top 20. The lack of an established Pay-TV market in Germany, has constricted the growth of Bundesliga domestic broadcast revenues which are the lowest of the ‘big five’ European leagues.  

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Building partnerships

Top 20 commercial revenue generating clubs
Rank Club Revenue (€m) Money League ranking
1 Bayern Munich 172.9 4
2 Real Madrid 150.8 1
3 FC Barcelona 122.2 2
4 Manchester United 99.4 3
5 Schalke 04 79.0 16
6 Liverpool 75.8 8
7 Chelsea 68.8 6
8 AC Milan 63.4 7
9 Hamburger SV 63.2 13
10 Borussia Dortmund 60.7 n/a
11 Manchester City 57.0 11
12 Juventus 55.6 10
13 Arsenal 53.7 5
14 Internazionale 48.3 9
15 Olympique de Marseille 45.1 15
16 Olympique Lyonnais 42.9 14
17 Benfica 41.2 n/a
18 Tottenham Hotspur 38.5 12
19 AS Roma 38.1 18
20 Napoli 37.7 n/a

Note: The structure of commercial contracts and sponsorship agreements varies from club to club, therefore revenues may not be directly comparable. For example certain clubs will have in house retail and/or catering operations and recognise sales as revenue (gross method) whilst other clubs outsource such operations to a third party, receiving revenue in the form of a royalty (net method).

Source: Deloitte analysis.

Generally, clubs which have established brands with history and tradition augmented by support that reaches beyond domestic markets are the most successful in driving commercial revenues.

Bayern Munich, the most successful German club, with the largest fanbase in Europe’s largest commercial market generated commercial revenue of €172.9m (£141.6m) including sponsorship and marketing of €82.6m (£67.6m), merchandising of €38.9m (£31.8m) and other stadia revenues of €38.2m (£31.3m). Based on commercial revenue alone, Bayern would hold a top ten Money League position. There are three other German clubs in the commercial top 20 including Borussia Dortmund who generated the tenth highest commercial revenues of any club, despite not being in the overall Money League top 20. The Bundesliga’s 2010/11 Herbstmeister (autumn champions), who headed into the winter break with a ten point lead, will be aiming for qualification for Champions League which would ensure that the club return to the Money League.

Six English clubs are included in the commercial top 20 with the clubs with the largest fanbase and global appeal able to record sponsorship deals such as Manchester United’s agreement with Aon and Liverpool’s deal with Standard Chartered which are each worth a reported €24.4m (£20m) per year. Further down the Premier League the market remains challenging with many clubs restricted to low value and/or short term deals. This picture is replicated across Europe with Barcelona securing a €165m (£135.1m) five and a half year deal with Qatar Foundation at the same time that three La Liga clubs are playing in 2010/11 without shirt front sponsors. Whilst this agreement has caused controversy with some of their support, the revenue increase will see Barcelona challenge Real Madrid at the top of the Money League in seasons to come.

Number of clubs in top 20 rankings by country

Number of clubs in top 20 rankings by country

Source: Deloitte analysis.

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Leading edge

Each of the top nine Money League clubs feature prominently in all three categories with six clubs recording top ten positions in each list. At the top of the tree are the Money League top three of Real Madrid, Barcelona and Manchester United. While at least one club is able to displace one of them from the top three in each category, they each generate a minimum of c.€100m (£81.9m) from each source – a consistency other clubs cannot match.

The larger clubs, as football’s most recognisable brands with the largest fanbases will, barring crises, such as a prolonged period of reduced on-pitch performance and non-participation in the Champions League, remain at the top of the revenue lists for each stream in the years to come.

Below the top level, clubs typically rely on broadcasting to provide at least 40% of their revenues. With all but the elite clubs facing an increased challenge in delivering commercial revenue growth in the difficult economic climate, matchday revenues – which is the most controllable revenue stream on a day to day basis – have become increasingly important to clubs seeking to improve the balance of revenue from each source. Matchday and commercial revenues are significantly more polarised amongst the top 20 clubs than broadcasting, providing the opportunity to clubs to differentiate themselves from their peers.

Clubs who have recently completed stadia enhancements, or moved stadia, have shown the competitive advantage that can be gained on their peers. It is critical that clubs complete developments that are in the pipeline. Although the economic climate remains challenging, innovative pricing solutions and corporate hospitality offerings can help clubs maximise these more controllable revenues.

Polarisation by revenue stream

Polarisation by revenue stream

Source: Deloitte analysis.

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