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A new chapter

Deloitte Football Money League 2012

A rewritten classic

For the 2009/10 season onwards, the UEFA Cup was rebranded as the UEFA Europa League. Here we provide a brief guide to this revamped competition, examining how it compares with the UEFA Champions League and the opportunity it provides for a wider group of clubs to experience European competition.

Although the trophy for the winners remained the same, the competition format was amended. The group stage was expanded to 12 groups of four teams, rather than eight groups of five teams, with the top two teams from each group joined in the Round of 32 by the eight clubs finishing third in their UEFA Champions League group.

Each national association within UEFA is allocated three places in the Europa League (including its qualifying rounds), with the exception of those nations ranked seven to nine (under UEFA’s coefficient ranking system), which have four, nations ranked 52 and 53, which have two, and Liechtenstein which qualifies only the cup winners. An additional place in the first qualifying round is given to the national associations finishing in the top three places of UEFA’s Respect Fair Play rankings. These associations are entitled to enter the club which won their domestic top division fair play competition.

Offering European football to a wider group of clubs is part of UEFA’s desire to provide the opportunity for more of the ‘football family’ to take part in UEFA club competitions. To this end, the group stage of the 2011/12 Europa League contained clubs from 24 different nations.

The stage at which clubs enter the competition is determined by the sporting criteria for their qualification, i.e. final league position or domestic cup performance, and their national association’s UEFA coefficient ranking. This ranking is based on the performance of the association’s clubs in UEFA club competitions over the preceding five years.

Our Mutual Friend

In 2010/11 the Europa League distributed €150m between the 56 clubs reaching at least the group stage of the competition. This is only around a fifth of the €754m distributed across the 32 clubs reaching the Champions League group stage. However, to put this in context, Champions League distributions alone amount to the sixth highest revenue generating league in Europe.

In fact, the rebranding of the Europa League, including the collective selling of repackaged broadcast rights for more of the competition and the introduction of SEAT as the presenting sponsor, has seen 2010/11 Europa League distributions increase almost fourfold from the €39m distributed in the last season of the UEFA Cup, 2008/09. For that season the distributions to clubs reaching at least the group stage of the UEFA Cup were only 7% of those distributed to clubs reaching the group stage of the Champions League.

For individual clubs, the increased distributions meant that reaching the group stage of the Europa League in 2010/11 was worth at least €1.1m, compared with €0.2m two years earlier in the UEFA Cup.

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The distribution mechanism is similar to the Champions League with clubs receiving a mix of fixed (€1m in 2010/11) and performance related income from UEFA, in addition to the market pool distributions. Before the rebranding, clubs only received money from the market pool if they reached the quarter-final of the competition. In the Europa League it is paid to all the clubs qualifying for the group stage. The size of a club’s market pool distribution is determined by a variety of factors including the proportional value of the club’s national TV market within the overall European total.

In 2010/11, the high value of the Spanish broadcast rights to the competition led to a market pool distribution of €5.9m to Villarreal, a losing semi-finalist, helping them earn €9m in distributions, the highest of any Europa League club. This was €1.2m more than the €7.8m earned by the tournament winners, FC Porto, who received a market pool payment of €1.5m. Similarly, Besiktas, who were beaten in the Round of 32, received the second highest distribution from the competition, €8.5m, largely due to a market pool distribution of €6.6m, reflecting the high value of Turkish broadcast rights.

Hard Times

For clubs entering European competitions infrequently, or even those who regularly competed in the UEFA Cup, the revenue from the Europa League can be significant. However, for those clubs used to playing in the group stage of the Champions League the reduction in revenue is very significant. In 2010/11, MSK Zilina, who finished bottom of their Champions League group losing all six matches and scoring only three goals, received UEFA distributions of €7.4m, the lowest amount of all the clubs reaching the group stage, yet still almost as much as the Europa League winners.

By way of illustration, we estimate the impact on prize money alone, excluding the market pool distribution and group stage payments, on Manchester United after their exit from the 2011/12 Champions League at the group stage.

In 2010/11 the club received €16.1m in UEFA distributions for progressing through the knockout stages to the final of the Champions League. Having entered the 2011/12 Europa League at the Round of 32, if they were to win the final in Bucharest in May 2012, they would receive €4.6m in UEFA distributions, from the knockout games. This would be a reduction of €11.5m on the previous year, despite having played a game more.

Matchday revenue may also decrease if a club reduces ticket prices to try and maintain the attendances achieved in the Champions League in a previous year. This may at least partially be offset by the additional home game played in order to reach the Europa League final. There may also be a reduction in commercial revenue as it is common for clubs to have performance related payments built into their commercial contracts, such that progress in the Champions League generates more revenue than reaching the same stage of the Europa League.

Nonetheless, although not as lucrative as the Champions League, the Europa League does provide the eight Champions League clubs finishing third in their group the opportunity to win a European trophy and to earn further revenue after their Champions League exit. In 2010/11 a total of €11.6m was distributed by UEFA to those clubs entering the Europa League from the Champions League, with losing finalists Braga earning €4.5m from Europa League distributions. If an English club reached the Europa League final they would receive more than this as the market pool distribution is worth more to English clubs because of the higher value of the broadcast rights in England compared with Portugal.

Great Expectations

Some clubs, particularly those in the highest revenue generating leagues, point out the difficulty in balancing progression in the Europa League with the demands of other competitions, which often provides clubs with contrasting priorities, especially if the distributions from domestic leagues are substantial. For example, finishing a place higher at the end of the Premier League season is worth c.£0.8m.

Clubs pushing to enter the Champions League or those fighting to avoid relegation from the Premier League have to assess the value of achieving such aims alongside the value of progression in the Europa League.

This pressure of managing resources is often greater for those clubs competing in the Europa League all season as they usually have less strength in depth in their playing squads compared with the top clubs in the Champions League.

Fulham played 19 matches in their run to the Europa League final in 2009/10, effectively another half season in the Premier League with increased travel, and had they reached the same stage in 2011/12, when they entered the competition in June through a fair play place, they would have played 23 matches.

Nevertheless, the Europa League does provide much needed revenue for many clubs at a time when clubs’ finances are being scrutinised more than ever before.
In 2009/10 Fulham’s run to the Europa League final, where they ultimately lost in extra time to Atlético de Madrid, generated £12.5m, 16% of the club’s revenue for that season.

For many clubs the Europa League gives them the most realistic opportunity to experience European competition, whilst for others it provides a useful chance to establish themselves and gain experience in European football, with the longer term aim of progression in the Champions League.

Stoke City’s qualification for the 2011/12 Europa League gave the Potters the opportunity to play in a European competition for the first time in 37 years with manager Tony Pulis stating that it gave Stoke a better chance of attracting bigger name players.

Having won the UEFA Cup in 2007/08 and reached the Round of 16 of the UEFA Cup in 2008/09 and the Europa League in 2010/11, Zenit St Petersburg have gained valuable experience of competing in European competitions. This helped them progress through the 2011/12 Champions League group stage and into the knockout rounds. Similarly, having won the UEFA Cup in 2008/09 and qualified for the knockout stages of the Europa League in 2009/10, Shakhtar Donetsk qualified for the quarter-finals of the 2010/11 Champions League before losing to the eventual winners, FC Barcelona.

The benefits of performing strongly in the Europa League are also apparent for the individuals taking part, not just the clubs involved. The Europa League’s 2010/11 winning manager, André Villas-Boas, left Porto for Chelsea in June 2011 becoming the Premier League’s youngest manager at the time. His, and the tournament’s, top scorer in that season, Radamel Falcao, joined Atlético de Madrid in August 2011 for a reported record transfer fee for a Portuguese club of €40m.

A Tale of Two Cities

The Europa League is unable to offer clubs the revenue available to those competing in the Champions League, but when assessed on its own merit there are many things to admire. The re-branding of the competition has significantly increased the revenue available to the clubs taking part, as well as offering clubs and players from across Europe the opportunity to gain valuable experience of participating in European competition.

Deloitte Football Money League 2012

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