While some of Europe’s most struggling economies threaten the euro, many of the top league’s best clubs are also struggling financially, with overdue debts, and shrinking revenue streams. When UEFA voted to pass Financial Fair Play in 2010, they set a three year target to get clubs and leagues into a healthier position financially. Though that window was extended to 2015, we wanted to see how clubs are doing, and discover if teams were gradually adjusting or simply delaying the inevitable.
Take AC Milan for example: the sale of Zlatan Ibrahimovic and Thiago Silva to Paris St. Germain for around $75 million may mean they are loosing their collar when it comes to financial obligations. Ibrahimovic was making $30 million a year, and while he arguably delivered the club a Serie A title, owner Silvio Berlusconi may not be so quick to replace him & Silva with comparable stars.
The FFP regulations offer managers and owners the chance to reign in the spending that has risen out of control. Many teams in the English, Spanish and Italian leagues have come away with net losses on the season in the past few years, when economic instability exacerbated otherwise manageable deficits.
The multinational consulting firm Deloitte puts out a report of the top 20 highest grossing teams in the European leagues every February on the prior year’s season & figures. While that report for the 2011/12 season won’t be out for a while, the Champions League distribution figures were recently released.
Every team that qualified into the group stage received 7.2 million Euros. Nearly all teams received a performance bonus averaging at 2.65 million euros. A pool of 341.1 million euros from market-based revenue was split according to market draw, with the average of 10.65 million euros paid per club. To give you an idea, Man United, who did not advance beyond group stage, received total disbursements of over 35 million euros. Smaller market teams like SL Benfica who made it quarter finals, received a total of 19.8 million euros.
The structure for UEFA’s payouts seem to incentivize smaller teams to acquire huge stars to build their market audience, even if it means a net loss on the season, or delaying payments and racking up interest on loans. Star-studded rosters seem to be just as much a factor in revenues as the teams performance. Hopefully, in the coming seasons, teams learn to rely less on their owners benevolence and wealth for their equity and more on crafting smart, well-rounded teams that can compete at the top levels in their leagues.