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| Football and the World Economy | |
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| Tweet Topic Started: Dec 31 2008, 02:15 PM (1,216 Views) | |
| Sammy Maudlin | Apr 12 2010, 11:33 PM Post #46 |
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I guess we should not be too surprised that any new regulation will be watered down from what was initially proposed. But something like the German rule which ursus references sounds realistic to me for UEFA to enact. Being able to meet your budget and cover any debt, if needed, is a basic requirement for any business and thus is what UEFA should require. |
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| Simon | Apr 13 2010, 02:48 AM Post #47 |
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Let's not forget Barcelona either! This is a current league table of debt: £727m Manchester United £609m Real Madrid £436m Barcelona £386m Internazionale £348m AC Milan £297.7m Arsenal £240m Liverpool £147m Juventus £136m Roma £96m Bayern Munich £0 Chelsea £0 Manchester City The figures come from Prof Jose Maria Gay de Liebana, football finance specialist from the University of Barcelona. There are some points to pick out here. Whatever one thinks of Florentino Perez, at least Real Madrid's huge debts are funding improvements to the squad. One of the many things that angers me about United's debt is that it's so pointless. The whole lot of it is simply the Glazers' borrowings to take over the club in the first place. Their net spend in the transfer market in the five years they've been here is a mere £6m - the lowest figure in the whole Premier League. Effectively, United are just paying all this money for the privilege of having the Glazers as owners. Great! Arsenal's debts are sensible at least, as they're on their new stadium, which is paying for itself. Chelsea's debts are apparently zero after they announced a £340m write-off in December 2009, while City announced a £305m debt-to-equity write-off this January. However, the key part of Platini's proposal is that clubs cannot spend more than they earn, so Chelsea and City would still fall foul of that. In fact the only club on the list that wouldn't is Arsenal. |
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| Sporting | Apr 13 2010, 08:20 AM Post #48 |
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Ursus Arctos previously posted: "The German rules allow for some debt, but clubs must demonstrate that they can fulfill the budgets that they file in order to receive a license to play for the season. Bielefeld was 2.5 million euros short as of the end of the winter break, and couldn't come up with the cash." My questions are: what kind of debt is £96m (big or small - rhetorical question this one!) , is this figure correct, can Munich fulfil whatever budget they have, and if not how does this all fit in with the Bundesliga's aim of keeping its finances on an even keel? |
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| Merengue | Apr 13 2010, 08:21 AM Post #49 |
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I understand Simon's frustrations about Manchester United's situation. Clubs like Real Madrid and Barcelona acquired their debt by obtaining bank loans secured by their future TV revenue, Chelsea are now withoutdebt because Abramovich converted, if I recall correctly, his personal loans to the club into additional shares. Anybody know how Liverpool's debt was accumulated/ Was it lke Man United's in being related to how the club was acquired? My final question is how does Bayern Munich have such a large debt if, as the Guardian article which began this discussion related that German clubs are operating in the black? It is a sad state of affairs if almost all of Europe's biggest clubs are operating in deficits. Note, however, that no French clubs were listed here. Edit: I see Sporting has simultaneously asked the same question. |
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| ursus arctos | Apr 13 2010, 11:07 AM Post #50 |
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It is really difficult to do comparative economic analysis of football clubs. Difficult even within one country, and exponentially more difficult across countries. Reporting rules and schedules, accounting principles and a host of other important factors vary across Europe (let alone between Europe and the Americas). Gay de Libeana has done as much serious work on this as anyone, but even he is hobbled by the same issues. His numbers are therefore probably best seen as given one a "ballpark" sense of relative debt levels, rather than precise figures. Bayern's number is a bit higher than I would have expected, but 1) putting all of the figures in sterling makes Bayern's euro-denominated look larger, given the recent devaluation of the pound against sterling and 2) I would guess that a significant part of it is related to their purchase of Munchen 1860's half of the company that operates the Allianz Arena. What I can say is that the Bundesliga wouldn't have given them a license if hadn't demonstrated that they were well able to sustain that level of debt from their turnover. Here's a brief description of their process from the English-language version of their report on the 2008 season (available at this link.)
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| Simon | Apr 13 2010, 11:21 AM Post #51 |
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The same question about Bayern Munich occurred to me as well. I know the other year they had a huge transfer market spending spree when they failed to qualify for the CL. Didn't they make Luca Toni the highest paid player in the world, or is my memory playing tricks? I do think the German model is superior in particular with regards to its treatment of fans. Football fan culture seems to be appreciated in Germany, whereas in England football fans were treated as scum prior to 1989, and then purely as customers (yuk!) since then, a revenue source to be milked as far as the market will allow. Which is pretty damn far as the whole point of being a football fan is that you can't just take your money to a rival 'company' if you feel you're being mistreated. There are some issues with the German model though. It is perfectly feasible for private ownership / investment of funds to be a benevolent process. Fulham have certainly benefited for Mohammad Al-Fayed's ownership. Aston Villa seem to be prospering under Randy Lerner, and Manchester City fans can seemingly anticipate a brighter 2010 - 2020 period with Sheikh Mansour in charge than they could otherwise. There doesn't seem to be any avenue for that to happen in Germany, which seems to be a bit of a limitation. Maybe it's a worthwhile limitation though, as it also prevents situations such as with the Glazers, Hicks/Gillett and the mess at Portsmouth. |
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| ursus arctos | Apr 13 2010, 11:31 AM Post #52 |
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Toni was the highest paid player in Germany (and may still be), but I don't think he was ever the highest paid player in the world. Simon, Hoffenheim is an example of a German club with a tycoon benefactor (who actually played for them when they were an amateur oufit in the seventh level of the pyramid). It's possible in Germany if the tycoon is really interested in football philanthropy; what the tycoon can't get is control. |
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| Merengue | Apr 13 2010, 11:39 AM Post #53 |
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Good work ursus with the information on the Bundelsiga's financial review process. I was interested to note in the Guardian article Simon linked which began this discussion, that corporations if they have demonstrated a prolonged interest in supporting the sport, such as Bayer in Leverkusen or VW and Wolfsburg can also obtain a controlling interest in a club. Of course that can no longer happen with the new set of rules as no corproration would be able to currently establish their long record of support for a club under the current guidelines restricting ownership to less than 50%. |
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| ursus arctos | Apr 13 2010, 11:54 AM Post #54 |
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The German rules really had to make some accomodation for Leverkusen and Wolfsburg because of their very special circumstances. Both Leverkusen and Wolfsburg are "company towns" to a degree that is pretty much unknown in the contemporary US, with the vast majority of people who live and work there either working (or having worked) directly for Bayer or VW, or else being materially dependent on the support of people who work for one of those firms. The football clubs need to be seen in the context of a much wider network of corporate community support programs that goes back a century and includes housing, libraries, cultural support and the multi-sport organizations from which the two professional clubs sprung. I'm always pleased to participate in these discussions, as I think that it is an issue which (for better or worse) is central to the modern game. It's also one on which I've done a bit of work in my professional capacity. BTW, the latest version of the Bundesliga report, which doesn't have as much detail on the licensing process, but does have a lot of interesting data, can be downloaded from here. |
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| Johnbuildr | Apr 13 2010, 01:36 PM Post #55 |
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Whew! Mr. Brown Bear, et. al., this is one helluva deep discussion, and I have absolutely nothing worthwhile to impart to it (so, please don't bench me Merengue ) But I will say it has been very informative on matters the vast majority of fans no doubt have no clue about, as well as being too deep and cerebral for me at times! But, thank you all! Oh, and Simon, don't be too hard on your English clubs vis-a-vie their treatment of fans; American pro football and basketball owners and clubs are just as bad if not worse. I'd call them 'damn capitalists', but of course the pro sports business is more of a one of a kind monopoly run by a few super rich tyrants taking advantage of capitalist ecomonics in each of our countries than anything else. There is really nothing else quite like big time pro sports in any of our countries' economies in the world; not that I can think of anyway. |
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Qui desiderat pacem, praeparet bellum | |
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| ursus arctos | Apr 13 2010, 02:41 PM Post #56 |
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Don't sell yourself short John, that is a very astute comment about the singularity of big time pro sports in modern capitalism, and one that I very much agree with. Here in North America, for instance, pro sports teams are able to extort ridiculously one-sided stadium deals from municipalities desperate for the cachet that comes from being a "big league city". And yet study after study has shown that the positive economic impact of those "investments" is much more tenuous than is the case with direct public investment or even the subidization of new non-sports businesses. And we are all familiar with the "market power" that clubs have over their fan base due to the "inelasticity" of fandom. As wise a man as he is, Merengue is never going to see the light and decide to support Barcelona (anymore than I could ever become a Merengue). While we may change the way in which we support the club and "consume the product"*, we aren't going to switch sides the way we might switch brands of toothpaste. That gives the club owners a great deal of power, as people like Simon have discovered to their great regret in recent times. * yellow card to the bear for applying marketingspeak to something we all love. |
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| libero | Apr 13 2010, 06:02 PM Post #57 |
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Good anology ursus, and it is true sports teams do have fans over the barrel as most are not going to switch allegiance. I will say in response to John's comment about sports and capitalism that many have said the NFL is actually a perfectly set up socialist entity as all clubs share the wealth equally. It leads to competitive balance and as most know has created probably the most lucrative sports league in the world. I have followed the discussion some have had in the Spain forum about how the inequitable distribution of TV income in Spain ahs helepd create the current imbalance in the league where Real Madrid and Barcelona dominate. I do not know how TV money is distributed in the Bundesliga but overall the German system seems an adequate alternative to the imbalance we see elsewhere in Europe. |
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| Johnbuildr | Apr 14 2010, 05:04 AM Post #58 |
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I would only add, libero, that although the NFL internal economics may reflect a socialistic model, it is the greatest capitalistic economy to ever exist that alone fuels its fire. ( I was actually thinking of red carding the bear for his taking our minds so far off the sport side of our passion, but then how can you red card sheer facts and truth? )
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Qui desiderat pacem, praeparet bellum | |
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| ursus arctos | Apr 14 2010, 08:06 AM Post #59 |
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libero, the Bundesliga has a collective television deal in which all clubs participate. I'm not certain of the exact revenue-sharing mechanism, but believe that it is not a straight "split the pie into 18 equal pieces" system, but rather has some mechanism designed to partially reflect the success and popularity of the individual clubs (as does the English system and the one that Italy is in the process of introducing). That said, it is definitely more "socialistic" than the Spanish model, and results in a much narrower band of disparity when it comes to television revenue among Bundesliga clubs. Of course, those clubs that participate in European competition have a separate revenue stream not available to their less succesful counterparts, but that is true everywhere. |
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| Merengue | Apr 14 2010, 09:28 AM Post #60 |
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The Spanish sharing of TV revenues is the most inequitable that I have ever heard of. 1/2 of all revenues go to Real Madrid and Barcelona, the remaining 18 clubs receive the other half and even there I do believe clubs like Valencia, Atletico Madrid and Sevilla are receiving more money than Osasuna, Xerez and Valladolid. The difference, and this has been a recurring topic in our La Liga discussion thread is that in addition to their other revenue options, which are greater than the rest of the league's other clubs, this hugely disparate receipt of TV money has made the Spanish league increasingly unbalanced. Just look at the current gap between 2nd place Real Madrid and 3rd place Valencia, 19 points! In my mind the Spanish league is going to have to do something to level the playing field and changing the distribution of TV rights fees is a good place to start. it does not have to be an even share for all teams, clearly more people are interested in watching Madrid and Barcelona than Zaragoza and Almeria but the current inequity is causing too much harm in my view to the league's competitive balance. Once again, Germany provides I think a good example of a viable alternative for distribution of TV revenue. |
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