Despite Economic Slowdown, Football Clubs Earnings Are On The Rise. How Do Football Clubs Make Money?
Many football fans wonder how clubs make so much money to be able to foot the deafening deal of buying a player. It should be well noted that the highest earning clubs in the world are well dominated by the European league clubs as shown in the Deloitte’s sport revenue ranking table. Surprisingly, Real Madrid has been toping as the highest earner for some years now.
The global economy may be slowing, nowhere more so than in Europe, but the revenues of the world’s 20 richest soccer clubs — all of them European — soared by 14 percent over the past year. Despite the billions of dollars in turnover, but the real truth is; soccer is hardly a successful business.
The global accounting firm Deloitte recently published its annual Football Money League, ranking the world’s 20 richest clubs by revenue.
10 Top Earning Football Clubs
European and World club champions Real Madrid once again topped the money league, with over half a billion dollars in earnings, and Manchester United, Barcelona and Bayern Munich followed close behind. To put some perspective on the riches at play in the world’s game: The combined turnover of those 20 clubs is less than $7 billion — equivalent to about one-fifth of Deloitte’s earnings. In fact, the annual revenue of the global accounting firm is greater than the combined earnings of the world’s five most lucrative football leagues, let alone the top 20 clubs.
But how do they manage to make such money in the first place. Here are the top 4 ways football clubs make money:
Match Day Ticket & Product Sales
This is the big sales day as Football clubs earn a pool of share from sales of tickets and also have opportunities to display and sell their products such as shirts, bags, etc. Fans are often lined up to purchase one or two products from their supporting club. Considering the number of matches in a year, the revenue generated from Match Day could be insanely huge. Apart from the big day matches, clubs often organize some sub matches-could be a friendly match just to engage with their fans before the popular leagues. All these often turn out to be financially blissful to the clubs.
This is the commercial aspect of the business. Companies in the United States, Europe, Africa and lots more are often fighting for sponsorship opportunity for the top clubs. Companies will pay a club a huge amount of money just to have either a product name or the company’s name on the shirts of the players. Some might even sponsor the boots such as Reebok often do. This is almost free money for the clubs as it cost them nothing to have the sponsoring company brand name on their team’s clothing and accessories.
Broadcast Revenue Sharing
This has been a great leverage for the football clubs. A pool of revenue generated from broadcast rights from the big networks will be shared amongst the participating clubs. In 2014, an aggregate of €6billion was generated from this source alone contributing about 60% to individual club total earning. However, there is currently a controversial sharing formula which gives about 45% of the total revenue to the top 20 clubs but a new European law recently passed has addressed it which will see lower ranking clubs also enjoy a fair percentage of the aggregate revenue.
Sales of Players
Clubs are always on the look out to either replace or sell a player they envisage may no longer fits into their current formation. This is done as a sales transfer to another club for a substantial worth of money. However, competitors may also approach a player directly showing readiness to offer better pay, position and benefits in order to have the player facilitate his own move.
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However, with all the money these clubs make; many of them are just as reckless in money management just like the way they are paid. Some of them carry immense levels of debt: Deloitte put Manchester United’s earnings at $589 million, for example, but the club reportedly carries $527 million in debt. This suggests that football clubs might just be set up to make money, seeing from the unjustified salaries offered to players and staff. They do not seem to have mastered the art of cost control and many of these clubs are not well positioned to survive a devastating economic blow if it does happen in the near future within the sport industry.
However, it is a roller coaster for the sport industry right now even in the midst of the global economy slowdown.