The economics of football

The economics of football

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Football economics rarely obey the laws you studied at business school! When buying players, for example, business people are willing to make far riskier investments than they would in their normal dealing lives. For much of football’s history, owners have had control, imposing maximum wages and ruling the transfer system. Today, however, players and their agents command vast salaries over which owners have little control.

The economics of football changed dramatically with the arrival of new forms of pay-per-view TV and sky-high broadcasting rights in the big European leagues. The smaller and lower leagues, however, haven’t seen much of this new money – most of which goes to a handful of top-fight clubs.

Where the money comes from

To make it to the top 10 of Europe’s top revenue teams, a club needed to generate sales turnover of more than €400mn in 2017. A club receives most of its income from four main sources – match-day revenue, broadcasting rights, sponsorship deals and commercial activities. Where necessary, clubs may top-up their coffers with money borrowed from the banks.

An awful lot of clubs have an awful lot of debt. Many clubs, for example, have been “propped up” by soft loans from generous owners. Equally, banks with political connections to particular clubs (especially in Spain) have extended huge overdrafts, which have been stretched beyond normal breaking points.

Where the money goes

Clubs used to spend less than 40% of their income on players’ wages, but players are now able to claim a much larger slice of the pie. A club must also pay staff such as coaches and caterers, as well as spending money on maintaining the stadium and training grounds.

Almost two thirds of a club’s spending is eaten up by players’ salaries. The rest goes on operating costs, ground maintenance, and transfer fees.

Transfers

For the club buying, transfers are a huge drain on resources. For example, Premier league clubs spent a record $1.5 billion during the 2016 summer transfer window.

Investments

Since 1992, UK premiership clubs have invested a combined total of more than $3.5 bn in new facilities.

Profits

In Sep 2011 Manchester United announced a record annual operating profit of $164.4 million.

2018 FIFA world cup finances

The World Cup could have a total impact on the Russian economy that could amount to between $26 billion and $30.8 billion over the 10 years from 2013 through to 2023, according to the organizers’ latest estimations. That’s attributed to growing tourism plus large-scale spending on construction, plus later knock-on effects from those government investments. It even suggests the World Cup will encourage Russians to exercise more, so they take fewer sick days.

The total spend on the tournament will be $11 billion, though that doesn’t include some costly new infrastructure and stadiums which organizers say would have been built regardless.