Financial pull of UEFA knockouts3 min read . Updated: 14 Feb 2020, 05:37 PM IST
Big clubs need to stay in the hunt and advance deeper in major European football competitions to preserve their revenues, small clubs to generate windfalls
Aater this month, when Juventus and Lyon square up in the last 16 of the top major club football event in Europe, the prospect of winning, while enticing for both, will have different financial implications for each. Juventus, a superclub from Italy, needs to win to stay in the hunt for the 20% or so revenue bump it has become used to from European football. For Lyon, a French club a few levels below Juventus in stature, it’s a big deal that they are here and further progress will mean a larger windfall.
The knockout phases of the two major club football competitions in Europe, the UEFA Champions League and UEFA Europa League provide an array of intriguing fixtures to the fan. For the clubs involved, it’s an opportunity to chase big paydays. How big depends on the league they play in and how big a name they are. Big clubs need to go deep to preserve revenues. Small clubs need to do the same to generate windfalls.
The Union of European Football Associations (UEFA) is the apex administrative body for all professional football in Europe. As the organizer of the most prestigious club competition in world football, UEFA also controls its broadcast rights and the revenues generated. Crucially, it distributes the revenue on a system based on various factors, the most important of which is performance. The further a club goes, the larger the share of the pie it garners.
Each club competing in the UEFA Champions League, including the qualifying play-offs, gets a share in the total prize money. This is distributed according to four pillars—25% on participation, 30% on performance in the current year’s competition, 30% on performance-based coefficient rankings over 10 years, and 15%, a variable amount that factors in the country’s national broadcasters’ contribution to the national pool, as well as relative performance of each club in the previous year’s domestic competition.
This revenue pool is significant. In 2017-18, revenue from UEFA was €2.1 billion or 10% of the aggregate revenue of all European football clubs.
While its revenue contribution pales before domestic TV revenues (which account for 37% of aggregate revenues), this proportion varies across European leagues, at times spectacularly.
The Big-5 leagues—in England, Spain, Germany, France, and Italy—command large broadcasting revenues for their domestic leagues because of their global footprint and popularity. For smaller leagues such as Ukraine, Croatia, Serbia, and the Czech Republic, however, it is a completely different story. In Ukraine, 69% of the league’s revenue in 2017-18 was generated from UEFA revenues, as opposed to just 3% from domestic TV.
While this snapshot reveals the importance of UEFA revenues for clubs, this is not consistent across all years and is strongly linked to performance. Every group stage victory in the Champions League earns a club €2.7 million. Qualification for the round of 16 fetches €9.5 million. Every successive round has a higher award, with an appearance in the final fetching €15 million and the winner an additional €4 million.
Performance-linked payouts mean the money earned from UEFA can fluctuate sharply in successive years. For instance, in 2017-18, English clubs received €39 million more than the previous year, while Spanish clubs received €44 million less in aggregate. While these might not be significant amounts for the European elites, it can be crucial for smaller leagues.
Ukraine saw a 78% year-on-year increase in broadcast revenues from the previous year. This was on account of the nation’s foremost clubs, Shakhtar Donetsk and Dynamo Kyiv, qualifying for the knockout phases in the Champions League and Europa League, respectively.
The fluctuating fortunes of clubs in the Champions League are apparent in the UEFA revenues earned by them.
Among the top 10 clubs in terms of UEFA revenues in 2017-18, only five featured in the top 10 of the previous year. In 2017, runners-up Juventus, by virtue of being the only Italian team in the final 8 earned €112 million—€22 million more than champions Real Madrid. At the other end, European newcomer Leicester City had its own dream run to the quarter-finals and earned €84 million—all new revenues.
The volatility in earnings from UEFA emphasizes the perils of clubs relying on it. The superclubs are expected to realize it. Below them, clubs such as Lyon and Shakhtar Donetsk look to do a Leicester.
However, as highlighted in an earlier piece, a club should focus on revenue from commercial operations such as the sale of merchandise, stadium rights, advertisement and promotions to remain financially sustainable in the long haul.
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