FC Barcelona, by its lofty standards, endured a disappointing 2018-19 season. It won the Spanish league by some margin, but suffered a spectacular semi-final loss to Liverpool in the UEFA Champions League, and a shock defeat to Valencia in the season-ending Spanish King’s Cup final. The setbacks on the field notwithstanding, the club’s finances seem to be more robust than ever.

The latest edition of the Deloitte Football Money League Report, published last week, shows that FC Barcelona earned the highest revenue among all football clubs in 2019: At €840 million, it added an impressive €150 million, or 18%, over 2018. About 40% of the total revenue increase came from its commercial operations, which the club had overhauled.

But not every club, especially in the lower reaches, has such a handle over this revenue stream that makes a big difference to profitability. Commercial revenues for a football club are essentially high-margin sources of revenue such as the sale of merchandise, stadium rights, advertisement and promotions. These revenues are broadly under a club’s control, and are generally less contingent on market cycles.

A football club’s revenues can be broken down broadly into three overarching categories — commercial, broadcast and matchday. While broadcast revenues are mostly dependent on the auction of TV rights, matchday revenues (ticket sales) are generally constrained by the capacity of a club’s stadium. Commercial revenues, therefore, become crucial for a club’s financial performance.

However, over the past five years, broadcast revenues have increasingly become more important, primarily due to leagues striking lucrative TV deals and the increasing payouts by UEFA for teams competing in the Champions League. For the top 20 clubs, broadcast revenues grew at a compounded annual growth (CAGR) of 11%, against 8% for commercial revenues, and leapfrogged it in terms of contribution.

While commercial revenues are crucial, not all clubs have the ability to leverage their brand. Top clubs like Barcelona and Real Madrid have a massive international profile; therefore, great potential to raise money from merchandise sales, promotions and sponsorship. Even among the top 20 clubs, there are wide disparities. For instance, Barcelona’s revenue from commercial operations is €20 million more than La Liga rival Atletico Madrid’s entire revenue for the 2018-19 season.

In 2018-19, for the top five revenue earners, commercial revenues accounted for 49% of their revenues. But as one goes down the pecking order, this keeps reducing with lower-ranked clubs heavily dependent on broadcast revenues. Among clubs that ranked 16-20, the share of commercial was just 22%.

The disparity in the ability to raise commercial revenue is so strongly entrenched that the set of top six clubs have not changed from 2013-14 to 2018-19. What’s changed is their positions and the relative importance of commercial in their revenue basket. In absolute terms, Barcelona has leapt from sixth in 2013-14 to first in 2018-19, while growing the fastest in this set. The third fastest-growing club in this set was Manchester United; that it has managed to do so amid a period of footballing turmoil for it is testament to the power of its brand.

Manchester United was ranked fifth in 2018-19, with commercial revenues of €317 million. The club ranked seventh was Liverpool, with €211 million, a perceptible drop. But the set of clubs ranked 7 to 10 in overall revenues also contains three names that have made massive progress in this sphere with a combination of consistent performance, blockbuster signings and strategic commercial deals.

One of them is Liverpool, which registered a solid 23% year-on-year increase in commercial revenues in 2018-19, fuelled primarily by sponsor bonuses from a successful UEFA Champions League campaign. Premier League rivals Chelsea and Tottenham Hotspur are also close on its heels, with upcoming sponsorship deals set to boost commercial revenues. A special mention has to be made of Juventus, whose signing of Cristiano Ronaldo in 2018 provided a 30% boost to its commercial revenues.

Commercial revenues are becoming more crucial for clubs. Over the past decade, lucrative broadcast revenues have given windfalls to clubs, but they cannot take this for granted. There is a lot of disruption taking place in the broadcast and media rights landscape, especially with the FAANGs (Facebook, Amazon, Apple, Netflix and Google) entering the football broadcast space. For instance, the Spanish La Liga has an exclusive arrangement with Facebook to broadcast all its matches in India. In a period of change and churn, having more of what they can control is a good thing for clubs.

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