Contents
Welcome
How we did it
Ups and downs
The Deloitte Football Money League
Tackling the crunch
Welcome
Welcome to the twelfth edition of the Deloitte Football Money League, in which we profile the largest clubs in the world's most popular sport. Being released less than nine months after the end of the 2007/08 season, and as soon as all the clubs' revenue figures are available to us, the Money League is the most contemporary and reliable analysis of clubs' relative financial performance.
There are a number of methods that can be used to determine the size of a club including measures of fanbase, attendance, broadcast audience, or on-pitch success. However, for this publication we compare clubs using revenue from day to day football business operations which we believe is the best publicly available financial comparison – with our methodology outlined in more detail in 'How we did it'.
In all our previous editions of the Money League we have reported on the remarkable revenue growth of our top 20 clubs, and this year's edition is no different. The combined revenue of our top 20 clubs was €3.9 billion in 2007/08, more than three times the level in our first edition covering 1996/97, and a €220m (6%) increase on the previous year. As predicted last year, a minimum revenue level of €100m is now required to gain a place amongst our top 20 clubs. Congratulations to Real Madrid who top the Money League for a fourth successive year with a revenue total of €366m.
However, we publish this year's edition amidst a global economic downturn affecting the majority of industry sectors. Football is not immune to the difficulties caused by this changing environment. Nonetheless, we believe that the unique nature of the football industry, underpinned by loyal club fanbases and long term broadcast and sponsor contracts secured in advance may enable major clubs to be relatively resistant to the economic downturn. There are other businesses that will feel the pain sooner and to a greater degree. This does not mean football clubs can be complacent, far from it. But they do have more time to plan and adjust than some.
This edition covers the 2007/08 season, the most recent period for which club revenue figures are available, and this period was clearly before the worst of the economic slowdown and so has had only a limited impact on the revenues of the top 20 clubs. All bar two of our top 20 clubs have shown revenue growth in this period when revenues are calculated in local currency.
We expect next year's edition, covering the season currently in progress (2008/09) to show some early signs of how the wider economic environment is affecting the game's top clubs at a revenue level particularly across the matchday, driven by attendances and ticket pricing, and commercial revenue streams. However, we believe it will not be until the following season, 2009/10 and seasons after that, that we will we get a fuller picture of the impact of the changing economic environment as clubs' revenue performance will reflect the impact on season ticket and corporate hospitality renewals, and several clubs will have been in the market to renew or negotiate new sponsorship contracts.
So far there are some encouraging early signs. Whilst there are differences between clubs, average attendances in the 'big five' leagues – in England, Germany, Spain, Italy and France – are generally holding up in the first half of the 2008/09 season when compared with previous seasons. It will be interesting to note how the more flexible pricing structures adopted by certain clubs impact on matchday yields. Furthermore, even in the last six months or so as recession has set in in the wider economy, several Money League clubs have either renewed existing commercial contracts or secured new partnerships, which reflects the continuing attractiveness of the game's elite clubs, many with global fanbases, to commercial partners.
The most obvious effect of changing economic circumstances on this year's Money League is the depreciation of Pound Sterling against the Euro and the impact this has had on the relative ranking of English clubs. Last year we predicted that English clubs could account for around half the Money League clubs in 2007/08, the first year of new improved Premier League broadcast deals. In fact there are seven clubs in this year's list, one more than last year and one fewer than the record of eight in the previous year.
The impact is most obvious at the top and the bottom of the Money League. Manchester United's record breaking year in winning the Premier League and UEFA Champions League helped increase revenues to £257m, an uplift of £45m compared to the previous year.
Converting the club's revenue figure into Euros at the exchange rate used for this edition (as at 30 June 2008) translated to a total of €325m and second place in this year's Money League rankings, over €40m below the revenues of Real Madrid, and €16m above third placed club FC Barcelona. Had exchange rates remained stable at the rate we used for last year's edition (as at 30 June 2007) the club's revenues would have reached €382m, replacing Real Madrid at the top of the list. The fact that if today's exchange rates were applied United would have finished below Barcelona, emphasises the impact that exchange rate movements have had on English clubs' relative ranking in this year's list. Meanwhile Aston Villa, Everton and West Ham United can all consider themselves unlucky to have missed out on a top 20 place.
Overall, in the past four years, we have seen a clearly defined top 10 develop in the Money League with the main debate being about the order, not the composition, of that list.
At the lower end of the top 20 there are three new entrants 'promoted' into the Money League compared to last year, two of which (Fenerbahce and VfB Stuttgart) reach the top 20 for the first time with revenues driven by their successful participation in the UEFA Champions League, reinforcing the importance of competing in Europe's top clubs competition in the Money League rankings. Congratulations to Fenerbahce who become the first Turkish club to feature in the Money League and are the only club from outside the 'big five' European leagues in this year's list – an impressive achievement. Finally, the first year of new Premier League broadcast agreements has facilitated Manchester City's return to the top 20, with the club's new Abu Dhabi based owners having grand plans to transform the club's fortunes on and off the pitch.
So how are clubs equipped to meet the challenges presented by this changing economic environment? In addition to profiling the top 20 clubs in 2007/08, we provide commentary on the possible future outturn in this edition. At a revenue level, broadcast revenue has been a key driver of clubs' growth since we began our analysis. For several leagues, new or previously negotiated broadcast contracts are set to provide a stable revenue stream for clubs for a significant number of years.
The French league has a four year broadcast contract in place running to 2011/12, with a slight uplift in value, whilst the German Bundesliga has recently concluded broadcast deals for the four year period from 2009/10, which although not at the values of the deal it replaced – the league's six year deal with Kirch was scrapped after regulatory concerns – is an overall improvement on current contracts.
Spanish Superclubs Real Madrid and Barcelona, have individually negotiated broadcast contracts in place until 2013/14, both at substantial uplifts compared to previous deals. All these contracts will deliver stable, and, in some cases, improved revenues in forthcoming seasons.
The Premier League, the world's most popular and lucrative domestic football league, is currently negotiating broadcast contracts for the three year period from 2010/11 with the outcome of these negotiations and the contract values achieved, likely to be a key determinant of the ranking of English clubs in the Money League in future seasons. Whilst it is undoubtedly a challenging environment top-tier domestic league football remains key content for Pay-TV operators driving subscriptions. The recently concluded domestic live rights (with BSkyB and Setanta) and highlights rights (with BBC) contracts have generated values which are a 4% increase on current contracts. The worldwide popularity of the Premier League has the potential to deliver further revenue growth for clubs, with the depreciation of sterling against other major currencies potentially working to English clubs' advantage for any overseas rights sold in other currencies.
Participation in the Champions League has often been crucial in determining the ranking of clubs at the top end of the Money League and a key driver in propelling clubs into the top 20. Only six of the clubs in this year's top 20 didn't participate in the Champions League group stages.
UEFA's decision to adjust the competition's qualification procedure from 2009/10 has the potential to impact on rankings in future Money Leagues. The top three clubs from Europe's top three ranking leagues (currently England, Spain and Italy) and top two from the fourth and fifth ranked leagues (currently France and Germany) will automatically qualify for the group phase (compared with the current system of two clubs and one club respectively).
UEFA's desire to guarantee that certain lower ranked leagues have participants in the group phase of the competition means that the fourth placed teams in the top three leagues and third placed teams in the fourth and fifth ranked leagues will face clubs from the leagues ranked seven to 15. The outcome of these ties, which will involve clubs from the 'big five' European leagues in ties against theoretically stronger opposition, could be crucial in determining future Money League rankings.
Our focus this year
In addition to our usual profiles of the top 20 clubs and their revenue sources we provide a feature article examining the impact of the economic downturn on the world's top football clubs across the three core revenue streams – matchday, broadcast and commercial – and also clubs' wages costs and club financing. Our particular focus is on the impact the downturn has already had on clubs, the challenges clubs now face going forward and the options they have in adjusting to this changing environment.
The Deloitte Football Money League was compiled by Dan Jones, Austin Houlihan, Rich Parkes, Martyn Hawkins, Simon Hearne, Amelia Ashton-Jones and Caspar Schmick. Our thanks go to all those who have assisted us, inside and outside the Deloitte international network. We hope you enjoy this edition.
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