John McCormick: researching important facts

 

John McCormick poses the questions and, clearly banishing all thought of action at the wrong end of the table, assesses the pros and cons of European qualification …

It must be around now that Deloitte put the finishing touches to their “Money Football League”, which comes out about 9 months after the end of the season.

Deloitte analyse three revenue streams: matchday income, broadcasting rights and other commercial activities. Any club that can fill grounds, appear on TV and appeal to sponsors should score highly. Buying and selling players doesn’t make any difference as transfers are not included in Deloitte’s calculations.

Deloitte’s league lists the top twenty revenue generators in Europe. Within that twenty there’s a clear divide, with Real Madrid and Barcelona well ahead of the rest. They have big crowds and always qualify for the European Championship, which brings additional TV income and big prize money. They are global brands, which brings great opportunities in respect of sponsorship and sales. But the clincher is broadcasting rights. Spanish clubs don’t have a collective agreement and these two get about half of the total TV income of La Liga.

Then comes a “second division” (my phrase, not Deloitte’s) which includes six English clubs plus a dozen from across Europe. They tend to move up or down the MFL depending on their performance in European competition, especially the Champions League, but their TV income is much lower than that of Real and Barca.This explains the €80 millions gap between Barca (second) and Man Utd (third) – not much less than Sunderland’s total revenue, €87.9, that season.

€52 million of Sunderland’s €87.9million comes from TV. In the Premiership the money is shared fairly evenly. Merit and individual screening payments do favour the higher achieving or more fashionable clubs but the deal is still so good that in 2010-11 Blackpool earned more from TV than Valencia, who finished third in La Liga.

To this can be added matchday income of €17-18 million and slightly more from commercial ventures. For comparison, the lowest of the six English clubs in the Money League proper was Man City, in 12th place with revenue of €169 million. However, our revenue did get us a mention in Deloitte’s report. Deloitte listed the ten clubs below their Money League and we were there, at the bottom. You can think of us being number thirty. West Ham and Everton were just above us, and Aston Villa and NUFC held 25th and 24th places respectively. We five have to be strictly “third division”.

Can SAFC make the Money League itself? Villa, West Ham and Newcastle have been there, and there is quite a bit of movement around the bottom, so the answer has to be yes.  However, as the gap between us and the twentieth club is in the region of €27 millions it would be quite a challenge. Our new sponsorship deal may help but even though Deloitte maintain we are one of the best supported clubs in Europe our matchday revenue is relatively low. We could raise prices but with what effect on attendance? Sir Niall is probably right that the improved atmosphere from a good crowd would be more important to the club than the additional matchday revenue. Being televised more and finishing higher in the league would probably be as financially beneficial as more expensive tickets or refreshments.

European qualification could bring in additional money but clubs don’t necessarily benefit from the Europa League. It’s only the Champions League which brings in the big money.

MSK Zilina, who lost all of their Champions League group matches in 2011 received €7.4 million from that competition whereas Villareal received €9 million from the Europa League, the highest amount among the contenders, and Porto, who won it, only got €7.8 million.

Europa League participation might bring other financial benefits – up to 20 more games and so on – but bearing in mind that it might require more players or wages, or impact on Premiership results it is not a guaranteed panacea for English clubs. Whether a new format will change this remains to be seen. Personally, even though I have my doubts I’d still like us to qualify.

There are some other factors to consider. Television deals are crucially important to revenue.  However, eleven of the clubs in Deloitte’s top 30 were English, and they will benefit as much as us from any new deals the Premiership negotiates. Furthermore, Germany (6 clubs) and Italy (5), the next most represented leagues, have both recently renegotiated TV deals. The Bundesliga will get income of about €500 million (doubling the previous amount) for the next four years. The position in Italy is more confused, at least to me. Serie A went back to collective negotiations a couple of seasons ago. I’m not sure how money is distributed but the total reportedly compares to payments made to the Premiership. So I don’t see TV income making much of a change to Sunderland’s place in the Money League.

Europe’s financial problems might have an impact on some clubs but I expect a limited effect. Spain, for example, where many clubs are heavily in debt to local banks and a good number owe massive amounts of tax, has only Real, Barca, Atletico and Valencia in Deloitte’s top 30.

While Real and Barca are under pressure to negotiate the next Spanish TV deal collectively as well as to repay debts they are so far ahead that even after paying off debt, clearing their tax bill and losing TV income they would still be well above us. Atletico and Valencia could drop down the MFL if they fail to qualify for Europe; they tend to oscillate in and out of the top 20 anyway.  On the other hand, sharing TV rights might see more Spanish clubs joining the MFL. Malaga, currently doing very well under a rich owner, must be prime candidates for inclusion.

This leaves only a few clubs from other European leagues and, apart from Rangers, who will surely drop out of contention altogether, downward movement elsewhere is likely to be countered by clubs under new ownership rising, much as Malaga will. Who can ignore PSG these days?

Putting all this together, it appears that events affecting other clubs will do little to move SAFC up Deloitte’s Money Football League. We have to do it for ourselves. All we need do is improve our Premiership position, win the cup and qualify for the Champions League. If we do that the prize money, matchday revenue and TV income will follow. Simple isn’t it?

Those of you who might be pessimistic about our chances might take comfort from the thought that Deloitte’s Money Football League is not only of no importance, it also doesn’t tell the whole story. It gives one side but doesn’t provide a full picture of financial health. As you’ve seen, it ignores transfers, debts and even unpaid taxes. That lot will have to wait.

 

 

 

 

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