Have you ever asked yourself how do soccer clubs make money? Let me clue you in!
More than 1 Billion People watched the 2014 FIFA World Cup Final, that is one out of every seven people in the world!
Clearly, soccer is the most-watched sport in the world. The fanfare that surrounds the game is unprecedented.
But besides being a sport, soccer is also a business. And a good one at that.
There are hundreds of expenses a club has to endure to bring the best product possible to the fans. And so, having sufficient income is pivotal for the big clubs.
They can not rely on matchday revenue alone anymore to make them enough money. And so, several interesting streams of income have emerged over the years.
What that has done is made certain clubs richer while others have struggled to keep up. All in all, finances in the soccer world have become an interesting topic that needs to be explored further.
That is exactly what we shall try to do in this guide.
There is no better place to start than matchday revenue. It is the conventional way in which a club remains profitable.
It consists of the money earned by clubs through matchday ticket sales, hospitality, and other avenues like food and drinks used for generating income.
During the inaugural Premier League season, matchday revenue yielded 43% (89 Million) of the £205M revenue. Of course, that sum has decreased to about 13% as clubs generate revenue from different sources.
Matchday revenue has also been decreasing globally with the top 20 highest-earning football clubs getting just 16% of their revenue from matchday income in 2018/19 compared to 20% in 2013/14.
The obvious reason for that seems to be the broadcast experience improving every day and people finding it tough to visit their favorite club’s stadium every week.
Moreover, the matchday experience has become quite costly and so many fans tend to prefer the virtual experience to the real thing.
Also, matchday income depends a lot on the capacity of the home grounds. So the likes of Real Madrid and Barcelona can earn way more than clubs with a 30 or 40,000 seater stadium.
This is also why many clubs try to expand their seating capacity. But that too is a double-edged sword.
Unless a club luck out and find a wealthy billionaire, any expansion in the seating costs hundreds of millions, and that has to be compensated from somewhere.
What ends up happening is the ticket prices increase significantly much to the disarray of the fans.
Moreover, matchday revenue also depends on the individual circumstances of clubs and the countries they play in.
For example, Bayern have a considerably lower matchday revenue compared to other top clubs despite a world-class stadium like Allianz Arena.
That is because the ticket prices generally are lower in Germany. Of course, Bayern compensate that through other streams of income.
The COVID pandemic has further limited matchday revenue for football clubs as the entry of fans in football stadia has been limited considerably.
What that has led to is a decrease in a major income source and the expense of maintaining the condition of the ground as well.
Premier League Clubs reported a loss of around £540 Million from the lack of matchday revenue coming in.
And the challenge for various clubs is that this trend may continue in 2021 and beyond as the world still comes to terms with large public gatherings like those on a matchday.
Clubs like Real Madrid have dealt with this loss or matchday revenue by playing their home games on their training pitches.
This shift has reduced the maintenance expenditure on the Bernabeu and given Madrid the opportunity to renovate the stadium.
Clubs like Arsenal on the other hand have been hit the hardest after the COVID pandemic’s impact on matchday revenue.
This is also a challenging time for clubs who depend on their fans primarily to keep them in business. For them, matchday income and ensuring matchday attendance is critical to their survival.
So in the immediate future, they may have to look at other avenues of making money.
The commercial revenue is the most important source of revenue for the top clubs in the world.
The top fifteen clubs in the Deloitte Football Money League have made commercial revenue the greatest source of their income. While the clubs below the top 15 depend more on the broadcast revenue.
And while broadcast revenue is often regulated by authorities, commercial revenue truly is the income source with exceptional potential for the biggest clubs.
It includes revenue streams like sponsorship, merchandise, foreign tours during the off season, and other such profitable operations.
Often, broadcast and commercial revenue go hand in hand. As matches are broadcasted throughout the world, the best performing teams acquire new fans every day.
These loyal fans tune in regularly to watch their favorite teams play. And naturally, this presents an attractive opportunity for brands to collaborate with these clubs to advertise their products to the fans.
Just take the Adidas deal of Real Madrid. The merchandising enterprise made a deal of reportedly €1.1B when they extended their partnership with Madrid till 2028.
So at this stage, every big club is a valuable asset to sponsors and clubs get mind-boggling amounts of money from these companies.
The blueprint of growing commercial revenue is the same as growing any other source of income, creating greater on-field success to grow the brand.
After all, that is how the biggest brands collaborate with clubs as they find them marketable and successful operations.
So Real Madrid with their three consecutive Champions League wins from 2016 to 2020 increased their revenue by 41% in five years.
But that is not all. Commercial revenue is also a measure of the brand value of a club.
So while Manchester United may not have had a decent spell from 2016-20, they were still able to make a revenue growth of 21%.
That is because of the brand value United has acquired globally ever since the advent of broadcasting. A lot of the credit of course goes to Alex Ferguson and his all conquering sides.
One of the most important sources of income for most clubs is the broadcasting revenue.
This source of income arises as TV channels pay the league authorities to show the matches of that league.
This revenue is then divided by the authorities among the participating teams of the competition.
So unless a club is a huge global brand, broadcasting revenue is the major source of income for most clubs in the top tiers of European leagues.
After all, for Premier League clubs like Burnley or Sheffield United, broadcasting revenue may be about 60-70% of the total revenue of the club.
But for a club like Manchester United, broadcast revenue is about 38%. That is because they have developed other sources of income.
The reason why this revenue source is so relevant is the exceptional growth of this market as more broadcasters acquire rights to show the major leagues.
When we think of the Premier League, the clubs received a total of £2.46 Billion in 2019/20 which was then divided among the clubs equally. The astounding fact is that this figure has grown to its present value from £953 Million in 2010/11.
This equal distribution of broadcast revenue has increased the financial muscle of mid-table Premier League clubs and has made the league more competitive as well.
That is because clubs do not have to rely on selling their best players to make money as the broadcast revenue helps them stay in profit.
The situation is similar in the Bundesliga where Bayern get around €65M from the TV deal while a team like Fortuna Dusseldorf get about €25M.
The reason for the unequal division is the contribution of each club to the broadcast revenue. So understandably Barcelona and Real Madrid are the most-watched teams of La Liga and their games are the main pulls of the broadcast revenue.
But the argument exists that for a team like Real Valladolid, getting extra money from the broadcast revenue could be a huge boost.
And this added income could help these clubs improve and ultimately make La Liga more competitive.
On the European stage, you get more money as you advance in the competition. So if a team reaches the knockout stages and goes further, its share would be more than a team knocked out in the group stage.
So in several instances, broadcast revenue is beyond a teams control, while in other cases, like the cup competitions, it may be influenced by on field performances.
If a club has a small stadium, does not have a huge global brand, and only gets a small chunk of the broadcasting revenue, then how can it survive in the tough economic climate?
Well one solution could be player sales. It has become a successful income generating model for various clubs as they sell their greatest asset- the players for huge fees.
Over the years, clubs like Borussia Dortmund, Valencia, AS Monaco, and Ajax have bought or groomed young players for marginal fees and then honed their skills for a few years.
Later, they sell them for huge profits to the best clubs in the world. This is a financial model that helps self sustaining clubs stay competitive while remaining profitable.
For example AS Monaco made a net profit of around €319M by selling Mendy, Mbappe, Bernardo Silva, Fabinho, and Thomas Lemar for much greater prices than they were bought for.
But understandably, there are shortcomings in this method as well. That is because when clubs follow this model, they need inflated values of their players.
But as clubs hold out to sell their players at the best possible fees, their contracts start running out too.
A club like Arsenal sold some of their most bankable stars for cheap because of their expiring contracts.
The case of Lewandowski is no different. He chose to run down his contract at Dortmund to move to Bayern.
In this way, Dortmund could not receive a fee for a world-class player. This fate should be avoided by clubs going down this route of raising money from player sales.
The Top Clubs in the World
So with all these major streams of income, let’s see how clubs at the top of the pile are doing with regards to their finances.
The source of all this information is the famous Deloitte Football Money League report which is an annual report that breaks down the revenue of the top football clubs.
In the latest 2020 edition of the report, Barcelona, Real Madrid, Manchester United, Bayern, and PSG made the top five.
What needs to be touched on is that this report covered the 18/19 season and the findings reflect the performance of clubs during that period.
That of course means that the aftermath of the COVID crisis is not covered in this report.
Also, this report does not cover the income generated from player sales and majorly covers broadcast, commercial and matchday income.
FC Barcelona top the Money League becoming the highest revenue generating football club in the world leaving Real Madrid behind.
They are the first club ever to go through the €800M barrier making a gross revenue of about €840.8M.
And the best thing is that they are on the track to become the first-ever club to raise €1B from revenue.
Now while one would assume that they would have suffered from the up and down form on the pitch and the sacking of Valverde, things seem to be going well for Barca financially.
Representatives from Deloitte believe that this increase in revenue is due to Barca maximizing their commercial revenue by taking more control of it into their own hands.
They are doing licensing and merchandising in house which makes it a major source of commercial revenue for the club.
So while the matchday income had a small increment of around €14M, commercial revenue went up by around 19% which is exceptional for Barca.
That is because it is a source of income completely in their control. It reflects how profitable a club can be on a consistent basis.
But to truly keep themselves at the pinnacle of the Money League, Barca must bring more consistency in their on field performances.
And for that, they need consistency in the board, with many decisions at the club being halted due to the upcoming presidential elections.
Whoever wins must aim to keep the financial growth going while also improving on field performances.
2018/19 was the first year for Real Madrid without Cristiano Ronaldo. And the sporting and financial metrics show that they did not do so well.
The financial growth was borderline with a profit of just €6.4M compared to €76M last year and displaced them to second place behind Barcelona.
Why did this happen? Well first and foremost on-field performances dipped following the exit of Cristiano Ronaldo. This led to a decrease in commercial revenue from winning competitions.
The broadcast revenue has also been below par as they rank 6th in the Money League broadcast revenue despite being 2nd overall. That is because they could not reach the latter stages of the Champions League and were eliminated in the Round of 16 of the competition.
A player like Cristiano Ronaldo also attracts a significant amount of viewership. This is reflected by the significant growth in revenue of Juventus who took home a profit of around €65M after signing Ronaldo compared to an €11M loss the previous year.
But with a financial powerhouse like Madrid, things may not continue to remain that bad. And if they can ensure the adequate use of their other streams of income, they will be sure to make a lot more profit in the coming years.
One such source has to be their exceptional social media following. They are the most followed football club on Instagram, Facebook and Twitter which is a huge asset if they can make use of it.
What they could do is offer subscription based content and exclusives to their social media followers.
But more than that, sporting success is the best way for Los Blancos to beat Barca in becoming the first club with one billion euros in revenue.
And for that they will have to improve their squad and perhaps get one or two marquee signings to replace Cristiano Ronaldo and the aging core of the side.
Manchester United has a global brand unlike any other English club. They remain the top English club in the Money League too with revenue totaling €711.5M.
They have seen an increment this year moving their revenue up from €666M to the present value.
Part of it is due to the return to the Champions League where they reached the Quarter Finals.
And while a managerial change meant they finished in sixth place, the revenue from the Champions League was enough to grow the broadcast income from €230M to €274M.
In the future, United face stiff competition from other English clubs breathing down their necks in the Money League.
Arch-rivals Liverpool and Manchester City are quite close, being in 6th and 7th place respectively.
And while they may not have the same global appeal that United possess, they are doing much better on the pitch which should translate to an increase in revenue in just a few years.
For a club like United, most commercial deals run for the good part of a decade, so there is enough revenue to work with for improving on-field performances.
The current European Champions sit comfortably at 4th place in the Deloitte Football Money League.
There has been a rise in the revenue of about €30M which shows the fact that the club is going in the right direction.
Another reason for this rise is the greater broadcast income generated this year as they got a bigger contribution from UEFA.
The exceptional treble-winning performance of Bayern in 2019/20 is sure to improve their financials further after taking into account the universal hit all clubs would take from the COVID pandemic.
And since the matchday income of Bayern is only 14%, they can surely cope financially with the closure of the Allianz Arena in the near future.
The financial might of PSG is slowly beginning to reflect in the Money League. The club has adapted new ways of increasing revenue and the appeal for its merchandise made by Nike Jordan is shooting up.
The club’s revenue went from €547.1 million in 2018 to an impressive €635.9 million in 2019.
New kit sponsorships deals with Accor live limitless and Rwanda Development Board have made sure that the expected commercial revenue goes up further in 2020.
Playing the Champions League final in 2020 is also sure to be a revenue boost in the coming year.
As for their transfer dealings, PSG have adapted to the FFP constraints they face and have started to make shrewd signings of players that allow their stars to shine.
The appointment of Mauricio Pochettino should also help their finances a lot after Tuchel struggled in Ligue 1.
A slight cause for concern for PSG might be the Mediapro LFP broadcast deal that fell out recently leading to a decreased broadcast revenue for French clubs.
But as discussed previously, a club like PSG can still earn from its commercial revenue and player sales if needed.
The major revenue sources for clubs include commercial revenue, broadcast revenue, matchday income, and money from player sales.
Clubs that explore all sources of income are financially smart and are not hit hard when one revenue source fails to deliver.
And while clubs like Barcelona and Manchester United have maximized their commercial revenue, there is nothing more effective in improving a club’s revenue than on-field performances.