In recent years, the footballing industry has grown immensely in stature and popularity, and this has led to a significant increase in finances, investment (including FDI), and global marketing power. The investment into top European football clubs skyrocketed in 2008 after Sheikh Mansour completed the purchase of Manchester City Football Club and invested over £1.5bn in the following years. Owners of national and European rivals, including Manchester United FC (MANU), Liverpool FC (LFC), FC Barcelona and Real Madrid CF increased their investments in line with that of Sheikh Mansour’s, to maintain a competitive sporting environment, and as a result, the elite European clubs are now financial behemoths, with hundreds of different income streams.
Since 2008, the sport dubbed “The Beautiful Game” has garnered more attention than ever before and has evolved into a commercial machine, producing some of the most recognisable sporting icons in the world. Examples include Lionel Messi and Cristiano Ronaldo, who have estimated net worth’s of £309m and £361mrespectively. The increased interest in football, coupled with the gargantuan investments made by club owners has seen the football industry grow into one of the most lucrative and stable industries in the global economy.
With global GDP forecasted to contract by 5.2% in 2020, the global economy has received historic financial consequences as a result of the global pandemic. How did the colossal European football industry fare in these unprecedented times? And in particular, what impact has the global pandemic had on the largest clubs within this lucrative industry?
According to the latest Forbes valuations, the highest valued European football clubs are Real Madrid FC (£3.2bn), FC Barcelona (£3.1bn), Manchester United FC (£2.9bn), FC Bayern Munich (£2.3bn), Manchester City FC (£2.1bn) and Chelsea FC (£2bn). Analysing these European behemoths and how well they have coped with the global pandemic will allow a clearer answer as to which clubs are suited to withstand unexpected financial disasters, such as COVID-19.
England, also known as “The Home of Football”, is home to the most lucrative domestic league in the world: The Premier League. Boasting a potential audience of 4.7 billion people and being broadcast in 212 territories to 643 million homes, the Premier League is comfortably the most-watched sports league in the world. The Premier League has also seen the value of its broadcast rights climb 8% to £9.2bn for the 2019-2022 cycle, according to the Associated Press.
Being the world’s biggest sports league, it makes sense that 3 of the highest valued European football clubs (Manchester United FC, Manchester City FC and Chelsea FC) are members of the Premier League. How have these clubs coped with the global pandemic?
Manchester United revealed their third-quarter results to 31 March 2020 and financial performance was considerably worse when compared with third-quarter results from 2019. Total revenue for the three months ended 31 March 2020 was £123.7 million, a decrease of 18.7% from the three months ended 31 March 2019. This was described as a “result of a decrease in broadcasting and matchday sectors”. The club also recorded a pre-tax loss of £28.55m between 1 January and 31 March. On 21 May 2020, Manchester United said the pandemic had cost them £28m, a figure which has likely increased since.
As for Manchester City, dubbed Manchester United’s “noisy neighbours”, they were reported to have lost out on £109.3m of income as a result of COVID-19 containment measures. This was made up of losing out on £53.6m from TV revenue, £13.9m from matchday revenue and £41.7m from commercial revenue. Fortunately for Manchester City, Sheikh Mansour’s consistent investment in the club has no signs of slowing down, having already reportedly spent upwards of £60m on player transfers in the last week. According to reports, Sheikh Mansour’s net worth still stands north of £16bn, which puts Manchester City in a strong and stable position coming out of the pandemic.
Chelsea FC were the only “Big Six” Premier League club to report an operating loss (-£2m) in 2018/19 according to Deloitte. This was largely down to a reduction in profits achieved on the sale of players by £53m and a £69m increase in wage costs incurred by the club. Whilst the figures are not known yet, it can be realistically assumed that Chelsea FC will have also struggled in the pandemic, as they have been required to postpone numerous matches and have hence lost out on monumental amounts of matchday revenue. In 2018/19, Chelsea FC were estimated to have earnt in excess of £2m per matchday, and matchday revenue represented 14.9% of their total income according to the BBC.
Both FC Barcelona and Real Madrid CF reduced player wages by 30% in a bid to cut costs during a time where Spanish lockdown measures meant fans could not attend the matches. Barcelona hoped to have saved £203m as a result of these wage cuts, and the introduction of such measures by both clubs indicates a huge decrease in revenue. In 2019, FC Barcelona saw their wage bill increase by £13.5m (3%). This increase saw their annual wage bill increase to a whopping £451.02m, which is by far the highest wage bill in European football. Such a wage bill represents a significant financial burden for a club that is already reportedly £799m in debt.
As for FC Bayern Munich, Germany’s efficient and successful containment of COVID-19 saw them return to training and play competitive football earlier than their European counterparts. However, Bayern Munich president Herbert Hainer said in an interview “When income decreases, there’s less money in circulation. And given the economic impact of the coronavirus crisis on people’s everyday lives, outrageous sums in the millions are even less justifiable than they already were”. Despite statements as such, Bayern Munich spent upwards of £45m on player transfers in July 2020, signalling a strong financial position even after negative financial effects from the pandemic were taken into account.
The global pandemic has negatively impacted many industries including the European football industry. However, large amounts of cash reserves, numerous alternative income streams, sponsorship deals and TV deals partnered with the return of competitive football has seen European footballs ‘crème de la crème’ appear in strong positions coming out of the pandemic. Financial results released in the coming months will be able to confirm or deny such statements, and it remains to be seen if smaller clubs will manage to stay afloat in a post-pandemic world.