The Economics of Performance in Top-Flight Football

European football has become increasingly expensive, with many club revenue streams failing to keep pace. UEFA’s introduction of tighter financial regulations makes European football a challenging landscape to navigate. Breaching UEFA protocol carries consequences, and this has forced clubs to rethink revenue maximisation strategy. League appeal, however, remains crucial for commercial potential.

Euromonitor International’s Passport Sports is a database that brings together the ingredients to identify commercial performance in professional sports and highlights opportunities for both sports properties and partners.

Click on the image below for an interactive preview of the data that compares the commercial performance of top leagues and teams in North America and Europe.

European football economy regulations: the FFP rules

It is a brave new world for European football clubs aiming to succeed commercially, following the introduction of FFP rules, which set out clearly the sources of revenue and expenses for European clubs.  For instance, breaching the UEFA FFP may result in measures that include fines, withholding UEFA competition revenues, points deductions for the domestic league, prohibition on registering new players for UEFA competitions, restrictions on the number of players registered for UEFA competitions and possible disqualification from future UEFA competitions.


Two-thirds of the top clubs failed to meet sustainability criteria

Of the top 20 clubs by total revenue in the world, just six had a positive total revenue / transfer expenditure ratio after the July-August 2017 transfer window. Ten clubs had a minor negative, and three clubs had a significant negative ratio. The major negative ratios of the three clubs could result in regulatory breaches of the UEFA FFP if the imbalance is left unaddressed.

AC Milan and Real Madrid are at the opposite extremes of the 2017 market sustainability ratio. Not only does Real Madrid generate higher total revenues, but it closed the past two seasons with a positive operating income, and had a positive market balance for the 2017 summer transfer window.


The growing importance of UEFA Champions League revenues

The fixed revenues for clubs reaching the final stages of the Champions League have increased significantly in recent years. Between the 2011-2012 and the 2016-2017 seasons, the prize for reaching the group stage increased from EUR7.2 million to EUR12.7 million (+76%), while the prize for the winner of the cup rose from EUR26.7 million to EUR48.2 million (+81%).

Europa League revenues have grown too, albeit from a smaller baseline, with prize money for the winner rising from EUR17.2 million to EUR40.65 million (+136%). Tightened financial controls mean that, for clubs, prize money is playing a more important role than ever before. This figure is likely to grow, especially for clubs that reach the highest stages of the competition.


Performance remains key driver for club revenues

For the top-flight clubs, the better the club performs, the higher the total revenue generated. However, the opposite may occur. Manchester United, for example, ranked among the lowest performers but generated the second highest revenues. On the other hand, Juventus recorded a performance score five times higher than that of Manchester United but saw just half the revenue of the English club.


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