Sports Extra
How Football Clubs Make Their Money – Five Key Facts
It would be right to say that football is an exceedingly rewarding sport, with all key stakeholders in the sport reaping benefits from it. The substantial sums of money involved in football each year raise inquiries regarding the true profitability of the sport.
How Does Football Clubs Make Their Money?
How are football clubs able to afford exorbitant transfer fees and offer enticing contracts to players consistently? This is one of the viral questions being asked by football lovers and sportsmen across the globe. The truth is that there exist various avenues through which these teams generate revenue.
These avenues encompass not only matchday earnings, merchandising, TV broadcasting agreements, player transfers, and prize money, but also rely on a team’s success on the field, which in turn triggers a chain reaction in the types of sponsorships they can secure, ultimately influencing their commercial appeal.
In this piece, Sportxparte will be highlighting five ways by which football clubs make money:
Matchday Sales
Football teams, particularly those in England, have successfully transformed matchdays into an extraordinary and almost surreal experience for their devoted fans. This is achieved through the provision of exceptional value in terms of ticket prices, as well as the availability of high-quality food and beverages. In the upper echelons of English football, such as the Premier League, teams play a total of 19 home league games each season. To cater to the needs of their loyal supporters, these teams offer season tickets, which grant fans the opportunity to purchase tickets for all home league matches in advance, prior to the commencement of the season. For those fans who are unable to afford season tickets, individual matchday tickets are also made available for purchase. It is worth noting that Arsenal, a prominent team in the Premier League, charges approximately £97 for a premium home ticket.
It is intriguing to consider that despite the fact that Arsenal has the capacity to allocate over 50,000 home tickets for each matchday, they are able to generate substantial revenue. According to Statista, Arsenal’s matchday revenue for the 2018/19 season amounted to an impressive £100 million, encompassing not only ticket sales but also income generated from the sale of food and beverages within the stadium.
Sponsorships
For prominent football clubs worldwide, this aspect holds significant importance in their revenue streams. Esteemed brands allocate substantial funds to establish associations with teams through kit sponsorships, stadium naming rights, shirt sponsorships, sleeve sponsorships, and various other forms of sponsorships. In the 2019/20 season, Manchester United boasted three sponsorships on their home kits, namely Adidas, Chevrolet, and Kohler. Adidas contributes approximately £75 million per season, Chevrolet around £64 million, and Kohler £10 million.
To the average football enthusiast, it may seem perplexing why these brands invest such substantial amounts to feature on these shirts. However, from a marketing perspective, it aligns with their strategic objectives. Manchester United is estimated to possess a global fan base of approximately 1.1 billion followers, as per a survey conducted by the club itself in 2019. The extensive reach that United offers to these brands often outweighs the financial investments they make to sponsor the club, Sportxparte reports.
Shirt Sales
Clubs are capitalizing on the sale of shirts to their advantage, as fans are eager to keep up with the latest kit releases ahead of a new season. Most clubs, particularly the larger ones, recognize the influence of signing a high-profile player to boost shirt sales. On average, clubs receive a percentage of around 7.5% to 10%.
In 2018, Juventus acquired Cristiano Ronaldo from Real Madrid for approximately £100 million. Within 24 hours, Adidas, their shirt sponsor, had sold roughly 500,000 replicas of the jersey with Ronaldo’s name printed on the back. Juventus would have earned an estimated £3.6 million to £4.8 million from these shirt sales, which, although seemingly insignificant, is quite substantial. This is a mutually beneficial arrangement for both the club and the kit manufacturers.
Printing jerseys for millions, if not billions, of fans worldwide is a daunting task for clubs. These kit manufacturers assume the responsibility of producing the shirts for the clubs and also assist in expanding their brand globally through their stores.
TV Broadcasting Deals
The commercialization of television rights is of utmost importance to the top European football clubs and leagues, as it represents the highest value in their profit and loss accounts. A complex tender process is employed, wherein broadcasters compete to acquire the rights to broadcast European football league games and become the official rights-holder of the competition. The clubs receive a portion of the broadcasting revenue due to their participation in domestic and international competitions.
The value of the best European football leagues has experienced a significant increase, as fans worldwide increasingly follow their favourite football clubs, players, and competitions. The Premier League, which currently leads the ranking, serves as an example. The formation of the Premier League in 1992 marked the beginning of a new era of broadcasting rights. The introduction of subscription-based broadcasting on Sky Sports played a crucial role in the league’s success, and this structure has since been replicated across football leagues worldwide. The Premier League’s headstart was instrumental in making it the most-watched and, therefore, the most valuable league globally.
The international broadcasting rights for the Premier League were valued at £40 million in 1992. At present, they are estimated to be worth £3.83 billion. The domestic rights for the Premier League are put up for auction every three years and are sold in six different packages. The most expensive package costs Sky Sports £9.3 million per game.
The UK Broadcast Revenue is divided into three parts. Fifty per cent of the revenue is equally distributed among the 20 Premier League teams. Twenty-five per cent is paid as ‘Merit Payments’, which is prize money based on the final position in the league table. The remaining 25% is paid as ‘Facility Fees’ which is a fee per game broadcasted.
Football Transfer Market
Arguably the most prominent indicator of the exorbitant sums of money involved in football is the reported transfer fees paid for top-tier players.
These transfer fees have continued to escalate over the years, prompting calls for stricter financial measures to prevent the market from spiralling out of control. In 1975, Giuseppe Savoldi’s transfer from Bologna to Napoli marked the first signing exceeding £1 million, while 17 years later, Jean-Pierre Papin’s move from Marseille to AC Milan became the first seven-figure transfer. With the influx of money into the sport during the 1990s, transfer fees began to skyrocket. In 1996, Newcastle shattered the transfer record by acquiring Alan Shearer for £15 million, only for that record to be more than doubled just three years later when Christian Vieri moved from Lazio to Inter Milan for £32 million. Zinedine Zidane’s £46.6 million transfer to Real Madrid in 2001 stood as the record for eight years until Real Madrid surpassed it twice in the summer of 2009 with the signings of Kaká and Cristiano Ronaldo. Just eight years later, the transfer fee record was once again more than doubled, as Neymar’s transfer from Barcelona to PSG reached a staggering £198 million.
As transfer values continue to rise, so does the value of clubs, as their assets become increasingly valuable.
In Conclusion
The potential for generating revenue in football for clubs is virtually limitless, as there exist additional sources of income such as transfer market transactions, prize money, and merchandise sales.
The contemporary football industry has become highly commercialized, prompting clubs to spare no effort in achieving outstanding results on the field, which enhances the overall viewing experience of their supporters and ensures a steady flow of funds.
