How do football clubs run as a business model in the modern era?

Besides being the greatest sport in the world, football is largely becoming a business hub for billionaires. The rise of Chelsea and Manchester City in the past few years are successful examples of billionaire takeovers. Many may argue with football being used as a front by billionaires to cash in money. 

Football’s growth and influence all over the world also serve the purpose of globalization. Clubs run as a business that involves investment such as stadium, players, etc. In return achieve their goals with huge profits as the revenue is covered by ticket prices, merchandise, sponsorship, and broadcasting rights.

Image Credits: myfrugalbusiness.com

The major factor that separates big and successful clubs from small and unsuccessful clubs is risk. Clubs have to take the risk by spending money on top players in expectation of an increase in fan following, shirt sales, packed stadiums, and also help the team grow over the period. Lionel Messi and Cristiano Ronaldo’s influence over their new clubs (PSG and Man Utd) can be seen all over the world. 

Clubs take the risk by bringing in players to improve the overall quality of their squad to compete and win big competitions, Champions League, and domestic league. Clubs also invest in rebuilding stadiums which returns huge revenues when ready to play in. Barcelona’s Camp Nou rebuild in 2022 will last for up to two years, but the new project would earn the club 200 million annually.

But as we know, there will always be a time when things won’t go the way you expected them to. Unsuccessful clubs fear financial failure when revenues don’t match the expected expenditures. Many transfers fail miserably, and clubs find themselves in difficult situations as many fail to compete with others. 

Teams that face relegation or get knocked out of club competitions are unable to attract fans or players as the club loses its prestige year by year. Significant underperformances in terms of performances based on wages cause losses which tend to grow over seasons if not handled properly. The recent Ousmane Dembele-Barcelona saga is a good example.

Clubs also face penalties from their sponsors when they fail to reach certain objectives they approved of while signing their agreement. Qualification to Champions League remains the most common criteria for top clubs. Club managers are also given certain objectives to fulfil and are awarded or discarded based on their performances over the season. 

Image Credits: sqaf.club

UEFA has introduced a new system of ‘Financial Fair Play’ to limit clubs from spending loads of money on player salaries and transfers. However, it’s still not clear how clubs like PSG and Man City pull off big-money signings without violating any rules. Many big clubs that attract Europe’s biggest audiences also felt unsettled with UEFA’s system of distribution of revenue.

To overcome this problem, Real Madrid President Florentino Perez introduced the idea of the European Super League as an attempt to shift the revenue system back in favour of major European clubs. All the members would be guaranteed to play each other, increasing the number of big-name clashes that draw large audiences. 

However, Premier League clubs backed off pretty quickly due to rising tension around the club facilities. UEFA threatened to disqualify clubs if they agree to re-join the Super League in the future. Despite such warnings, Barcelona, Juventus, and Real Madrid stayed calm and still have plans for ESL for the future.

Image Credits: skysports.com

Despite facing a huge backlash from fans all over the world, Florentino Perez has huge plans for the future, which would eventually change the whole overview of European football. The 74-year-old has made decisions that looked controversial, but as time passed, those decisions proved to be vital for the club.

Cristiano Ronaldo’s transfer from Real Madrid to Juventus raised eyebrows as Ronaldo was expected to retire in the capital of Spain. Perez and Cristiano also shared a bittersweet relationship, and when Juventus offered £105 million, Perez accepted the transfer fee considering Ronaldo being 33. Real Madrid struggled in their initial season after Ronaldo’s departure, but after two years, they are one of the best teams in Europe again.

Real Madrid will also complete their renovation of the new Santiago Bernabeu stadium in the summer, adding more to the revenue stream as the club looks set to complete its rebuild. A new stadium with new superstars will bring in a huge increase in revenue and fan following over the world. Many questioned his decision of letting go of Cristiano Ronaldo, but Perez has rebuilt the squad for the future.

Leave a Reply

%d bloggers like this: