owning and running a football club is
difficult and expensive there are plenty
of alternative businesses that are
easier to run and often far more
lucrative too which begs the question
why would anyone want to buy a football
club structurally the economic model of
a football club poses many challenges
take revenue for instance there are two
major issues with Revenue generation of
football clubs firstly the revenues are
volatile this means that they fluctuate
heavily from one year to the next
particularly when a club qualifies for a
continental competition or experiences
relegation or promotion broadcasting
income in particular is very volatile
the premier league has a relatively
equitable distribution of broadcast
income and also has the best TV deals so
Premier League clubs are slightly more
insulated but for clubs such as PSG and
Bayern Munich with weaker domestic
broadcasting deals the revenue that
comes from European competitions is
Paramount and can amount to between 50
and 80% of total broadcasting Revenue
this is of course highly sensitive to
team performance one bad day in a
crucial Champions League game can
literally translate into millions of
Euros of lost income this is not the
case in most other Industries where
there are stable reliable bases of
recurring revenue and second on the list
of challenges Revenue growth
opportunities are limited ticket prices
are regulated in some countries for
example and Stadium expansion
necessitates massive investment for that
reason it can't happen frequently and
either way there's only so big you can
make a stadium so Match Day income is
structurally limited broadcasting or TV
deals last for 3 or 4 years and the
Quantum of increase to each renewal has
been reducing in fact TV deals in some
top five European leagues have seen
downward revisions recently plus owners
have a limited amount of control in this
area anyway commercial deals present the
only real recurring Revenue growth
opportunity and it's also arguably an
area where investors and owners think
that they can do more all said and done
football club growth even for the best
and biggest Taps out at between 8 and
10% annually this is already much lower
than many other Industries and crucially
this is for the very best football clubs
the average growth would be much lower
next on the cost side both player wages
and transfer fees in a free market
continue to rise exorbitantly and The
Winner Takes all nature of football
means that club Owners often think
investment is imperative to stay stable
this means football is structurally
becoming less and less profitable as a
simple example if a club pays 100
million EUR for a striker and they don't
hit the ground running then that club
will potentially be in the market for a
new striker in the next window any club
they approach to buy the new Striker
will now think that their Striker is
playing better than the one that they
just spent 100 million EUR on and will
attempt to extract an even bigger fee
for that player thus in a way each
exorbitant transaction sets a baseline
for subsequent transactions making
transfer spending prohibitively higher
each season and players are not
oblivious to this they see other players
signing on high wages and attempt to
drive up their own wages at the next
contract negotiation and agent fees make
things worse because agents are
structurally incentivized to drive up
transfer fees and wages the implication
of this is most football clubs are not
profitable in fact over the last 10
years from the 20123 season to the
2021-22 season only three Premier League
clubs cumulatively made a profit after
tax namely Tottenham Hotspur liver pool
and Burnley even treble winners
Manchester City made a 103 million loss
over that time and if this wasn't all
enough cash flow is another structural
issue for clubs high wages and transfer
fees necessitate cash and a football
club's two biggest assets are the
playing Squad and the stadium which are
structurally relatively IL liquid
meaning that they can't as easily be
traded for cash this means that football
clubs often seek debt to pay off wages
and transfer fees or to invest in
stadium development because their cash
reserves are too low to cover it this
debt often comes at a high interest rate
since traditional Banks don't want to
lend to football clubs because as we've
discussed in detail they are
structurally bad businesses and banks
are worried about their loans being paid
back so why then do owners and investors
continue to hold an interest in football
what are the opportunities that they're
seeing beyond the hubris and sport of it
all well there are a few things that are
worth noting firstly price football
clubs are loss making de debtrid
entities such entities are often not
expensive buy cheap turn it around and
you could make a handy profit second
brand associating with the football club
can have a rub-off effect on a parent
brand the publicity can drive business
elsewhere not to mention that it's
unusual to find a business boardroom
anywhere in the world without at least
one football fan being able to entertain
clients or potential business partners
at your very own football club is
probably a Charming thought for many
potential owners and third commercial
potential and football remains
relatively untapped compared to some
American Sports for example this might
explain why American owners have been so
interested in football clubs over the
last few years and all of this means
that despite the inherent challenges
football club ownership remains an
attractive proposition for some even if
it's not the most attractive industry
from a purely business
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