The Sustainability of Football
Soccer today is no longer merely a popular sport, it is an industry capable of generating a yearly turnover of over €25 billion in Europe, €3.6 billion in Italy only. This requires football clubs to face new challenges and factor in sporting and management aspects simultaneously. A change is already underway in the business model of the main football franchises, following the introduction Financial Fair Play regulations, so that there is a greater concern for financial aspects, especially in consideration of the fact that Italian football teams have accumulated €5.2 billion in debt as of last year.
A few months ago, the short-lived initiative to set up a Super League brought to light a well-known problem, namely the need to rethink both the distribution of television rights and the format of the current Champions League, which has become obsolete and unattractive. In spite of the uproar the initiative caused, the Super League project brought to light the need to develop an overall strategic vision, with the aim of maximizing the revenue pie and developing a sustainable approach to the game from in terms of finance and cost rationalization. Furthermore, since football clubs take entrepreneurial risk on themselves, they should be able to have greater involvement in the governance of the tournaments in which they participate, in order to better monitor the fan experience, the environmental impact of the business, financial sustainability and media rights management. At present, without these changes it is extremely difficult to plan for development strategies that, especially in the most important football clubs, call for large investments in the long term, as also stated by the president of Juventus Football Club Andrea Agnelli, one of the sponsors of the Super League initiative, on the occasion of a speech at Bocconi University.
Having said that, the importance of results on the field cannot be overstated, as the market appreciation is based on them and so is the potential for greater earnings through capital gains in the sale of players. The sustainability of this business model, still prevalent in small and medium-sized clubs that cannot diversify their revenue sources, also raises questions following the recent investigation launched by Covisoc on the capital gains accrued in the past two years in the context of transfers of some players between Serie A teams. It should be noted these are not "illegal" operations, but a market tool widely used to by Italian teams and replicated throughout Europe. The criticism that is leveled at the football system in general is that players can be valuated to worth major figures that are apparently not validated by fully demonstrable sporting reasons. The basic problem from which to start, however, is perhaps another: who can say what the objective price of a player is, being the latter determined by the subjective match between supply and demand? In this case, the tools of finance and corporate valuation principles can make a valuable contribution.
The overlap between football and finance is also evident in the recent trend of private equity funds investing in the football industry: after negotiations with Serie A went nowhere, CVC signed an agreement with Spain's Liga in August which provides for the sale of 10% of the Spanish football league's commercial rights to the private fund for 2.7 billion euros. Another investment was the sale of Genoa to the US financial holding 777 Partners last September. Alternative financing instruments, such as Minibonds and Kickbonds, are met with growing favor by clubs, although they do not always bring the desired results. In this regard, we should recall the InterSPAC initiative launched by Carlo Cottarelli for the development a major stake controlled by fans at the Milanese team.
In conclusion, it is essential to understand the main value drivers of football clubs, the extremely complex regulatory framework within which soccer franchises operate, together with the main managerial and business issues that characterize them, in order to facilitate the development of new and financially sustainable management models that are capable of involving all of the game's stakeholders.