European Super League: Football turns back from its own missile crisis

THE GREAT game was staring into the abyss, an attempt by big business to mould football into something that fits nicely in a portfolio of assets. But the instigators, shadowy figures tucked away on ranches or sitting high in Manhattan penthouses, underestimated the power of the product, the will of the people and the rich heritage that is indeed far richer than the cultural savvy and sensitivity of Wall Street barons in expensive suits with gilded lifestyles. Football has never been a culinary feast, but the bitter taste in the mouths of thousands of players, managers and supporters has never been so acrid.

And so, the putsch-type coup failed, for now. Maybe the clubs realised that without fans, their product would soon be meaningless. And without the public’s support of TV deals, merchandising, media interest and money, football would eventually be as unemotional as the covid-induced, sanitised closed-doors game we have witnessed over the past year. If anything, this period has raised awareness of how crucial the game is to so many people, their routines destroyed by a virus, their links to their clubs being compromised on a daily basis. This was no time to test people, even though they probably thought that fan-free stadiums may mean less abuse, protests and questioning. They were so wrong and misguided.

Delusion

The nonsense being spoken by those with self-interest at heart just adds to the fury of the masses. Real Madrid president Florentino Pérez claims he was not worried about anyone leaving the cartel and insisted young people are no longer interested in meaningless games. What an insult to the people and to Real Madrid’s La Liga rivals. Young people’s attention span may have changed, but essentially, they are being priced out of the game. With incomes declining over the past decade, waiting lists for tickets at some clubs and alternative ways to watch football, it may be true that young people have a different perspective, but this doesn’t mean the product is at fault. Perhaps Pérez should wonder if his own club’s digital offering, which has been very successful, is actually contributing to that problem. Or maybe they have literally become spoilt by success? Pérez and others fail to realise that a European Super League will have winners and losers – Arsenal versus Tottenham, with both teams at the bottom end, may become as unappealing as Huesca versus Getafe. It is all relative.

It was clear where the appeal was for the likes of Perez, the Glazers, Kroenke and FSG. Dr Peter Dawson of University of East Anglia, believed the super league raised a number of pertinent issues. “The attraction for the big clubs is that they can play other big clubs more frequently and, at least for the founder members, there is no threat posed by relegation. This becomes closer to the franchise system (closed leagues) that operates in the major North American sports. This creates more certainty from a business perspective and probably more demand if there is an appetite among consumers to watch the top teams play each other more often,” he said.

Dawson highlighted the negative impact of a cash-rich super league on domestic competitions. If, for example, the super league members were allowed to continue in their home leagues, then the financial advantages would serve to make the Premier League, La Liga and Serie A more uncompetitive than today. Without these clubs, the danger is that the domestic leagues will be less attractive from a business perspective. 

Brands

But it would not have been all milk and honey for the super league members, claimed Brand Finance. The London-based consultancy estimated the brand values of the founding clubs would lose a combined value of € 2.5 billion, rising to more than € 4 billion. Furthermore, they calculated the annual loss for the founders would be around € 1.1 billion in revenues. And the brands themselves would suffer significant reputational damage.

Even though the super league appears to have been abandoned, reputational damage may still hangover the 12 clubs in the near-to-medium term future. That won’t necessarily peak until fans return to the stadiums, which may still be some time away. 

Brand Finance also pointed out that an attempt to reach new markets like China and the United States may not have had the desired outcome. Their research over the past few years indicated that in both countries, the most popular leagues are their domestic competitions, suggesting the markets are maturing. David Haigh of Brand Finance cautioned: “If the ESL founding clubs saw the Chinese market as a vacuum available for them to fill, they will be in for a nasty shock when they discover there’s only one true ‘super league’ in China.”

Deep down, it is hard to believe anyone thought this audacious attempt to bring about the Disneyfication of top level football would succeed. At best it seemed like a bargaining tool, a threat to the governing bodies to squeeze more money out of the game. Let’s be frank, the Premier League was one of the first examples of such a tactic. At worst, it looked like a cynical, greed-driven tactic to divide and conquer. The way it has developed over a very short timeframe is really a massive own goal for the 12 clubs. They have not only lost their deep and rich gravy train, but their reputations are in tatters. UEFA and FIFA now have some moral high ground, despite their own shortcomings. 

It may take some time for clubs to repair their images. Certainly, club owners will have to demonstrate their sincerity and sorrow at trying to dismantle the world’s most popular sport. If the pandemic brought to a head the poor business management of many, many clubs, then please get your house in order – do not try and tailor the game around sub-optimal practices.

Now is the time for UEFA, FIFA, the Football Association to introduce new standards for ownership. Clubs are assets of public value and should be treated accordingly. They are not banks, hedge funds, private equity funds or even North American sporting franchises. Mr Owner, if you don’t like that, it is time to invest somewhere else. To the governing bodies, the message is fairly obvious – do not waste this moment, for the matter may not be dead.

@GameofthePeople

Photo: ALAMY

Real Madrid still a “unique club” as pandemic squeezes the purse

AT first glance, Real Madrid’s 2019-20 financials do not appear to be too troublesome, but with a major redevelopment plan for the Bernabéu Stadium in progress and a higher level of net debt, a 6% drop in revenues to € 715 million is arguably the start of the club’s near-term challenges. With expenses at a massive € 680 million, the club made a modest net profit of € 300,000 versus € 38 million in 2019. 

Real Madrid have already implemented significant spending controls to try and reduce the risk of unsustainable debt, including a cut in players wages. In 2019-20, despite agreed reductions, Real’s football wages still rose by 5% to € 378 million, which amounts to 53% of income. 

Hurdles

Real Madrid’s management, hinted at their Ordinary General Assembly (OGA) that some difficult times were ahead for the game: “The pandemic has changed life as we know it”, said club president Florentino Pérez. “We’re faced with an unprecedented situation which would have been impossible to imagine and which has had a serious impact on every facet of society and of course, the world of football.”

Interestingly, Pérez called for a reform of European football to make it more competitive and exciting. It was clear he was referring to the much-discussed and controversial super league.

Pérez also claimed there is an element of bias against Real around TV coverage and punditry, a comment which drew criticism from La Liga President Javier Tebas. “I think the president of Real Madrid is getting very distracted by the matter of the European Super League, they should inform him better,” he responded.

The current global crisis comes at a time when Real’s squad needs reinforcements with a number of key players at the veteran stage of their career. This is a problem Real knew was coming a long time ago: Luka Modric, Sergio Ramos, Toni Kroos, Nacho, Marcelo and Karim Benzema are all over 30 and although younger players are now being introduced, these players have limited upside and are undoubtedly expensive.

Ramos looks bound for Paris Saint-Germain and Modric has had a year added to his contract, but other members of the “old guard” have at least a year on their contracts to run. 

Funding

Although Real’s January window activity might be forcibly muted, there is still talk of them trying to lure Kylian Mbappé and Erling Haaland to Madrid in the summer. With these two young strikers valued at up to € 400 million between them, Real will need to source the funding of such lavish acquisitions. Their net spend in 2019-20 was € 184 million, some € 60 million more than 2018-19. It is likely to be lower in 2020-21, which means players will have to be sold to fund any headline-making purchase. In both of the last two seasons, they made over € 100 million on player sales. Ramos and Isco look like being the first players to leave.

Real’s spending limits, like their rivals Barcelona, have been cut significantly, a drop of 27% to € 555 million (Barca is down 43% to € 454 million). Barca’s net debt position is far worse.

Real’s income was obviously compromised by the ban on fans on matchdays, resulting in the revenue stream dropping by 20% to € 116 million. Broadcasting, too, suffered, falling by 11% to € 231 million. Real’s strength – boosted by their 230 million global fans – was in their commercial income, which rose by 4% to € 369 million. This now contributes over half of the club’s total revenues.

Financing will bring the overall cost of the Bernabéu transformation to around € 800 million. During the pandemic, Real have been playing their home games at their training complex. Investment in the project has so far totalled € 113 million, with € 100 million drawn from the loans.

The club has no shortage of people wanting to lend them money and they have secured long-term financing that includes four loans totalling € 155 million with a maturity of five years and € 50 million over five years. Cash has come from five Spanish banks. Net debt at the club has risen by almost € 200 million to € 118 million. For the past four years, Real have been in a negative net debt position which meant they were able to pay-off debts and spend more freely in the market. 

Real said at their OGA that the club has solid liquidity with a net worth of € 533 million and a treasury of € 125 million (as of June 30).

Loss

They have already forecast revenues will drop again in 2020-21 to around € 617 million, which would be € 300 million higher if not for covid-19. Of course, if the fans return, that could all change, but they are already bracing themselves for a € 90 million-plus loss.

In the meantime, Real are defending the La Liga title they won in 2019-20. They are currently chasing a resurgent Atlético Madrid but are well ahead of troubled Barcelona. They are still in the UEFA Champions League and will face Atlanta in the round of 16. 

As for coach Zinedine Zidane, there have been rumours he is feeling the pressure of the immense work load. Like so many high-profile coaches, Zidane’s role is discussed on a weekly basis, game-by-game and the narrative changes all the time. He has an uncanny knack of producing job-saving results just at the right time. 

Just before Christmas he was, allegedly on the brink of being sacked but in the past fortnight, he is refusing to commit himself over his future. Ultimately, it won’t be Zidane who decides if and when he leaves the Bernabéu.

Pérez offered a cautious note about the year ahead at the club’s OGA: “We’re heading into a difficult reality, the consequences of which are still unknown at this stage. We all know we’ll have to travel a long path full of obstacles, facing up to this adversity, but we’re a unique club, one that never gives in.”

@GameofthePeople
Photo: PA Images

1005 Words

World Football League – driven by greed, not excellence

WHEN  a financial institution becomes involved in discussions about the future of football, it doesn’t sit very comfortably. It will undoubtedly be good for accountants, lawyers, bankers, intermediaries and the main protagonists (in other words, the clubs in the driving seat) but for the future of the game and the eco-system that supports it, questions have to be asked about the intentions of the parties involved.

The financial crisis of 2008-09 taught us many few things – that some financial firms are systemic and vital for the stability of the global economy, that governments and banks are indelibly linked and the pursuit of profit often clouds judgement. Regulators have since tried to rein-in reckless bankers, but the very ethos of financial services is, let’s be clear, to make money.

CVC Capital Partners is a big name in private equity and they have an interest in sport, notably Formula 1 and Rugby Union. The Luxembourg-based company has around US$ 75 billion under management. CVC is already talking to FIFA about the commercial rights of the expanded Club World Cup and they’ve been approached by Real Madrid president Florentino Pérez regarding a possible World Football League, another attempt to create elitism on a grander and more lucrative scale.

These threats of major disruption are becoming more frequent, and usually involve, at some point and in some way, clubs like Real Madrid. Football’s governing bodies should be concerned, for it indicates that forces are at play with the intention to challenge the status quo, but not necessarily for the overall benefit of the sport’s stakeholders.

A World Football League is the latest concept, but in truth, it is a European Super League because one of the ideas we have heard is a 20-team top division that includes teams from the five leading leagues – in other words, England, France, Germany, Italy and Spain. It does seem that the agent provocateurs merely keep coming back with a similar agenda. It’s the same bottle with different labels.

The critics have called it “insane”, “selfish” and “egotistical”. More worryingly, Aleksander Ceferin of UEFA believes it will “ruin football around the world”. It would certainly change the current landscape and render the UEFA Champions League redundant. All major leagues would surely be weakened, but according to Pérez, it would double revenues for the clubs involved. A huge carrot has been dangled.

Equally disconcerting is that it would be a two-division “closed” league with relegation and promotion only between the two 20-team leagues. Closed structures may benefit the member clubs but they are for the few and not the many. Given that broadcasting revenues will be one of the main attractions, it could mean that clubs outside the new elite would be scratching around for scraps from the top table. And with the channels constantly pushing the new league, interest in the old model could quickly evaporate and we could see the decline of clubs that are part of the game’s rich heritage. We’ve seen something similar occur in some of the smaller leagues in Europe where fans shun their domestic league in favour of watching Barca, Bayern or Real on TV.

It is difficult to see how a breakaway competition can be beneficial to the overall structure of European football. Pérez, who was chosen as the first president of the World Football Club Association (WFCA), has said that the world is changing and football has to keep developing, working towards ensuring that national and regional competitions are aligned. The WFCA has been created for a reason, but at present it only includes eight clubs: Real Madrid, AC Milan, Auckland City, Boca Juniors, River Plate, Club América of Mexico, Guangzhou Evergrande and TP Mazembe. Pérez said: “The new association will be a credible, focussed counterpart to FIFA and we will strive to improve all aspects related to clubs.” The sceptic might suggest that the creation of the WFCA is aimed to prepare the way for the rebel World Football League.

Taking a more positive approach, the current polarisation of Europe’s biggest leagues where a group of clubs are dominating each year cannot be healthy either. In some ways, the time may be right to introduce a better competitive balance to European football. In France, Italy and Germany, most clubs are not getting a look-in while in Spain, Real Madrid and Barcelona have long dominated La Liga. If there is no hope of overtaking clubs like these, then there is an argument that they could be removed from the domestic league to allow better competition among the rest of the club. A closed league is not the way and a project being guided by anyone other than FIFA or UEFA is unacceptable. If football becomes a free-for-all, the structure of the global game will crumble. However, if this latest move is designed to prompt action from the governing bodies, then it might just work.

The Pérez project will go nowhere fast without the support of Gianni Infantino and although the FIFA president is open to consolidation – witness the pan-African league idea – rubber-stamping a league that will effectively trigger a break-up will not get his blessing.

The future of European football is to create greater levels of inclusion, encourage more competitive balance and to remove monopolies. If football is the world game then it should be allowed to flourish and should not be stymied or destroyed by self-centred elitist structures. Yet it cannot be good for German football that Bayern Munich win the Bundesliga every season, neither is it healthy that Juventus keep on retaining the Scudetto. We do not have the perfect world at the moment, by any means, but the creation of a breakaway global league should not come about like this, not at a time when much of Europe is at a political crossroads, and not promoted by one club or by financial opportunism. It is time that continual attempts to disrupt come to an end. But that will only happen if the governing bodies, who get weaker with every attempt to undermine, listen to all stakeholders and are open to change.

 

@GameofthePeople

Photo: PA