The sun stops shining for the European elite

AROUND € 6 billion has been wiped off the value of Europe’s top football clubs according to KPMG Football Benchmark’s European Elite (EE) report for 2021. Covid-19 left its mark on the continent’s leading clubs, the top 32 losing 15% of their enterprise value (EV) over the past year. What’s more, the pandemic impacted the financial performance of the top 80 clubs, between them they incurred net losses of over € 2 billion. In 2019, 20 of the 32 clubs in KPMG’s report made a profit, but in 2020, only seven were not in the red.

KPMG’s report comes at a time when the word “elite” is being redefined European football. The aborted attempt to create a European Super League  (ESL) threatened to redraw the game’s global map, but there can be no doubting the influence or intent of the 12 clubs who acted as standard bearers for the breakaway competition.

The EE top 10 comprised eight of the 12 ESL advocates. Real Madrid, for the third year running, topped the list with an EV of € 2.9 billion, followed by rivals Barcelona whose EV is only € 40 million lower. Manchester United were third with an EV of € 2.66 billion. All of this year’s top three were in the € 3 billion bracket a year ago. While Real Madrid and Barcelona’s EV decline was 16% and 10% respectively, Manchester United lost 20% of their value.

All three clubs experienced revenue declines, United suffering a 19% deterioration in their income. United are just one of eight Premier League clubs in the top 32, but the league’s combined EV drop was 18%. While five of the leading pack were from the English league, Arsenal fell out of the top 10, a reflection of the London club’s recent decline on and off the pitch. West Ham United dropped out of the 32, while Atalanta, Fenerbahce and Olympique Marseille the new entrants.

Of Europe’s big five leagues, Serie A and Ligue 1 sustained the most damage from the pandemic, although the Bundesliga endured a 30% decrease in matchday revenues. 

After a period of growth, the top 32 had a combined value of € 33.6 billion and of this total, the 12 ESL clubs contributed € 22 billion. This underlined the power and influence of these clubs. KPMG’s research revealed they also account for 74% of social media popularity among football’s top clubs.

KPMG’s elite included five league champions, six runners-up and 10 clubs who finished third or fourth in their domestic leagues. The lowest-placed member of the 32 was Schalke, who were relegated from the Bundesliga.

The past year has been very traumatic for football, especially in the lower leagues and at grass roots level, but the pandemic has provided an opportunity to reassess the modern game and the business models of the leading clubs. KPMG made a number of suggestions in their report, but they were adamant that the entrenched and long-lasting impact of the covid-19 crisis has accelerated the need for structural change. 

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Photo: PA

KPMG report shows Liverpool and Spurs on the rise, Arsenal struggling to keep pace

STUDIES on the economic state of football are fairly predictable these days, the small band of uber-clubs is well established at the forefront of the game. But these studies can provide some pointers about the clubs on the rise or those in decline. If one assumes the top bracket will remain more or less intact, dramatic changes are always going to be rare.

KPMG’s latest European Elite report identifies a number of clubs that have had a good four or five years. It also confirms what we already knew about one or two that have seen better days. Above all, KPMG’s work shows that elite football has grown substantially since 2016 and on the basis of current growth trajectories, there could be a changing of the guard at the top of the Enterprise Value (EV) table.

Real Madrid remain the number one club by value, their € 3.5 billion some € 200 million higher than Manchester United’s EV. Barcelona are breathing down United’s necks with an EV of € 3.2 billion. When KPMG launched their European Elite series, not a single club had an EV of € 3 billion and there were eight with a value of more than € 1 billion. In 2020, there are 13 clubs worth more than € 1 billion and eight are higher than € 2 billion.

Real Madrid’s EV has increased by 20% over the past five years, one of the lowest growth rates among the very top clubs. Barcelona have grown by 16% and are now the top club in terms of revenues generated. However, the gap between the two clubs has actually widened, with Real having a € 285 million advantage (+9%) compared to four years earlier when the differential was € 147 million (+5%).

The fastest growing clubs among the top bracket since 2014-15 have been Tottenham (+158%), Liverpool (+109%) and Manchester City (+61%), not a huge surprise given their performances in English football and the UEFA Champions League. Conversely, Arsenal, a club that is struggling to keep pace with the other members of the elite, went up by just 11% in that period.

The club with the highest growth rate is France’s Lyon, who increased their EV by 193% in the five-season timeframe.

In the first European Elite report in 2016, Arsenal were ranked number five, by 2020 they had dropped five places to 10th. Furthermore, the change in fortunes in north London has been remarkable – in 2016, Arsenal’s EV was more than twice the size of Tottenham’s (€ 1.7 bn versus € 801m), but in 2020, the Gunners are more than € 200 million behind Spurs (€2.1 bn versus € 1.9bn). This shift represents the recent playing performances of the two clubs as well as the sentiment surrounding them.

The top 10 by Enterprise Value (Source: KPMG Football Benchmark)

    EV Growth
1 Real Madrid 3.5bn +8%
2 Man.United 3.3bn +4%
3 Barcelona 3.2bn +19%
4 Bayern M 2.9bn +7%
5 Liverpool 2.7bn +27%
6 Man.City 2.6bn +6%
7 Chelsea 2.2bn -0.4%
8 Tottenham 2.1bn +23%
9 Paris SG 1.9bn +45%
10 Arsenal 1.9bn +19%

Likewise, Manchester United’s position in the North-West of the UK has come under threat. In 2016, United had a € 1.3 billion advantage over Manchester City and just over €1.6 billion on Liverpool. Four years on, United’s EV has risen by 15% while City’s has gone up by 61% and Liverpool’s by 109%. The gap between United and City is now € 736 million, while Liverpool are just € 684 million behind the Old Trafford club.

In Germany and Italy, the dominance of Bayern Munich and Juventus is underlined in the EVs of the two clubs. Bayern may have lost some of their advantage over Borussia Dortmund, but their EV is still 125% higher, while Juventus still have an EV that is 76% more than nearest challenger Inter Milan. Inter’s rivals, AC Milan have fallen down the rankings, losing another 5% of their EV.

This report may be something of a landmark event. Football’s future is rather cloudy following the coronavirus and the financial state of the game may change significantly. Indeed, we could be on the brink of massive shifts in the industry. Until some form of normal service is resumed, the full damage of this crisis may not be truly apparent. If the European Elite is a snapshot document, what will it tell us in a few years’ time when the dust has truly settled.

To see the full report, visit KPMG Football Benchmark’s site.

Photo: PA

Commentary Box: Edge of your seat?

IN RECENT weeks, I have visited Brighton and Swansea and I stood and watched out of necessity. As soon as the referee’s whistle started the game, the fans in my section stood up and had no intention of using the seats they had paid for.

Fine, if you like terracing, but having parted with £30, I wanted my seat and owing to a damaged knee, I actually needed to sit down. Up and down the country, fans insist on persistently standing, but the authorities have been reluctant to change the current legislation. Many are in denial that some form of standing is what people are calling for, especially younger fans who want to create a better vibe at English (and Welsh) grounds.

At Swansea and Brighton, club stewards could do little, if anything, to combat the issue – there were clearly people who were unhappy about having to stand, especially those with smaller children who had no chance of seeing the game with hundreds of people standing in front of them. Standing has been prohibited in the Football League/Premier since 1994, but there are now moves to change that, with increased pressure to install so-called “safe standing” zones.

KPMG’s Football Benchmark  noted that the tragedies of the 1980s have been driving the narrative around standing and highlighted Germany’s Borussia Dortmund (BVB) as a good example of how grounds can be adapted for flexible use. BVB, the world’s best supported club in terms of crowd numbers, convert their stadium for UEFA games thanks to “rail-seating” on their giant terracing normally used for Bundesliga games.

Germany has never banned standing and it has paid-off with the highest attendances in European, indeed global, football. But tragedies like Heysel and Hillsborough are still relatively fresh in the memory and the latter is rarely out of the news. “Since the troubles of the 1980s, stadium design, technology and crowd management approaches have certainly moved on from an age where crowds were packed into football grounds with often outdated provision for safety,” said KPMG.

France are currently experimenting with the reintroduction of standing accommodation and in the UK, Celtic have been using “rail-seating” for two years. There has been pressure on the Football Association to bow to the demands of fans who want to stand at games. Surveys suggest that as many as 70% of Premier League fans want to see standing back in their grounds.

Bringing back standing, either in the form of traditional terracing or more conservative models like “rail-seating” could increase crowds, although replacing current seating configurations with the rails might just be “like for like” in terms of numbers. It is also very unlikely that clubs will be allowed to introduce areas that go for quantity rather than quality of fan experience.

At the same time, installing new seating that can become safe standing areas will require investment and the cynics among us will undoubtedly anticipate clubs passing on the cost to their fans. Optimistically, KPMG says: “The possibility of admitting more spectators may contribute to clubs making football more socially inclusive through more affordable ticket prices in standing areas.”

At present, though, charging seating prices for sections that require people to stand (one man stands up in front of you and that, effectively creates a wave of plastic seats tipping-up as everyone behind them jockeys for position to see the game), is a winner for the clubs. Lower prices mean that they will have to create scale within their stadium to ensure revenues do not drop.

Ideally, a stadium should have both forms of accommodation – standing for younger folk to create the ambience at English grounds that has been somewhat lacking in recent years and seats for the rest. If clubs want people to get to stadiums early, share in the experience, spend money and enjoy it, comfort and safety have to be at the forefront of their planning.

It is probably a matter of time before something shifts in the UK – Tottenham’s new stadium will include “seating incorporating barriers” and in the new Guide to Safety at Sports Grounds (the Green Guide), such seating is featured. KPMG concludes: “With the ongoing trials in France, the government review of its all-seater policy in England, the continued success of standing in Germany and the imminent publication of new best practice guidelines, this is certainly a period of change in the stadium landscape in some of Europe’s top leagues. Many issues – with spectator security at the top of the agenda – are at stake and the continuing shift in the regulatory position gives club Chief Executive Officers and other stakeholders plenty of food for thought.”

Meanwhile, some clubs need to give serious thought to how they can control the persistent standing in areas where people do not want to be leaping in and out of their seats for 90 minutes. “Safe standing” is one thing, but “safe seating” should also be an issue.

Photo: Celtic’s safe standing area – courtesy of PA.

A special thanks to the Swansea steward that helped in moving me to an area where people sat in their seats.

To see Football Benchmark’s paper on safe standing, click here