Mega Transfers: How Do Clubs Recoup Their Money?

kayode OGUNDARE @kaybaba99

 

On Wednesday July 1, the transfer window will officially open with clubs having the opportunity to formalize the transfers of the players that have joined them. It also signals the period – until the end of August – when crazy transfer figures will fly in the air as clubs flex their financial muscles to get some of the world’s best players into their fold. Already, there are speculations that Man City could be preparing the first £100million bid for Paul Pogba and you’re left wondering if the world is going crazy?
Damn! How do they make their money that they are able to fork out such humongous amounts of money for players? How would such a player repay such an outrageous amount of money? How do clubs declare profits that would make small corporations go green with envy?
It has become a ritual, an annual rite of passage, where football fans congregate to wish their clubs will buy certain players even as they admit they have no clue where the money for such acquisitions.
To mark the official opening of the new season, therefore, I have reproduced this piece that was first published in this column two years ago on June 25, 2013 although with slight modification to reflect current realities.

I have listed 10 ways by which a club can generate money and I hope you find the piece worth your while.

1. MATCHDAY REVENUE: Traditionally, the oldest means of making money by football clubs, ticket sales are a steady source of income and with the innovation of season-ticket sales, a club can be guaranteed that stream of income regardless of how the season turned out performance-wise because the fans would have paid for their tickets in advance before the first ball is kicked. Arsenal, because of their ticket prices and size of the Emirates stadium, generate the highest match-day revenue in the top European leagues.

2. MERCHANDIZING: On June 11 2009, Manchester United announced that Cristiano Ronaldo has agreed a deal to join Real Madrid and by April 15, 2010, barely a year later, it was reported that over 1.2 million Ronaldo-branded shirts had been sold in the city of Madrid alone!

Let’s assume that a shirt goes for €50 at the time (actual price of a Real Madrid shirt is €95 for the 2015/16 season), that was some cool €60million in just one year, from just one city! If you factored in sales from other parts of Spain and around the world, then you will understand whi Ronaldo’s £80million transfer fee was not a bother for the Santiago Bernabeu honchos.

Apart from shirts, clubs also sell other memorabilia such as mufflers, mementoes, branded items like key-rings, offer catering and hospitality services on match-days and, like in the  case of Bolton Wanderers whose Reebok stadium also has a hotel and events centre which also generates money for the club. Clubs also organize stadium tours all through the week (except, of course, on match-days).

On June 11 2009, Manchester United announced that Cristiano Ronaldo has agreed a deal to join Real Madrid and by April 15, 2010, barely a year later, it was reported that over 1.2 million Ronaldo-branded shirts had been sold in the city of Madrid alone! Let’s assume that a shirt goes for €50 at the time (actual price of a Real Madrid shirt is €95 for the 2015/16 season), that was some cool €60million in just one year, from just one city!

  3. SPONSORSHIP: Due to the increasing involvement of corporate organizations in sports, clubs are able to attract sponsorship from blue-chip companies. And, in recent years, clubs are getting more creative about picking the pockets of sponsors.

For example, Man United have Chevrolet as shirt sponsors, AOL now hold the naming rights to the training complex, and they still pick up extra cash from Turkish Airlines as official airlines, carmakers Audi which brans the Old Trafford stadium seats and DHL which has its name and logo on the team’s training kits. As long as you’re a good brand, sponsorship money will not be a problem.

4. STADIUM NAMING RIGHTS: Tough a very recent phenomenon, clubs are increasingly seizing the opportunity of letting out the naming rights to their stadium to generate huge revenues which in turn help in offsetting the transfer fees of players acquired at exorbitant amounts.

Usually, such deals are for a specified period of time before they are renewed, re-negotiated or rescinded. Prominent among such deals are Arsenal’s with Emirates Airlines which saw their new stadium named after the company for an initial 15 years period starting from 2007. The deal was renegotiated for a further five years until 2028 and the club got paid a total of £250m.

Etihad Airways also acquired the naming rights to the City of Manchester Stadium (CoMS), home ground of Manchester City for a 10-year period worth a cool £400m. Stoke City(Britannia), Swansea (Liberty), Wigan (DW Stadium) and Bolton Wanderers (Reebok Stadium) are some of the other clubs who gave up their stadium’s names for cool cash.

5. IMAGE RIGHTS: Clubs earn a chunk of their income when they permit their players to promote goods and services for sponsors and pocket a percentage of the income paid for such promotions.

Depending on the player, some clubs are known to keep a larger share of such income than what they give the concerned players although this would have been written into the initial contract of such a player.

For instance, when you see the face of C.Ronaldo on a product, under his current deal with Madrid, the club are entitled to as much as 50% of all accruable incomes from such endorsement. To make him extend his stay, Real are reportedly offering CR7 as much as 75% of his image rights.

6. TV RIGHTS: In today’s football, nothing exemplifies the fact that money rules the game more than the fact that income from TV rights for the next three seasons starting from 2016/17 was an astronomical £5.136bn, a 70% increase on the current 3bn deal which expires at the end of the incoming season.

Last season, each Premier League team from champions Chelsea to 20^th-placed QPR all got an equal amount of £54,118,7940 from domestic, overseas and central commercial TV income. The only point of divergence was in facilities fee (depending on how many of each club’s games were shown on live television) and merit money (depending on where you finished on the table).

7. COMPETITION REVENUES:With marquee-signings, a club is expected to do well in as many competitions as possible and this should translate into huge revenues for the club. So, if a club forks out on an expensive player, he’s expected to help them win things and earn revenues.

8. GUEST APPEARANCE FEES: Some players are always in high-demand and thus their clubs stand to make a lot of money when they feature in exhibition matches. In 2008, when Man United visited Nigeria to play Portsmouth, they reportedly got paid £2m for a trip that lasted 48 hours simply because they fielded all their top stars which was the main demand of the organizers.

You can understand why Chelsea rushed down to Thailand and Australia to play exhibition games barely a week after winning the EPL last season. The Asian market is a lucrative one and every team is aspiring to get as large a chunk of it as possible to add to the revenue base.

Man United have not missed out on a pre-season tour of the United States in the last five or so season (they are billed to go again this month). This has got nothing to do with the excellent facilities or inclement weather. It’s all about capitalizing on the huge markets and fanbase in the United States. It’s about the bottom-line. Simple.

9. MEDIA REVENUE (Print, electronic and social): Most, if not all, clubs in Europe now make money from owning and operating their own broadcast media such as television and radio stations as well as internet-streaming sites. Practically all of them also make money from printing Match-day programmes which are sold to fans as they enter the stadium for games.

10. BUY-OUT CLAUSE: Still using the Ronaldo example, Real Madrid reportedly clamped a buy-out clause of almost a billion Euros on him which meansthe club stand to net a substantial amount of money (not necessarily the whole buy-out figure) if or when he’s eventually sold before the expiration of his contract. If you add this to all the other streams of revenue that had been made off his name, then you’ll definitely know there’s no how the club will not have turned a profit on the player.

So, good people, you now have a fair idea of where your club will raise the money for that big-money transfer. Have I left anything out? You got any questions on transfer? Let’s hear from you.