UK_SBG_DeloitteFootballMoneyLeague2006.pdf

February 2006

Football Money

League

Changing of the guard

Edited by

Dan Jones

Authors

Austin Houlihan and Rich Parkes

Sports Business Group at Deloitte

201 Deansgate, Manchester, M60 2AT

Telephone: +44 (0)161 455 8787

Fax: +44 (0)161 455 6013

Email: sportsteamuk@deloitte.co.uk

www.deloitte.co.uk/sportsbusinessgroup

February 2006

Football Money League

Contents

Introduction

by Dan Jones

The Deloitte Football Money League

Leagues within the Money League?

by Rich Parkes

The Real deal

by Austin Houlihan

Football Money League

Introduction

By Dan Jones, Partner, Sports Business Group at Deloitte.

Welcome to the 2006 Deloitte Football Money League. This is

the ninth year of the publication, profiling the largest clubs in the

world’s most popular sport for the 2004/05 season. A number of

methods may be used to determine the size of a club – including

measures of fanbase, attendances, TV audiences, or on pitch

success. However, for the purposes of this publication, we look at

the best publicly available measure of ‘financial muscle’: revenue

from day to day football business operations. We only rank the clubs

on the money coming in. We do not consider a club’s budget for

outgoings or what someone might pay to buy, or invest in, a club.

Chart 1: Total revenues 2004/05

€

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The Deloitte Football Money League is the most contemporary

and reliable analysis of clubs’ relative financial performance and is

released less than nine months after the end of last season, as soon

as the relevant clubs’ accounts are available to us.

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150

The big news this year is that, after eight consecutive seasons at the

top of the Money League, Manchester United has been overtaken

by Real Madrid. Real have transformed their revenues, doubling

them in only four years. What may make other clubs look more

closely at Real is the method by which they have delivered much of

their revenue growth. The mainstay of Real’s revenue growth is not

matchday revenues, as we have seen in many of the UK clubs, or

broadcasting revenue, as we have seen – and continue to see – in

Italy, but strong progress in realising their commercial potential.

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100

Real have concentrated on improving their commercial revenue,

both in terms of developing a progressive and extensive partner

programme, and in turning the club’s strong international support

into revenue for the club. To date both these objectives have been

very successful, helping to propel Real’s commercial revenue well

above any other Money League club. We profile Real’s commercial

revenue, and comment on how they have made it to number one,

in one of our feature articles. Whilst not every club has Real’s

particular strength of brand and history, we hope there are some

insights that others may find comparable to their own situation.

Source: Deloitte analysis.

premium content remains critical to the business models of Pay-TV

broadcasters. Just look at the collapse of Premiere’s share price after

losing the Bundesliga rights, or the recent deals in Italy and France,

for clear evidence of this. Recent deals have confirmed our view that

the often forecast collapse in broadcast revenues has not materialised

and will not happen. In the major European countries the value of

top class broadcasting rights continues to rise. We have recently seen

a large increase in the value of the German Bundesliga Pay-TV deal,

following the huge French deal announced in 2005 which

commences next season. And content providers continue to

innovate. In Italy, for example, we have seen live rights split into Pay-

TV and Digital Terrestrial, with further financial rewards for the clubs.

Football remains a growth sport, especially at the highest level. The

continued high level of interest in the sport – both public and

commercial – is reflected by another year of strong growth. In our

first Money League in 1996/97 the 20 clubs’ combined revenue was

€

1.2 billion. This year, the total broke the

3 billion barrier for the

first time after growing by 6%.

However, many clubs are rightly continuing to concentrate day to

day on the areas over which they have direct control. The stadium

development boom, started in the early 1990s in the UK, and most

recently seen in Germany, has provided the perfect opportunity for

clubs to enhance their revenues. We believe further opportunities in

The catalyst for this remarkable long term growth was the

broadcasting rights revolution of the 1990s, fuelled by soaring

interest in the game, new technology and deregulation of the

broadcast markets. Despite the maturing of broadcast markets,

Football Money League

How we did it

“In our first Deloitte Football

Money League in 1996/97 the

20 clubs’ combined revenue

was € 1.2 billion. This year,

the total broke the € 3 billion

barrier for the first time.”

We have used, for each club, the figure for total revenue

extracted from the club’s annual financial statements, or other

direct sources, for the 2004/05 season. In some cases, the annual

financial statements do not cover a whole season, but are for

the calendar year, in which case we have used the figures for the

most recent calendar year available.

We use the terms ‘revenue’ and ‘income’ interchangeably.

Revenue excludes player transfer fees, VAT and other sales related

taxes. In a few cases we have made adjustments to total revenue

figures to enable, in our view, a more meaningful comparison of

the football business on a club by club basis. For instance, where

information was available to us, significant non-football activities

or capital transactions have been excluded from revenue.

this area still remain for all clubs to increase matchday – and non-

matchday – income. These can include ticket yield management and

segmentation techniques, and the development of enhanced

customer packages – all of which do not require great capital

investment (but which do require careful thought). Targeted

research and consulting with the market can assist clubs in ensuring

that they are meeting the ever changing demands of the customer.

In some cases the immediate financial benefits can be dramatic. In

all cases the customer welcomes the interest in their views.

Based on the information made available to us in respect of

each club, to the extent possible, we have split revenue into three

categories – being revenue derived from matchday, broadcast and

commercial sources. Clubs are not wholly consistent with each

other in the way they classify revenue. In some cases we have

made reclassification adjustments to the disclosed figures to

enable, in our view, a more meaningful comparison of the

financial results.

We have seen only three changes to the composition of the 20

Money League clubs since last year. In common with on pitch league

tables, we have lost the three clubs in last year’s ‘relegation zone’

(Olympique Marseille, Aston Villa and Rangers). They have been

replaced by Everton (making their first appearance in the Top 20)

and the return of Olympique Lyonnais and Valencia. Our Top 20

clubs are shown in the chart on the previous page. The revenue

differences between clubs at the bottom of the table are small, and

a number of familiar names remain slightly below the Top 20.

Marginal differences in on pitch performances can be the difference

between appearing in the Money League and just missing out.

Matchday income is largely derived from gate receipts

(including season tickets and memberships). Broadcast income

includes revenue from television and radio and from both

domestic and international competitions. Commercial income

includes sponsorship (mainly derived from brand/name placing

on team shirts and around stadia), conference, catering and

merchandising.

The publication contains a variety of information derived from

publicly available or other direct sources, other than financial

statements.

Our focus this year

In addition to our usual profiles of the Top 20 clubs and their

revenue sources, we provide two additional articles this year.

As highlighted above, we comment on Real Madrid’s commercial

revenue transformation, the key element underpinning their rise to

the top of this year’s Money League. We also look back over recent

trends in the Money League and highlight key areas to watch in the

future. But firstly we provide the profiles of the Top 20 clubs.

We have not performed any verification work or audited any of

the information contained in the club financial statements for the

purpose of this publication.

All figures for the 2004/05 season have been translated at

30 June 2005 exchange rates (£1 =

€

1.4806). Comparative

figures have been extracted from previous editions of the

Deloitte Football Money League.

The Deloitte Football Money League was compiled by Dan Jones,

Rich Parkes and Austin Houlihan of the Sports Business Group at

Deloitte. Our thanks go to all those who have assisted us, inside

and outside the Deloitte international network. We hope you enjoy

this edition. •

There are many ways of examining the relative wealth or value of

football clubs – and at Deloitte we have developed sophisticated

models of anticipated future cash flows to help potential investors

or sellers do just that. However, for an exercise such as this, there

is insufficient public information to do that. Here – in the Deloitte

Football Money League – we use revenue as the most easily

available and comparable measure of financial wealth. Revenue, like

salary for an individual, is not the be all and end all of wealth, but

all would agree that – as a starting point – it is better to have more

than less, and the choice of how to spend it. •

Dan Jones

www.deloitte.co.uk/sportsbusinessgroup

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