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THE INDUSTRY IN THE LAST 10 YEARS
Extraordinary growth. Between 10% and 25% annually…
- Stadium development
- Broadcasting deregulation
- Marketing revenue
… and a major change in the business model…
- From clubs as organizers of local events (like a circus) to global
entertainment companies (like Walt Disney)
… that could “break” the industry in two segments: big
global clubs and smaller local ones
- The change benefits big clubs that can capture the growth and
become global franchises and powerful brands
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SOURCES OF REVENUE: 6 BIGGEST CLUBS · 2004/05
72,2
55,1
82,2
124,0
62,8
71,7
82,0
138,0
124,4
88,0
79,0
102,5
83,7
63,7
66,1
57,9
22,838,1
Marketing Media Matchday
Million €
(42%)
(29%)
(29%)
(38%)
(37%)
(25%)
(16%)
(59%)
(25%)
(10%)
(54%)
(36%)
(23%)
(32%)
(45%)
(32%)
(38%)
(30%)
Machester Utd. Chelsea FC AC Milan Juventus R. Madrid FC Barcelona
246
221
234 229
275,7
208
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COSTS
Source: ladbrokes.com, 01.08.05Source: eurobet.com, 01.08.05As in all other professional sports, managing player’s
compensation is the major cost challenge.
Player salaries are the highest costs
G-14 recommends that salaries have to be between
55% and 70% of revenues
Salaries have increased spectacularly in the last 5
years... But are now more stable
Amortizations depend on transfer prices, that had its
highest in the season 2001-02
Operational costs have to be tightly controlled in a
professional manner
Player
salaries
Transfer
amortization
Operational
costs
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PROFIT & LOSS: 6 BIGGEST CLUBS · 2004/05
221
234
276
208
34
-13
18
246
229
-9 -24
Million €
OPERATION REVENUES
OPERATION EXPENSES
OPERATION
PROFIT/LOSS
TOTAL PROFIT/LOSS(1)
(1) Operation profit/loss +/- financial +/- extraordinary results.
Machester Utd.
221
230
-9
-207
234
N.A.
N.A.
N.A.
229
243
-13
-3
276
300
-24
+2
208
190
+18
+37
246
212
+34
+15
Chelsea FC AC Milan Juventus R. Madrid FC Barcelona
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STRONG RELATIONSHIP BETWEEN SALARIES PAID
AND SUCCESS ON THE PITCH…
Relative
Salaries
Ranking
0,25
0,5
1
2
4
Rotherham
United
Reading
Preston
Plymouth
Arsenal
Aston Villa
Barnsley
Birmingham
City
Bolton
Wanderers
Brentford
Bristol
Rovers
Bury
Derby
Leeds
Leicester
Liverpool
Manchester United
Newcastle
Scunthorpe United
Sheffield
United
Sheffield
Wednesday
Shrewsbury
Southampton
Southend
Tottenham
Wrexham
R2 = 0,94
1 320,50,25
RELATIONSHIP
SALARIES -
SUCCESS
(UK 1990-1999;
LOGARITMIC
SCALE)
Best players, paid
at market price will
win championships
Source: S. Szymanski & T, kuypers, Deloitte, Estim&Co.
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… BEST PLAYERS CAN ONLY BE PAID BY THE BIGGEST CLUBS
Source: ladbrokes.com, 01.08.05Source: eurobet.com, 01.08.05
Club size matters.
Source: Szymanski, Deloitte & Touche FIT, Estin & Co.
RELATIONSHIP
SALARIES -
REVENUES
(UK 1990-1999;
BASE 100
LOGARITMIC
SCALE)
Salaries (% of revenues)
Revenues
(average1990-1999)
Rotherham
Reading
Preston
Plymouth
ArsenalAston
Villa
Barnsley
Birmingham
Blackburn
Rovers
Bolton
Wanderers
Brentford
Burnley
Bury
Cambridge
Coventry
Derby
Everton
Huddersfield
Leeds
Leicester
Liverpool
Manchester
United
Newcastle
Oldham
Peterborough
Scunthorpe
Sheffield United
Sheffield Wednesday
Southampton
Southend
Tottenham
WBA
West
Ham
Wrexham
40%
60%
80%
100%
12,5 25 50 100 200 400
30%
50%
70%
90%
Safe zone
salaries are
less than 55%
of revenues
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CURRENT CHALLENGES
“Product management”: Players and team performance
Revenue growth and globalization
Cost control and value chain management
Industry organization and regulation
Balance of TEAM PERFORMANCE vs. STAR PLAYERS
- Chelsea / Liverpool vs. Real Madrid
Balance of RESULTS vs. ATTRACTIVENESS OF PLAY
- Chelsea vs. FC Barcelona
MANAGEMENT OF TRANSFER MARKET
- Less star players in the market (“Not for sale”)
- Commercial value vs. Sporting Value
- Best and worst practices
Example: Recent transfers of 20 million or more in Spain
Ronaldinho, Eto‟o, Deco (FC Barcelona)
Beckham, Samuel, Woodgate, Robinho, Ramos, Baptista
(R.Madrid)
YOUTH TALENT DEVELOPMENT
- High investment in schools and youth teams
- Fierce competition to hire young players
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CURRENT CHALLENGES
“Product management”: Players and team performance
Revenue growth and globalization
Cost control and value chain management
Industry organization and regulation
Development of new sources of growth beyond Europe.
Globalization of Brands
- Markets
Asia, US…
- Business model
Tours, schools, clubs
- Content of the brand, positioning
“The theater of dreams” (MANUTD), “the galactics” (Madrid),
“more than a club” (FCBARCELONA)
The role of players
- Execution
Infrastructure, management, control, communication…
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CURRENT CHALLENGES
“Product management”: Players and team performance
Revenue growth and globalization
Cost control and value chain management
Industry organization and regulation
Players compensation
- Fixed salaries and bonuses
Transfer prices
Agents
New owners
- Inflation, market disturbances
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CURRENT CHALLENGES
“Product management”: Players and team performance
Revenue growth and globalization
Cost control and value chain management
Industry organization and regulation
FIFA / UEFA / National Associations / Leagues / G-14 / Clubs
Calendar, release of international players, revenue distribution…
The “Charleroi Case”
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THE STARTING POINT AND THE STRATEGIC ALTERNATIVES
STRATEGIC ALTERNATIVE 1 EVOLUTION
SEASON 2002 / 2003
Revenues of 123M
- Number 12th in global ranking
Losses of 73m
Debt of 186m
Team is 6th in the Spanish
Championship
Drastic reduction of expenses
Very moderate investment for 2/3 years
Less economic risk but higher market and
sporting risk
STRATEGIC ALTERNATIVE 2
REVOLUTION: “THE VIRTUOS CIRCLE”
High investment in the team to generate
immediate results and revenues
Fast expenses reduction. 0 losses year 1
Accelerate / investment and business plan in
year 2 to get results faster
Higher financial risk but less market and
sporting risk
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… AND OBTAINING PROFITS
87
75
85
119
110
139
123
169
208
240
6
-15 -14
10
-38 -45
-72
6,7
18 19
96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05
05/06
(estimated)
Revenues
Profit / Loss
The Club consolidates its revenue growth with a cost
structure that produces profits in a sustainable way.
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Revenues of 123M
Number 12th in global
ranking
Losses of 73m
Debt of 186m
Team is 6th in the Spanish
League
240m revenues
Among 5 highest in the
ranking
Profit 19m
Debt of 150m
Team won Spanish
Championship 2004/2005
THE TRANSFORMATION
WE WERE IN 2002 / 2003
- Valdés
- Puyol
- Gabri
- Xavi
- Jorquera
- Motta
- Iniesta
- Navarro
- Saviola
- Kluivert
- Overmars
- Mendieta
- Anderson
- Christanval
- Rochemback
- Riquelme
- Sorin
- Bonano
- Enke
- Geovani
- Dani
- Frank de Boer
WE ARE IN 2005 / 2006
- Valdés
- Puyol
- Gabri
- Xavi
- Oleguer
- Jorquera
- Motta
- Iniesta
- Messi
- Ruben
- Saviola
- Ronaldinho
- Eto’o
- Deco
- Edmilson
- Giuly
- Belleti
- Gio
- Márquez
- Silvinho
- Maxi
- Larsson
- V.Bommel
- Ezquerro
- Damià
Net
investment in
players
98m
Profit +
amortizations
99m
Real state
investment
38m
Real state
sold
28m
The club achieved its transformation self-financing
its growth.
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THE NEXT DECADE WILL BE ABOUT…
Globalization
Development of Asia and US markets
Soccer global ubiquity thru “media play”
(TV, IP-TV, web, mobiles, ...)
Top clubs positioned as global brands
(media, international leagues, tours, ...)
Star players as global icons / characters
Clubs and players will promote proximity to
the fans
- Schools, Tours, Humanitarian actions
Soccer will continue to be the most popular
collective sport to be played
… while
being closer
to people
Further
globalization
and growth…
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KEY SUCCESS FACTORS FOR CLUBS OVER NEXT YEARS?
CLUBS KEY SUCCESS FACTORS OVER THE NEXT DECADE
Attractive
game
Sporting
success
Governance &
management
Club’s city
image
Fan base
attraction
Global
audience
Players’
image
Financial size
& strength
SPORTING FACTORS
In a
globalized
world few,
clubs will be
competing for
a global
market
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FCBARCELONA IS ALREADY WELL POSITIONED TO BE ONE OF THE
LEADING CLUBS IN THE NEXT DECADE
Ronaldinho as main global icon -
Deco, Eto’o, Marquez and Messi
follow suit
7 distinct nationalities. 3 continents
represented
Global TV coverage of
Champions League
Room for improvement of
“La Liga” TV coverage
BarçaTV growing
international penetration
Vast coverage on web and
print media
#1 club in members and fan base
within the young segment
Most attended games in
international tours
Identification with key players
“Fashion” and “tourism” strong
statements
City that stands for peace, civism
and solidarity
Already in the top 6 clubs in revenue
size, and growing
Democratic election system
to Board guarantees good
governance
Management achieved
excellent results in last 2
years
57 main trophies
Current Liga champion
Ronaldinho, Eto’o, Deco and Messi
accumulating individual prizes last 2
years
Unique offensive and spectacular
game recognized worldwide
Young and talented player squad
guarantees pitch entertainment over
next years
Attractive
game
Sporting
success
Governance &
management
Club’s city
image
Fan base
attraction
Global
audience
Players’
image
Financial size
& strength
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