A monthly compilation of interesting business news related to soccer. February 2012. Continue reading “The Month in Soccer Business: February 2012”
When Michael Lewis’ Moneyball: The Art of Winning an Unfair Game hit shelves in 2003 booksellers could be forgiven for believing that a story about sports management and statistics might not exactly light up the mass-market audience. Even though it was about America’s national sport it was about the Oakland Atheltics, not the Yankees. Moneyball of course went on to be a national bestseller as Lewis’s tale of the underdog A’s and Billy Beane managed to capture the attention of baseball fans, academics and corporate executives alike.
Moneyball is about the success of a perpetually underfunded baseball franchise in the face of the financial might of historically larger baseball clubs. Lewis’ explanation for Oakland’s success is two-fold: a rigorous application of statiscal sobriety to player selection and business acumen in player trading. Billy Beane used these tools to outperform competitors year after year while also paying out a much smaller wage budget; it is a familiar American narrative that plays especially well in the recent times of extreme financial disparity. But Lewis’ most important theme is emphasizing the rewards of innovation in an industry which had grown complacent and wasteful.
An environment in which major financial decisions, like player trading and wages, are divorced from reality is easily recognizable for soccer supporters because an equally ridiculous climate exists in the world of soccer. Elite clubs owned by billionaires are able to splash mountains of cash on outsize transfer and wage budgets while the minnows who must operate within the considerations of balance sheets and income statements are resigned to the fate as perpetual middlers or relegation fodder. The rise of Manchester City is only the most recent example of a club whose financial presence places one more brick in the wall between the tiers of clubs. Moneyball has a following among soccer supporters because it gives hope that money is not the sole determinant of a club’s success and that disciplined management and scientific innovation can build an underdog into a giant. It worked in baseball, can it work in soccer? Is it possible to buy low, sell high and still win things in soccer? Continue reading “Moneyball Does Not Work In Soccer”
I am always astounded by some of the figures thrown around in the Football industry. It never made sense to me how clubs could pay
blockbuster transfer fees, pay oversize wages and still make as much money as everyone thinks. Favorite Portuguese boo-boy Cristiano Ronaldo is reported to currently be earning £183,000 a week
at Real Madrid with the figure eventually rising to £556,000 a week (!!!) by the end of his contract.
But do big paydays for stars result in big paydays for football owners? A quick, unscientific look at the data for the current grouping of Premier League teams.
As you can see profitable clubs are in the minority even in the Premier League.
- 17 of the 20 clubs are unprofitable with an accumulated deficit over the past 17 seasons.
- 15 of the 20 clubs have an accumulated deficit of £15m (!) or more
- The 3 most profitable clubs also have the lowest wage/turnover ratios with the exception of Arsenal which ranks 4th behind Aston Villa. (this might actually be due to incorrect/misleading data)
- Wigan, Chelsea, and Portsmouth have the highest wage/turnover ratios; 89.5, 84.5, and 77.6 respectively
- Man United has been profitable for 15 of the past 17 seasons
- Fulham has been profitable for 1 of the past 17 seasons
It is even hard to argue that the deficit belongs to recently promoted clubs or that Premier League survival brings financial stability. If we only keep clubs who have had at least a 5-year tenure in the top flight the numbers improve only marginally.
The main lesson? Unless you’re a footballer, a footballer’s agent, a footballer’s wife, Arsenal or Man United, you’re not making a lot of money in Football.
Some info about the data I used. Data was supplied by the wonderful website The Political Economy of Football. The time period sampled was from the 1991/92 – 2007/08 season, not all clubs have complete datasets within this period as some were not in the Premier League, however the missing data is not substantial enough to throw off the general trend. I plan to do a more in-depth analysis in a future post, on the relationship between wages and a club’s financial stability.
Next time on “Show Me The Money!”: Digging into Serie A.