Balance sheets of top clubs in Europe continue to deteriorate despite five years of record income growth!

In this blog, we are highlighting some of the most important conclusions and numbers from the fourth edition of the Club Licensing Benchmarking Report for the fiscal year 2010 that was most recently published by the UEFA. The report provides a detailed and comprehensive analysis of financial matters of the top division European Clubs. The information included in the report was received directly from the clubs and their national associations. Here are the highlights:

Revenues/Income: according to the report, the income of the 734 European top division clubs totaled €12.8 billion. The average income growth per year over the last five years was 9.1%. This meant that incomes of top soccer clubs in Europe far outpaced the growth of the European economies which, in stark contrast, grew only 0.2% on average. The average revenue of English clubs was €134 million. The biggest contributor to the rising incomes/revenues of top division clubs have been broadcasting deals, which have grown at annual rate of 12.4%.

Salaries: while the incomes/revenues grew, European clubs spent 64% of their revenues on salaries and another 7% on net transfer costs. It was reported that the net transfer costs almost doubled from the previous year and were recorded at €933 million. Interestingly too, the top 10 clubs outspent the next 10 clubs by €166 million on transfers and salaries. This points out to a growing financial advantage of the top ten European clubs and perhaps explains their continued hegemony on the field. Perhaps not surprisingly, the report disclosed that most of the Premier League clubs are net importers (i.e. they buy more players than they sell) in the transfer market.

Profits/Losses: despite the phenomenal growth in their incomes, after all income and expenses were accounted for, the combined net “bottom line” losses for top division European clubs increased by €435 million from 2009 and totaled €1.6 billion. In addition, 56% of clubs were reported losing money – which was on par with the previous year – and 61% reported operating losses. According to the report, the increase in reported losses resulted from the “combined employee and net transfer costs” which increased by 14% annually. The reported assets and liabilities of top division European clubs totaled €21 billion and €19.1 billion, respectively. Thus, a total net worth for all top division European clubs was €1.9 billion in 2010. The report pointed out that 52% of clubs saw continued deterioration of their balance sheet positions. The report concluded that “balance sheets [of the European clubs] have deteriorated despite five years of record income growth.”

Fan Attendance: according to the report, Germany boasts the highest average match-day attendance but England draws the highest cumulative number of fans. Otherwise, fan attendance numbers appear rather lackluster. For example, only 12% of clubs recorded average attendance in excess of 20,000 supporters and 49% of top division clubs attract an average of less than 3,000 fans into their games. Judging by these standards, MLS average attendance of approximately 17,000 per game looks impressive.

UEFA Club Rankings: as the chart below clearly demonstrates, FC Barcelona accumulated the most of the UEFA ranking points in the past 10 years with Manchester United being a close runner-up. In addition to bragging rights, these rankings are important because they are used to determine the seeding for UEFA’s club competitions.

The report paints a complex financial picture of the European Soccer. While there are some positives, and top among them are increasing incomes for most clubs, the disturbing trends of deterioration of clubs’ balance sheet positions — which is mostly attributable to high player salaries and exorbitant transfer fees — and the growing divide between the rich clubs and those with lesser means continue.

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