FOOTBALL

BUSINESS
INSIDE

Strategies for
Football Clubs
Financial Sustainability.

1
 Ladies and Gentlemen,
dear readers,

For as long as I can remember, football has been my biggest hobby. Ever
FOOTBALL
since I was a little boy and my dad took me to the stadium of VfL Bochum for BUSINESS
the first time, I have fallen in love with that sports. When I grew up and had
to decide what I want to do for a living, I seriously considered studying sports INSIDE
or journalism to start working in the football industry. However, the business
world also fascinated me, as a skier I love the mountains, and thus I decided
to move to Switzerland and study business there. Table of Contents
Now, twelve years later, I still live in Switzerland and now am a lecturer at the
university I studied at. And I love it. I never regretted my decision to move
and study here. Yet, my love for football and my fascination for the whole Chapter 1 Page 8
industry has not shrank a bit. I still watch every single game of my club, Distinctive Aspects of the
nowadays just mostly on TV. Watching Germany win the World Cup live in
the stadium in 2014 is still one of the best experiences of my life. That is why
Financial Management of Football Clubs
Published by
I always felt the urge to connect my love for the game and my professional FOOTBALL BUSINESS INSIDE

Chapter 2 Page 18
life and have frequently engaged in research and practical projects in the Thomas Maurer e.U.
Dietenberg 205/4
football industry.
The Current Situation 8563 Ligist
Austria
This report is a consequence of all of that. Now, that the whole industry is www.footballbusinessinside.com
facing challenges and public interest in the financial stability of football clubs
has risen, I felt the need to show two things: first, the football business as a
Chapter 3 Page 30 Responsible for the
whole is not as financially unstable as it is often portrayed. Plenty of clubs Approaches for Improvement content
Dr. Florian Hohmann
are managed in a very stable and sustainable way. But second, there are florian.hohmann@unisg.ch
some severe problems that have to be solved if we want to continue enjo-
ying the game that we all love. The good news is: there are various approa- Chapter 4 Page 44 Layout
ches for improvement that are already being discussed. And that makes me Interview with Ilja Kaenzig Thomas Maurer
optimistic that in some years, my future children will
still feel the same emotions about football that I do.
and Raphael Landthaler All contents of this publication are
protected by copyright. No part of
this publication may be reprodu-
Good luck and best regards, Chapter 5 Page 52 ced in any form or by any means
without written permission. FOOT-
The Conclusion BALL BUSINESS INSIDE accepts no
responsibility for the correctness,
completeness and up-to-dateness,
nor does FOOTBALL BUSINESS
INSIDE pay any damages.
Responsibility for the content of
advertisements lies solely with the
respective authors of the adver-

Dr. Florian Hohmann

tisement.

Further information can be requested

florian.hohmann@unisg.ch at office@footballbusinessinside.com

2 3
Management
Summary
Managing the finances of a football club is com- in the financial situation of professional football worthwhile to come up with ideas for how such to retain profits in order to plug the holes left
plex. The revenues a club can generate are very has risen. Club managers have to plug the holes clubs can be set up in a more stable way – espe- by the COVID-19 crisis. New revenue sources
much dependent on its sporting success. In re- left by the COVID-19 crisis while simultaneously cially now, when the business is more receptive could be developed that are ideally not directly
turn, however, sporting success is also highly being successful on the pitch. League associa- to change than ever. linked to sporting success. A strong and authen-
dependent on how much revenue a club can tions and federations are discussing new regu- tic brand image, professional financial reporting
generate and therefore invest in the squad. Fi- lations that could positively change football in There are various approaches and ideas of how and close customer relationships can help clubs
nancial executives always need to find the right the future. Hence, now it is the perfect time to to make financial management in football more stabilising their revenues. Additionally, the eS-
balance between investing enough money in critically reflect on the financial sustainability of sustainable, some of them already being dis- ports market and trends such as digitalisation
the team to maximise sporting success, without the football industry and to set the course for a cussed in league associations or committees of and sustainability will grow in importance. Fur-
taking excessive risks and harming the financial successful future. UEFA and FIFA. thermore, either a new mentality or new licen-
stability. This balance act is even more compli- sing criteria are needed for clubs to be more
cated by the fact that the football business is un- Analysing financial ratios of European football Within this report, several approaches for im- profitable after the crisis. Regulations like a de-
der great public scrutiny and very much driven clubs shows that it is wrong to say that the foot- provement are introduced and a timeline with termined minimum equity ratio or a flexible sa-
by emotion. In recent years, the football indus- ball industry as a whole has a fundamental fi- possible short-, mid- and long-term measures is lary cap could help to end the currently prevai-
try has been publicly criticised and accused of nancial problem and is bound to fail. However, set up. ling “rat race”. The football industry can take its
being unsustainable and disconnected from re- many clubs, especially in smaller leagues, were cue from the Basel III regulations, which were
ality. Now, since the whole industry is struggling already in financial difficulties before the cur- The short-term measures are all aimed at en- developed for banks after the global financial
due to the COVID-19 pandemic, public interest rent COVID-19 pandemic. Therefore, it seems suring the immediate survival of the clubs now crisis of 2007-2008.
during and after the COVID-19 pandemic and
have largely already been implemented. The Long-term, if based on new regulations or not,
cash drain during the first lockdown had to be all clubs, also in smaller leagues, should be
stopped and clubs had to ensure that enough able to raise their equity ratio to a healthy le-
liquid funds are available to keep the business vel. This would make the whole system more
Short-term Mid-term Long-term
going. Clubs have negotiated with their play- stable and resistant to crises. If clubs succeed
ers to agree on salary waivers, have stopped in linking more components of the variable
certain investments and introduced measures part of a player’s salary to their revenues, this
● Stop cash drain ● Diversify revenue streams ● Improve equity ratio up to a like short-time work. Additionally, assets were would further increase their stability. Last but
● Ensure sufficient cash inflow ● Slowly introduce variable healthy level sold and loans were taken out to obtain fresh not least, digitalising the processes of financi-
● Balance sheet restructuring components in player contracts ● Make salaries as variable and liquid means. There are clubs that also might al management is currently a big trend within
linked to financial outcomes linked to revenues as possible have to carry out balance sheet restructuring. all major corporations. While this is not an im-
● Improve transparency and access to
● Implement new licensing criteria ● Exploit the opportunities of new
Due to the low reserves of some clubs, the crisis portant topic for football clubs at the moment,
financial data
technologies and digitalisation
can lead to over-indebtedness, from which the in the long run, when some technologies are
● Professionalise financial reporting
clubs have to recover as fast as possible. Fur- more established and also accessible for smal-
● Employ a new mentality thermore, the crisis should be used as an op- ler companies, utilizing the possibilities of new
● Create a unique brand image that portunity to become more transparent and re- tools like RPA or AI will also be very beneficial
fits to your fan base and the values port more openly about the financial situation. for the football industry.
you live Mid-term, it will be utterly important for clubs

4 5
About the Author
Dr. Florian Hohmann Introduction

Florian Hohmann is Project Leader and Lecturer Football is emotion. Football is the most popu- kes managing the finances of a football club
for Financial Management at the University of lar sports in the world. For many people, foot- different from financial management in an or-
St. Gallen (Switzerland). His consulting projects ball is an essential part of their lives. But foot- dinary market-focused company? What did
as well as his research and teaching activities ball is also business. A business that has often the financial situation of professional football
are focused on the areas of Accounting, Ma- been publicly criticised and accused of being clubs in Europe look like before the COVID-19
nagement Accounting, Auditing and Corporate disconnected from reality and unsustainable. pandemic? What were the main issues? How
Finance. He also works for the Swiss accounting Now, since the whole industry is struggling due severe is the effect of the pandemic on what
standard Swiss GAAP FER, is leader of an expert to the COVID-19 pandemic, public interest in kind of clubs? And what measures can be ta-
group in the International Controller Associati- the financial situation of professional football ken to make the system more sustainable in the
on, consisting of Swiss finance executives, and has risen. Club managers have to manage the future? These questions will be systematically
host of the Podcast Meet the CFO. His previous balancing act of plugging the holes left by the answered in the course of this report.
experience is in the areas of banking, strategy COVID-19 crisis and being successful on the
consulting and consulting of sports organiza- pitch at the same time. League associations and Lastly, Ilja Kaenzig (Managing director VfL Bo-
tions. federations are discussing new regulations that chum) and Raphael Landthaler (former CFO SK
could positively change football in the future. Rapid Wien) share their practical insights and
Florian Hohmann holds a PhD in Management Hence, now it seems to be a perfect time to re- critically reflect on some topics of this report in
from the University of St. Gallen as well as two lease a report about the financial sustainability an interview.
Master’s degrees: Banking & Finance and CEMS of football clubs.
International Management. He is a passionate
football fan, however his own football skills are The purpose of this report is twofold: first, to
rather mediocre. He has already spoken about present the general challenges of managing the
the financial situation in football at different finances of a football club, as well as a snapshot
events, panel discussion, podcasts, and on Ger- of the current financial situation. Second, to
man TV. In 2020, he joined our Football Busi- derive concrete ideas for future improvement
ness Inside network as a member of our expert from current challenges and issues. What ma-
hub.

6 7
Chapter 1
Distinctive Aspects of the annual profit in order to earn interest on the
money invested by the shareholders. Football

Financial Management of Football Clubs clubs are not primarily profit-driven companies.
For them, money is much more a means to an
end – something that is important to increase
the sporting success, which in normal situa-
tions is always considered the primary goal. In
Professional football clubs are medium-sized, ted. In order to be able to adequately depict pitch. Should you draft a conservative budget July 2019, before the COVID-19 crisis hit the
often internationally operating businesses. As this correlation in the management accounting plan based on the worst-case scenario, even global football industry, Dr. Claudio Kasper,
such, professional financial management is es- system, financial executives of football clubs though this could be a self-fulfilling prophecy, Head of Management Accounting & Corporate
sential. However, the financial management of must demonstrate a high level of scenario ca- whereby investing less you are also less likely Finance at FC Schalke 04, expressed in an in-
football clubs is not entirely comparable to the pability. They always need to be able to answer to be successful on the pitch? Or should you terview the rationale that many football clubs
usual accounting, reporting and control practi- questions such as what happens if they advance take risks and invest more money, hoping for have traditionally followed:
ces of ordinary market-focused companies. In to the Champions League, the Europa League sporting success and consequent increase of
the following, the most distinctive aspects of or the national cup, what happens if they sign income? Whilst this planning is already utterly
the financial management of football clubs are another player or organise another concert in difficult for one season, the complexity incre- “Frankly speaking, it is a successful
discussed in order to provide the basis for all their stadium. ases significantly when it comes to multi-year
subsequent analyses and recommendations. planning. season for FC Schalke 04 if we
Today, even many companies outside the foot-
Volatile revenue streams ball industry indicate that financial planning Financial vs. sporting success manage to qualify for the
Business forecasting and budgeting are crucial has become increasingly challenging, since we As mentioned above, financial and sporting suc-
activities within financial management. Since are currently living in a so-called VUCA world cess are reciprocally related. On the one hand, Champions League and at the same
budgeting always involves assumptions about – an economy determined and driven by vo- if your team performs well in your respective
future developments, it is always associated latility, uncertainty, complexity and ambiguity. competitions, this usually leads to considerab- time break even in our annual result.
with great complexity and uncertainty. While Within the football industry, these factors have ly better financial results. On the other hand,
ordinary companies are often able to forecast always been present. Financial executives must if you invest more money in your squad, your Not making a profit nor a loss shows
future sales trends or cash flows with relative draw best-case scenarios (e.g. qualifying for chances to win more games can be much high-
accuracy, such forecasts are extremely complex the Champions League and winning the natio- er. This can create a vicious circle of clubs deci- that we have used our available
for football clubs, as financial success heavily nal cup), worst-case scenarios (being relegated ding to spend more money in anticipation of si-
depends on sporting success. If clubs are very to the second division) and many scenarios in gnificantly higher future returns due to greater resources optimally. A high profit is
successful and qualify for international com- between, calculating how much money can be sporting success. While this strategy can work
petitions or win titles, they earn more money invested in the licensed player squad for each in some cases, it is at the same time very risky, not very beneficial for us, since we
from broadcasting, sponsoring, and in many scenario. While budgets for each scenario can since sporting success cannot be fully planned.
cases also have higher matchday and merchan- be calculated quite precisely, the sporting suc- If the results fail to materialise, the clubs need have no shareholders that demand
dising income, as fans are more excited about cess is hard to predict. Clubs must decide which to deal with big deficits.
the club. However, this relationship also works scenario they will use as a basis for their finan- a dividend. Of course, we are not
in the other direction and in years when clubs cial planning when determining how much can It is important to note that the goals and finan-
unexpectedly do not qualify for international be invested in the player squad, always keeping cial objectives of football clubs and commercial opposed to a high profit, but we are
competitions or are even relegated to a lower in mind that the money they invest can also enterprises are fundamentally different. An or-
division, incomes are much lower than predic- have a big impact on the performance on the dinary company strives for the highest possible not actively trying to reach one.“

8 9
FC Schalke 04 has become one of the clubs with is played for the fans, and fans mostly care about permitted. Clubs are allowed to be organised as
the biggest financial problems in the course of what is happening on the pitch and not about fi- associations or limited companies. However, if
the COVID-19 crisis. The club could only survive nancial numbers. The pressure to invest as much they take the form of a limited company, the so-
the short-term consequences of the crisis with money as possible in good players and to make called “50+1 rule” states that the registered as-
a debt guarantee of the local government. expensive, high-profile transfers is mostly very sociations, and thus their members, must hold
high. However, due to the recent crisis, fans have a majority of the voting rights – 50% plus one
In a conversation with the CFO of a Swiss Super understood how important a solid financial ba- vote – in the football club. An exception applies
League club, the manager explained that they sis is, which could foster a mentality change (see to companies or individual investors who have
actively try to be exactly break even and not chapter 3). substantially funded a club for at least 20 years.
make a profit in good years, so the club does not They are allowed to gain a controlling stake in
have to pay any profit taxes. Legal forms & financing options that club. This is the case for Bayer 04 Leverku-
Football clubs appear in various different legal sen, VfL Wolfsburg (owned by companies) and
While it is clear that football clubs are not prima- forms. Many clubs such as FC Barcelona or Real TSG Hoffenheim (owned by a private investor).
rily profit-oriented companies and sporting suc- Madrid in Spain or FC Schalke 04 in Germany are
cess is always the main goal, actively not trying still registered as sports associations. Other clubs The legal form obviously influences the finan-
to make any profits by allocating all of your re- operate as corporations and use the legal form cing options of clubs significantly. Football
sources to your squad or using accounting tricks of a limited liability company (LLC) or public limi- clubs, just as any other business, can finance
to avoid taxes can be very dangerous in the long ted company (PLC). Some clubs, like for example their activities through internal or external fun-
run. If you do not make any profits you cannot Ajax Amsterdam, Borussia Dortmund, Celtic FC, ding (see figure 1).
build up any reserves that would give you stabi- Manchester United or Juventus F.C. are also pu-
lity and security in financially challenging years, blicly listed.
as they act as buffers in absorbing losses (see
chapter 2). Various clubs even operate with a Every country has their own specific legal forms
so-called “structural deficit”. That means that in and rules. In Spain, for instance, the legal status
normal years, excluding any extraordinary reve- of a sociedad anónima deportiva (S.A.D.) (pub-
nues and expenses, the clubs report a loss. The lic limited sports company) was introduced in Sources of funding
negative result can only be avoided by unexpec- 1990 and is mandatory for most professional
ted sporting success or other one-time effects football clubs. However, due to tradition, some
like selling a player with a profit. clubs like FC Barcelona and Real Madrid are al- Internal financing External financing
lowed to keep their status as non-commercial
Now during the COVID-19 crisis, it became obvi- sports associations. Also in Switzerland, the
ous that relying on extraordinary income to avoid Swiss Football League made it mandatory for
losses and to operate with little reserves is very every Super League club to transform their le- Debt financing
Debt
risky (see chapter 2). Also, fans started to realise gal form into that of a public limited company,
the challenges some clubs are facing and the to- even though some clubs wanted to maintain
Mezzanine financing
pic of financial sustainability has become much the form of a sports association. In the English
more prominent within the public discourse, Premier League and the Italian Serie A, clubs
which could be an opportunity for many clubs. are usually public limited companies and ow- Equity
Self-financing Equity financing
When talking to CFOs of football clubs, many in- ned by wealthy individuals or investment firms.
dicate that it is emotions and public pressure by
fans and the media that decoy managers into ta- In Germany, on the contrary, a majority control
king more financial risks. Football is a game that by a single entity (person, or company) is not Figure 1: Sources of funding

10 11
The potential of internal financing does not de- resources to football clubs and preserve re- the goal of the Financial Fair Play (FFP) rules
pend on the legal form of the club, since self-fi- payment claims without increasing the clubs' is to increase long-term financial sustainabili-
nancing is realised through retained earnings. If indebtedness. Another mezzanine instrument, ty and improve fairness. Clubs are monitored
clubs manage to make a profit, these profits can which can only be used by limited companies, by the UEFA Club Financial Control Body. The
be retained and used to strengthen the equi- are convertible bonds. Just like normal bonds, rules state that the difference between “rele-
ty position and as sources of internal funding. convertible bonds are fixed-income corporate vant income” (income from e.g. gate receipts,
However, the options of external financing sig- debt securities that yield interest payments. sponsoring, broadcasting, merchandising, etc.)
nificantly vary with the legal form of a football Yet, investors have the right to convert their and “relevant expenses” (cost of sales/mate-
club. claims into a predetermined number of com- rials, salaries, interest payments, etc.) should
mon stock or equity shares if certain criteria are not be greater than EUR 5 million, aggregated
The potential instruments of debt financing met. over three years. However, the gap between
are the same for all clubs, regardless their legal relevant income and expenses is allowed to be
form. The most common form of debt finan- External financing through equity capital by up to EUR 30 million, if equity participants of
cing, taking out a bank loan, is used by plenty selling shares is only possible for limited com- the club cover the losses. If clubs violate the FFP
of football clubs, in most cases for long-term panies. There are numerous clubs that have rules, they can be punished with fines, transfer
infrastructure investments. Various football sold some or the majority of their shares to in- bans, point deductions or exclusion from UEFA
clubs have also already issued bonds to raise vestors. Yet, the type of investors football clubs competitions.
debt. A football-specific instrument, which has work with varies. In Germany, where clubs
already been used in some cases, are so-called are generally not allowed to sell the majority As UEFA states itself, due to the FFP, financial
“fan bonds”. Taking a loan from fans can help of their voting rights to investors, some clubs results of European clubs have improved signi-
clubs to raise debt for better conditions, but the bring strategic partners on board (e.g. FC Bay- ficantly, with club balance sheets strengthening
amount of capital that can be raised through ern München, Borussia Dortmund). Strategic (net equity doubling), and net debt to revenue
“fan bonds” is usually limited. Some clubs have partners are mostly sponsors that acquire a cer- plunging from 65% to 35%. Yet, as recent de-
also made use of asset-backed securities (ABS), tain number of shares of a club to strengthen velopments show, the rules of FFP can easily
which are bonds collateralised by assets such as the relationship and leverage synergies. In Eng- be bypassed, as there is some leeway for clubs
receivables (future cash inflows). land, France and Italy, most of the big football when it comes to third party transactions. In
clubs have sold the majority of their shares to practice, club owners can try to increase the
Mezzanine financing is a hybrid type of finan- either wealthy individuals or investment firms. club’s revenues instead of covering losses by “For the purpose of the breakeven
cing, having both debt and equity characteris- signing, for instance, sponsoring agreements.
tics. Some mezzanine instruments can also be Financial Fair Play & Licensing The rules of FFP state the following: result, the licensee must determine
used by football clubs that are still organised as Football clubs are not as free in their financi-
associations. One of these typical instruments al planning as most industrial companies. Due the fair value of any related party
are subordinated loans, which are riskier for to certain regulations by the national football
creditors than normal loans, since in the event associations or the UEFA, specific financial stan- transaction(s). If the estimated fair
of insolvency they are not repaid until the other dards have to be met in order to be allowed to
creditors have received their money. For foot- participate in competitions. value is different to the recorded
ball clubs, liabilities from subordinated loans
are mostly towards private benefactors or pa- For international competitions organised by value then the relevant income must
trons. Subordinate loans have the advantage UEFA, the “UEFA Club Licensing and Financial
that even though they are reported as debt Fair Play Regulations” apply. While the club li- be adjusted accordingly […]”
in the balance sheet, they can be allocated to censing system criteria are designed to assess
equity in the balance sheet analysis, which can the clubs’ financial situation in the short term
help clubs in licensing procedures (see chap- (e.g. no overdue payables towards other foot-
ter 1). This allows patrons to provide financial ball clubs, employees, tax authorities, etc.),

12 13
If the UEFA Club Financial Control Body believes ration of the season in question. The source of vented with creative accounting and even the
that the declared fair value of the related party financing is questioned less. While there are de- German licensing regulations, which are seen as
transaction is too high (i.e. a club owner signed tailed rules regarding the liquidity situation and some of the strictest in Europe, help preventing
a sponsoring contract with a value much high- how to assess it, the financing situation is only short-term illiquidity of clubs but do not suffici-
er than it would have occurred between inde- mentioned briefly ently foster long-term stability (see chapter 2).
pendent parties), an independent third-party “Only direct costs of acquiring a
assessor will perform a fair value assessment. Particular reporting practices
Obviously, such decisions on a by-case basis are “The statement of financial position Another factor that has to be kept in mind player’s registration can be
open to interpretation and can be contested on when analysing the financial situation of foot-
legal grounds. must be transparent and orderly. ball clubs is that there are some peculiarities in capitalised. For accounting
the clubs’ financial reports due to their specific
In addition to the UEFA regulations, there are The applicant's assets should not be business model. The most striking aspect is pro- purposes, the carrying value of
licensing regulations by national football asso- bably the high amount of hidden reserves plen-
ciations. The licensing system that is one of the permanently reduced as a result of ty of clubs possess. Hidden reserves occur if the an individual player must not be
strictest in Europe and has served as a role mo- fair value of an asset is greater than its book
del for other regulations is the licensing process the match operations. In the event value. For football clubs, this is mostly the case revalued upwards, even though
of DFL, the German league association. when it comes to the value of their players.
of negative equity/association's management may believe market
Besides sporting, legal, infrastructural, media When football clubs transfer a player, the acqui-
technology, personnel and administrative cri- funds, the applicant is obliged by a sition costs of the player’s registration are usu- value is higher than carrying value.
teria, certain financial criteria have to be met ally capitalised as intangible assets. However,
to obtain a license from DFL. The basis for the condition to improve this value.” the International Financial Reporting Standards In addition, whilst it is acknowledged
financial assessment of a club are its consoli- (IFRS) as well as local accounting standards and
dated financial statements. This is important, As the excerpt shows, the rules concerning the the UEFA Club Licensing and Financial Fair Play that a licence applicant may be able
since many clubs operate with corporate struc- financing structure are very softly worded and Regulations all state that football clubs can only
tures and several subsidiaries. Only taking indi- short. There are no concrete numbers or hard capitalise these acquisition costs. This means to generate some value from the use
vidual financial statements into account would limits for the debt-to-equity ratio. Just in the that if the market value of a player increases in
lead to false conclusions and offers room for (for most companies already threatening event) the future, or if a locally trained players (who and/or transfer of locally trained
manipulation. The clubs have to present their of negative equity, which in financial terms is will always have a book value of zero) make it
audited consolidated balance sheets, income nothing else than over-indebtedness, clubs into the first team and increase their respective players, for accounting purposes
statements, notes, management reports of the must improve their balance sheet structure. value, this is not shown in the balance sheet.
last fiscal year as well as several forward-loo- The UEFA Club Licensing and Financial Fair Play costs relating to an applicant’s own
king budget statements. Hence, it can be summed up that football clubs Regulations specify the following:
do not have complete freedom of action in youth sector must not be included
What is striking about the German licensing terms of financial management but are bound
regulation is that the rules are very liquidity- to national and international regulations. Yet, in the balance sheet – as only the
driven. The primary criterion for assessing the while some of these rules have in fact helped to
economic performance of a license applicant is improve the financial sustainability within the cost of players purchased is to be
its liquidity situation and thus the question of football industry over the previous years, there
whether the applicant will have enough liquid are still some flaws and loopholes in the regula- capitalised.”
funds to ensure match operations for the du- tions. UEFA's Financial Fair Play can be circum-

14 15
Hence, a player that initially cost EUR 10 million
will never have a higher book value than that,
even though the management might (even
rightfully) believe that they could sell them ea-
sily for EUR 30 million. One additional aspect
is that the capitalised costs of acquiring the
player’s registration is to be depreciated over
its useful life. This means that in the example In 2017, Borussia Dortmund acquired Jadon
above, the initial book value of EUR 10 million Sancho from Manchester City for EUR 7.84 mil-
decreases every year until it is zero at the end lion and signed a three-year contract with the
of the player’s contract with the club. The dif- player. In 2018, the club extended the contract
ference between the estimated market value until 2022. In 2019, it was extended again until
of a player and the book value is called hidden 2023. Assuming that the EUR 7.84 million are
reserves. In some cases, the hidden reserves the whole direct costs, this is the development
can be considerable. Let us look at a concrete of the book value of the capitalised costs from The website transfermarkt.de estimates the
example. acquiring Jadon Sancho: current market value of Jadon Sancho to be
EUR 100 million. Thus, Borussia Dortmund
possesses estimated hidden reserves of
Year Book value Useful lifetime Depreciation
around EUR 97 million just attributable to this
(beginning of the year) (in million EUR)
player. In the current annual report 2019/20,
Borussia Dortmund discloses capitalised play-
2017 EUR 7.84m. 3 years 7.84/3 = 2.61
er registrations of EUR 228.3 million. The ove-
(until 2020)
rall market value of the squad is estimated to
be EUR 592.1 million, resulting in estimated
2018 EUR 5.23m. 4 years 5.23/4 = 1.31
total hidden reserves of more than EUR 360
(extended until 2022)
million.
Obviously, not every club has hidden reserves like Bo-
2019 EUR 3.92m. 4 years 3.92/4 = 0.98 russia Dortmund and market values are always just an
(extended until 2023) estimation. Yet, when analysing the financial situation of
football clubs, it always has to be kept in mind that signi-
ficant hid-den reserves can exists, which when realised
2020 EUR 2.94m. 3 years 2.94/3 = 0.98 lead to extraordinary gains.
(until 2023)

2021 EUR 1.96m. 2 years 1.96/2 = 0.98

(until 2023)

2022 EUR 0.98m. 1 year 0.98

(until 2023)

2023 0
Note: Borussia Dortmund applies straight line depreciation. Any potential directly attributable contract ne-
gotiation costs (e.g. agent/intermediary fees), which could also be capitalised, are neglected due to lack of
information. The future book values until 2023 will only develop as presented above if the contract is not
extended. If the player is transferred to another club before 2023, the carrying amount will be derecognised.
Table 1: Exemplary development of the book value of the player's registration of Jadon Sancho.

16 17
Chapter 2
The Current The Current Situation
Situation .15
However, what is more interesting than the absolute number of revenues is how
The football industry, just like various other in- fees or other smaller revenue streams). Obvi-
they are composed in the different leagues (see figure 2).
dustries, has to deal with the challenges of the ously, for some clubs, revenues from transfers
COVID-19 pandemic. Most clubs are forbidden are also a crucial part of the turnover. However,
to sell any tickets and to have their fans on the as transfer fees are usually extraordinary in- 100%
13% 16% 15% 11%
stadiums for matches. This has serious con- come, they are not considered part of recurring 90% 20%
sequences for the financial situation of most revenue. 80% 16%
28% 30% 11%
football clubs. However, while the crisis has se- 70% 30%
verely hit the industry as a whole, some clubs Before the COVID-19 pandemic, revenues 60% 22% Others
25%
were significantly more affected than others within the European football market have con- 50% Matchday
and faced greater financial trouble after a short stantly grown. In 2018/19, professional Euro- 40%
time. If we want to see this crisis as an oppor- pean football clubs have disclosed revenues Sponsoring & Merchandising
30% 59% 54% 59%
tunity to learn and try to develop ideas for ma- of in total EUR 26.2 billion. Yet, turnover is 20% 44% 47% Broadcasting
king the whole system more stable, it is crucial distributed very unequally, since 65% (nearly
10%
to study why some clubs were hit harder than EUR 17.0 billion) of the total revenues are at-
0%
others. Hence, the following sections analyse tributable to the top 5 European Leagues. The Premier La Liga Bundesliga Serie A Ligue 1
the pre-COVID-19 financial situation of various English Premier League alone reported total League
clubs and leagues, demonstrating its concrete revenues (excluding income from transfers) of
effects on some clubs. EUR 5.85 billion, followed by the Spain’s LaLiga Figure2:2:Composition
Figure Composition of
of revenues
revenues in
in the
the top
top 55 leagues
leagues 2018/19
2018/19
(EUR 3.38 billion), the German Bundesliga (EUR
Revenue streams and costs 3.35 billion), Italy’s Serie A (EUR 2.50 billion) As it becomes clear from figure 2, Bundesliga and Ligue 1 have a rather diversified
The biggest challenge for football clubs in the and the French Ligue 1 (EUR 1.90 billion). How- As it becomes clear from figure 2, Bundesliga revenues from broadcasting were threatened.
course of the COVID-19 pandemic is the collap- ever, what is more interesting than the absolute revenue
and Ligueprofile,
1 have awhile
rather for the other
diversified three leagues
revenue broadcasting
However, since the resume is by fargames
of league the most
and
se of some revenue streams. In general, most number of revenues is how they are composed profile, while for the other three leagues broad- international competitions, matches are shown
professional clubs have three main recurring in the different leagues (see figure 2). important revenue
casting is by stream.
far the most Whilerevenue
important usually diverse
normallyrevenue
on TV andprofiles arecontracts
the original seen ascon-
pos-
revenue streams: the marketing of media rights stream. While usually diverse revenue profiles cluded with television providers apply again.
(broadcasting), income from sponsoring con-
itive, since diversification reduces the dependency on specific sources, clubs with
are seen as positive, since diversification redu-
tracts and the sale of merchandise, and match- aces the dependency
higher on specific sources,
share of broadcasting income Matchday
clubscurrently income,from
benefit on the contrary,
that. Whenwillfootball
conti-
day income (ticket sales as well as revenue from with a higher share of broadcasting income cur- nue to be seriously impacted due to the ban of
refreshments during games). In some countries games in most
rently benefit fromleagues in football
that. When Europegames
and allfans
international competitions
in the stadiums. werespon-
Also, income from sus-
like Germany or France, other recurring reve- in most leagues in Europe and all international soring and merchandising can be heavily impac-
nues are also reported separately (e.g. income pended between
competitions March and
were suspended May/June
between March (Ligue 1 COVID-19
ted by the even cancelled
pandemic.the remaining
Sponsors might
from granting usage rights for the clubs’ brands, and May/June (Ligue 1 even cancelled the re- be financially impacted by the crisis as well and
public catering, rentals and leases, membership games
mainingof the ofseason
games completely),
the season completely),also
also revenues frompayments.
reduce future broadcasting wereactivities
Sponsoring threat-
ened. However, since the resume of league games and international competitions,
18
matches are shown normally on TV and the original contracts concluded with 19
tel-
 in the stadiums cannot be carried out without season 2019/20 to July and August after the As figure 3 shows, only for the Portuguese
fans. For some clubs, especially in Germany, balance sheet date. Therefore, the remaining Primeira Liga broadcasting revenue accounts
income from hospitality is crucial as well. It is broadcasting fees from the season 2019/20 will for more than 50% of all revenues. In other
normal for many sponsors and corporate part- be recognised in the annual report of 2020/21. leagues, it is significantly less.
ners to have their own boxes or business seats The lack in matchday income, on the contrary,
in the VIP area of the stadium. For the season cannot be made up for later, as fans are still The revenue structure is also important when
2018/19, it is estimated that on average 40% of not allowed to be in the stadium. A similar de- it comes to the question of how much money
the sponsoring of the German Bundesliga can velopment can be seen in the financial state- can be invested in the professional squad. As
be attributed to hospitality. When it comes to ments 2019/20 of Borussia Dortmund. While already described in chapter 1, football clubs
merchandise, some clubs could also experience most revenue streams could be held constant usually try to spend as much money as possible
a decline. Fans might also be financially impac- or improved, matchday income saw a decline of on their sporting success. This is also reflected
ted by the COVID-19 pandemic and, since they 27%. Juventus F.C. reports a decrease in reve- in the cost structure of football clubs. Out of
cannot go to the stadiums anyway, might not nues from ticket sales of 30%. Unlike Manches- the total expenses of German Bundesliga clubs,
spend money on merchandise at the moment. ter United and Borussia Dortmund, Juventus 37% were attributable to salaries of players and
F.C. also showed a decrease in merchandising coaches and 22% were attributable to trans-
Thus, the higher the share of broadcasting in- income of 28%, which according to the club is fers. Therefore, revenues that can be genera-
come, the better it is for clubs right now. This attributable to “the provisions stemming from ted without incurring large additional costs are
also becomes apparent when looking at the an- the spread of the COVID-19 pandemic which, particularly important for football clubs. This is
nual reports of football clubs whose fiscal year among other things, imposed the lockdown, why clubs with a larger share of broadcasting
ended at June 30, 2020. For Manchester Uni- with a subsequent considerable drop in store revenues can usually allocate more money to
ted, revenues decreased by nearly 19% compa- product sales.” players and their salaries. More matchday in-
red to the previous year, which resulted in a loss come usually also leads to higher costs from
The Current
of EUR Situation
25.56 million. While revenue from spon- Whereas large clubs are already struggling with match operations and more merchandise sales
soring and merchandising increased by 1.4%, these declines, smaller clubs are being hit even
The Current Situation
also result in increasing costs of goods sold. In
broadcasting income decreased by 42% and harder. Clubs in smaller footballing countries contrast, an increase in broadcasting revenues
Whereas
matchday large
incomeclubs areHowever,
by 19%. alreadyasstruggling
Man- and with these
those in thedeclines, smaller
lower leagues clubs
of larger are
coun- is not usually accompanied
broadcasting revenues by ishigher costs. Thisaccompanied by higher costs. This is also
not usually
chesterhitUnited
being evendescribes in its annual
harder. Clubs in smaller tries usually
report,footballing receive less
countries andbroadcasting
those in theincome
lower is also partially reflected in the salaries/revenue
broadcasting income was only deferred due to and are thus more dependent on other income partially
ratio of thereflected in the
top 5 leagues (seesalaries/revenue
figure 4). ratio of the top 5 leagues (see figure 4).
leagues of larger
postponement countries
of the remainingusually
games ofreceive less broadcasting income and are thus
the streams.
80%
more dependent on other income streams. 70%
73%

70% 62%
61%
100% 60% 54%
9%
90% 26% 19%
80% 38% 15% 59% 59%
48% 50%
14% 54%
70%
24% 40% 47%
60% 33% Others 44% Salaries/revenue ratio
50% 18%
39% Matchday 30% % Broadcasting revenue
40% 30%
30% 32% Sponsoring & Merchandising 20%
53%
20% 41%
27% Broadcasting
10% 21% 10%
12%
0%
Eredivisie Primeira Jupiler Pro Bundesliga Premiership 0%
(NED) Liga (POR) League (AUT) (SCO) Premier La Liga Bundesliga Serie A Ligue 1
(BEL) League
Figure 3: Composition of revenues in selected non-top 5 leagues 2018/19 Figure 4: Salaries/revenue ratio 2018/19 top 5 leagues
Figure 3: Composition of revenues in selected non-top 5 leagues 2018/1920 Figure 4: Salaries/revenue ratio 2018/19 top 5 leagues

As20 figure 3 shows, only for the Portuguese Primeira Liga broadcasting revenue The German Bundesliga shows a much lower salaries/revenue ratio compared21to
The German Bundesliga shows a much lower Particularly clubs outside the top 5 leagues with revenue ratio. This can cause severe problems, Financial stability
salaries/revenue ratio compared to the other lower revenues seem to struggle to meet this especially during the recent COVID-19 pande- To assess both financial stability and risk of a
top 5 leagues. In general, especially when loo- benchmark. In the last “Club Licensing Bench- mic. As the UEFA already stated when analysing company, usually certain financial leverage ra-
king at the first four leagues, the salaries/reve- marking Report” that was published by the the financial key figures of 2018: “In addition, a tios are calculated. Security and thus the secu-
nue ratio seems to correlate with the share of UEFA in 2020, the salaries/revenue ratios of all continuation of the low revenue growth repor- rity ratios are aimed in particular at a balanced
broadcasting revenues. Ligue 1 is the excepti- European first leagues of the year 2018 were ted in FY2018 coupled with a reduction in trans- financing and financing structure of the assets.
on amongst the top 5 leagues, with a very high presented. Wages exceeded 70% of revenue in fer profits could leave clubs with high wage to The security of a company depends to a large
salaries/revenue ratio of 73%. 13 out of the 20 10 of the top 20 countries. Besides France, the revenue ratio’s heavily exposed and potentially extent on the proportion of equity in its total
clubs show a ratio above 70%. Two clubs, AS benchmark was met or exceeded on average in lead to financial distress.” Today we are in a si- capital. Therefore, the equity ratio is a common
Monaco FC (132%) and Lille OSC (112%) even the first leagues of the following countries: tuation where revenues are not just growing measure to analyse how much risk a company
had a ratio of above 100%, meaning that their slowly, they are collapsing. Matchday income is can bear. In contrast to debt capital, which must
salaries are higher than their recurring income Russia (70%) already deteriorating, sponsoring income (es- be repaid in full, equity capital can bear the
and they are thus highly dependent on extraor- Turkey (79%) pecially when it comes to hospitality) will most corporate risk. For safety and stability conside-
dinary income from player transfers or surpri- Portugal (75%) likely go down, revenue from merchandising is rations, the aim should be to achieve the high-
sing sporting success. The UEFA has included Belgium (71%) already decreasing for some clubs and some in- est possible equity ratio. Debt capital entails a
a salaries/revenue ratio of 70% as a risk indica- Switzerland (71%) dustry experts believe that even broadcasting dependence on lenders. For example, lenders
tor in their Financial Fair Play Regulations. The Ukraine (76%) revenues might decline as there could be less may demand collateral or contractually agree
benchmark is explained as follows: Greece (74%) consumer interaction with the sport in the fu- restrictions with the company. Contractually
Israel (78%) ture. agreed restrictions in connection with the gran-
Poland (74) ting of debt capital are referred to as covenants
Whilst some costs such as matchday expenses and are often used by banks.
The same can also be observed in the second are mostly variable costs, salaries are fixed
leagues in top 5 countries. Clubs of the English costs that have to be paid even though reve- The amount of equity a company needs to be
“Given that other – mainly Championship, for instance, reported a salari- nues are declining. This is a problem for most seen as stable heavily depends on the business
es/revenue ratio of 107% in 2018/19. clubs – especially for those with an already model, firm- and industry-specific characteris-
fixed – operating costs tend to high salaries/revenue ratio. These clubs also tics as well as the risk tolerance of debt provi-
The numbers presented in this chapter show have problems to realise high extraordinary ders. As a general rule of thumb, most inves-
consume between 33% and 40% of that football clubs generated, on average, high gains to make up for the structural loss, since tors consider companies with an equity ratio of
revenues, and pre-COVID, they were constantly most clubs are facing financial challenges and over 30% to be solidly financed. Particularly in
revenues, a wage-to-revenue ratio increasing. Yet, most of the income is used for the transfer market has slumped significantly. the current situation, an equity cushion can be
the players’ and coaches’ salaries and for trans- If these clubs cannot agree with their players utterly important for clubs. Equity capital can
in excess of 70% is highly likely to fers. In some competitions, a kind of “rat race” on voluntary salary waivers, they will face hea- absorb current losses and avoid over-indebted-
has developed: if some clubs take high risks and vy losses. The amount of losses that a club can ness. Therefore, it is interesting to look into the
result in losses, unless there is a invest an increasing amount of their revenues in absorb depends to a large extent on its stability pre-pandemic equity ratios of football clubs in
salaries and transfers, other clubs feel the need and financing structure, which will be analysed different countries in order to assess their ca-
significant surplus from transfers.” to do the same in order to maintain sporting in the following. pability to deal with losses.
competitiveness. In the end, a vicious circle de-
velops where all clubs invest more money and As previously described, clubs of the German
the sporting difference between the clubs is Bundesliga are limited when it comes to raising
the same as before, only with a higher salaries/ equity due to the “50+1 rule”. Yet, the strict li-

22 23
esting to look into the pre-pandemic equity ratios of football clubs in different
countries in order to assess their capability to deal with losses.

As previously described, clubs of the German Bundesliga are limited when it

licensing process
censing process could lead to higher equity rati- can easily operate with a low equity ratio as ratio of nearly 50% until the fiscal year 2012,
os due to self-financing.
could lead to higher equity ratios due to self-financing. The equityThe equity
ratiosratios of all
of all 18 they are backed up by Volkswagen AG. Also, which then deteriorated and went down to
18 Bundesliga clubs of the season 2018/19 are Hertha BSC was able to attract new investors only 4.8% in 2015. While Werder Bremen had
Bundesliga clubs of the season 2018/19 are shown
shown inin figure
figure 5. 5. in the 2019/20 season, who acquired shares in mostly played in the Champions League during
the club and thus increased the equity ratio to the 2000s, the season of 2010/11 was Werder
a current 18.7%. Further investments are plan- Bremen‘s last participation in the Champions
100% ned. The low equity ratios of SC Paderborn and League. Afterwards, the club still invested a lot
especially Union Berlin, who were just promo- of money in the squad in order to qualify for
80% ted to the first League at the end of the season international competitions again but failed, and
2018/19, reflect the efforts and financial risks with high salaries but declining revenues, equi-
60% some clubs (have to) take in order to win the ty shrank constantly.
“rat race” and advance to a higher league.
40% Schalke 04, on the other hand, has always ta-
30% What is striking are the cases of Werder Bremen ken big financial risks to play in the Champions
20% and FC Schalke 04. Both teams are in the first League. As already shown by the quote of Dr.
league for several decades already and have Claudio Kasper in chapter 1, Schalke 04 never
0% played in the Champions League or the Euro- tried to make profits but to maximise sporting
pa League several times. Yet, Werder Bremen success at any cost. Since 2014, the only time
-20% had a pre-pandemic equity ratio of only 14% that Schalke 04 disclosed slightly positive equi-
and Schalke 04 was even over-indebted with a ty was in 2018. Otherwise the club has always
-40% ratio of -8%. This shows that the “rat race” does been over-indebted and operated with great
not only exist in lower divisions when teams are financial risk. Over-indebtedness occurs when
SC Freiburg

Fortuna Düsseldorf

Hertha BSC
TSG Hoffenheim

Borussia Dortmund

RB Leipzig

FC Augsburg

VfL Wolfsburg

FC Schalke 04

1. FC Union Berlin
1. FSV Mainz 05

1. FC Köln

Werder Bremen

SC Paderborn 07
Eintracht Frankfurt
FC Bayern München

Bor. Mönchengladbach
Bayer 04 Leverkusen

trying to be promoted, but also in first leagues the loss carried forward by a company is greater
if clubs take risks to qualify for the Champions than its equity (see figure 6).
League. Werder Bremen used to have an equity

Assets Liabilities
Current assets 20
 Liquid funds 5 Debt 50
Figure 5: Equity ratios of German Bundesliga clubs  Receivables 10  Short-term
Figure2018/19
5: Equity ratios of German Bundesliga clubs 2018/19  Inventories 5  Long-term
It can be seen that the majority of teams are qui-
It can be seen that the majority of teams aretequite
stable.stable. Eleven
Eleven teams teamstheare
are above above
threshold Noncurrent assets 29
 Financial assets 9
of 30%. The average pre-Corona equity ratio of  Tangible assets 10
the threshold of 30%. The average pre-Corona equity
German ratio ofteams
Bundesliga German Bundesliga
amounted to 36%.  Intangible assets 10
However, seven clubs show an equity ratio of
teams amounted to 36%. However, seven clubs show
below 30%,an
twoequity ratio
clubs even of below
show negative30%,
equi- Equity 50
ty and are thus over-indebted.  Share capital
two clubs even show negative equity and are thus over-indebted. Loss carried forward 51  Non-voting non-ownership share
capital
What has to be kept in mind is that as explai-
 Reserves (legal, free/statutory)
What has to be kept in mind is that as explained in chapter
ned in chapter 1, due 2.3, due to
to special special
regulations
Bayer 04 Leverkusen, TSG Hoffenheim and VfL
regulations Bayer 04 Leverkusen, TSG Hoffenheim
Wolfsburg and VfLowned
are fully Wolfsburg are fully
by investors. This 100 100
explains the very high equity ratio of TSG Hof-
owned by investors. This explains the very high equity
fenheim, whileratio of TSG
also showing thatHoffenheim,
VfL Wolfsburg Figure 6: Example of over-indebtedness in the balance sheet

while also showing that VfL Wolfsburg can easily operate with a low equity ratio
24 25
as they are backed up by Volkswagen AG. Also, Hertha BSC was able to attract
In the simplified situation presented in figure 6, to its own subsidiaries. The club has done busi- While in the German first league financial sta-
the company’s creditors are not covered any- ness with itself, and such intragroup transac- bility seems to be sufficient for most team, the
more by assets valued at book value. The resul- tions must of course be eliminated again in the The
secondCurrent Situation
league already appears to be a bit less
ting equity would be -1. The reason that Schal- consolidated financial statements. stable (see figure 7).
ke 04 has been able to survive financially with
these disastrous figures so far is that the going In general, some football clubs often claim that 100%
concern forecast has always been positive, part- profit retention and their equity ratio is not
ly because Schalke 04 always had high hidden as important as for other businesses. While it 80%
reserves due to the market value of some of is true that in a volatile environment, as is the
theira players (see chapter 1). However, relying case in football, equity can fluctuate more, ef- 60%
on this is, as mentioned before, very risky, espe- forts should always be made not to fall below a
cially because Schalke 04 does not only show a certain equity ratio in order to provide stability
40%
threatening pre-pandemic equity ratio but also in bad times. The German DFL also emphasises
low liquidity. Cash and cash equivalents were in their last business report that “the equity 30%
very low at the end of the 2019 financial year ratio is an indicator for the financial stability.” 20%
and net of current account liabilities were even The importance of a solid equity base is now
negative (EUR -5.1 million). The current ratio becoming clear in the wake of the COVID-19 cri- 0%
(the ratio of assets with short-term availability sis. Clubs with a healthy equity ratio can absorb
to short-term liabilities) was down to 22.5%. the current losses. If there are short-term liqui- -20%
The current ratio should be at least 100% so dity bottlenecks due to a lack of cash inflows,

VfB Stuttgart

1. FC Nürnberg
VfL Osnabrück
SV Darmstadt 98

Hamburger SV

1. FC Heidenheim
Karlsruher SC
SpVgg Greuther Fürth

FC St. Pauli

Erzgebirge Aue
SG Dynamo Dresden

SV Sandhausen

VfL Bochum

SV Wehen Wiesbaden

Arminia Bielefeld
Hannover 96
SSV Jahn Regensburg

Holstein Kiel
liabilities becoming due in the short term can such solidly financed associations can more
be covered with resources available in the short easily raise short-term debt capital to bridge
term and thus on time. the liquidity bottlenecks. It is no surprise that
Werder Bremen and Schalke 04 are two of the
In the annual reports, Schalke 04 justifies its clubs that were hit the hardest by the current
poor financial situation with the argument that crisis. In its 2020 half-year report, Schalke 04
profit retention plays a subordinate role for reported a 32.5% decline in turnover compared
sports associations and also refers to the al- to the previous year. Equity became even more Figure 7: Equity ratios of German 2. Bundesliga clubs
ready mentioned hidden reserves. In its 2010 negative. Further loans had to be taken out to Figure 7: Equity ratios of German 2. Bundesliga clubs 2018/19
2018/19
annual report, Schalke 04 even claims that the bridge the liquidity bottlenecks. Due to its ris- The average pre-COVID-19 equity ratio of Ger-
club's financial situation is actually much better ky financing structure, the club was only able The
man average pre-Corona
2. Bundesliga equity to
teams amounted ratio
27%of German 2. Bundesliga teams amounted to
than it appears, as the group equity is negative, to obtain the necessary loan with the help of a (compared to 36% in the 1. Bundesliga). Eleven
but the equity in the individual financial state- guarantee from the state of North Rhine-West- 27% (compared
(compared to sevento
in 36% in the 1. Bundesliga).
the 1. Bundesliga) clubs Eleven (compared to seven in the 1.
ments is positive. While the latter is true, this phalia. In the years before, Schalke 04 had al- show an equity ratio of below 30%. Arminia
statement is utterly misleading. The financial ready secured various liabilities through mort- Bundesliga) clubs show
Bielefeld had negative equity an equity ratio
in 2018/19. Yet, of below 30%. Arminia Bielefeld had neg-
situation in the individual financial statement gages and the assignment of receivables and just like Union Berlin the year before, they won
of the club only looks better since the club has trademark rights, so that there was hardly any ative equity
the “rat race” in
and2018/19. Yet, tojust
were promoted thelike
first Union Berlin the year before, they won the
sold club-owned rights such as naming rights collateral left for the current crisis. league at the end of the season 2019/20.

26 The situation looks even more serious when looking at first leagues besides the
27 top
 The situation looks even more serious when seen when looking at Juventus F.C.’s financial for clubs outside the top 5 leagues, this situa-
looking at first leagues besides the top 5. In the report. In 2019, the club reported a loss of EUR tion is very challenging. Not only do clubs from
Austrian Bundesliga, the average equity ratio 39.90 million and an equity ratio of only 3.3%. smaller leagues rely more on matchday revenue
was 16% and only four out of twelve clubs re- With the COVID-19 pandemic starting in 2020, than clubs from top leagues, but player salaries
The Current
ported an equitySituation
ratio above 30% in 2019 (see the loss became even greater and amounted to also account for a significantly larger proportion
figure 8). EUR 89.68 million at the end of the 2020 finan- of revenue on average. Most clubs will have to
cial year. The losses were absorbed by a capi- deal with significant losses in the current scena-
100% tal increase of around EUR 300 million, so that rio.
the equity ratio is currently standing at 20.3%.
80%
However, in can be stated that Juventus F.C. is The amount of losses that a club can absorb
60% currently not pursuing a sustainable business depends to a large extent on its stability and fi-
model. Absorbing losses by raising fresh equity nancing structure. In general, the more equity a
40% only works as long as investors have no problem club has, the more stable it can get through the
30% burning money. crisis. A solid equity base can not only absorb
20%
losses, but also improves the risk assessment of
0% In Spain’s LaLiga, the two big players FC Barce- clubs and thus offers them the possibility to bor-
lona and Real Madrid show very different finan- row money at short notice in case of liquidity
-20% cial situations. Real Madrid managed to achieve shortages.
-40%
continuous profits during the last years and in-
creased its equity ratio up to 46.8% in 2019. On In Germany, seen as the country with one of the
LASK
RZ Pellets WAC

FK Austria Wien

FC Wacker Innsbruck

spusu SKN St. Pölten

FC Red Bull Salzburg

SV Mattersburg

CASHPOINT SCR Altach

SK Rapid Wien

TSV Prolactal Hartberg

FC Flyeralarm Admira
SK Puntigamer Sturm Graz

the contrary, FC Barcelona disclosed an equity strictest licensing regulations, Bundesliga clubs
ratio of only 9.8%. It is no coincidence that FC had a pre-pandemic equity ratio of 36%. How-
Barcelona is named as one of the big clubs that ever, even there, seven clubs showed an equity
has severe problems at the moment. Other than ratio of below 30% and two clubs even reported
Manchester City or Juventus F.C., FC Barcelona negative equity. As recent developments show,
cannot carry out a capital increase to improve the clubs with the lowest equity ratios are also
the financial situation, since as mentioned in the most vulnerable ones and currently being
chapter 1, the club still keeps its status as a non- hit hardest by the crisis. Clubs outside the top
commercial sports association. five leagues seem to be even more in danger.
Figure 8: Equity ratios of Austrian Bundesliga clubs 2018/19 Not only are they often hit harder by the crisis,
Figure 8: Equity ratios of Austrian Bundesliga clubs 2018/1932 Summary but on average they also have fewer reserves to
Due to the COVID-19 pandemic, the football in- draw on.
When looking
When looking at big
at the theEuropean
big European teams,
teams, there thereinis2019.
of 64.0% a diverse
However,picture.
this ratio isMost teams
only that dustry is experiencing a sharp decline in reve-
is a diverse picture. Most teams show a solid fi- high due to the investments of the club owner. nues. Matchday income is already deteriorating, Taking a look at the biggest international clubs
show a solid
nancing financing
structure, structure,
some of them some
obviously be- ofInthem obviously
their balance sheet,because they
Manchester Cityare owned
disclo- sponsoring and hospitality income is going down leads to a mixed picture. Most of the clubs are
cause they are owned by very solvent investors. ses accumulated losses of more than EUR 600 and revenue from merchandising is decreasing on a solid foundation and will survive the crisis
byIn the
very solvent
English investors.
Premier League, Arsenal disclosed million. Due to share capital amounting to more for some clubs. Furthermore, some industry ex- with a few scratches. Clubs like Manchester City
a very solid equity ratio of 42.6% in 2019, Liver- than EUR 1.4 billion, the equity ratio is still high. perts believe that even broadcasting revenues and Juventus F.C. currently do not follow a sus-
Inpool
thewas
English Premier
at 33.3%, League,United
and Manchester Arsenalat disclosed
Yet, also inathe
very solidPremier
English equityLeague,
ratio where
of 42.6% might decline as there could be less consumer tainable business model, but they have solvent
27.7%, which went down to 25.4% in 2020 due most clubs raised equity from investors, some interaction with the sport in the future. investors who provide enough capital to absorb
into2019,
the firstLiverpool
implications of wasthe at 33.3%,
COVID-19 and Manchester
pande- clubs, such asUnited
West Ham at United
27.7%, andwhich
Wolver-went the losses. One club that could face major prob-
mic. Looking at the balance sheet structure of hampton Wanderers, showed negative equity At the same time, most football clubs have high lems is FC Barcelona. The pre-pandemic equity
down to 25.4%
Manchester City, it in 2020obvious
become due tohowtheinves-
first implications
in 2019. of the COVID-19 pandemic. fixed costs. Player salaries are the largest ex- ratio was already very low at 9.8%, and as a non-
tors can make up for continuous losses in foot- pense item for most clubs and have to be paid commercial sports association, the club cannot
Looking
ball clubs.at the balance
Manchester sheet
City had an structure
equity ratio of A
Manchester City,
similar situation it become City
to Manchester obvious
can behow even though revenues are declining. Especially currently sell shares to raise capital.
investors can make up for continuous losses in football clubs. Manchester City had
28 29
an equity ratio of 64.0% in 2019. However, this ratio is only that high due to the
Chapter 3
Approaches
for Improvement
As can be concluded on the basis of the figures serves, they are very susceptible to crises. The
presented in chapter 2, it would be wrong to same accounts for football clubs that do not
say that football as a whole has a fundamental have wealthy patrons or investors without big
financial problem. There are enough clubs that return intentions.
are solidly financed and are now faced with un-
expected problems due to the COVID-19 pande- As described in chapter 1, for many people who
mic. On the other hand, many clubs in smaller work in the financial area of football clubs, it is
leagues were already facing financial hardships quite normal that there is no attempt to make a
before the current crisis. And even for some of profit. This rationale has been prevalent in the
the bigger clubs, it took only little to cause great football industry for a long time. It is believed
financial distress after a short time. Therefore, that if you do not use all of your income for
it seems to be worth reflecting on how the sys- sporting success, you do not use your resour- to keep up in sporting terms. This creates a vi- As mentioned before, the licensing process of
tem as a whole can be made more financially ces efficiently and have to suffer severe conse- cious circle from which very few can break out. the German league association is considered
sustainable. quences in the competitions. While this is true The current COVID-19 pandemic shows, how- to be one of the strictest in Europe. Yet, as the
in some cases, there are also various examples ever, that a certain amount of reserves is also analysis in chapter 2 shows, even those rules do
Within this chapter, various ideas and ap- of clubs who manage to reach their sporting indispensable for football clubs to be able to not prevent clubs from having little or even neg-
proaches that could possibly help the football goals while making constant profits. In the Ger- survive crises. Therefore, it should be the goal ative equity. The reason for this is that the licen-
business in the long term will be discussed. man Bundesliga, SC Freiburg, which is still a re- of all clubs to generate profits in good times at sing process, like the entire football business in
Obviously, it is not the idea to present a ready- gistered association and can thus not sell any least until sufficient reserves have been built general, is very liquidity-oriented. The main fo-
made plan to restructure the football business. shares, has the second highest equity ratio in up. Otherwise, the fate of a club depends on cus is to ensure that the clubs have sufficient
The ideas are only meant to stimulate thinking the league (see figure 5 in chapter 2), as profits the goodwill of creditors, politicians or patrons liquid assets and expected cash inflows to be
about possible future approaches to improve- have been continuously kept in the company and one faces the risk of destroying a club to able to finance the respective following season.
ment. After all, one should learn from crises, every year and reserves have been built up. which many people have a great emotional at- Regulations regarding stability are much less
and a system that does not evolve will not last tachment and which is often important for its strict, as already described in chapter 1.
forever. Perhaps the current crisis is an opportunity for region.
a change of mentality in some parts of the in- It is normal that in constantly growing markets
New mentality & financing structure dustry. It is clear that many clubs, especially in Introducing new licensing criteria without any major shocks, the focus of regula-
It is important for people engaged in the foot- smaller leagues, feel the pressure to squeeze The approaches described earlier are admit- tors lies on the daily operations and the short-
ball industry to keep in mind that despite all the last out of their financial resources. When tedly very idealistic. Changing the mentality of to-medium-term liquidity. However, when
the emotion and public attention, in the end, your competitors do not aim to build up reser- a whole system and restricting yourself on a shocks like the current COVID-19 pandemic hit
most football clubs are subjected to the same ves but plan with structural deficits and always voluntary basis is often difficult. Therefore, it a system, the importance of long-term stability
rules as normal companies. If companies do not invest all resources in the first team, you feel could be helpful to adjust the licensing criteria becomes apparent. Thus, it seems to be a good
make profits for years and do not build up re- compelled to do the same in order to be able in order to discipline clubs from the outside. time to adapt some regulations.

30 31
Even though the origin of the crisis itself and
the main actors involved are entirely different,
some parallels can be drawn between the glo- To increase profits, many banks had operated resistant to crises. As a result, equity ratios of million (approx. EUR 1.66 million) for League
bal financial crisis of 2007-2008 and the current with very low equity ratios before the financial European banks nearly doubled between 2008 Two clubs. The caps include basic wages, taxes,
COVID-19 crisis. The crisis rapidly spread into a crisis of 2007-2008. Due to the lack of stability and 2019. bonuses, image rights, agents’ fees and other
global economic shock, challenging global eco- in the financing structure, these banks were hit fees paid directly or indirectly to all registered
nomies and several business industries. The fi- hard by the crisis and would have gone bank- The football business could learn from the con- players. The English Championship (2nd high-
nancial crisis of 2007-2008 resulted in several rupt. In numerous countries, banks were then clusions that were drawn from the financial cri- est league) is also discussing a potential hard
bank failures and many banks were rescued by rescued with aid packages from states, as they sis and also implement certain capital require- salary cap of GBP 18 million (approx. EUR 19.89
states. The experiences made during the crisis were considered systemically important and ments for football clubs. This would force them million) from next season on. Yet, the salary
lead to changes in regulations, as the German a series of bank failures would have had far- to take less risks and build up reserves in good caps could be challenged in the courts by play-
Government describes: reaching consequences for the entire financial years that act as a risk buffer in bad years. Obvi- ers or clubs that are not in favour.
system. The term “too big to fail” was created ously, just like for banks, the minimum required
to describe this situation. However, saving bank equity ratio would have to be defined by inter- A second option would be the “soft cap”, which
“One of the most important lessons comes with a price, since, as pointed out in the national associations and then implemented allows you to exceed the cap under certain cir-
highlighted quote, banks had taken big risks for step by step. Football clubs cannot massively cumstance, for example if you pay a “luxury
from the global financial crisis is: profit reasons, but did not have to bear the eco- increase their equity in the short term unless tax” that benefits the poorer clubs. However,
nomic risk. Knowing that you can take high risks they sell shares. The strengthening of the equity since the salary cap in European professio-
Those who have opportunities for without having to face the consequences can basis of banks was carried out successively until nal football is not intended to ensure similar
create a moral hazard, because you would not 2019. In addition, it has to be clearly defined sporting conditions for all clubs, but is rather
profit must also bear the associated have a reason to take less risks in the future. The what constitutes risk-bearing equity. In Basel III, an instrument to make business models more
same applies to the football industry. In princi- the core capital (tier 1), which is the capital that sustainable, neither a “hard” nor “soft” but a
risks. The goal must be to reassert ple, it is up to each club to deliberately take big can bear the most risk, is composed primarily of variable salary cap would probably be the most
risks as long as they also bear the financial con- common shares and retained earnings. suitable. Rules could be introduced to stipula-
the principle of liability. Especially sequences. Yet, it can certainly be argued that, te that clubs can only spend a set percentage
just like banks, some football clubs are “too big Another measure which has recently more of- of their turnover on salaries. LaLiga in Spain is
with regard to the events of 2008 to fail”. Football clubs are surely not as relevant ten been discussed and that could help mitiga- heading in a similar direction. Even though they
for the global economy as banks. Nevertheless, ting the problem of the “rat race” is a salary cap. do not impose hard salary caps, the league has
and 2009, it had become apparent for many countries and regions, football clubs Salary caps are traditional components of sport introduced squad cost limits. A group of ana-
are essential for social cohesion and the every- competitions in the United States. In principle, lysts reviews the financial situation of every
that the institutions did not have day life of many people and thus also relevant they aim to limit salaries in professional sport. club before the transfer window opens and es-
for the system. That is why there are many ex- However, there are different ways in which such tablishes squad cost limits for each team. The
sufficient equity and liquidity to amples of football clubs that were saved from a salary cap can be designed. One option is the participation of the clubs in the process is key
insolvency by public aid, which in return creates so-called “hard cap”, which is used in the NFL. to come up with budgets and in case of disa-
cover the risks on their books. Stricter the same moral hazard as for banks. A hard cap represents a maximum amount of greement between club and league, clubs can
wages for the whole team that a club is not al- turn to independent bodies to settle any diffe-
regulations are necessary to ensure In response to the experiences made in the ban- lowed to exceed. For the season 2020/21, the rences that may exist. LaLiga has just published
king crisis, in 2010 the global regulatory frame- salary cap in the NFL is USD 198.2 million. In the squad spending limits allocated to the clubs
the stability of the financial markets work of “Basel III” was introduced. The Basel III August 2020, clubs in the English League One for the 2020/21 season. Due to the significant
standard aims to strengthen the requirements and League Two (the 3rd and 4th league in decrease in revenues, the total budget for the
in the future and at the same time to on bank‘s minimum capital ratios and to im- England) have decided to introduce hard sala- 20 first division clubs has been reduced by EUR
prove corporate governance as well as transpa- ry caps to oppose the prevailing wage inflation 610 million compared to 2019/20, now amoun-
avoid burdens on the states due to aid rency. Higher minimum equity ratios were defi- and improve financial sustainability. The fixed ting to EUR 2.33 billion. FC Barcelona has expe-
ned and implemented to strengthen the stabili- caps amount to GBP 2.5million (approx. EUR rienced the highest cut with a budget of now
packages for credit institutions.” ty of the banking system and make banks more 2.76 million) for League One clubs and GBP 1.5 EUR 382.7 million, down from EUR 671.4 milli-

32 33
on in 2019/20. Since contracts that have been re 30 June, the deadline for UEFA to request Making revenues less volatile no use if these values are not lived in practice.
signed with players in the past are obviously va- the Financial Fair Play figures from the clubs. In chapter 1, it has been already described A brand quickly becomes untrustworthy if the
lid, clubs are negotiating with players to achieve The players Arthur (formerly Barcelona) and that a distinctive feature of the financial ma- people acting do not match the values. For ex-
voluntary salary cuts Miralem Pjanić (formerly Juventus) changed nagement of football clubs is the volatility of ample, a club that propagates sustainability and
sides. Arthur officially cost Juventus F.C. a revenue streams. Everything is related to the environmental awareness, but whose represen-
A flexible salary cap (cap as percentage of re- transfer fee of around EUR 70 million, while sporting success. If clubs perform poorly on the tatives fly in private jets at every opportunity,
venues) in European football is something that FC Barcelona had to pay around EUR 60 milli- pitch, they will get a lower share of the money quickly becomes untrustworthy.
should at least be considered, since many clubs on for Pjanić. While only around EUR 10 mil- generated from broadcasting, often less fans
and leagues are already starting to go in this di- lion flowed from Turin to Barcelona for the are interested in buying tickets to watch the A good example of a club with a strong brand
rection. It is obvious that implementing a salary exchange deal, both clubs were able to record games at the stadium, fans are less inclined to that stands for certain values and bases its ac-
cap or caps in European football is not simple. large book profits. Arthur, whom FC Barcelona spent money on merchandise and with poor tions on them is the German second league
Assuming this would be a UEFA-wide move, bought for around EUR 31 million in 2018, still performance, the market value of players can club FC St. Pauli. St. Pauli is located in an ut-
one has to wonder how the caps would differ had a residual book value of around EUR 20 also decline. Now, the external shock of the terly political and alternative area in Germany
from country to country. As already descri- million at the time of the swap, while Mira- COVID-19 pandemic has shown how massively and is thus very politically active itself. The club
bed in chapter 2, leagues with a higher share lem Pjanić, who joined Juventus in 2016 for most revenue streams collapse if clubs cannot has been credibly campaigning against sexism,
of broadcasting revenues, such as the Premier EUR 32 million, had a residual book value of play with fans in the stadium. While this is obvi- racism and homophobia for a long time before
League, can certainly use a greater share of around EUR 13 million. Hence, neglecting any ously very normal, since playing football is the such campaigns became bigger in football in ge-
their revenues for player salary than others. taxes to keep it simple, the swap resulted in business model of all football clubs, it could be neral. Outside of campaigns, the club has also
Furthermore, some experts are questioning book profits of around EUR 50 million for FC worth reflecting on how clubs could disconnect repeatedly let action speak for itself. St. Pauli
whether salary caps can be implemented in the Barcelona and EUR 47 million for Juventus F.C. some revenue streams from sporting success. has already let homeless people and refugees
EU from a legal perspective. And in practice, it is spend the night in the stadium. People buy mer-
difficult to adjust your salary costs every season These profits improve both the profit and loss One way of doing so is strengthening your chandise with the FC St. Pauli logo are not ne-
according to your revenues, since players usu- account, which is important for Financial Fair brand apart from what happens on the pitch. cessarily fans of the football team but identify
ally have long-term contracts with fixed wages. Play, and the balance sheet situation. Various Whilst this seems pretty straight-forward and is with the values that the logo and the club stand
A flexible salary cut might have to be accompa- other clubs have engaged in deals like that as also tried by many clubs, in practice it seems to for. On various festivals in Germany, which have
nied by a new form of player contracts, as pre- well, although mostly with youth players and be challenging. Strengthening your brand does nothing to do with football, you can find FC St.
sented later in this report. thus not publicised as much. If two clubs ag- not mean simply hiring a marketing agency that Pauli stands where you can buy merchandise.
ree to swap youth players for officially EUR 10 develops a fancy claim and a marketing cam- Just recently, the club has announced that they
Finally, no matter if you want to introduce million each, they both record book profits paign for your club. There are plenty of exam- will produce their own football jerseys from
new capital requirements or a flexible salary of EUR 10 million. However, this approach is ples of clubs who tried to work on their brand the season 2021 on. As the club states, in its
cap, close attention has to be paid to different also risky and can quickly end up in a vicious image but at the same time completely forgot search for a supplier of sustainably and trans-
accounting shenanigans some clubs already circle, because players exchanged for a large about their fan base and their values. If you re- parently produced performance apparel, it had
make use of today to gloss over their finan- sum are then on the club’s balance sheet for ally want to develop a strong brand, you need not found a provider that fully met the criteria.
cial reports. As pointed out in chapter 2, FC exactly this amount and are depreciated over to know who your fans are, understand their Now FC St. Pauli wants to produce the world‘s
Barcelona already reported a risky financing the term of the contract, as explained in chap- values and needs. You cannot try to establish most sustainable team sports collection with its
structure before the COVID-19 pandemic, and ter 1. This means that a player swap with high an international premium brand if most of your own brand called “DIIY”. With this project, the
Juventus F.C. managed to increase its equity sums significantly above the book values pro- fans are local working-class people who want club is also responding to the wishes of its fans,
through a capital increase but has recently mises me, as a club, a high profit today, but in their club to be close to the fans. Knowing who who demand real sustainability from their club.
reported constant losses. To polish the num- return I have significantly higher depreciation your fans are and what they want before deve- Of course, the preconditions for FC St. Pauli are
bers during the pandemic, the clubs have car- in the coming years, which reduces my profits. loping marketing slogans and hashtags is key. Of very special due to its history and origins and
ried out a player swap which will result in a course, the best brand image and communica- the model cannot be copied. Also, not every
large book profit for both parties right befo- ted values that the club should stand for are of club has to be political. But every club should

34 35
 their audience well Making fixed costs variable venues. While this argument is valid, it should
or do not stand for One reason for financial problems of clubs is also be applied in the other direction: if a club‘s
specific values. collapsing turnover. A second reason is that turnover decreases, the absolute salaries of
costs can hardly be reduced when turnover the players must also decrease. So, if the play-
Besides making falls, as a large part of the costs of football clubs ers are ultimately responsible for the revenues
your revenue are fixed costs. As shown in chapter 2, the big- with their performance, what is the argument
streams more sta- gest expense item of football clubs is salaries. against also remunerating them on the basis of
ble by knowing your Players usually sign contracts with a fixed salary turnover?
fans and strengthe- and various variable components. Those varia-
ning your brand, it ble components are usually linked to the per- It is clear that this is much easier said than done.
is also important to formance of the player (number of appearan- Changes in the remuneration also require men-
constantly try to di- ces, scored goals, etc.) and the team (number tality changes. All relevant stakeholders would
versify your income of victories, titles, etc.). Also, there are often need to understand what it means to be vari-
and to look for new clauses that if clubs are relegated to a lower ably remunerated based on turnover and why
revenue streams. league, salaries are reduced accordingly. Howe- this could be beneficial. The transfer market is
Clubs might get ver, maybe in the future, it is worth considering an overbidding competition. If a club starts to
CC BY-SA 4.0

creative and think linking the variable parts of the salary rather to link salaries to revenues, but other clubs keep
outside the box, financial but sporting results. In situations like the current system and this is also preferred by
just like FC St. Pau- right now, revenues are significantly declining, players and their agents, the club has no chance
li did with creating while players can still fulfil all their sporting of signing good players. Yet, as stated before,
be aware of its origins and fan base and know their own sports brand. What will continue to goals and receive all of their bonuses. now is a good time to at least talk about new
what makes them unique, just like FC St. Pauli. increase in importance for most football clubs is approaches that might make the business more
If clubs know what they and their fans stand for, digital content and eSports. The revenues clubs Obviously, the main criterion for a player‘s per- sustainable. In times of constantly growing re-
this can also be beneficial for their revenues. can make from eSports are also hardly connec- formance is always the results on the pitch. venues, at least in the big leagues, clubs mana-
ted to the sporting success and not impacted Hence, players and their agents will initially ged to keep their salaries/revenue ratios quite
FC St. Pauli might create new sustainable reve- by the COVID-19 pandemic. On the contrary, find it incomprehensible if variable remunera- constant and there was no need for change.
nue streams now by creating their own sports due to the pandemic, the importance of digital tion components are linked to financial results, Now that revenues heavily decreased due to
brand. Also, a strong brand that stands for cer- content actually increased. Even pre-pandemic, because a player does not influence these on an external shock and that the whole indust-
tain values disconnects merchandise income nearly 50% of Millennials and Gen Z watched the pitch as directly as wins or losses. However, ry is unsure about what future developments
from sporting success. If fans do not buy jer- livestreamed and recorded videos of others the financial results are indirectly very much will look like, some stakeholders might be more
seys or other products just to cheer for the club playing videogames each week. The final of the influenced by the performance of the players. open to new ideas.
in the stadium but because they identify with ePremier League Invitational competition du- If players perform well, clubs receive more mo-
the brand, you will have more stable revenue ring the first lockdown between Trent Alexan- ney due to better sporting results. Furthermo- For sure, new variable remuneration compo-
streams, no matter how you perform on the der-Arnold (Liverpool) and Diogo Jota (by then re, well-performing players attract fans. This is nents based on economic criteria must be int-
pitch. In addition, it becomes more important Wolverhampton Wanderers) was watched by often not only reflected in an increase in mer- roduced slowly and step by step. The practice of
for clubs to really know about their fan base 3.5 million viewers on Facebook, YouTube and chandise sales, but also by selling more tickets making a larger part of players‘ salaries variable
anyway, since this is increasingly demanded by Sky TV. for matches. Finally, very skilled and well-known and linking it to sporting criteria was also not
sponsors. More and more companies are loo- players can increase the sponsoring value of a implemented overnight, but has slowly been
king for closer alignment of brand purpose and In 2019, the worldwide eSports market gene- club. When the media and some fans criticise established. Today, for some players, a decent
want to transport certain values when coopera- rated revenues of EUR 787.83 million and is the high salaries in professional football, it is of- amount of their income is linked to sporting
ting with a club. Football clubs with fewer fans, expected to grow up to EUR 1.315 billion until ten argued that it is the players who generate success. Therefore, it might also work to initi-
but which serve a certain market segment that 2023. eSports, social viewing and livestreaming the high revenues for the clubs through their ally link small parts of the variable remunerati-
is interesting for a sponsor, can be more attrac- will become increasingly important sources of performance on the pitch and that they should on to economic developments and then gradu-
tive than clubs with more fans that do not know income for football clubs. therefore also receive a fair share of these re- ally increase this share. What will probably be

36 37
implemented in many future player contracts As is already the case today, players receive dif- dable on a stock exchange are obliged to pro-
anyway are contractual clauses about what ferent salaries depending on their sporting abi- vide comprehensive financial reporting. Yet, for
happens when revenues plummet due to ex- lities and other value to the club. This fictional most other clubs, numbers are hard to find.
ternal events. A key learning from the crisis is club has a star player, who has stood out with In the past, there have already been develop-
that clubs should not fully depend on the play- his performance for years, and several other ments towards increased financial transparen-
ers’ goodwill to waive their salaries if they are players who are among the best in the world cy. National and international federations now
in severe financial problems due to unexpected in their position. Otherwise, a few other play- publish some selected figures that are also rele-
endogenous shocks. ers form the (extended) regular squad, and the vant for the various licensing procedures. While
squad is completed by some clearly supplemen- this development is positive, the published fi-
The ideal (and probably utopian) scenario for tary players. If salaries are fully variable now gures are limited to a few relevant core para-
every club would be to have salaries fully linked and agreed on as a percentage share of revenue meters. From clubs themselves, there is still of-
to their revenues. This would mitigate the pro- (column 2 of table 2), players are remunerated ten little published information on the financial
blem of volatile and therefore often difficult- just like today in absolute terms (column 3 of situation. However, for a few reasons, it would
to-predict revenues by giving the professional table 2). However, if the club’s turnover drops, be beneficial for all parties involved to publish
squad a remuneration linked to turnover on a absolute salaries are automatically adapted ac- comprehensive financial statements just like
percentage basis. In this way, the salaries/re- cordingly. other companies do.
Player Salary Salary
venue ratio could always be kept constant and
(share of revenue) (in million EUR)
the risk of unexpected large losses mitigated. Summing up, it can be concluded that espe- As already mentioned before, in addition to the
Also, within this system, a flexible salary cap cially due to the volatile revenues in football, goal of strengthening the capital base, another
Player 1 5% 25.0
as a squad cost limit in terms of X% of a club’s making as many fixed costs as possible variable key learning from the global financial crisis that
Player 2 4% 20.0
revenue could be introduced much more easi- would help increasing the clubs’ stability. Since lead to the Basel III regulations was that trans-
Player 3 4% 20.0
ly. The example of LaLiga that was presented player salaries are the largest expense item, it parency within the banking industry had to be
Player 4 3,5% 17.5
earlier in this chapter shows how hard it is to would be a great help to link the level of salaries increased. The same accounts for the football
Player 5 3,5% 17.5
define squad costs limits based on a club’s pre- to the development of turnover. Such a change industry today. When a growing number of sta-
Player 6 3% 15.0
dicted turnover every season without salaries could certainly not be introduced overnight and keholders are increasingly critical of an indus-
Player 7 3% 15.0
of the players being linked to the financial per- would be met with resistance from various sta- try, increased transparency helps. Already for
Player 8 3% 15.0
formance. Clubs like FC Barcelona and Real Ma- keholders. Still, now seems to be a good time at least the last decade, but particularly now
Player 9 2,5% 12.5
drid, whose limits were decreased significant- to at least try to increasingly tie smaller compo- in times of the COVID-19 pandemic, many fans
Player 10 2,5% 12.5
ly by LaLiga, now have to negotiate with their nents of the variable remuneration of players and the media critically question the financial
Player 11 2,5% 12.5
players to be able to meet the criteria. Table 2 to financial criteria rather than purely sporting stability of the football system. For years, there
Player 12 2% 10.0
shows an example of how such a (admittedly ones. has been talk of a "sick system" that is deve-
Player 13 2% 10.0
fictional) complete variable remuneration of loping in the wrong direction and is gradually
Player 14 1,5% 7.5
a squad could look. In this simple example, a Increasing financial transparency ruining itself in order to be able to pay players
Player 15 1,5% 7.5
squad of 23 players is assumed. All other taxes One thing that should definitely improve in the and their agents too much money. While part
Player 16 1,5% 7.5
and social contributions are included in the sa- short term and that is also part of sustainable fi- of this criticism is valid and there are some
Player 17 1% 5.0
lary costs. We assume that we are dealing with nancial management is financial disclosure and clubs that definitely do not follow sustainable
Player 18 1% 5.0
a large Champions League club with a turnover transparency. For plenty of football clubs, only business models, the results of this study also
Player 19 1% 5.0
of EUR 500 million. The salaries/revenue ratio few financial figures are publicly available and show that there is a high number of clubs that
Player 20 0,5% 2.5
of the club is set at 50%. fans as well as the media and other relevant are managed sustainably. By disclosing compre-
Player 21 0,5% 2.5
stakeholders do not get much insight. In the hensive financial results and explaining them
Player 22 0,5% 2.5
English Premier League, you can find compre- to people, prejudices and mistrust towards the
Player 23 0,5% 2.5
hensive financial reports for most clubs. Also, football industry could be reduced. Of course,
Table 2: Exemplary fictitious distribution of fully variable clubs that are listed on the stock exchange (see clubs would also have to disclose and explain
player salaries chapter 1) or that have outstanding bonds tra- negative results. At the moment, one can often

38 39
observe how clubs engage in massive impressi- described in chapter 1, the public pressure on about digitalisation with financial executives that are now launching their first digitalisation
on management in financially bad times. There some managers to take financial risks to ma- from different corporations for the past years, I initiatives in the finance sector are starting to
are many cases of clubs that have reported and ximise sporting success can be very high. Fans want to share some of the insights and key lear- automate repetitive processes. Robotics is used
celebrated revenue increases at their annual sometimes do not understand if clubs do not nings here. to automate processes such as capturing inco-
general meetings in recent years, even though invest in new players before a season starts or ming and outgoing invoices. In the long run,
they were making losses at the same time and if they transfer good players to another club. For most big companies, the digital transforma- CFOs are planning to utilise the possibilities
the financing structure was very risky. Many However, if it is carefully explained why mo- tion of financial management is already hap- that artificial intelligence and analytics offer.
clubs in the past have also repeatedly empha- ney cannot be invested at the moment or why pening. A 2019 survey of 130 European CFOs Especially pre-dictive and prescriptive analytics
sised the figures of their individual financial it is important for the club finances to transfer and other financial leadership decision-makers is a field that will also play a role for football
statements to the fans, which often looked a player to another club, fans will understand found that 95% of respondents currently see clubs in the future. Scenario planning, which is
much better than the consolidated results. This much better and the problem of public pressu- skills gaps in the finance function. When asked utterly important for football clubs (see chapter
practice does not help anyone in the end, as it re will be mitigated. what specific skills were missing, 64% of res- 1), will be much easier and more accurate with
leads to negative surprises if financial situations pondents said they lacked skills in using new predictive analytics tools. Simply put, predictive
get severe and increases public mistrust. Last but not least, lack of transparency always tools and digital technologies. CFOs are sitting analytics comprises a variety of statistical tech-
leads to inefficiency on markets. Hence, by on a valuable pool of data, which, however, niques from data mining, predictive modelling
Negative financial results do not need to be hid- being more transparent clubs could actually de- cannot yet be adequately analysed. Necessary and machine learning that analyse current and
den. For every result there are reasons, and tho- crease some costs in the future. Attempts have technologies and knowledge are not yet suffici- historical data to predict future outcome. Tho-
se reasons can be explained to fans. Especially been made for many years to cap expenses for ently available. Building up such resources is se who can efficiently evaluate large amounts
after the experiences made in the course of the players’ agents. In addition to that, some clubs time-consuming and costly. of data will have competitive advantages in the
COVID-19 crisis, the interest of the fans in the will have to reduce player salaries in the next future, not only in the normal business world,
finances of the clubs and the understanding for few years. In transparent markets, where finan- Most people have recently heard about digital but also in football.
negative results seems to be bigger than ever cial information is accessible to everyone and trends such as artificial intelligence, predictive
before. This momentum must now be used to comparability is therefore much greater, such and prescriptive analytics, big data, automati- The step-by-step digitalisation roadmap for fi-
become more transparent and to explain finan- projects are easier to implement. on, robotics, process mining, blockchain, and so nancial management, that has been built with
cial developments more honestly. Of course, on. There are many fancy new technologies and CFOs and other finance executives based on
in the current situation, it is easier for club of- Digitalisation in financial management digital buzzwords. The main question is: Which their practical experience, is illustrated in figure
ficials to explain negative financial results, be- A very recent topic that most financial executi- technologies are useful for my business model 9 on the next page.
cause they are due to externalities that every ves are currently dealing with is digitalisation. in the future and where do I start? In general,
fan understands. Yet, negative results should Many companies are investing in automating there are two arguments for making use of new
also be openly communicated and explained in their processes or analysing data with artificial technologies: increasing the quality of output
the future, even if the causes for them are no intelligence. Since football clubs have a diffe- or decreasing costs. When it comes to digitali-
longer rooted in external factors. As various sci- rent focus than these firms and also much less sation projects, most companies focus on tech-
entific studies from behavioural research show, money to invest than big corporations, the to- nologies that increase efficiencies and thus re-
people do tend to shift responsibility for nega- pic of implementing new digital tools in the fi- duce costs first. It is particularly important to be
tive results away from themselves. However, it nance function will not become relevant short- able to report the first success stories quickly
goes down much better with fans and investors term. However, in the long run, when these in order to convince as many people as possib-
if you also take responsibility for poor financial tools are more established and their implemen- le within one's own organisation of the neces-
results, as this suggests control and shows that tation is cheaper, also football clubs will also sity of the innovations. Therefore, quick wins
you know the reasons for the development. have to think about which new technologies to should be taken along first, before engaging in
make use of. Therefore, it could be interesting long-term and expensive digitalisation projects.
Furthermore, if the public knows more about to already look at the new opportunities that Simple staff training in the use of the current
the financial situation of a club, fans will under- digitalisation offers for financial management in IT infrastructure is often enough to achieve
stand some decisions much better. As already the future. Since I have been leading workshops initial efficiency gains. Many large companies

40 41
 GOAL: QUALITY &
BIG DATA & AI
EFFICIENCY IMPROVEMENT Those who can efficiently evaluate large
amounts of data will have competitive
advantages in the future. Predictive and
prescriptive analytics help to better
forecast future developments and to
deduce which measures need to be
implemented today in order to be
successful in the future.
DEFINE LONG-TERM
STRATEGIES
INTERIM GOAL: After efficiency gains can be demonstra-
START SIMPLE! IMPROVE EFFICIENCY ted through initial digitisation projects,
long-term strategies can be tackled that
The first concrete measures should be as
require more effort but also bring great
simple as possible. Often, no new techno-
strategic benefits in the long term.
logies need to be implemented to achieve
short-term efficiency gains. Simple staff
training in the use of the current IT
infrastructure is often enough for initial
efficiency gains.

DEFINE QUICK WINS STANDARDISATION &

It is important to be able to report the
first success stories as quickly as possible.
AUTOMATION
Those who want to take the first steps
Projects that promise short-term efficien-
towards digitisation often start with
cy gains/cost savings with little effort
process mining to identify trends and
should be carried out first.
patterns in existing processes, make them
more efficient and, if necessary, standar-
dise and/or automate certain process
steps.

Figure 9: Digitalisation roadmap for financial management

42 43
Chapter 4
Interview with
Ilja Kaenzig and Raphael Landthaler
This study was written to provide some food
for thought for decisionmakers in the football
business. Therefore, it is important to discuss Mr. Kaenzig, Mr. Landthaler, thank you very who’s carrying the risk if we fail? As the CFO,
the various topics of this study with experts much for discussing the topic of financial sus- you always have to be the “party pooper” and
from the field to reflect on them critically. To do tainability in profession football with me to- say “no, we can’t buy this player.”
so, an interview with Ilja Kaenzig and Raphael day.
Landthaler was conducted to get two different Ilja Kaenzig: Before COVID-19, we could plan
points of view. Ilja Kaenzig: I’m actually very excited to discuss our revenues with 80%-90% security. We knew
this topic, since this is one of the most pressing how much broadcasting income we would get,
issues for all of us at the moment. Currently, we what our sponsors will pay us and can usually
all have to be very dynamic and adapt to the quite accurately estimate how much tickets we
new realities. will sell in one season. The budget we could
allocate to our squad remained quite stable
In the report, we describe how financial plan- during the last years. What we had to do was
ning in football usually carried out and how it mainly finetuning. Do we have to spend a litt-
became even more challenging now due to the le less money because a sponsor drops out?
COVID-19 pandemic. How difficult is financial Or can we maybe generate additional income
management in football and how has it chan- that we can directly allocate to the budget of
ged due to the current pandemic? our first team? Now, things are differently. Ever
since the pandemic, our main question is: How
Raphael Landthaler: Financial planning in foot- much risk can we take? I’m currently discussing
ball has never been easy. I worked for Rapid with my team on a daily basis to assess all de-
Wien, a club that is still 100% owned by its club velopments.
members. There is no investor that could com-
pensate for losses. So, the question has always Do you already have an answer to the ques-
Ilja Kaenzig Raphael Landthaler been: How much risk can we take? Sporting tion of how much risk you want to take in the
is Managing director of the German 2. Bundes- worked as CFO for SK Rapid Wien (Austrian success leads to higher revenues, but to achie- current situation?
liga club VfL Bochum. Before, he worked in dif- Bundesliga) for many years. During that time, ve sporting success, you usually need to invest
ferent roles for Bayer 04 Leverkusen, Hannover he was also Board Member of the European more money and take higher risks, because if Ilja Kaenzig: Before the season started, we ag-
96 (both Germany), Grasshoppers Club Zürich, Club Association (ECA) representing subdivision sporting success doesn’t materialise, you’ll reed on adopting the strategy of a, as we call it,
BSC Young Boys (both Switzerland) and FC So- 2. Afterwards, he was Executive Board Member have to deal with great losses. I don’t know “controlled offensive”. This means that we de-
chaux-Montbéliard (France). of the Austrian Bundesliga (ÖFBL). how often I have heard the phrase: “We need to cided to keep our budget for the squad stable
invest now in order to take the next step.” But so we don’t have to give up our sporting am-

44 45
bitions. We are convinced that despite the cur- pend on our TV ranking. Recently our ranking decrease now due the pandemic. Would you
rent situation, we have to remain competitive in has been stable, but it is possible to fall short find it useful to implement regulations regar-
order to be able to generate additional income EUR 2 to 3 million from one season to the next, ding a minimum equity ratio for football clubs
in the future. But mind you: I am not speaking particularly if you are already high up in the ran- to make the whole system more stable?
about promotion. In the 2. Bundesliga it`s just king. So, we have used most of our resources
about winning the next match. The league is so to keep our salary budget stable. Secondly, if Ilja Kaenzig: As you have described in your stu-
balanced, you can get quickly in trouble – on any resources are left, we want to invest money dy, especially in second divisions, a kind of “rat
and off the pitch. It`s not about fantasies when in players that ideally yield a return on invest- race” has developed. This problem has been
we talk about ´remaining competitive´. ment one day. Third, we would like to invest in apparent in many smaller leagues and has now
our youth teams and infrastructure. Last but also reached the 2. Bundesliga in Germany.
In normal times, do you try to allocate your not least, we also set up a development plan Most teams are trying either to be promoted
budgets in a way that you can report profits at to increase future revenues. However, we do or to climb in the TV ranking, which has caused
the end of the year or do you try to break even not have the money to initiate the projects ne- a sharp increase in player salaries that’s not
and invest all of your resources in the squad? cessary. But as I said, that’s only possible when healthy for the system. We gave ourselves an
there are extraordinary effects like surprising internal salary cap that we don’t exceed. But
Raphael Landthaler: At Rapid, we have always sporting results that impact earnings. the salaries some of our competitors are willing
planned our season with a structural deficit of to pay are no longer in balance with the reve-
around EUR 3-5 million. But we have based our So, reducing certain costs in order to increase nues they can generate. Generating income by
planning solely on income from national com- your reserves is impossible? selling players should not be part of your busi-
petitions. This means, to break even or to make ness model. Relying on income from transfers
a profit, we either had to reach the group sta- Ilja Kaenzig: Yes, that’s not possible. Our finan- to break even is rather risky. You should be able
ge of the Europa League or we needed to sell cial goal is to break even. We can only build up “Our members don’t want to to finance your squad with your recurring re-
players. To decrease the risks a little, we fre- reserves when there are extraordinary effects. venues. But for plenty of clubs this is the case,
quently did a kind of market value assessments Our boards want to see the best sporting re- make profits, they want to even though the 2. Bundesliga is very strong in
for our players to get a feeling for how much sults possible. Football is such an emotional terms of overall turnover. So, yes, we have to be
other clubs might pay for them. Despite all that business with so much public pressure. You see sporting success.“ alarmed and think about new rules. I am part of
risk, during my seven years at Rapid Wien, we can’t invest less in the squad to retain earnings. a working group discussing exactly these topics
have reported profits every year, even though At the latest, when you lose too many games, and trying to come up with regulations to pre-
they we very little sometimes. But we had quite the pressure becomes so high that you have to vent this “rat race”. The topic will get even hot-
some extraordinary income from transfers and change the coach or sign a new player. ter now due to COVID-19, since a lot of clubs
the Europa League. will be more willing now to search for investors.
Raphael Landthaler: I agree. Breaking even is We are heading for an iceberg and must try to
Ilja Kaenzig: In the second division, it is very dif- the optimum. Rapid doesn’t have any owners avoid the crash. Within the working group, we
ficult to pursue ambitious sporting goals and to who demand a dividend. If I report profits of are talking about the solution you mentioned
make profits at the same time. Just like Raphael EUR 10 million but am only fifth in the Austri- and intend to increase equity requirements
said, you need an extraordinary season, for ex- an league, people will ask me why we didn’t and limit losses. But the question is always how
ample winning several games in the Cup com- invest more to reach the second or first place. much clubs are actually willing to limit them-
petition, in order to make profits. We would like Our members don’t want to make profits, they selves and what kind of measures are possible
to retain profits and use them for other kinds of want to see sporting success. from a legal perspective.
investments. We have defined important areas
in which we want to invest. Yet, our main goal The fact that it is difficult for you to make pro- Raphael Landthaler: What I would like to add:
has always been to keep the budget for our fits also means that it is nearly impossible to this “rat race” exists, because we are all cons-
first team stable, which hasn’t been easy at all build up equity, if you do not have any positive tantly in bidding competitions to get the best
times. Our squad budget is very much based on external effects. Hence, quite some teams ope- players. A few years ago, FIFA has started a task
our broadcasting revenues, which in return de- rate with low equity ratios, which will further force to discuss new rules for the transfer sys-

46 47
tem. One rule that’s been discussed is limiting them. Maybe this can be also linked to equity versifying them. I already mentioned how im- more stable. Look at all the new big internati-
squad sizes, which in my eyes could help miti- ratios and then only apply to clubs which are in portant eSport, or more precisely eFootball onal companies out there: Uber doesn’t own
gating the problems of the “rat race”. Imagine difficulties. became for us. We are very successful in the any cars and Airbnb doesn’t own any real es-
every club worldwide would only be allowed virtual Bundesliga and have our own talent pool tate. Their main asset is customer contact, and
to have a squad that consists of, let’s say, 25 Mr. Kaenzig, as you say, it is not easy to agree with players from the region now. This market that is one of the key assets nowadays, which I
players that are above 21 years old. That would on salary caps and implementing them could is already as important as a sponsor for our in- believe we have in Austria. If you are in direct
take a lot of pressure off the transfer market, take a while. At the same time, clubs have to come and I believe that it will grow significantly contact with your customers, be it sponsors or
as player “hoarding” of some big clubs would deal with big losses at the moment. This is es- in the future. We also have ideas for projects fans, you can keep your revenues more stable,
stop. FIFA is also discussing capping agent fees. pecially difficult for clubs with only little equi- with “passive fans”, which could generate addi- because you know if they are unhappy and can
Those are all measures that could help. Imple- ty. I believe, also your club VfL Bochum will re- tional income in the future. But, as I said, what change things.
menting a minimal equity ratio is something we port negative equity at the end of this season. happens on the pitch will always be crucial.
should discuss but could be difficult, since clubs What is your plan for dealing with this in the How important is a strong brand for a foot-
have different assets in their balance sheets. In future? Raphael Landthaler: In Austria, matchday re- ball club?
Austria, a few clubs have built their own stadi- venues are very volatile and vary with your
ums. Obviously building your own stadium in- Ilja Kaenzig: Our plan is based on two pillars: sporting success. Sponsoring is more stable, Ilja Kaenzig: You need to be authentic and
creases your total assets and your liabilities by on one hand, we are planning to decrease our since contract periods are usually 3 to 4 ye- know where you come from. In Germany, the-
a lot. What I would find very useful is for licen- squad budget step-by-step in the future, inline ars. We are also trying to get longer contract re are clubs like FC St. Pauli or Union Berlin
sing bodies to evaluate the revenue at risk of with the falling TV revenues from the TV deal periods with our hospitality partners. There is that are very political. But this is deeply rooted
football clubs. That would be a forward-looking starting in 2021. On the other hand, we are also a major difference to German teams, as they in their history and you can’t copy that. Other
analysis and help assessing how risky the bud- trying to come up with new projects that can are mostly working with selling bodies like clubs developed into big glamorous brands.
gets of clubs are. lead to quick wins for us despite the pandemic. Lagardère to market their rights and attract We are neither of the two. Here in Bochum,
The digital market is very interesting for us. We sponsors. I’m not a fan of that, because you every-thing is down-to-earth and handmade.
Have you also discussed the potential intro- have also been in the eSports market very early, lose the personal contact to your clients and It’s football as you know it from the 80s and
duction of salary caps in Germany or Austria? which is beneficial for us right now and will pro- thus cannot build strong relationships. I be- 90s, and this attracts people. Some clubs that
bably grow in importance. Furthermore, we be- lieve that with strong personal relationships, are struggling right know forgot where they
Ilja Kaenzig: Yes, in our working group we have, lieve that sustainability is a crucial topic and we you can make your sponsoring income much come from. I know about big clubs that tried
but it seems to be too difficult legally. How- already developed some project ideas in that
ever, the system of LaLiga of establishing squad area. In addition to these two measures, we are
cost limits for each club that are linked to their still keeping our eyes open for investors that
revenues is very interesting. That would be a fit to our club. This could also lead to smaller
promising system for us as well. However, so investments by strategic partners or to a pan-
far, we didn’t find a way to implement it. But continental cooperation.
I personally believe that salary capping is the
future. Since you have already mentioned potential
new sources of revenue now: Can it be possible
Raphael Landthaler: It’s an interesting idea for football clubs to make revenues less depen-
we can definitely discuss. But it definitely has dent to sporting results?
to be linked to turnover in percentage terms. A
fixed hard salary cap would not make any sen- Ilja Kaenzig: You can never completely discon-
se in football. And the percentage that you are nect the financial from the sporting success.
al-lowed to spend on salaries must differ bet- We need to stay ambitious, otherwise we will

VfL Bochum
ween league, since leagues are different and be less attractive for sponsors. However, it is
you can’t just put one business model on all of possible to make revenues more stable by di-

48 49
to become an international brand but want to contract in the future, so clubs don’t have to transparency. They can tell me in negotiations get any compensation. This system is not fair.
be like us now. But as I said, you can’t copy start negotiating with players about salary cuts what other clubs are offering, and it’s on me The solidarity contribution scheme should also
a brand. What we are is deeply rooted in our anymore when revenues collapse due to exo- to decide if I believe that or not. If the finan- apply to national teams. We could also talk
history and no marketing agency can just give genous shocks. cial results of all clubs are publicly available, I about increasing the proportion from 5% to 7%
us a brand image. know roughly how much other clubs can offer. or something like that. And if a player doesn’t
What do you think about increasing financi- And the agent does not have the information change the club at all after he has left your club,
Does the brand image that you have just de- al transparency? Is that something football advantage anymore. Thus, more disclosure you don’t see any money anyway. Why not im-
scribed have a direct positive effect on your clubs should do? requirements can help taking pressure off the plementing a rule that small clubs that trained
revenues? transfer market And, by the way, publishing a player who plays for a bigger club now get
Ilja Kaenzig: Yes, definitely. I believe that we annual reports is also a good marketing inst- 2% of the player’s salary as compensation? It
Ilja Kaenzig: I’m sure it does. For instance, de- are already quite transparent. But there are rument, as it shows sponsors and other part- could also help small clubs if they were allowed
spite the pandemic and the fact that our fans clubs who just show revenues and costs of ners that you are not an old-fashioned sports to sign 5-year contracts with youth players. If I
can’t come and watch our games in the stadi- the fiscal year. That’s it. No club that I know association but a reliable and solid business. sign a 5-year contract with a 16 years old play-
um right now, we had higher merchandise sa- about shows the budgets for the upcoming fis- er, I will probably receive a higher transfer fee
les than ever this year. I have the feeling that cal year. We always present our budgets to our Thank you both for discussing these topics with later when I sell him to a bigger club. To cut a
the distance we have to our fans due to the members on the annual general meeting. Even us and sharing your insights. As already said in long story short: big clubs need smaller clubs,
pandemic made them try to be close to us by this year, during the pandemic, we showed our the report, I think we all agree that we are not because they supply them with players. But for
showing our colours. numbers, despite the fact that they obvious- dealing with a broken system that has to be that, they should also be fairly compensated
ly looked really bad. To say it clearly: I believe completely redesigned. But one that has some so they can survive. In Austria, more and more
What is your opinion on the suggestion, that it would be an asset for the football busi- issues that should be fixed, and the current si- amateur clubs are closing down, which is a pro-
made in this study, to link variable compo- ness to make transparency criteria stricter. But tuation seems like a good time for change. Do blem for the whole industry.
nents in player contracts more to financial then you need to implement rules that actually you have any other final ideas, which would
than sporting success in the future? increase transparency. Right now, for examp- make the financial management of football Ilja Kaenzig: I also have another point in mind.
le, every club of Bundesliga and 2. Bundesliga clubs more sustainable and that we have not At 2. Bundesliga, all clubs, maybe besides Ham-
Ilja Kaenzig: German football also managed to has to publish the agent fees they paid. This discussed yet? burger SV, are in the same boat and have to
make salaries more variable by implementing information alone doesn’t give me much. We deal with similar problems. That is a distingu-
bonuses for appearances or victories in the need comprehensive standards just like listed Raphael Landthaler: There is actually one thing ishing factor from first leagues. RB Leipzig has
past, so I wouldn’t say that this is completely companies. Apparently, this topic is currently that I would like to add. Generally, it is crucial to different issues than SC Freiburg. But in the
impossible. You would have to start somewhe- discussed in the DFL task force. So, let’s see. create an ecosystem that also makes sustainab- second league, we are mostly facing the same
re and then convince more and more players. I would be in favour, because we don’t have le business possible for smaller clubs. The FIFA challenges and have similar financial structures.
Right now, it doesn’t seem feasible, because anything to hide. A greater transparency could solidarity contribution scheme is an important We should make use of that and try to collabo-
revenues are so uncertain, and I don’t think be a USP and also might help us to attract new lever for small clubs. At the moment, all clubs rate more. We could try to uncover new reve-
that players would take that risk at the mo- sponsors. who have contributed to a player’s education nue opportunities all together. Or we cut costs
ment. Maybe we can do that in the long run, and training receive a proportion of up to 5% together by undertaking mutual investments.
but we will have to see. Raphael Landthaler: I believe that we have set of the fee that is paid if the player is transferred For instance, if we need to fly somewhere, we
a standard in Austria, because at Rapid Wien, before the expiration of his contract. However, currently all charter planes separately. Why
Raphael Landthaler: In Austria, there are al- we published an annual report for the first the solidarity contribution scheme applies ex- not chartering planes for the whole league
ready way more variable compensation com- time in 2013. Now more and more clubs are clusively to international transfers. This means, and then splitting costs? Overall, that would
ponents in player contracts compared to Ger- doing that. So, I agree with both of you that if Ilja sells a home-grown player to a Spanish be much cheaper for every club. The second
many or other big leagues. Sometimes, 30% to financial transparency should definitely in- club, he receives a transfer fee. If the Spanish league in France is a good example for this, be-
50% of the total salary is variable. I don’t know crease. If I may add another advantage: more club sells the player to an English club a few cause from my experience, they are collabora-
if linking the variable components to financi- transparency would also decrease informati- years later, VfL Bochum will receive 5% of the ting much more.
al success can work. But I’m sure that there on asymmetries. Right now, player agents can transfer fee. Yet, if the club sells the player
will be a pandemic paragraph in every player earn a lot of money mainly due to the lack of within the Spanish league, VfL Bochum doesn’t

50 51
Chapter 5
The Long-term, if based on new regulations or not,

Conclusion all clubs, also in smaller leagues, should be

able to raise their equity ratio to a healthy le-
vel. This would make the whole system more
stable and resistant to crises. If clubs succeed
in linking more components of the variable
Managing the finances of a football club is com- cussed in league associations or committees should be developed that are ideally not di- part of a player’s salary to their revenues, this
plex. The revenues a club can generate are very of UEFA and FIFA. This study was written to rectly linked to sporting success. A strong and would further increase their stability. Last but
much dependent on its sporting success. In re- further foster these discussions and help foot- authentic brand image, professional financial not least, digitalising the processes of financi-
turn, however, sporting success is also highly ball executives to critically reflect on the ideas reporting and close customer relationships can al management is currently a big trend within
dependent on how much revenue a club can presented. help clubs stabilising their revenues. Further- all major corporations. While this is not an im-
generate and therefore invest in the squad. Fi- more, either a new mentality or new licensing portant topic for football clubs at the moment,
nancial executives always need to find the right In figure 10, the most important approaches for criteria are needed for clubs to be more profi- in the long run, when some technologies are
balance between investing enough money in improvement offered in this report are summa- table after the crisis. Regulations like a deter- more established and also accessible for smal-
the team to maximise sporting success, without rised and placed in a timeline. mined minimum equity ratio or a flexible salary ler companies, utilizing the possibilities of new
taking excessive risks and harming the financial cap could help to end the currently prevailing tools like RPA or AI will also be very beneficial
stability. This balance act is even more compli- The short-term measures are all aimed at en- “rat race”. for the football industry.
cated by the fact that the football business is suring the immediate survival of the clubs now
under great public scrutiny and very much dri- during and after the COVID-19 pandemic and
ven by emotion. In recent years, the football in- have largely already been implemented. The
dustry has been publicly criticised and accused cash drain during the first lockdown had to be
of being unsustainable and disconnected from stopped and clubs had to ensure that enough
reality. liquid funds are available to keep the business
going. Clubs have negotiated with their play- Short-term Mid-term Long-term
Analysing some financial ratios of European ers to agree on salary waivers, have stopped
football clubs shows that it is wrong to say that certain investments and introduced measures
the football industry as a whole has a funda- like short-time work. Additionally, assets were ● Stop cash drain ● Diversify revenue streams ● Improve equity ratio up to a
mental financial problem and is bound to fail. sold and loans were taken out to obtain fresh ● Ensure sufficient cash inflow ● Slowly introduce variable healthy level
However, as shown in chapter 2, many clubs, liquid means. There are clubs that also might ● Balance sheet restructuring components in player contracts ● Make salaries as variable and
especially in smaller leagues, were already in fi- have to carry out balance sheet restructuring. ● Improve transparency and access to linked to financial outcomes linked to revenues as possible
nancial difficulties before the current COVID-19 Due to the low reserves of some clubs, the crisis financial data ● Implement new licensing criteria ● Exploit the opportunities of new
pandemic. Therefore, it seems worthwhile to can lead to over-indebtedness, from which the technologies and digitalisation
● Professionalise financial reporting
critically reflect on how such clubs can be set up clubs have to recover as fast as possible. Fur-
● Employ a new mentality
in a more stable way – especially now, when the thermore, the crisis should be used as an op-
business is more receptive to change than ever. portunity to become more transparent and re- ● Create a unique brand image that
port more openly about the financial situation. fits to your fan base and the values
There are various approaches and ideas of how Midterm, it will be utterly important for clubs you live
to make financial management in football more to retain profits in order to plug the holes left
sustainable, some of them already being dis- by the COVID-19 crisis. New revenue sources Figure 10: Approaches for improvement after COVID-19

52 53
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