Football
Gabriele Marcotti, Senior Writer, ESPN FC 6y

Gap between superclubs like Man United, Real Madrid and rivals must be addressed

UEFA's Annual Benchmarking Report, released Tuesday, confirmed what many suspected: the rich are getting richer and leaving the merely well-off far behind. This is perhaps the most stark observation from the hefty study -- it runs to 126 pages -- of top-flight club football in every league across the continent. If you're even a little bit wonk-ish, the Benchmarking Report, which is compiled from licensing, transfer and financial data, some of it accessible only to UEFA), makes a fascinating read, filled with all sorts of interesting nuggets.

For example, the median commission paid to agents in the 2000-odd transfers analysed by UEFA stands at around 13 percent. Sometimes it's lower and sometimes it's much higher: in fact, there were 28 deals where the transfer fee was more than €10 million ($12.2 million) and the commission was more than 50 percent.

Nice work if you can get it.

Then there's the fact that overall, the game is in pretty decent health. In 2011, European clubs recorded operating losses of €382 million while the most recent data available shows operating profits of €832 million.

Look at bottom-line losses, which include a host of other elements like transfer income/costs and taxes, and they've gone from €1,670 million to €269 million in just six years. Indeed, 70 percent of top-flight clubs from Europe's big five leagues reported bottom-line profits. Financial Fair Play regulations (first introduced, not a coincidence, in 2011) may have their flaws, but there's little argument that they've contributed to keeping costs down and turning European football into an industry capable of growing at a 10 percent clip annually.

But the single biggest takeaway is confirmation of what we've known for a long time. The game is fractured and polarized between the super-rich and everybody else. Most are better off, but the 1 percenters are a lot better off.

- UEFA: Sponsorships enlarging financial gap
- Quarter of transfers done after seasons start

This is happening both on a macro level across Europe and in individual leagues. Take wages, which correlate to success on the pitch as you'd expect. There are 10 clubs with wage bills of €221 million ($270 million) or above. Then there's a €60 million ($73.3 million) gap with the club in 11th place (AC Milan, as it happens).

Could €60 million in salaries per season buy you a decent amount of manpower? Say a Cristiano Ronaldo plus an Alexis Sanchez? Probably. But the massive disparity exists within individual leagues as well. The top four in England have an average wage bill that is almost twice as high as the next four. In Italy and Germany, it's more than twice as high; in Spain a whopping three-and-a-half times as high.

Go further down the food chain and the picture gets worse. In Portugal, the top three spend (on average) seven times as much on wages as those ranked fourth to sixth. In Scotland, the top two (Celtic and Rangers) pay their guys nearly five times as much as the next two.

The reason this disparity exists isn't rocket science. It's down to revenue, mostly commercial revenue. Nine clubs earn at least €25 million ($30.5 million) from shirt sponsorship. Another 20 are between €3 million ($3.6 million) and €25 m million ($30.5 million). Everybody else earns less than €3 million, often much less.

Or take kit deals: Manchester United, Barcelona and Real Madrid all earn more than €75 million ($91.5 million), which in some cases is 100 times more than some of their rivals in their very same leagues. The top 12 clubs by commercial income (which includes sponsorship) saw their revenues double in the past six years. The other 88 clubs in the top 100 saw far more modest increases, on average less than 25 percent.

And this gap is getting bigger and bigger and bigger.

It used to be that broadcast revenue was the big discriminant, the real difference maker between the haves and have-nots. That's still true on a league-by-league basis: the average Premier league club receives more than twice what the average Italian club gets (Serie A has the second biggest contract) and 28 times as much as the average Dutch side (the Eredivisie ranks eighth, for reference).

But within the leagues, thanks to centralized collective deals, the earnings gap has in part been eroded. The top earning club in England gets roughly 1.3 times as much as the median club while in Spain, the multiple is 4.1. That's highest among major leagues but a lot lower and more equitable than it once was: indeed, it's interesting to note that if La Liga's method for awarding TV money were used in the Premier League, a method skewed more towards rewarding historical results and the size of a club's fanbase, Manchester United's broadcast revenues would shoot up from €146 million ($178.7 million) to a whopping €362 million ($443.2 million).

The real secret to the club's dominance is that they are massive universal brands that have learned to monetize their fan base at a time when the game is as globalised as it ever was and as new money is flowing into it. In many ways, that gives the big clubs a perpetual advantage because while some fans are fickle, most aren't going to withdraw their support.

Consider Manchester United. They haven't won the Champions League since 2007-08 or Premier League since 2012-13; they've generally been underwhelming since the departure of Sir Alex Ferguson. Yet guess what? They have the highest revenues in football and the second-highest wage bill. They built up a heck of a lot of credit with their success in the previous 25 years and those fans aren't going away any time soon.

Being a universal brand generates a virtuous cycle of success: because you're rich, famous and successful, folks will flock to you. Sponsors and money soon follow. And, unless you're a fool who squanders it (and there have been cases...) that will only increase your wealth, fame and success.

It's probably not a coincidence that what the UEFA Benchmarking Report calls "non-wage operating costs" shot up 10 percent last year. Some of that is down to exceptional items and impairments but a lot of it is clubs investing even more in commercial and sponsorship activities. Everybody wants their slice of the pie but the chosen few are already at the table, gorging themselves.

Football has always had its rich and poor, its Manchester Uniteds and Huddersfield Towns. But the reality is that more than ever, there's a glass ceiling and the folks looking down on the plebs are flying around with Iron Man's jet pack while the plebs below press their noses longingly upwards.

People have talked about luxury taxes, salary caps, centralized marketing and even redistributing commercial income along the lines of TV income (like the NFL does). UEFA president Aleksander Ceferin raised the issue last August and mentioned it again in his foreword to the report. It's basically market engineering along the lines employed to introduce Financial Fair Play.

The problem with FFP was that while it achieved one of its goals -- namely, turning club ownership from a perpetually loss-making vanity project into a viable, and often profitable, business -- it hasn't done much for making the playing field equitable. But there are tweaks that are worth considering and this report provides plenty of evidence of why we might want to do that. Oh, and provided, of course, that there are enough folks out there who care to make it happen.

Frankly, the impression is that between those who are happy to watch their superclub squash the rest of the league, those who support mid-sized teams and make do with the scraps that fall to them (the odd cup run or home draw with a one-percenter) and those who came to the game in the past decade, think this is normal and can't imagine any other way, it may well be a losing battle.

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