European football’s brave new world

There is an advert being run by Barclay’s Bank just now, which shows a young guy phoning one of their customers. He tells the customer that he is in the process of upgrading their account and that he just needs their security details. In the background someone else is saying “he’s lying”. “He’s lying”, going on to remind customers that Barclays will never phone and ask for security details. At the end of the ad the customer is told “thanks very much and have a nice day”, which is followed by the comment “well, that’s true at least”.

Much the same can be said of today’s initiative by Europe’s “big clubs” to give them a privileged position, either through “reform” of the Champions League, or the replacement of the Champions League with a separate ‘European Super League’ drawn from England, Germany, Spain, Italy and France. This is being proposed by Bayern Munich and Juventus (http://www.standard.co.uk/sport/football/bayern-munich-and-juventus-call-for-20team-european-super-league-to-replace-the-champions-league-a3155766.html) and would involve 20 teams, including, according to the Evening Standard, “Arsenal, Chelsea, Liverpool and the Manchester clubs”.

Karl-Heinz Rumenigge – Chief Executive at Bayern Munich – presents this as an inevitable development – “I see that in the top five leagues in Europe, the big teams are always getting stronger and stronger.” (http://www.bbc.co.uk/sport/football/35535729). Well of course they are – they are almost permanently in European competition where the big bucks are.

But the problem for the big clubs is that occasionally some guttersnipe gets above itself and outperforms the biggest teams. The best example this season, of course are Leicester, whose team cost less than 10% of what it cost Manchester City to assemble their side last Saturday, but who, by general agreement, took the much more expensive team apart.

Leicester though, aren’t about the occasional result. It seems almost inevitable that even if they don’t win the Premiership, next season they will qualify for the Champions League, or at least be given the opportunity to qualify through the final qualifying round.

Remember the names of the teams from England that the Evening Standard suggested would be included in the Super League – Arsenal, Chelsea, Liverpool and the Manchester clubs. Of course as only four teams from England can qualify for the Champions League, all five of these won’t be there every year. In the past the regular “loser” would have been Manchester City, though with the billions spent on the team in recent years that has ceased to be the case. Arsenal, on the other hand, have never failed to qualify, and it’s only been since Sir Alex Ferguson’s retirement that Manchester United’s permanent involvement has become uncertain. With the vast sums of money spent on the Chelsea team since Abramovich became the club owner, the team that has tended to be squeezed out in recent years has been Liverpool.

However, this year, Leicester have created a more difficult problem, in that, given their current position, it would seem likely that only three other places will be available. Let’s suppose Manchester City, Arsenal and perhaps Manchester United if Tottenham Hotspur don’t gate crash the procession. But no Chelsea, no Liverpool and perhaps even no Manchester United, who will all lose out on the considerable rewards of playing in the Champions League.

How considerable? The following table makes this clear (source http://www.totalsportek.com/money/uefa-champions-league-prize-money/)

Thus from playing in the Champions League, an English team winning the competition could make 100 million euros. There are some points to note from this:

  1. That an English club could make as much from “market pool share” as from winning the Champions League. What is the market pool? This is defined by UEFA as “The market pool amount will be distributed according to the proportional value of each television market represented by the clubs playing in the UEFA Champions League (group stage onwards), and will be split among those teams competing from a given association”. In other words, a team from Scotland will get much less than an English club might hope to get from the market pool because the English TV audience is much larger than the size of the Scottish TV audience. Or a team from the Netherlands will get much less than a team from Germany, or Spain, or even Italy or France because these are much larger countries with much larger TV audiences. In other words, while UEFA are cutting back on the market pool from 45% to 40% of revenue over the next four years, it is not an accident that the Super League would involve teams from England, Germany, France, Spain and Italy because teams from these countries have a built in, permanent advantage when revenues are distributed from the Champions League.
  2. What does it tell you when a club can make as much from the market pool as it can from playing success? It might well be the case that the argument that the bigger countries contribute more than an equal share of revenue from their television operators, but is the Champions League a sporting competition or a financial one? Sadly, I think we know the answer to this.
  3. How do the rewards from the Champions League correspond to domestic rewards? In many countries of course – particularly the smaller ones – they dwarf what can be earned from domestic success. The above table tells us that if Celtic can manage to get through the qualifying rounds this time, they will make 12 million euros, even if they don’t win a point – that, at current exchange rates, is £9.3 million. For winning the Scottish Premiership, it was reported by STV at the time of the creation of the SPFL, the Champions would win approximately £2.5 million, so if they did nothing more than turn up for eight Champions League group games, Celtic could make getting on for four times more than they can in Scotland. When they last qualified for the group stages in 2013/14, while they lost five times (in a group that included Barcelona, Milan and Ajax) they did win once, which alone would have earned them another 1.5 million euros (£1.16 million). On top of that they would also secure a share of the market pool (though being a smaller country, a smaller share).

    In short, in smaller countries the rewards from Europe dwarf those from the domestic game. Celtic win £2.5 million (or thereby) from winning the SPFL, but from this season could make £10.5 million + their share of the market pool, even if they do as dismally as they did in 2013/14.

    Moreover – and perhaps arguably even more important – that type of money is just not available to other Scottish clubs who don’t play in Europe, giving Celtic a considerable advantage over other Scottish clubs, in much the same way as clubs from bigger countries have an advantage over Celtic because of their preferential access to the market pool.

    In many respects football has become a self-reinforcing process, in that if Celtic win the Scottish Premier League and qualify for Europe, the much greater rewards from Europe make it more likely they will win the Premier League again which qualifies them for Europe which make the much greater awards in Europe available to them, which makes it more likely they will win the Premier League again which qualifies them for ………….

  4. But what about in the bigger countries. The following table suggests what would be won by each club at the end of the current season should Leicester win the Premiership

As we can see the reward for winning the Premiership is broadly similar to that from wining the Champions League. However, this avoids a very difficult point. The above forecast – for such it is by Sportek (http://www.totalsportek.com/football/premier-league-prize-money-table-2015/) – suggests not just that Leicester will win the Premiership but that Tottenham will be second, meaning that of the clubs suggested by the Evening Standard for the Super League only two will actually compete – Manchester City and Arsenal. Or put another way, Manchester United, Liverpool and Chelsea will not, and because they wont compete in the Champions League they will not have access to up to £100 million in revenue from European competition.

OK, they can’t all win it, and it’s probably unlikely that any of them would win it. But even if they only got to the last eight, they could still make 70 or 80 million euros – between £54 and £62 million – which instead becomes available to Tottenham and Leicester. It is obvious that a revenue hit of that sort of magnitude has to be harmful, particularly as with Manchester United it will have happened (according to the above forecast) for two seasons on the bounce. It simply cannot be allowed to happen, or at least not too often.

So, in conclusion, let’s go back to Herr Rumenigge who is quoted later on as saying

“A super league outside of the Champions League is being born. It will either be led by Uefa or by a separate entity, because there is a limit to how much money can be made.”

Just as in the Barclays advert, eventually we get some truth – “there is a limit to how much money that can be made”. This is an obvious truism, but what is missing is the determination of the big clubs to secure as much money for themselves, a point emphasised by Andrea Agnelli (President of Juventus) who said “You need to protect shareholders of the club, who are the real stakeholders” – not fans, but shareholders, which is at the heart of another Agnelli observation that “top football clubs should be able to make as much money as their counterparts in American sports” (http://www.standard.co.uk/sport/football/bayern-munich-and-juventus-call-for-20team-european-super-league-to-replace-the-champions-league-a3155766.html) Where will this money come from? Well eventually one way or another it will come from fans, even if in the form of TV revenue, which can be disguised as much as we like, but with pay TV comes from fans. But fans aren’t stakeholders in the world of the 20 European Super League – shareholders are stakeholders. Fans are customers to be milked as thoroughly and regularly as possible. But, fair play to Rumenigge and Agnelli – at least we did get the truth eventually.

But before you go, one last point in passing. How odd is it that the “champions” (if Leicester do it) are on live TV less often than Liverpool, Chelsea and even Newcastle?

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