The Business Model of European Football Club Competitions

Abstract

This paper presents the business model of the most important football competitions in Europe at club level (Champions League and Europa League). In this academic endeavor we have addressed current themes and concerns that are less discussed in systematic scientific researches, such as: income and expenses sources per each competition, their dynamics, the distribution of funds to the participating clubs, their role in the economy of the most powerful teams and of the most important championships in Europe. The importance and role of the competitions considered herein are measured on the basis of sports considerations as well as on their financial indicators, as part of UEFA's budget, the highest forum that governs the entire European football phenomena from an administrative, financial and control perspective. Of course, football is not just a sport anymore. It has held for several years an important place in the current overall mechanisms of socio-economic life. As such, this entire framework dominated by economics is not complete without the current legislative, political, social or cultural conditions (globalization, audiences, sponsors, supporters, social media). Although in some cases it is difficult to make a proper inventory, such elements make up the profile of the true world phenomena. In this context, this paper analyses the implications of the introduction by UEFA of a new licensing and regulation framework “Financial Fair Play” and the benefits and disadvantages of this program for all parties involved in the football business at European level.

Full text

Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
Available online at www.sciencedirect.com
2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and/ peer-review under responsibility of Academic World Research and Education Center
doi: 10.1016/S2212-5671(15)00562-6
ScienceDirect
2nd GLOBAL CONFERENCE on BUSINESS, ECONOMICS, MANAGEMENT and
TOURISM, 30-31 October 2014, Prague, Czech Republic
The Business Model of European Football Club Competitions
Teodor Dima
a*
a
Bucharest University of Economic Studies, Department of International Business and Economics 6 Piata Romana, Bucharest 010374, Romania
Abstract
This paper presents the business model of the most important football competitions in Europe at club level (Champions League
an
d Europa League). In this academic endeavor we have addressed current themes and concerns that are less discussed in
systematic scientific researches, such as: income and expenses sources per each competition, their dynamics, the distribution of
funds to the participating clubs, their role in the economy of the most powerful teams and of the most important championships
in Europe. The importance and role of the competitions considered herein are measured on the basis of sports considerations as
well as on their financial indicators, as part of UEFA’s budget, the highe
st forum that governs the entire European football
phenomena from an administrative, financial and control perspective. Of course, football is not just a sport anymore. It has held
f
or several years an important place in the current overall mechanisms of socio-economic life. As such, this entire framework
dom
inated by economics is not complete without the current legislative, political, social or cultural conditions (globalization,
audiences, sponsors, supporters, social media). Although in some cases it is difficult to make a proper inventory, such elements
make up the profile of the true world phenomena. In this context, this paper analyses the implications of the introduction by
UEFA
of a new licensing and regulation framework "Financial Fair Play" and the benefits and disadvantages of this program for
all parties involved in the football business at European level.
© 2014 The Authors. Published by Elsevier B.V.
Selection and/ peer-review under responsibility of Academic World Research and Education Center.
Keywords: business model, economic cycle, football club competitions, globalization, financial fair play
1. Introduction
European Football has significantly changed especially over the last 20 years, following an intense process of
trad
ing and marketing, a process that has brought important sums of money.
* Teodor Dima. Tel.:+4-345-4345-434.
E-mail address: teodor.dima@gmail.com
© 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and/ peer
-review under responsibility of Academic World Research and Education Center

1246 Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
The article cumulates two perspectives that establish the business model of Football Club Competitions, one that
particularly develops an economic approach, and the other one that presents the current tendencies of this field.
For this academic pursuit, I have used documentation as a proper
method of research in this field following the
usual steps of a scientific research:
x Review of the official documents of UEFA – financial reports, organizational pap
ers, marketing analysis.
x Review of the documents filed by the Deloitte Company: Football Money League for 2004-2014, Annual
Revie
w of Football Finance for 2011-2014.
x Critical review of scientific materials, books, articles and research
ing articles that approach the topic of
football club in Europe and the current interests in the field.
x Comparative analysis of European Club Competitions: U
EFA Champions League and UEFA Europa
League.
2. The Economy of European Football Competitions
According to the Annual Review of Football Finance (2014) co
nducted by Deloitte, the total value of European
Football market is €19.9 billion. Internal football is by far the most important section of this industry. Almost half of
the whole sum (€9.8 billion) represents the cumulated income of just five of the most powerful internal competitors
(
England, Germany, Spain, Italy, France), named by the experts in this field the “big five”.
The economic pattern of sport, and in particular of European
Football, is quite a recent topic of academic debate.
Andreff and Staudohar (2000) are the first who propose a pattern in order to feature the financial structure of
contemporary professional sports - “MCMMG (Medias – Corporations – Merchandising – Markets – Global)”.
Bourg and Gouguet (2012) constitute the “SATI model (Sponsors – Actionnaires – Television – Intern
ational)”
as an adjustment to the financial reality of sport after 1995, starting from football model. Bastien (2013) summarizes
and varies both of the previous versions through the SATEMMI model (Spectateurs – Actionnaires – Television –
Entreprise – Marches – Merchandising - International)”.
Synthesizing the specialized literature, I consider that the c
urrent business model of European Football Industry
is based on three important income - generating factors:
1. Media rights – the value paid by media companies in order to br
oadcast the sport events;
2. Commercial income – cumulates sponsorships (mainly from placing the brands on t-shirts, around the stadium,
m
edia broadcasting) and other business income (marketing activities, conferences services, catering, etc.);
3. Matchday revenue –money from ticket sales (including season tickets subscriptions) and su
pporters’ expenses
inside the stadium (promotional items, services).
In some financial reports, the sponsorships income and other bu
siness income are quantified separately. Taking
into consideration the current realities of this industry, where the money obtained from broadcasting has the greatest
share, mostly playing a major role, I believ
e that the above model – MCM (Media – Commercial - Matchday)
represents the most appropriate approach to European football business.
A major point in increasing the European Football market w
as to restore the system of government of European
Club Competitions, moving to a format that includes more teams, in order to increase the interest of supporters as
well as of sponsors and media partnership. UEFA Champions League (UCL), the main inter-clubs competition
m
oved to a new format at the beginning of 1992 being upgraded in more stages: 1994 (16 teams), 1998 (24 teams),
2000 (32 teams) and it has been adjusted several times mainly on the basis of sports criteria. The centralization of
media and commercial rights by UEFA, led to significant increases in revenue, reaching by 2014 almost 10 times
th
e value of income in 1994, incomes resulting only from this competition. And this successful format was quickly
adopted and applied, using the same coordinates, by the second European inter-clubs competition, UEFA Europa
Le
ague (UEL), starting in 2009.
All this changes were developed and
managed by UEFA (Union Of European Football Associations) the upper
forum on administrative and checking level of European Football. UEFA represents the national football
associations of Europe, organizes pan-European competitions at club and national-team level, supervising the
f
inancial procedures, regulations and media rights for these competitions.

1247
Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
Table 1. The evolution of the Total UEFA Revenue, UCL Revenue and the share (%) of the UCL Revenue in Total Revenue in the period
2003/04 – 2014/15 (2013/14 – 2014/15 based on estimates)€m
Club Competitions
and Other
Revenue
EURO
Total UEFA
Revenue
UEFA Champions
League (UCL)
Revenue
UCL
Revenue/
Total
Revenue
(%)
2003/04
620.2
855.2
1475.4
568.8
2004/05
656.1
656.1
593
2005/06
647.7
647.7
606.3
2006/07
895.5
895.5
818.5
Total 2003/04 – 2006/07
2819.5
855.2
3674.7
2586.6
70.38
2007/08
886.1
1350.9
2237
820.1
2008/09
900.4
900.4
819.1
2009/10
1309.8
1309.8
1108.5
2010/11
1384.1
1384.1
1153.2
Total 2007/08 – 2010/11
4480.4
1350.9
5831.3
3900.9
66.90
2011/12
1404.8
1390.9
2795.7
1165.4
2012/13
1697.2
1.7
1698.9
1424.1
2013/14* (est.)
1726
1726
1445.2
2014/15* (est.)
2017.7
2017.7
1471
Total 2011/12 – 2014/15* (est.)
6845.7
1392.6
8238.3
5505.7
66.83
Data source: UEFA Financial Report 2004-2014, UEFA CEO Report
UEFA budget follows the financial coordinates of sports st
ructures presented above, the three vectors (Media –
Commercial – Matchday) represent over 95% of the annual cashing (acco
rding to an analysis of the last 20 years on
income categories). A part of this income, money from TV broadcasting rights has represented 75% for more than
ten
years. Due to the fact that the European Football Championship (EURO) takes place every four years, the
organization budget suffers major transformations in those years which include this competition comparing with
th
ose years which do not include it. For the relevance of this analysis, I do consider that the most appropriate
approach is a cyclic one for periods of four years.
In table 1 I included the last ten years data and the forecasts for the next two years. This way, in the economic
c
ycle 2007/08 – 2010/11 were collected € 5.831 billion (an increase of
58.7% comparing to the previous cycle), and
for the next period 2011/12 – 2014/15 incomes of € 8.238 billion are estim
ated (an increase of another 41.2%). A
large part of the budget is based on the sums coming from UCL, the trend being of a slight decrease: from 70.38%
(2003/04 – 2006/07), to 66.9% (2007/08 – 2010/11). This decrease in the specific income value resulting from UCL
is deter
mined by the movement to a new format of the second European Competition as importance (UEL). It is
estimated that UEL value in the total budget will increase from 9.3% (2007/08 – 2010/11) to 11.6% in the next four
ye
ars.
From the entire cash collected by the two European inter – club competitions (UCL and UEL), about 75% of the
sum
goes to the participant clubs, and the rest of 25% is operated by UEFA in order to cover the event expenses,
internal allocations, as well as for the development of European Football, at all levels, and to promote solidarity. A
comparative analysis of two competitions is represented in table 2. This is a comparison on the type of income
sources, as well as on expense sources, for the last season for which there is financial information (2012/13).
Distributing money to the participant teams in both com
petitions has been based on similar criteria since 2009/10.
Distributions have grown at an average rate of 12% every year over the last decade. Therefore, clubs cash in three
types of income: fixed sums for participation, performance bonuses (for each point or match won) and market pool.

1248 Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
The fixed sum for participation in UCL is 6.61 bigger than for UEL (€8.6 million compared with €1.3 million).
Total club share for UCL is 6.21 bigger than for UEL (table 2). Conseq
uently the huge interest of clubs to qualify
for number one competition of Europe is understandable. And this report, for UCL is the same for the other types of
income. The derived sum from the market pool is calculated on the basis of an algorithm that takes into account the
agreement negotiated by television for each native team, the performance of each team (the stage when it has been
eliminated), but also the national record (the place obtained at the national ranking from the previous year).
The importance of collected income by clubs for participation
in European competition varies depending on size.
For an accurate financial representation, two aspects should be followed: the direct impact (cash collected from
UEFA, tickets to European football matches) and indirect (extra money from commercial activities, marketing,
transfers, etc.), the last one is more difficult to be quantified. Therefore, for the clubs with an income that exceeds
100 million euros, as well as for the “big five” teams, the direct impact is quite low (between 10 and 25% of
budget), and the indirect one is bigger, the teams of this level having commercial devices of laboring fruit for sports
res
ults. For clubs with an income under 100 million euros, the direct collecting from European competitions has a
g
reater share (40 – 60% of budget), being decisive for certain clubs to develop the current activities.
Table 2. Project Management - UEFA Champions League vs UEFA Europa League (2012/13)€m
UCL
%
UEL
%
UCL /
UEL
Broadcasting rights
1097.2
77.04%
217.9
90.04%
5.03
Commercial rights
291.4
20.46%
17.1
7.06%
17.04
Other revenue (incl. tickets and
hospitality)
35.5
2.49%
7.0
2.9%
5.07
Total revenue
1424.1
100%
242
100%
5.88
Distribution: group stage and play-
offs
-317.2
-62.4
Distribution: performance bonus
-219.8
-63.1
Distribution: market pool
-434.6
-100.8
Distribution: other
-2.8
Total distribution to clubs
-974.4
-226.3
Contributions to UEL clubs
-50
Contributions from UCL clubs
50
Solidarity financed by clubs
-71.7
0
Club share
-1096.1
76.97%
-176.3
72.85%
6.21
Event costs
-142.1
-42.3
Referees and match officers (incl.
overheads)
-11.9
-12.7
Internal allocation: website
-4.4
-3.8
Internal allocation: UEFA Super
Cup
-6.0
0
Solidarity financed by UEFA
-33.9
-24.3
Contribution to/from European
football
-129.7
17.4
UEFA share
-328
23.03%
-65.7
27.15%
4.99
Data source: UEFA Financial Report 2014

1249
Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
But UCL is an attractive competition for clubs, not just a financial one. The sport and social benefits are also
significant. A successful season of UCL brings a lot of benefits: the clubs' increasing popularity, high interest of
fans (generating extra income from commercial and matchday activities), increasing market value of the players,
in
creasing value for stock market societies. On the contrary, non-participation in European competitions or
eli
mination in the early stages generates discontent for all parties involved (shareholders, supporters, players) and
important financial losses. Moreover, for top clubs a good itinerary in Champions League has become a matter of
heraldry, respect for the fans.
3. Current challenges and tendencies o
f European Football Industry
Sport - and football in particularly - is in the first line of the globalizing process.
Ducrey, Ferreira, Huerta and
Marston (2003) consider sport “the most universal aspect of popular culture. It crosses languages and countries to
captivate spectators and participants, as both professional business and pastime.” Therefore, all actors of this
industry should consider the globalization opportunities of this game when they build strategies and development
plans.
For Boniface (2000) “the sun never sets on
the Empire of Football. Football's influence has kept growing
throughout the world to reach a level that could well be the ultimate level of globalization”.
And European football club is a business with more and m
ore attractive numbers for investors, shareholders or
partners throughout the planet. The best example of globalization is that the shareholding of the most powerful clubs
has crossed the borders of “the old” continent, four teams from the first ten (ranking based on reported income of
clu
bs in 2013) having the majority of shareholders outside Europe: two from The United States of America and two
from the Middle East (table 3).
Table 3. Major European clubs by owner nationality
Position
Club
Owner nationality
1
Real Madrid
Europe
2
FC Barcelona
Europe
3
Bayern Munich
Europe
4
Manchester United
USA
5
Paris Saint-Germain
Middle East
6
Manchester City
Middle East
7
Chelsea
Europe
8
Arsenal
USA
9
Juventus Torino
Europe
10
AC Milan
Europe
Source: Deloitte Football Money League 2014
Yet football is not just a business, it is a real social ph
enomenon. The great interest in this one is proven by the
more intense competition to obtain rights for broadcasting, and also by more impressive audience numbers. Thus,
UCL 2013 finals had over 360 million televiewers, and about 13.
4 million viewers watched from the stadium the
club competitions matches in season 2012/13.
Usually, the participating clubs in European competitions
also have most viewers. So, over 25 clubs from 10
different countries have an average of 35,000 viewers for
matches played at home. Most loyal supporters are in
Germany, Great Britain and Spain, where the average league attendance exceeds 40,000.
A current social tendency is the fans' subscriptions to clu
bs accounts on social networks, in order to be kept in

1250 Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
touch with all updates. FC Barcelona is leading this segment with over 77.3 million Facebook likes and over 11
million Twitter followers, and the growth rate is over 50% annually.
One of the current issues that many clubs are facing is that t
hey have repeatedly reported significant deficits that
led to a record level of debt in the last years. Many clubs have registered losses, some of them have experienced lack
of cash, being unable to pay the debts to the clubs or even to their own players o
n time, others have entered
insolvency, have followed procedures of legal re-organization or have gone bankrupt.
The reverse situation could also be observ
ed, where private investors and other capital market participants
extended their influence at professional football club level. Some clubs have been taken over by owners with great
financial power, owners who spent huge sums of money in order to create a powerful team. Chelsea is the best
example and the most recent cases have been Manchester City and Paris Saint-Germain. These massive capital
in
vestments have determined other teams to spend much over the established budgets in order to attract the best
players on the market.
Both tendencies threaten the financial stability and disrupt the competitive balance not only among the clubs, but
also a
mong the European Football Championships. For this reason, in order to assure the financial stability of
European Clubs on a long term and to re-balance the competitions, UEFA has introduced the new regulations of
f
inancial fair-play.
Thus, in 2009 the Executive Board of the Union of Eu
ropean Football Associations (UEFA) approved by
majority of votes the concept of “Financial Fair Play”, followed in 2010 by the approval of the licensing and
regu
lating system of financial fair-play that became effective by means of the monitoring activity starting with
s
eason 2011-2012. Checking on the new rules produces the first effects in season 2013/14, when all clubs have to
su
bmit the approved standard in order to participate in European competitions. Thus, for the first time there are
unitary rules for all football clubs at European level. The programme provides a legislation that prevents clubs from
entering a “vortex” of debts, ensuring at the same time a competition based exclusively on self-generating resources.
The main financial rule promoted by the new regulations concerns the fact that a club has to spend money only if
th
ey gain money (the “break even” rule) with a few exceptions. More precisely, the relevant expenses (salary costs,
employers costs, fees, administrative costs, other operation costs, amortization of the procedures from transfers of
players, payment costs) should not exceed the relevant incomes (incomes from selling tickets, broadcasting rights,
sponsorship and publicity, trading activities and other operation incomes, profits from the transfer of players,
financial incomes, additional incomes from fixed assets). A maximum of 5 million euros is allowed on a monitored
period (or 45 million euros in case a capital infusion is applied).
Considering the scientific literature published on FFP topic, by
the official documents, by the experts'
perspectives on the field, as well as the various approaches evidenced by international mass media, I have
synthesized in table 4 the advantages and disadvantages of this measure, adding to the previously mentioned points
of view the author's interpretation and opinions.

1251
Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
Table 4. Advantages and disadvantages of introducing Financial Fair Play
Advantages
Disadvantages
Uniformity of economic rules for all European clubs
The difficulties of supervision in obeying The Regulation
Increasing infrastructure investments and other sustainable goals
High costs for monitoring and controlling, in relation to the
potential benefits
Club expenses exclusively within the limit of income
Favoring the powerful clubs by custom
Increasing discipline and rationality in clubs finances
Eliminating the acceleration of performance by massive
capital infusion
Increasing transparency and reliability of clubs
Limiting great transactions on transfer market
Limiting the re-organizing positions, insolvency or even bankruptcy of
clubs
Inequity in applying rules for teams from different
championships, because of some certain stipulations derived
from national legislation
Increasing the protection degree of creditors
The dual character of compatibility for imposed restrictions
in relation to economic rules of the European Union
Limiting the inflating effect as a result of reduced wage pressure and
transfer sums.
Encouraging clubs to use some financial and accounting
stratagems in order to avoid penalties
Faster reimbursement of clubs debts (to players, legal authorities, other
clubs)
Prejudicing the sport's performance by applying
inappropriate sanctions
Restoration of a competitive balance, both on clubs levels and
championships.
Risk of covering financial deficiencies by supporters
Promoting an ethical behavior, based on mutual respect
Encouraging a responsible management of financial resources.
Long term increasing of investments for children and junior branches.
Source: uefa.com, international media, author's opinion and interpretation
The conclusion of this analysis reveals the positive aspects
, considering especially the foundation at European
level of a standard for all professional football clubs, regardless of the country in which they activate. Nevertheless,
the expected effect depends decisively on the accuracy and consistency of the implementation, by the power of
adjusting to a field with a powerful global impact.
4. Conclusions
Mid90's was the moment when the European Football started
to become a great business. Moving to a new
format Champion League, achieving a proper environment for the huge potential of this mar
ket, the growing interest
from media companies, increasing football investments from all over the world, all these have transformed a niche
industry into a global business.
The European competitions numbers look increasingly better, h
aving a constant growth rate that few industries
can be proud of. To all of these, an impressive social, cultural and mass media impact is added. The good
m
anagement of the two inter-clubs competitions can bring important sums of money to the budget of participant
clu
bs and, especially, to the best ones. The relations developed in this research, the comparative analysis, the
synthesis of the current tendencies of this dynamic field can be the starting points for later academic approaches in
the sport management field.
The current research presents the Financial Fair P
lay characteristics, considered the most important
transformation at football managing level, the most popular sport of the planet. Presenting the FFP benefits and

1252 Teodor Dima / Procedia Economics and Finance 23 ( 2015 ) 1245 – 1252
advantages, even though schematically, has the advantage of obviousness, being at the same time a comparative
reference for the researches that summarize the results of implemented measures decided by UEFA.
Acknowledgements
This work was co-financed from the European Social Fund through Sectorial Operational Programme Human
R
esources Development 2007-2013, project number POSDRU/159/1.5/S/134197 „Performance and excellence in
docto
ral and postdoctoral research in Romanian economics science domain”.
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