Park Lane Whitepaper Series

White Paper: European Soccer

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Hello and welcome to the 1st edition of the Park Lane White Paper Series.

With the culmination of the European Super Cup and the Champions League
tournament in recent months, it would seem that soccer is on everyone’s
mind these days. And with just cause. The explosion of European soccer
onto the global stage in recent years has readily changed the way international
communities view the sport.

fans have pledged allegiance to their teams for life, while new fans,
both national and international, are steadily tuning in to join the
spectacle. Soccer is without a doubt the most popular sports phenomenon
in the world. What other sport could cause fans to crowd around a television
set past the midnight hour to watch a rerun of a match played hours
before and half a world away? More than likely, the viewers would know
nothing of the aforementioned competing countries if not for the popularity
of their soccer clubs. Such is the magic of soccer. The chaotic fervor
of competition, patriotism, and loyalty present in the fan-following
of European soccer clubs represents an imminent commercial and financial
growth for the sport as a whole.

clubs are positioning themselves for significant growth in all aspects
of the sport. It is becoming prevalent among soccer clubs to reinvest
revenues back into the development of their own clubs, whether it is
in youth development leagues, amateur competitions or stadia development
and expansion. Europe’s Premier League, by far the market leader in
terms of club and financial success, is at the forefront of soccer as
a business. With a successful new broadcasting deal under their belt
for the 2007-2008 season, revenues for Premier League clubs are expected
to increase as well. Other leagues and organizations will be looking
at the Premier League’s management and business models in order to
increase their own growth. The consensus in soccer is a shift towards
growth and expansion.

On the
inside of this publication, readers will discover an introductory guide
and general overview to European soccer. The intent is not to offer
financial advice or provide investment details into soccer clubs or
organizations. Rather, it serves as a guidebook that will cover significant
trends in, and insights into European soccer, and to further examine
its commercial and financial impact on the soccer business. It should
also serve as a refernce piece for those who need to look up a quick
fact. Readers will enjoy a general introduction to the sport, M&A
news, club profiles and performances, and an explanation of tournaments,
leagues, player transfers and the rules involved in each. In short,
the guide is written in such a way as to inform and educate novice and
informed readers alike.

I would
like to thank all those who have contributed to the creation of this
publication. My co-authors deserve a specific mention; their cooperative
collaboration made the assembling of this publication an enjoyable process.
I would like to thank Ilja Kaenzig, Harris Roth, Phi Vo, Dale Neal,
Jonathan Felton and Ben Dickey. Finally, I would like to thank you the
reader, for taking the time to review our publication. We are a team
fully dedicated to the sports investment industry, and we will be glad
to serve any of your needs in that capacity. To learn more about our
team, services, and achievements, please visit us at

—Andrew W. Kline

Managing Director

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Introduction to European Soccer

Soccer has grown beyond the walls of Europe to the Asian sub-continent and
the Far East. Professional soccer has existed for over a century in
Europe, with its roots in Association soccer in the United Kingdom (hereinafter,
the “U.K.”). Despite its worldwide popularity, the business aspect
of the sport has received less attention compared to the “big four”
American sports: basketball, football, hockey, and particularly baseball.
Other industries’ interest in soccer came into the picture only when
the sport evolved into a business activity. Soccer’s business potential
became apparent in 1992 when Rupert Murdoch placed a huge bid
to obtain the exclusive rights for English soccer. Then in 2005-2006,
two European soccer clubs saw heavy investment by Americans: Tampa Bay
Buccaneers owner Malcolm Glazier bought out two executives for a bigger
stake in Manchester United, and Cleveland Browns owner Randolph Lerner
bought U.K. soccer club Aston Villa for $119 million. Now in 2008, as
European soccer is poised for sustained growth, revenues from media
contracts such as the Premier League’s £1.7million deal with BSkyB
and Setanta Sports only serve as a reminder of how much the sport has
progressed as a business. Interest in soccer was formerly limited to
fans, players and semi-professional directors who lovingly cared for
soccer resources. Today, soccer provides unique opportunities for real
commercial investment and growth.

Fig 1: European Soccer Market Size

Fig 1: European Soccer Market Size

in European soccer involves a process of investigating new financial
sources resulting from growing commercial interests. The latter is supported
by private companies and some of the continent’s largest clubs. Soccer
is currently a multi-billion Euro industry, focused primarily on a few
clubs and star players. The global industry is dominated by the major
European leagues (Refer to Figure 1).

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European Soccer Culture

Community Involvement

Soccer’s historical development can be linked to the culture of where the game has been played, including the way in which local markets and fans identify
with their clubs. English soccer fans, for example, are perceived to
be extremely passionate about the game. This is evidenced at every
match involving English teams. Clubs and fans alike can identify with
the shared concepts of courage, patience, collectivism, individualism,
and discipline.

Each soccer club’s strategies are a reflection of the social and cultural norms that exist at that particular location. Soccer is deeply rooted
within local societies. Soccer clubs often sponsor a variety of events
for the entertainment of their local fans. Such initiatives can include
youth development and community-involvement programs as well as complimentary
or reduced admission to matches. Players often participate in
various charitable functions, such as campaigning against drugs. It
is important for soccer clubs to maintain ties to local community traditions
and values, even in the face of the game’s increasing commercialization.

Soccer and Religion

Some countries consider soccer almost a religion. Fans follow specific pre-game, game-time, and post-game rituals and traditions. Team colors and logos assume an almost sacred significance. Individual player and event memorabilia,
including balls, jerseys, and numbers, are highly prized and valued.
Matches are like pilgrimages, as some fans will travel from one country
to another to watch their teams play.

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leagues and competitions are administered and managed by the Fédération
Internationale de Football Association (FIFA), the Union of European
Football Associations, or Union des Associations Européennes de Football
(UEFA) and their member associations. These groups ensure that all matches
are conducted in accordance with established standards for the safety
and enjoyment of all fans.


soccer’s international governing body. FIFA’s roles and duties have
expanded greatly in recent years. Six global organizations: the Asian
Football Confederation, the Confédération Africaine de Football, the
Confederation of North, Central American and Caribbean Association Football,
the Confederaci—n Sudamericana de Fśtbol, the Oceania Football Confederation,
and the Union des Associations Européennes de Football all support
FIFA in organizing, promoting, and developing the sport of soccer. These
confederations, created in FIFA’s by-laws, oversee the game on the
world’s various continents. National federations, rather than continental
confederations, are members of FIFA. National federations must be members
of both FIFA and the confederation in which their nation is geographically
resident for their teams to qualify for entry in FIFA’s competitions.

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European soccer’s governing body, is one of the six continental confederations
of world soccer’s governing body. It acts as a representative voice
for the European soccer family. UEFA has grown to emerge as the main
driver of the game, working and acting on behalf of Europe’s national
soccer associations to promote soccer and strengthen its position as,
arguably, the most popular sport in the world. UEFA is an assemblage
of national associations based on representative democracy.

core mission is to promote, protect, and develop European soccer at
every level. The organization promotes the principles of unity and solidarity,
and deals with all questions relating to European soccer. UEFA uses
its revenues to support re-investment and re-distribution in the game
in accordance with the principle of solidarity between all levels and
areas of soccer. The organization is responsible for organizing successful
professional and amateur soccer competitions for youth and women.


UEFA was
comprised of twenty-five national associations when founded in 1954.
The number of member associations gradually increased until the beginning
of the 1990s, when political developments in Eastern Europe and the
fragmentation of the UssR led to a rapid rise in the number of new associations.
Consequently, there are now fifty-three associations under UEFA’s
administration. The organization’s objective is to continually seek
consensus among its members.

membership includes teams from all of the European countries, with Vatican
City, Israel and Kazakhstan also being member countries. England, Northern
Ireland, Scotland, and Wales, the four constituent countries of the
U.K., have their own soccer associations and separate UEFA membership.
The Faroe Islands, an autonomous region of Denmark, also has its own
soccer association which is a member of UEFA. The soccer association
of Gibraltar, a British Overseas Territory, however, was rejected for
membership by UEFA in 2007. The Crown dependencies of Guernsey, Jersey,
and the Isle of Man are not members of UEFA, but rather are members
of the English Football Association.

Each of
the national associations under UEFA, except Liechtenstein’s, has
its own soccer-league system. The clubs playing in each top-level league
compete for the title of their country’s club champion, and also for
places in the following season’s UEFA club competitions, e.g., the
UEFA Champions League, the UEFA Cup, and the UEFA Intertoto Cup. The
clubs playing in the top-level leagues are different every season, due
to promotion and relegation, except in San Marino where there is only
one level.

Fig 2: UEFA Member Associations

Albania England Italy Poland
Andorra Spain Kazakhstan Portugal
Armenia Estonia Lichtenstein Romania
Austria Finland Lithuania Russia
Azerbaijan France Latvia Scotland
Belgium Faroe Islands Luxembourg San Marino
Bosnia-Herzegovina Georgia Moldova Serbia
Belarus Germany F.Y.R. Macedonia Switzerland
Bulgaria Greece Malta Slovakia
Croatia Hungary Montenegro Slovenia
Cyprus Ireland Netherlands Sweden
Czech Republic Iceland Norway Turkey
Denmark Israel Northern Ireland Ukraine

Source: UEFA


New countries
have emerged in Eastern Europe over the past decade. This has resulted
in the birth of new associations and teams which, in turn, has led to
an increase in the size of various UEFA competitions. This constant
expansion has also been reflected in the ongoing introduction of new
competitions, including the UEFA Intertoto Cup in 1995, a Women’s
Under-18 Championship in 1997-98, and the UEFA Regions’ Cup for amateur
soccer players in 1999. Approximately 1,200 matches are held in UEFA
competitions each season. As soccer has evolved into a tremendous
commercial success, UEFA has stressed the need to reinvest the vast
sums of money generated by its activities back into the game at all


revenues continue to be soccer’s most important source of income.
Revenues from commercial rights and licensing remain second, but the
gap between the two continues to shrink.

Revenues sources include:

  • Broadcasting rights
  • Commercial & licensing rights
  • Ticket sales
  • Non-operating items:
    • Financial items
    • Extraordinary items & taxes
    • Provisions format
    • Provisions usage
    • EURO pool, and
  • Other soccer-related income:
    • Fines (used to finance the UEFA’s humanitarian help portfolio)

    • FIFA & EFP contributions.

Fig 3: Sources of Income

Fig 3: Sources of Income

UEFA Financial Report 2005-06

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in 2000, the G-14 was composed of fourteen leading clubs to represent
a singular voice in their dealings with UEFA and FIFA. The group’s
goal was to create, develop and implement synergies based upon shared
experiences and expertise. New members are allowed to join by invitation
only. Four more clubs joined in August 2002, bringing the membership
to eighteen. The group’s president is Olympique Lyonnais Chairman,
Jean-Michel Aulas, who replaced David Dein in May 2007. G-14 clubs are
spread across seven different countries and have won approximately 250
national league titles between them. Three of the G-14 clubs come from
each of the top divisions in England, France, Germany, Italy, and Spain,
two from the Netherlands, and one from Portugal. G-14 members have won
the European Cup/Champions League forty-one times out of fifty-one seasons.

The eighteen
members are distinguished by their achievements in club soccer, economic
base, scale of operations and, most importantly, their willingness to
co-operate and contribute to the G-14 in an open and progressive manner.
The G-14 also supplies many national teams with their most significant
players. The G-14 plays a major role in the issues taking place in the
European soccer competitions. Clubs belonging to the G-14 represent
the club-soccer world in its widest variety. Members universally, however,
are concerned with important rulings and negotiations on:

  • EC employment legislation
  • Sponsorship & TV rights
  • Intellectual copyrights, and
  • The format and management of club and national team competitions.

In early
2008, G-14 was disbanded after FIFA and UEFA agreed to their demands
on key issues including player injury compensation. The compromise resulted
in the formation of a European Clubs Association that will be represented
in both FIFA and UEFA. The demise of G-14 also signals the end to the
threat of a breakaway European super league.

Membership & Funding

The G-14
was funded with financial contributions from member clubs. The annual
budget determined the amount of funding. Fifty percent of this amount
was borne by member clubs in equal shares. The remainder was divided
into 154 shares, corresponding to the eighteen members’ total number
of votes. Each club’s number of shares corresponded to its number
of votes. Each member’s number of votes was calculated on the basis
of the titles won in the three major European club competitions. European
Champion Clubs’ Cup/Champions League titles equallled two votes, while
the UEFA Cup and Former Cup Winners’ Cup titles equalled one vote.

from commercial activities is another source of funding. The G-14’s
membership includes Europe’s big clubs, all wanting to share their
views and collective experience, in European institutions and in the
political arena, with the relevant soccer-governing bodies.


FA (Football
Association) is soccer’s governing body in England and the Crown dependencies
of Jersey, Guernsey, and the Isle of Man. FA holds a unique place in
the history of soccer. FA governs all professional soccer clubs in England.
It is the only association of England, and each island has their own
FA. FA is a member of UEFA and FIFA, and holds a permanent seat on the
International Football Association Board (IFAB). FA was founded in 1862
as a sole governing body, and continued to act as such until UEFA came
into existence. FA then became the UEFA member responsible for controlling
and managing U.K. soccer. FA administers broadcasting rights and ensures
that clubs adhere to player-transfer and wage requirements in accordance
with FIFA and UEFA regulations.

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Fig 4: G-14 Membership

Founding Members (2000) New Members (2002) Invitees (2007)
Manchester United (England) Arsenal (England) Monaco (France)
Liverpool (England) Lyon (France) Monaco (France)
Juventus (Italy) Bayer Leverkusen (Germany) Werder Bremen (Germany)
Milan (Italy) Valencia (Spain) Sevilla (Spain)
Internazionale (Italy) Roma (Italy)
Marseille (France) Olympiacos (Greece)
Paris Saint-Germain (France) Benfica (Portugal)
Bayern Munich (Germany) Celtic (Scotland)
Borussia Dortmund (Germany) Anderlecht (Belgium)
Ajax (Netherlands)   Fenerbahce (Turkey)
PSV Eindhoven (Netherlands)    
Porto (Portugal)    
Barcelona (Spain)    
Real Madrid (Spain)    

Source G-14 Official Website

European Soccer Structure (Leagues, Competitions, and Clubs)

Structure of Leagues & Competitions

the main governing body responsible for managing European leagues and
competitions. There are leagues and competitions for both men and women.

The two major leagues and competitions are:

UEFA Champions League

UEFA Champions League is the biggest and the most important league for all the clubs in Europe. It was first held in 1955, and was known as the European
Champion Clubs Cup (or just European Cup) until 1991. It was also known
as the European Cup, UCL, CE1, C1 or CL. The Champions League trophy
is considered the most prestigious in the sport.

On the 21st of May, 2008, Manchester United defeated Chelsea in Moscow, and
are the most recent winners of the coveted title.

Stages – The tournament consists of several
stages. In the present format it begins in mid-July with three preliminary
knockout, qualifying rounds. The sixteen surviving teams join sixteen
seeded teams in an eight group stage. Eight group winners and eight
runners-up enter the final knockout rounds, which end with the final
match in May.

teams and aggregate winners are paired, proceeding into the subsequent
preliminary round. Qualifying rounds are held from the middle of July
to late August. The losers of the third qualifying round are transferred
to the UEFA Cup, while the sixteen winners of the final qualifying round
are joined by the sixteen teams who have qualified directly, to participate
in the eight group stage.

are drawn into eight groups of four teams, each team playing every other
team in the group twice (home and away). The group stage is played between
the middle of September and early December. The teams finishing third
in their groups are transferred to the UEFA Cup, while the top two teams
from every group qualify for the next round. Here the sixteen remaining
teams take part in the knock-out stage, which starts in late February
and ends with the final match in May.

All qualifying
rounds and knock-out ties are two-legged, with each team hosting one
match. The team that scores the greater aggregate number of goals qualifies
for the next round. The away goals rule applies. Extra time and
penalty kicks are used, if necessary, to determine the winner. The final
is a single match played at a predetermined venue.

Qualification -The UEFA Champions League is
open to the league champions of all UEFA member associations (except
Liechtenstein, which has no league competition), as well as to the clubs
finishing from second to fourth position in the strongest leagues. Since
January 2007, the two lowest-ranked league competitors (currently the
Andorra and San Marino leagues) can also represent their domestic champions
in the Champions League.

The number
of places in the competition depends on the association’s rank in
the UEFA coefficients table:

  • Associations ranked first to third have four positions
  • Associations ranked fourth to sixth have three positions
  • Associations ranked seventh to fifteenth have two positions, and
  • Associations ranked sixteenth or lower have one position.

An association’s
rank also determines the stage at which the clubs enter the competition.
An additional place in the group stage is reserved for the title-holders,
in case they don’t qualify via their domestic league. An association
is, however, limited to sending a maximum of four clubs for a season.
This means that if the title-holders come from a league given four positions,
but finish out of the top four, they will take the place of the fourth
placed team. The fourth placed team will go to the UEFA Cup.

must be licensed by their national association in order to participate
in the Champions League. The club must meet certain stadium, infrastructure,
and finance requirements to obtain a license.


Cup is the second most important international competition for European
soccer clubs, after the UEFA Champions League. It began in 1971
and replaced the Inter-Cities Fairs Cup. In 1999, the UEFA Cup Winners’
Cup was abolished and merged with the UEFA Cup.

Stages -The UEFA Cup starts with two
knockout qualifying rounds held in July and August. Participants from
associations ranked eighteen and lower enter the first qualifying round
and participants from associations ranked nine to seventeen join them
in the second qualifying round. In addition, three places in the first
qualifying round are reserved for the Fair Play winners, and eleven
places in the second qualifying round are reserved for the UEFA Intertoto
Cup winners.

of the qualifying rounds join teams from the associations ranked first
through thirteenth in the first round proper. In addition, losers in
the third qualifying round of the Champions League also enter this round,
and another place is reserved for the title-holders. There are eighty
teams total in this round.

the first round proper, the forty survivors enter a group stage, with
the clubs being drawn into eight groups of five each. Unlike the Champions
League group phase, the UEFA Cup group phase is played in a single round-robin
format, with each club playing two home and two away games. The top
three teams in each of the eight groups advance, twenty-four in total,
where they are joined by the eight third-place teams in the Champions
League group phase.

is a winter break following the group stage. From this point, knockout
play resumes, with two-legged ties leading to the one-off final, which
is held at a neutral ground meeting UEFA’s criteria for a four-star

were introduced for the 2006-07 season due to the changes in the UEFA
Intertoto Cup format. UEFA will change the format to have twelve groups
of four teams in the second round instead of the current eight groups
of five teams, starting in the 2009-10 season.

Qualification – Clubs qualify for the UEFA Cup
based on their performance in national leagues and cup competitions.
Qualification for the competition is based on UEFA coefficients with
more places being offered to the more successful nations. Usually places
are awarded to teams who finish in various runners-up places in the
top-flight European leagues and the winners of the main cup competitions.
A few countries have secondary cup competitions, but England and France
are currently the only countries that grant a UEFA Cup place to their
secondary cup winners.

If the
previous UEFA Cup title-holders are not eligible to take part in either
of the current UEFA club competitions (UEFA Champions League or UEFA
Cup) by virtue of their domestic form, the UEFA Administration may,
at the request of the association of the club concerned, admit those
clubs to the current UEFA Cup competition. Participation will not be
at the expense of their association’s contingent.

can be quite complicated if one team qualifies for European competition
through two different routes. In all cases, if a club is eligible to
enter the UEFA Champions League then the Champions League place takes
preference and the club does not enter the UEFA Cup. The UEFA Cup place
is then granted to another club. If a team qualifies for European competition
through both winning a cup and league placing, the “spare” UEFA
Cup place will go to either the cup runners-up or the highest placed
league team which has not already qualified for European competition,
depending on the rules of the national association.

for the UEFA Cup can also be attained in two other ways:

  • The eleven winners in the third round of the UEFA Intertoto Cup enter the
    UEFA Cup at the second qualifying round stage from the 2006-07 season.
  • Three more berths are given to federations that finish above a certain level
    in UEFA’s Fair Play table. The top-placed federation automatically
    receives a Fair Play entry and two other federations gain berths via
    a draw among all other federations that meet qualifying criteria. In
    all cases, the recipient of a country’s Fair Play entry is the highest-placed
    team in the Fair Play table of that country’s top league that has
    not already qualified for Europe.

that are knocked out of the qualifying round and the group stage of
the Champions League can also join the UEFA Cup, at different stages.
The UEFA Super Cup and UEFA Intertoto Cup are also one of the important
competitions that take place between the various clubs in Europe.

Super Cup

Super Cup (European Super Cup) is at stake in an annual soccer game
between the reigning champions of the UEFA Cup and the Champions League.
It takes place at the start of the domestic season, in August, and it
is generally regarded as a minor event, with the Champions League and
UEFA Cup winners not always fielding their strongest sides. Since
the game happens after the summer player transfer window, the teams
selected may be different from the ones who won the qualifying competitions.

Intertoto Cup

Intertoto Cup, also abbreviated as UI Cup, is a summer soccer competition
for European clubs that have not qualified for one of the two major
UEFA competitions, the Champions League or the UEFA Cup. The competition
will be abolished from 2009 onward. Any club that wishes to participate
must apply for entry, with the highest placed club (by league position
in their domestic league) at the end of the season entering the competition.
The club does not necessarily have to be ranked directly below the clubs
which have qualified for another UEFA competition. If the club
which is in this position did not apply, they will not be eligible to
compete in the Intertoto Cup, with the space instead going to the club
which did apply.

FA Premier League – The Premier League, officially known as the Barclays Premier League
for sponsorship reasons, colloquially known as ‘The Premiership,”
is a professional league competition for soccer clubs located at the
top of the English soccer league system. It is England’s primary soccer
competition, and is governed by the Football Association. The Premier
League is currently contested by twenty clubs, operating a system of
promotion and relegation with The Football League. It has progressed
to become the world’s most watched sporting league, and the most lucrative
soccer league, with member club revenues totaling a figure in excess
of £1.4 billion. The Premier League is operated as a corporation that
is owned by the twenty member clubs. Each club is considered a shareholder
with one vote each on such issues as rule changes and contracts. The
clubs elect a Chairman, Chief Executive and Board of Directors to oversee
the daily operations of the league. The Football Association is not
directly involved in the day-to-day operations of the Premier League,
but has veto power as a special shareholder during the election of the
Chairman and Chief Executive and when new rules are adopted by the league.

La Liga
– Liga
de Fśtbol Profesional, commonly known as the Primera Divisi—n, is
Spain’s professional soccer league. It is considered to be one of
the best leagues in the world. Nine clubs have been crowned Campeones
de Liga. It is governed by the Spanish Football Federation.

– Serie A (officially
known as the Serie A TIM for sponsorship reasons) is a professional
league competition for soccer clubs located at the top level of the
Italian soccer league system. Historically, Serie A has produced the
highest number of European Cup finalists. In total, Italian clubs have
reached the final of the competition a record twenty-five different
occasions, winning the title eleven times. The Italian Football Federation
governs this league.

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Club Tier Structure

clubs across the various European leagues can be organized under various
tiers based on their past performance and resultant commercial success
(Refer to Figure 5).

Fig 5: Structure of Clubs and their Relationship

Fig 5: Structure of Clubs and their Relationship

Source: The New Football Business: a challenge for elite followers – A Case Study for IFK GÖTEBORG Monica Marquez & Heliodoro Martin

On top
of the soccer pyramid is a group of elite clubs, most of which belong
to the big five European countries. Supported by a huge mass of fans,
these clubs are the winners in this new era of soccer where the income-generating
capacity is likely to determine the clubs’ position/level in the soccer

Features of Elite Clubs:

  • Internationally focused
  • High brand recognition in Europe (prestige)
  • Annually compete in UEFA tournaments
  • Possess the top players
  • Highest player salaries (in absolute terms)
  • High financial power (high income)
  • Significant contracts with sponsor
  • Play national as well as European competitions

Elite Followers

The second
layer consists of Elite Followers. They are the ones that have missed
out on opportunities of winning a European trophy or reaching the final
rounds of the UEFA competitions. This category of clubs is not consistent.
Their categorization can vary every year depending on their performance.
Financially, they are not as strong as the elite clubs but act as competitors
to them.

Features of Elite Followers:

  • Internationally focused
  • Some brand awareness in Europe
  • Less frequent participation in UEFA tournaments
  • Some good players
  • Medium player salaries
  • Medium financial power
  • Standard sponsorships

The Nationals

The third
category, i.e. the Nationals, consists of clubs mainly focusing on national
leagues and competitions. They do not have the capacity to play in the
international club competitions as they lack top skills and possess
low financial power.

Features of Nationals:

  • Nationally focused
  • Brand recognition only in the domestic market
  • No participation in UEFA competitions
  • No top players
  • Modest total player salaries (in absolute terms)
  • Low financial power
  • Less sponsorship

The Survivors

This is
the last category of clubs which barely survive in the soccer industry.
They play only at the national and regional levels and are hardly recognized.
They do not form a part of professional soccer. They are restricted
only to the semi-professional level.

of Survivors

  • Nationally focused (even regionally focused)
  • Low brand recognition, even in the domestic market
  • Compete in the lower domestic divisions
  • Semi-professional players
  • Low total player salaries
  • Very low income: some risk bankruptcy
  • No important sponsorships

Clubs in all the categories can transition into higher or lower categories
based on their standing in their respective leagues (Refer to Figure

Fig 6: Network of Club Relationships

Fig 6: Network of Club Relationships

Source: New Football Business: a challenge for elite followers; A Case Study for IFK GÖTEBORG Monica Marquez & Heliodoro Martin

followers act as intermediaries between elite clubs and lower clubs
(nationals and survivors). Many clubs competing in a low division see
an opportunity to sell their players to top clubs in their same country,
because they know that they can get certain compensation when the players
are subsequently sold to an elite club in a foreign country. At the
same time, elite clubs are aware of the fact that top clubs in non-prestigious
leagues are working hard in the development of young talent. Thus, the
relationships in both directions (up and down) within divisions and
leagues are fundamental to the soccer clubs.

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Economics of Soccer

Business Models

models in the European Soccer industry primarily revolve around managing
soccer clubs. The clubs broadly pursue business models that are based
on income from match day ticket sales, broadcasting and commercial/merchandise
sales. Other non-regular but important sources of income include property
development, player registrations and transfers, lotteries and stadia
exploitation, as well as emerging income streams from broadcasting via
Internet broadband and managing training academies in emerging soccer
playing nations. Soccer clubs also have significant expenses incurred
in recruiting high quality talent and in day-to-day administration.

Revenue Mix

the majority of soccer clubs derive their revenues from the above mentioned
sources, the revenue mix may differ based on the degree of success on
the field, quality of talent and the popularity of the club’s brand.
Club revenues are also influenced by the local soccer association regulations.
Successful clubs with the potential to play in premier tournaments nationally
and in Pan-European leagues are at a significant advantage in terms
of their ability to derive revenues from gate receipts, broadcast income
and leveraging their popularity to generate income from sponsorship
and merchandise sales (Refer to Figure 7).

Fig 7: Primary Revenue Streams for Clubs

Match Day Earnings Broadcasting Commercial
Match day gate receipts Revenue share from TV and radio rights from national leagues Sponsorships
Season tickets Share of revenue from playing in Pan-European leagues (e.g. UEFA) Merchandizing

Source: Deloitte Football Money League, 20

Match Day Income

day income is largely derived from gate receipts (including season tickets
and memberships). Many clubs own their stadiums, and stadia capacity
along with attendance often determine the scale of revenues generated.
A loyal local fan base ensures strong attendance for home games played
by clubs and contributes significantly to match day earnings for the
clubs. Leading clubs are often able to invest in large and modern stadia,
and charge more for individual seats. Since only the leading clubs in
the national leagues qualify for the European championships such as
the Champions League and the UEFA Cup, they also derive additional income
from their share of the gate receipts from those games.


income includes revenue from television and radio transmission of both
domestic and international competitions. Revenue share from broadcasting
rights in national leagues are major contributors to club revenues.
Clubs qualifying to play in Pan-European leagues such as the UEFA Champions
League and UEFA Cup also gain from revenue share due to the broadcasting
and new media contracts carried out by UEFA.

A major
revenue driver for clubs going forward is the renewal of broadcast deals
in various territories. The growing interest in the game along with
deregulation of broadcast markets has resulted in the entry of new participants
in the broadcast space and increased competition. Premium content remains
critical to the business models of Pay-TV broadcasters, and as a result
value for top class broadcasting rights continues to rise. The development
and convergence of technologies has seen new entrants into the broadcast
rights market, increasing competition for rights.

With the
number of soccer Pay-Per-View (PPV) television (TV) subscribers in Europe
expected to reach 80 million, broadcasting is expected to generate nearly
£5.5 billion in revenues. The rise of PPV TV in some European
countries will influence the value of live TV rights for football and
the process by which TV rights are negotiated. As top clubs are aware
of this revolution and its commercial opportunities, many are encouraged
to become broadcasters themselves and eliminate, in the long run, the
intermediaries (media companies). This fact is exemplified by the case
of Manchester United, which has already established its own TV channel.
Other clubs, like Real Madrid and FC Barcelona, also have exclusive
channels, but they are constituted as ‘joint ventures’ with media

As the
competition heats up for media and broadcasting rights, organizations
such as the Premier League have profited as television stations competed
for the right to air the league’s games.

Commercial Income

clubs across Europe leverage their brand value and popularity among
fans to generate revenues through licensing of image rights, advertising,
merchandise sales and sponsorship deals. Leading clubs with star players
and a massive fan base look to derive substantial revenue from merchandising
sports goods and memorabilia.

is a range of sponsorship levels from sponsoring a single player, like
Vodafone and David Beckham, to full ownership of a team/club as was
the case with Parma and the erstwhile Parmalat in Italy, and Bayer in
Germany with Bayer Leverkusen. Other levels include sponsors for the
club stadium and club kits.

transfers and property development of clubs also contributes considerably
to club revenues although they serve as non—regular sources of income.
Clubs also generate income from re-development/sales of existing property
assets. Property development contributed £23.8 million to Arsenal’s
revenues in 2007, over 10 percent of the club’s revenues for the year.
A number of clubs also specialize as proving grounds for budding talent
that are then traded with leading clubs via transfers to generate revenue.
These include some clubs in the Netherlands and France.

trends that have contributed to the changing business models of clubs
include the rise in popularity of European club soccer in other regions
of the world, especially Asia. The emergence of large fan followings
in countries such as China, Japan and in Southeast Asia has allowed
leading European clubs to garner significant revenues from sponsorships,
broadcasting and merchandise deals in the region. The emergence of broadband
has also provided a new potential revenue stream from sales of online
broadcast rights and sponsorships.


clubs spend their budgets mainly in paying salaries and buying players,
both local and international. There are also other expenses, such
as the investment in building and maintaining stadiums and pitches,
the expenses associated to the competitions, and others.

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Ownership Structures

clubs across Europe have a variety of ownership structures. New ownership,
however, rarely results in relocation. The local club has to be acquired
as it stands and then investments need to be made to help the club work
its way up through the divisions, usually by hiring better talent.

The nature
of ownership is often determined by the degree of freedom granted by
local regulations. Some regions such as the UK are more open to club
ownership by foreigners including private individuals and investment
funds while club ownership in countries such as Spain and Germany is
characterized by member-owned or supporter-owned trusts.

Some of
the ownership structures prevalent in European soccer include:

Ownership by Private Investors

A number
of leading clubs are privately owned by individual wealthy investors
or high net worth groups who are often motivated more by reasons other
than a passion for the sport. The premier English soccer club Chelsea
is owned by the Russian billionaire Roman Abramovich while Manchester
City is owned by Abu Dhabi United Group for Development & Investment.
Leading Italian club Juventus is owned by the Agnelli family, the promoters
of the Fiat Group.

Some other
leading clubs are owned by successful sports investors with a tradition
of owning successful sports franchises. The world-renowned English club
Manchester United is owned by the leading US investor Malcom Glazer,
who also owns the National Football League’s Tampa Bay Buccaneers.

ownership has proved considerably successful in parts of Europe such
as the UK, where new owners with significant financial resources at
their disposal have been able to commit large sums to bring in new talent
and upgrade facilities allowing these clubs to emerge among the most
successful in the national and Pan-European leagues.

Ownership by Corporations

of soccer clubs by leading corporations has been driven by historical
linkages, and by the desire to secure a brand presence and/or to acquire
a potentially successful media franchise.

links that corporations have with their town of origin and their relationship
with the local community has often resulted in the local soccer club
being promoted/financially backed by these corporations. A number
of leading clubs are owned by leading global/local corporations such
as Bayer Leverkusen FC which is owned by the German pharmaceutical and
chemical giant, Bayer.

companies also seek to own or have a stake in leading soccer clubs with
the objective of establishing a strong media franchise and exploit the
strong brand profile of clubs from existing and new sources of media
that includes the increasingly popular Pay TV and Internet broadband.
In France, the broadcasting giant Canal + controls some clubs, and the
Girondins de Bordeaux have just been bought by CLT-UFA and M6. In Italy,
the leading soccer club AC Milan is owned by Silvio Berlusconi, the
owner of a number of leading Italian media networks.

Through the Stock Market

a number of clubs had taken the stock market model to raise capital
to finance their activities in the past, in recent years there has been
a reversal in this trend with a number of clubs delisting from the stock

The threat
of hostile takeover bids along with concerns over lack of transparency
of ownership and the risk of clubs falling into the wrong hands have
been some issues that have posed challenges to the effectiveness of
the stock market model. A central issue is the conflict between the
stock market’s relentless focus on profit maximization and shareholder
value, and other objectives such as sporting success. While the stock
market model has been most prevalent in the UK, the experiment has shown
that soccer clubs have found it difficult to prioritize profit over

a few leading clubs continue to remain listed on the stock market across
Europe (Refer to Figure 8), the poor returns on soccer shares have meant
that not too many clubs have followed the English cue and pursued the
stock market model.

Fig 8: Listed Football Clubs

Fig 8: Listed Football Clubs

Source: Company Annual Reports # Indicative list only

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Soccer & Player Associations

countries have national soccer associations that are responsible for
the overall management of soccer within their country. They act as the
governing body and represent the country in international soccer competitions
where UEFA acts as a representative for these national associations.
Some of the countries have player associations and player unions, the
responsibility of which is to enhance and develop the players’ talent
and also their commercial appeal.

National Associations

In Europe,
UEFA acts as a representative of the national associations. There are
currently fifty-three national associations under UEFA’s wing.

League Association

The German
League Association has delegated operational matters to DFL – Deutsche
Fußball Liga GmbH (DFL German Football League Ltd), the League Association
and the DFL Deutsche Fußball Liga GmbH. The League Association has
been an orderly member of the DFB since 2001. All thirty-six clubs and
joint-stock companies are members of the League Association.

In common
with DFB regional associations, the League Association is an ordinary
member of the DFB with voting rights. The League Association holds a
blocking minority and contributes three members to the DFB Presidential
Committee (the President, his deputy and the DFL Executive Board Chairman)
as well as thirteen members to the DFB Board. In addition to the above
mentioned bodies, professional soccer is also represented on the disciplinary
committee, the referees’ committee, the committee for tax and financial
affairs, the security committee, the coaching development committee,
the violence prevention committee, the voluntary work committee, the
anti-doping committee and the sports medicine committee. The League
Association has transferred its operative business to the DFL.

sphere of responsibility extends to marketing and promotion of the top
two divisions in domestic and overseas markets.

Regional Associations:
  • Norddeutscher Fußball-Verband (Northern German Football Federation)
  • Schleswig-Holsteinischer Fußball-Verband (Football Federation of Schleswig-Holstein)
  • Hamburger Fußball-Verband (Football Federation of Hamburg)
  • Bremer Fußball-Verband (Football Federation of Bremen)
  • Niedersächsischer Fußball-Verband (Football Federation of Lower Saxony)
  • Westdeutscher Fußball-Verband (Western German Football Federation)
  • Fußball-Verband Niederrhein (Football Federation of the Lower Rhine)
  • Fußball-Verband Mittelrhein (Football Federation of the Middle Rhine)
  • Fußball-und Leichtathletik-Verband Westfalen (Football and Athletic Association of Westphalia)
  • Fußball-Regional-Verband Südwest
  • Fußball-Verband Rheinland
  • Saarländischer Fußball-Verband
  • Südwestdeutscher Fußballverband
  • Heßischer Fußball-Verband (Football Federation of Hessen)
  • Badischer Fußball-Verband (Football Federation of Baden)
  • Südbadischer Fußball-Verband (Football Federation of South Baden)
  • Württembergischer Fußball-Verband (Football Federation of Wuerttemberg)
  • Bayerischer Fußball-Verband (Football Federation of Bavaria)
  • Nordostdeutscher Fußball-Verband (Northeastern Football Federation)
  • LandesFußballverband Mecklenburg-Vorpommern (Football Federation of Mecklenburg-Western Pomerania)
  • Fußball-Verband Sachsen-Anhalt (Football Federation of Saxonia-Anhalt)
  • Berliner Fußball-Verband (Football Federation of Berlin)
  • Fußball-Landesverband Brandenburg (Football Federation of Brandenburg)
  • Thüringer Fußball-Verband (Football Federation of Thuringia), and
  • Sächsischer Fußball-Verband (Football Federation of Saxonia).

The League
Association’s clubs and joint stock companies support centralized
media rights negotiation. The DFL consequently acts as the exclusive
agent for the most important broadcast rights on the German media market.
The new media contracts agreed to in December 2005 will realize a record
total of approximately €1.32 billion in the period from 2006-07 to
2008-09. From the 2006-07 season onwards, these funds will not merely
reward the clubs that enjoy the most on-field success. All thirty-six
clubs will benefit from the approximately 46 percent increase in media
revenues, resulting from income generated at home and abroad and marketing
activities centered on league fixtures.

One component
underpinning the successful exploitation of media rights is the DFL’s
meticulous and consistent support for its brand. The league has enhanced
the presentational quality of the product as a key contributor to long-lasting
success. For example, the DFL introduced a new corporate design (CD),
and has stipulated improved camera specifications for Bundesliga TV
broadcasts. Over recent years, the league has progressively established
communications platforms tailored to clearly-defined target groups.
Soccer supporters are among the target groups for whom the Bundesliga
represents an umbrella brand alongside the thirty-six clubs.

Subsidiary Companies

The league
has also expanded into other areas in recent years. It has two subsidiary
companies: LIGA Travel (the official BundesLIGA Travel Gmbh agency)
and Sportcast Gmbh (a TV production company).

Liga Travel Gmbh
– LIGA Travel is jointly owned by the DFL and BTI Euro Lloyd, one of
Germany’s leading business travel providers. The company offers travel
packages to all global destinations, and comprehensive full-service
packages for teams, sponsors, the media and supporters, including flights
and stadium transfers. Furthermore, the company offers special events
and/or incentive trips to away matches.

LIGA Travel’s
mission is to serve as a professional, efficient and value-for-money
partner to the top-tier clubs, serving all their travel needs. LIGA
TRAVEL GmbH is 51% owned by the DFL, with BTI Euro Lloyd accounting
for the remaining 49%.

Sportcast Gmbh – As
of the current season, Sportcast has provided TV coverage of matches
in the top two divisions and worked with the League’s media partners.
Once the League had commenced marketing its own rights, establishing
an in-house production company was the next strategic step, representing
an investment in the product and the future of the league. In this way,
the DFL has assumed direct responsibility for the presentational quality
of its product and secured a strong revenue stream.

Responsibilities – Marketing and Organization

and strengthening professional soccer in Germany is the declared goal
of the DFL Deutsche Fußball Liga GmbH. The operational subsidiary of
the League Association is also responsible for balancing the diverse
interests of all thirty-six members, who are at one and the same time
sporting rivals.

regards its primary responsibilities as organization, marketing and
service provision. The target customers are the League Association’s
clubs and joint stock companies, the media, the general public and the
supporters. The DFL sphere of responsibility is fundamentally divided
into three main branches: competitions, licensing and marketing.

Italian Football Federation

The Italian Football Federation (Federazione Italiana Giuoco Calcio, FIGC), also known as Federcalcio, is the governing body for soccer in Italy. It
organizes the Italian soccer league, Coppa Italia, manages the men’s
Italian national soccer team and the women’s national soccer team.
It is based in Rome and is a founding member of both FIFA and UEFA.

Teams under the purview of the Italian Football Federation:

  • National Team
  • Nazionale Under 21
  • Nazionale Under 20
  • Nazionale Under 19
  • Nazionale Under 18
  • Nazionale Under 17
  • Nazionale Under 16-15
  • Nazionale Femminile
  • Nazionale Femminile Under 19
  • Nazionale Femminile Under 17
  • Nazionale Calcio a 5
  • Nazionale Universitaria
  • Nazionale Militare
  • Nazionale Olimpica, and
  • Rappresentativa Giochi del Mediterraneo.

Holland – Royal Netherlands Football Association

The Royal
Netherlands Football Association (Koninklijke Nederlandse Voetbal Bond
– KNVB) is the governing body for soccer in the Netherlands. It is responsible
for organizing the main Dutch soccer leagues (Eredivisie and Eerste
Divisie), the amateur leagues, the KNVB Cup and managing the Netherlands
national soccer team. The association is based in the municipality of

Key Risks

are several risks that directly affect the financial stability of clubs.
A soccer club may face risks from relegation, competition and player
transfer. These risks may affect the teams’ on-pitch performance,
as well as revenue from broadcasting rights and sponsorships.


is the mandated transfer of the three least successful teams from a
higher division into a lower division at the end of the season. On the
contrary, if a team is within the top three teams in their division,
they are promoted to a higher division. This system of relegation/promotion
is followed by the major soccer leagues in Europe. As a rule, a pre-determined
number of teams at the bottom of a league/division are automatically
relegated down to a lower level, being replaced by the same number of
teams gaining promotion from that lower tier. Promotion and relegation
have the effect of regularly rearranging the leagues according to the
teams’ playing strengths.

Competitive Balance

balance implies the balance between the sporting capabilities of the
teams. Soccer leagues require a certain degree of competitive balance
in order to survive and flourish. Without uncertainty over the outcome
of individual matches and the league championship, sports leagues can
become predictable and boring. Lack of competitive balance is likely
to result in a decrease in spectators and potential losses in revenues
from gate tickets as well as a decline in TV viewership. If a league
does not have evenly-matched teams, there are no attractive contests
either for spectators in the stadium or for TV viewers. Some of the
significant risks from the lack of competition in a league include:

  • Threat of bankruptcy for the lower ranked clubs
  • The threat of rival leagues being formed by top clubs that seek competitive
    balance in a new or rival league
  • The creation of large income gaps within and between leagues that result
    in huge financial gains from making it into the European Champions League
    or the Premier League.

have an interest in winning as many games as possible to maximize revenue,
given that success attracts crowds and television revenue. Hence, ‘The
real issue may well be the inherent conflict between owners’ self-interest
and a league’s self-interest.” All of the five big European leagues
— England, Italy, Germany, France and Spain – have enjoyed significant
increases. However, both the rate of revenue growth and the absolute
level of revenue differ markedly across leagues.

UEFA makes
solidarity payments to national leagues for distribution to non-participating
clubs and to national football associations in order to maintain a competitive
balance. In 2004, solidarity payments to English Premiership clubs not
participating in the Champions League group stage amounted to around
£250,000 for each such Premier League club. This money is earmarked
for youth training programs with a view to strengthening non-participating
teams and promoting competitive balance. Similarly, £300,000 was distributed
to the Football Association and its clubs. The principle of solidarity
payments is extremely important and UEFA requires that this money be
spent on youth training means that the funds help strengthen the sporting
capabilities of teams and promote competitive balance.

Soccer is driven by several factors including players’ wages, trends
in player transfers and the development of new infrastructure especially
stadia. The globalization of the sport and emerging broadcast media
such as Internet broadband have provided new sources of growth for the
game. The need for capital and increased popularity of soccer globally
has attracted several investors resulting in heightened M&A activity
in the last few years. This trend is likely to continue as European
soccer makes further inroads into new markets creating new fan bases
and extending the game’s popularity.

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Recent Trends in European Soccer

Player Wages

paid to players are the most significant cost for soccer clubs. For
most clubs across Europe, players’ wages account for over half the
club revenues. The salary paid to a soccer player depends on the player’s
abilities, age and past performances. It is influenced by the level
of experience, the type of series/division, the country and/or league
for which he plays.

Wage Comparison

A comparison
of wages across leagues in European soccer shows that players with the
leading clubs in the English Premier League are among the highest paid.
Salaries for top European soccer stars, however, are significantly lower
than for leading players in the NFL.

Comparison Between Leagues

The wages
paid to players vary significantly based on the leagues in which they
play. Players that play in the top European leagues such as the EPL,
Spanish La Liga and the Italian Serie-A earn the highest salaries.

John Terry is the highest paid soccer player in EPL as well as in Europe
with a salary of around €9.17 million. He is closely followed by his
fellow-mates, Michael Ballack and Andriy Schevchenko, at €8.5 million.
Liverpool’s Steven Gerard and Manchester United’s Cristiano Ronaldo
round out the top five salaried players in EPL. (Refer to Figure 9)

Fig 9: EPL & Italian Serie-A Wages

Player (Club) €million
John Terry (Chelsea) 9.17
Michael Ballack (Chelsea) 8.
Andriy Schevchenko (Chelsea) 8.5
Steven Gerard (Liverpool) 8.43
Cristiano Ronaldo (Manchester United) 8.35
Italian Serie-A
Player (Club) €million
Kaka (AC Milan) 6
Francesco Totti (AS Roma) 5.5
Ginluigi Buffon (Juventus) 5.03
Patrick Vieira, Adriano, Zlatan Ibrahimovic (Inter Milan) 5.03

Source: ‘The 10 richest footballers in Britain’, 10 August 2007, MSN Money; ’494 Player Salaries of Serie A – Kakà is the king, 11 August 2007,

highly paid players across Europe include Bayern Munich’s Oliver Kahn
(Germany) with €5.71 million per annum, AC Milan’s Kaka (Italy)
with €6 million, and Roma’s Francesco Totti (Italy) with €5.5
million. Barcelona’s Ronaldinho gets a €4.7 million salary, which
is the highest in the Spanish La Liga. (Refer to Figure 9)

Between European Football & NFL/MLS

the salaries paid to the leading European soccer players is considered
to be very high, it is considerably lower as compared to the salaries
paid to the leading stars of American leagues such as the NFL, NBA and
MLB. While the salary paid to leading players in European soccer is
greater than that for the players in the MLS and NHL, it is significantly
lower than the salary paid to the NFL, NBA, and MLB players.

The average
salary of the top 5 earning players in European soccer is $12.6 million
as compared to $19 million in the NFL, $19.1 million in NBA, and $20.3
million in MLB. The highest salary paid in the NFL in 2007 was $30.8
million to Dwight Freeney (as part of his signing bonus), which is more
than twice the $13.5 million salary paid to John Terry which demonstrates
the commercial success of the big leagues in the USA.

in Major League Soccer (MLS) earn considerably lower salaries than their
European counterparts. Cuauhtemocs Blanco from the Chicago Fire earns
$2.7 million while other leading players also derive million dollar
salaries (Refer Figure to 10).

In 2007,
David Beckham was transferred from Real Madrid to LA Galaxy for a guaranteed
salary of $6.5 million per annum. Beckham was recruited with the objective
of raising soccer’s profile in America as he is also among the most
marketable stars of the sport. His commercial value can be gauged from
the fact that after his transfer to Real Madrid from Manchester United,
the club’s merchandise sales soared 67 percent in his very first season
and then grew by another 6.5 percent. His salary is more than twice
that of any other player in the MLS and more than fifty times the average

The high
salaries paid to soccer players in Europe have also contributed partly
to the increase in stadium ticket prices. This has raised some controversy
in Europe with some politicians calling for control on player wages
and reduction in the ticket prices.

Fig 10: Salary Comparison – European Football, MLS and NFL

European Football
Player (Club) €million
John Terry (Chelsea) 13.5
Michael Ballack (Chelsea) 12.5
Andriy Schevchenko (Chelsea) 12.5
Steven Gerard (Liverpool) 12.4
Cristiano Ronaldo (Manchester United) 12.3
Player (Club) $million
Beckham, David (LA Galaxy) 6.5
Blanco, Cuauhtemocs (Chicago Fire) 2.7
Angel, Juan Pablo (New York Red Bulls) 1.6
Reyna, Claudio (New York Red Bulls) 1.25
Donovan, Landon (LA Galaxy) 0.9
Player (Club) $million
Freeney, Dwight (Indianapolis Colts 30.8
Bulger, Marc (St. Louis Rams) 17.5
Davis, Leonard (Dallas Cowboys) 17
Adams, Gaines (Tampa Bay Buccaneers) 15.5
Geathers, Robert (Cincinnati Bengals) 14

Source: ‘MSN Money’, ‘’MLS 2006 Salaries’, The Washington Post, USA Today Salaries Database

Salary Caps

The European
league clubs compete with each other for the best players. The high
salaries paid to players have driven many smaller clubs into administration/financial
ruin. The disparity in financial returns and the ability to pay for
quality talent has also resulted in imbalances between the top clubs
and the lower tier clubs. A salary cap helps in maintaining a balance
within the league so that a wealthy team does not become dominant by
buying all the top players.

Professional Footballers’ Association (PFA) has suggested capping
salaries as one solution to the game’s growing financial crisis. Another
option suggested is “divisional contracts” wherein a player’s
salary rises or falls based on promotion and relegation.

caps make it difficult for teams in countries with high taxation to
attract the best players. The clubs in countries with lower tax rates
get the competitive advantage over other leagues. There are instances
where the clubs pay the taxes on player wages.

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Player Transfers

In soccer,
“transfer” refers to the transfer of a players’ registration from
one club to another. When a soccer player is under contract with a club
he can only leave if the club agrees to terminate this contract. As
a way of compensation, the club to where the player is transferred will
usually pay a ‘transfer fee.’ As part of the transfer deal, a portion
of the fee may go to the player himself and any agents involved in the

All transfers
can occur only during the ‘transfer window,’ a period in the year
when players can either shift from one team to another. The system was
already being used by a number of European leagues before being brought
into compulsory effect by FIFA during the 2002-03 season. There are
two windows per season, one from the close of the season until midnight
of August 31, and one from midnight on December 31, until 11pm on January
31 the same year.

The transfer
of players between clubs belonging to the same country is governed by
the Football Association concerned. This autonomy allows associations
to adapt their own regulations to the particular conditions and circumstances
of the country concerned. However, if any rule pertaining to the general
guidelines issued by FIFA is violated as part of a transfer deal, the
transfer must then be approved by FIFA. The current UEFA President,
Michel Platini, recently announced plans to hold talks with his FIFA
counterpart, Sepp Blatter, in 2008 with a view to obtaining for UEFA
the responsibility for regulating international transfers between European

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Types of Tranfers

Player Exchange

This is
an ingenious method developed by clubs to avoid monetary investments.
In such a deal, the two clubs involved contractually agree to either
a partial or complete exchange of players. For example, a club may decide
to pay the transfer fee of a target player by offering a player of their
own in exchange, along with some additional payment. This player exchange
may also be carried out without any money changing hands.

Free Transfer

A free
transfer involves a team releasing a player once his contract has expired
or if he has been made available just before the end of the contract.
The team does not have to pay any compensation for such release as it
has nothing left to pay on the contract, hence the term ‘free transfer.’

transfer fees were paid even when the player was out of contract (except
in Spain), but since the Bosman ruling, this is no longer the case.
The Bosman Transfer ruling, which governs all player transfers within
the European Union (EU), was brought into effect in 1995 following the
European Court of Justice’s decision to allow professional soccer
players in the EU to move freely to another club at the end of their
term of contract with their present team. The term “Bosman” is today
used as part of everyday soccer terminology to indicate free transfers.

Loan Deals

A loan
deal is a special kind of transfer that allows a player to play for
a club other than the one he is registered with for a specific duration
of time. The conditions governing the loan of a professional, such as
the duration of the loan and the obligation to which the loan is subject,
is regulated by a separate written contract between the clubs involved.
The player is, however, often asked to co-sign it so as to give his
consent to the transfer on a loan basis. The club that has accepted
a player on loan is not entitled to transfer him to a third club without
the written authorization of the club that released the player on loan
and that of the player concerned.

may be loaned out to other clubs for several reasons. Youth players
are often loaned to a club from a lower league in order to allow them
to gain valuable team experience. A club may loan a player if they are
short on transfer funds but can still pay wages. Some players are loaned
because they are unhappy or in dispute with their current club and no
other club wishes to buy them permanently. Henri Camara with Wolverhampton
Wanderers and Craig Bellamy with Newcastle United were loaned out under
such circumstances.

In the
EPL, players on loan are not permitted to play against the team which
holds their registration.

Transfer Rules

The basic
rules laid down by FIFA with regards to transfers that have to be observed
by all clubs, irrespective of their location, are as follows:

  • A player may only be registered with one club at a time.
  • Players may be registered for a maximum of three clubs during the period from July 1 until June 30 of the following year; in effect ruling that a
    player can only be transferred twice throughout the duration of a European
    soccer season.
  • A contract
    between a professional and a club may only be terminated on expiration
    of the term of the contract or by mutual agreement. This implies that
    a transfer can take place only if both parties involved, i.e. the player
    and the club he plays for, agree to the terms of the transfer.
  • A club
    that intends to sign a contract with a player who is under contract
    with another club must inform that player’s club in writing of its
    interest before entering into negotiations with the player.
  • A player
    can sign a contract with a club other than the one he is playing for,
    if the contract with his current club will expire within the next six
  • If a player’s contract was signed prior to reaching the age of twenty-eight then, provided he has completed three entire seasons or three entire
    years, he is permitted to end the deal with fifteen days’ notice.
    If the contract was signed after his twenty-eighth birthday, only two
    seasons or years must be served.

FIFA has made an exception to these rules, under which the contract
between the club and the player can be terminated and the player is
free to move on to another club of his choice. The exception is as follows:
A player has not been paid his salary for over three months. Despite
having informed the club of its default, the club does not settle the
amount due. The player then notifies the club that he will terminate
the employment relationship with the club.

in the aforementioned situation is only allowed at the end of the season,
unless the two parties have agreed in mid-season to mutually terminate
their working relationship.

Transfer Fees in European Soccer

In the
last few years, the majority of transfer fees that involved sums in
excess of £10 million have been paid by the leading clubs in England,
Italy or Spain. Clubs in countries such as Holland, Portugal, and France
are seen as breeder clubs that produce rich talent, which are then snapped
up by the clubs in more successful leagues, so much so that this has
turned into a major source of revenue for clubs such as Ajax (Holland),
Sporting Lisbon (Portugal) and AS Monaco (France).

football experienced a “transfer bubble” between 1999 and 2002,
following which fees fell significantly. The most expensive transfer
since 2002 and prior to this transfer season has been Chelsea’s purchase
of Andriy Shevchenko in 2006. The fee, while not officially disclosed,
was reported to be around £30 million.

11 shows the highest transfer fees ever paid in European soccer. Using
a different currency (the Euro being the most relevant) produces a slightly
different list due to exchange rate fluctuations.

Fig 11: Huge Transfer Deals in European Soccer

Rank Player From To Transfer Fee (£million) Year
1 Zinedine Zidane Juventus Real Madrid 47.5 2001
2 Luis Figo Barcelona Real Madrid 37.0 2000
3 Hernan Crespo Parma Lazio 35.5 2000
4 Gianluigi Buffon Parma Juventus 32.6 2001
5 Christian Vieri Lazio Internaz. 32.0 1999
6 Rio Ferd. Leeds United Manchester United 30.0 2002
7 Andriy Shev. A.C. Milan Chelsea 30.0 2006
8 Wayne Rooney Everton Manchester United 30.0 2005
9 Gaizka Mendieta Valencia Lazio 27.0 2001
10 Ronaldo Internaz. Real Madrid 28.5 2002

Source: BBC Sport

Of the
transfers in the list above, Rio Ferdinand’s included performance
related clauses, as did some of the other deals. Such performance related
clauses are more common since the bursting of the transfer bubble.

Over the
past decade, the average transfer fee paid for a player has increased
considerably. This inflation has resulted in even players of average
caliber commanding much higher transfer fees than they are worth. Rumors
of impending big-money moves, engineered by player agents, enable clubs
to cash in on their players, regardless of their talent. The commercial
successes of the sport and intense competition among leading clubs that
possess the financial clout have also contributed to players commanding
very high transfer fees.

A prime
example of the fee inflation has been the fact that transfer spending
by English clubs exceeded £500 million for the first time in the post
season transfer window of 2007-08. Total spending on transfers by Premier
League clubs in 2007 (January and summer windows) exceeded £530 million,
up by more than 60 percent since 2006 (£333 million). New owners at
a number of Premier League clubs combined with the £300 million of
extra payments to clubs from the new broadcast deal for the 2007-08
season, were the key drivers of this unprecedented rise in transfer
spending. The average transfer fee paid by Premier League clubs increased
from around £3.5 million in summer 2006 to £4 million in Summer of

The linkage
between on-field performance and the transfer fee paid for a soccer
player in recent times has weakened due to the difficulty in measuring
individual performance, as well as an increase in the intangible value
of a player. Clubs generally determine the value of a player based on
his past performances, as well as by the amount paid in the past for
players of similar calibre. Another important factor in estimating the
players’ value during transfer is his commercial potential in terms
of merchandise sales and viewership, as commercial value of a player
provides a major source of income for the club.

Third Party-Ownership

party ownership of soccer players first came into prominence during
the protracted transfer of Argentine striker Carlos Tevez from West
Ham to Manchester United in the summer of 2007. The Tevez case was complicated
by the fact that the player’s transfer rights were partly owned by
a private company (MSI, owned by Kia Joorabchian) rather than just his
club, which is the norm. Third-party ownership or part-ownership of
players has been a common practice in the South American game and does
not, in itself, break any soccer regulations in Europe. But it is illegal
for a third party to acquire the ability to materially influence a club’s
policies, and this is exactly what happened in the aforementioned case.

are a number of players of South American descent playing within Europe
who are partly or completely owned by third party owners. However, the
implications of the same were not so wide-felt until the transfer of
Argentineans Carlos Tevez and Javier Mascherano from Brazilian club
Corinthians to Premiership club West Ham United. The transfer breached
Premier League rules and led to West Ham receiving a record £5.5 million
fine from the league. Following the resolution of this incident, FIFA
introduced new regulations on third party ownership. As per the new
rules, no club can enter into a contract that enables a third party
to influence employment and transfer-related matters. FIFA also intends
to impose strict disciplinary measures on clubs that fail to follow
these rules.

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Stadia Development & Other Operations

and players are the most significant physical assets owned by clubs.
The extra revenue that ticket sales and other in-stadia facilities generate
make a huge difference to a club’s ability to invest in its playing
resources. However, stadia usually represent a highly inefficient cost
for clubs. While they account for significant capital expenses as well
as maintenance costs, the infrequent use of these facilities (they are
mainly used only on match days) results in poor productivity of these
assets. On account of this, many soccer clubs lease stadiums from local
authorities rather than investing in their own stadium.

In order
to increase their revenues from selling gate tickets and to improve
their public image and brand name, several top clubs have substantially
improved their stadia and the accompanying facilities, such as offices
and restaurants. Most English clubs regard appropriate stadia management
to be among the reasons for their commercial success. Clubs are also
exploring the opportunities to move to a completely self-owned stadium,
where they can accommodate larger crowds in better conditions. Clubs
also derive additional income by renting out stadiums for other activities
such as music concerts and alternative sports. Over the past decade,
the top ninety-two professional clubs globally have spent around £20
million more on average as investment on stadia each year than they
have on net player transfer fees.

sharing is a rising trend among several clubs within the same city,
and a number of these clubs secure long term lease contracts from the
owners. These contracts provide the owner clubs with an incentive to
improve facilities in order to maximize opportunities offered by these

Some aspects
with regard to stadia management are as follows:


Europe, some of the football stadia are owned by local authorities (municipalities)
while some others are owned by clubs themselves. In Italy, most of the
stadia are owned by local authorities. In France, too, most grounds
are owned by municipalities. While stadia ownership in Germany is similar
to that in France, some clubs such as Borussia Dortmund have part ownership.
In Spain, stadia ownership is more evenly split between clubs and municipalities.
In England, virtually all the stadia are owned by the clubs themselves.

The municipality’s
tenure might discourage commercially-minded stadium development. A short
lease period prevents clubs from investing in the stadium. On the other
hand, the local authorities find it hard to justify investment on grounds
of commercial benefit for private organizations such as soccer clubs.
In the future, however, it is likely that in spite of municipal ownership,
the revenue upside in some cases may be so significant that many clubs
might pay for the improvements themselves.

Non Match-Day Income

Non match-day
revenues offer significant revenue opportunities for soccer clubs. English
clubs have most successfully exploited their potential to generate income.
Non match-day revenues can be divided into two categories. The first
category involves straight revenue opportunities from hosting conferences
and banquets. These will be dependent on local market conditions and
the quality and type of facilities. The second opportunity holds long-term
potential as it involves leveraging the club’s brand. The Barcelona
museum is the third most visited in Spain due to its club shop which
serves as a prime attraction. In Old Trafford (England), Manchester
United’s ‘Theatre of Dreams’ museum offers visitors an opportunity
to take a tour inside the team’s changing rooms.

Revenue Streams

  • Mobile
    catering units (stalls and vendors)— food and beverage outlets —
    and merchandise (souvenirs) on the land immediately adjacent to the
  • Restaurants
    & bars — most clubs have restaurants and bars for their fans where
    they can watch the match and meet new supporters
  • Space rental
  • Perimeter boards, and
  • VIP seat holders and boxes (suites) with access to better facilities.

Financial Impact

upgrades and strong marketing strategies have enabled the Premier League
to attract more ticket-holders over the years. England leads the way
in Europe in terms of soccer finances and, in particular, its business
acumen in stadium management. Twenty-five new club soccer stadia have
been built in England since 1990, and at least half of all clubs in
the current Premiership season have plans for further investment in
new stadia or redevelopment of their existing grounds. As of 2006, English
clubs had already invested £2.2 billion into stadia development operations
since 1992-93.

Club revenue
(excluding broadcast income) from the first season at a new stadium
increases on average by 66 percent. This increase in revenue is largely
driven by an estimated 50 percent increase in average attendance in
the first season at the club’s new venue compared to the previous
season in the club’s old home.

utilization for stadia is increasing along with a rise in revenue yields
per seat on match days. Clubs are also becoming increasingly sophisticated
in treating their facilities as 365-day-a-year assets.

Stadium Naming Rights

being introduced in 2001, the naming rights sponsorship format has developed
into an integral aspect of all stadium plans across Europe. It has become
an effective tool for clubs to generate income to aid their development
activities. However, with the exception of the German market, only a
handful of European stadia bear naming rights, especially in comparison
to the U.S. This is set to change, though, as there are hardly any new
stadium constructions or renovation projects in which naming rights
sponsors do not play a fundamental role in financing reinvestment.

The English
club Arsenal sold the naming rights to its new stadium to Emirates Airlines
in a fifteen year deal worth £100 million in 2004. This allowed the
club to generate significant profits in the financial year 2006-07,
during which time they moved into the new stadium. A number of other
clubs across Europe had also previously signed naming deals, the biggest
among them being Bayern Munich’s fifteen-year deal with Allianz AG
at £4 million a year.

In 2007,
naming rights sponsors in European soccer’s top leagues paid a total
of around €43 million to the respective sponsored clubs/operators
and owners of the relevant stadia. A significant upturn can be anticipated
in markets other than England and Germany with regard to earnings from
this source, with many lucrative deals under negotiation in Italy, Spain
and France.

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Growth Drivers

soccer has emerged as the most popular global sports franchise, with
its leading players enjoying recognition worldwide and the sport itself
emerging as a major commercial success. The top twenty clubs have seen
their income almost triple since 1996-97 from €1.2 billion to €3.4
billion in 2005-06. Clubs can expect to see continued growth in
the near future from the game’s increasing global popularity, the
rise of several highly marketable players, the growth of Pay TV and
new broadcast deals and the emergence of new media such as mobile TV
and Internet broadband.


The increase
in popularity of European soccer across the world, especially in rapidly
growing Asia, has emerged as one of the strongest growth drivers for
the sport. Some leading clubs such as Manchester United, Barcelona and
Real Madrid have benefitted from the opportunity to sell individual
broadcasting and sponsorship rights for these overseas markets. These
premier clubs have also managed to establish a strong franchise in Asia
allowing them to earn considerable revenues from merchandise sales.
The huge opportunity offered by emerging markets such as China that
still have very nascent Pay TV markets provides significant opportunities
to these clubs. However, almost every club has the opportunity to benefit
from the globalization of soccer.

of ownership through the entry of foreign investors from the US has
provided soccer clubs (especially in the UK) with access to capital
necessary to improve the talent base and upgrade facilities. Leading
clubs such as Manchester United and Chelsea have benefitted immensely
from foreign investors who have helped the clubs improve and maintain
their performance in national leagues and in Pan-European UEFA tournaments.

of European soccer has also been characterized by the influx of talent
from South America and Africa into European clubs. Even coaches, whose
expertise used to be restricted to home countries, are now sought by
teams internationally.


players with an ability to draw a huge fan following have emerged as
marketable commodities that help clubs draw huge crowds to games and
generate considerable revenue from merchandise sales. With marketable
players, clubs are also able to expand their presence in newer geographies
such as the promising Asian markets like China.

Real Madrid,
which adopted its now famous Gal‡ctico (superstar — world famous
soccer player) strategy with leading talent such as Zidane, Ronaldo,
Lu’s Figo, Roberto Carlos, Raul and David Beckham, has demonstrated
most successfully the benefits of this strategy both on and off the
field. The acquisition of such marketable players provides an advantage
not only on the field but considerable growth potential for clubs financially.
This strategy, however, involves considerable expense and can be adopted
only by leading clubs with the financial power to invest in such leading

Broadcast Deals

With the
increase in football viewership and rise of Pay TV across Europe, the
revenue generation potential from broadcasting soccer is expected to
increase significantly. New broadcast deals for some leagues such as
the English Premier League are expected to involve considerably larger
sums resulting in higher payouts for clubs that participate in these

clubs have also launched their own television networks to leverage the
revenue generation potential from TV viewership and to keep fans interested
in the soccer club at all times.

& Convergence of Technologies

The development
and convergence of technologies has seen new entrants into the broadcast
rights market, increasing competition for rights. New media distribution
mechanisms such as the Internet (broadband connections) and the mobile
phones (notably the emerging 3G technologies) can provide the same soccer
related or similar content as those provided by traditional media but
over different networks and, to some extent over different devices.
Sports content, especially soccer, remains a key content driver for
telecom and media companies that have invested in such emerging media
with the aim of reaching a wider consumer base.

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M&A Activity

The commercial
success of European soccer has increased interest among financial investors
as well as high net worth individuals keen to tap into its growth. Wealthy
individuals, hedge funds and other financial institutions have sought
to buy into clubs to profit from the game’s rising TV and commercial
revenues. The last few years have seen a number of high profile takeovers
of leading clubs (mostly English) including the acquisition of eight
high-profile Premiership clubs including Manchester United, Chelsea,
Liverpool and Newcastle.


The acquisition
of major soccer properties began with the €195 million buyout of Chelsea
by Russian billionaire, Roman Abramovich (Refer to Figure 16). To date,
he has provided £485 million in additional financing to help Chelsea
acquire some of the world’s best players. This investment was critical
in winning two Premiership titles in the past three seasons.

The largest
and most high profile deal in European soccer was the €787 million
acquisition of the leading English club Manchester United in 2005 by
Red Football Ltd, a firm owned by the US sports tycoon, Malcolm Glazer.
This investment yielded handsome dividends as the club won the English
Premiership in 2007.

2003, there have been twenty-seven deals worth €2.4 billion across
Europe. The UK accounts for around 44 percent of deal volume, but there
has also been significant M&A activity in other parts of Europe
including Italy, Russia and Spain, all of which have hosted three deals
apiece. The investment climate and regulations in the UK have been more
welcoming of foreign investors unlike countries such as Italy and Spain
where a majority of the clubs are owned either by club members or by
passionate millionaires.

In Russia,
Spartak Moscow, FC Krylia Sovetov and Zenit Football Club have been
acquired by major players in the oil and gas industry. There have also
been deals in Austria, Greece and France, including the €41 million
buyout of Paris St Germain by French private equity firms Colyzeo European
Investment Fund and Butler Capital Partners as well as US firm Morgan
Stanley Capital Partners.


The first
wave of speculative investment in soccer was from investors who sought
to gain from the sale of the clubs’ single biggest asset, the land
upon which their stadia were built. The next wave of private investor
interest has been driven mainly by the popularity of the game and the
revenue soccer clubs receive from television rights. The UK is a case
in point as in May 2006 a €2.52 billion television rights deal was
negotiated by the Premier League with British Sky Broadcasting.

on the other hand, saw these investments as a way to finance better
players and build new stadiums. These investors are also often motivated
by a perception that the assets of a football club can be used more
efficiently to derive greater revenues from more effective merchandising
and exploitation of a captive and loyal fan base.

For the
moment, the acquisition of soccer clubs seems to be a trend that will
endure, especially in the UK. Indeed, at present a number of clubs are
reportedly being touted as being in the midst of a takeover.


In spite
of the advantages offered by the takeover of a club, there have been
voices of concern about the motivation of the acquirers. Three issues
have contributed to this concern over foreign ownership. They include:

  • Increased number of foreign-owned clubs in the EPL
  • Transparency and the need for strict compliance with UEFA and FA rules on dual ownership
  • Concerns regarding the integrity of owners and the need to comply with other

The growth
in foreign ownership of English clubs reflects the increasing globalization
of soccer and the opportunities offered by growth of the Pay TV market
in Asia. The issue, therefore, is not foreign ownership per se but the
motivation of owners behind acquiring the clubs. One particular concern
has been if these investors are likely to prioritize overseas markets
and TV audiences over domestic markets and the local fan base. For instance,
in 2006, a bid for Arsenal by the US billionaire, Stan Kroenke was opposed
by the club’s Chairman Peter Hill-Wood as he wanted to keep the club
English-owned and believed that foreign investments in soccer were against
the ideals and culture of the club.

The increasing
popularity of soccer and the profitability of top European clubs will
ensure that clubs remain an attractive takeover target in the future.

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Holdings, headquartered in London, UK, through its subsidiaries, owns
and operates the Arsenal Football Club, one of the top soccer teams
of the English Premier League. Founded in 1886, the club has won thirteen
First Division and Premier League Championships and ten FA Cups. The
team owns the Emirates Stadium located in London having an official
seating capacity of 60,432. Other activity includes property developments.
Arsenal’s subsidiaries include Arsenal Football Club; Arsenal Emirates
Stadium Limited, involved in property development; Arsenal Overseas
Limited, involved in retail operations; Arsenal Securities catering
to finance operations; and Arsenal Stadium Management Company Limited,
which handles stadium management, Ashburton Trading Limited, HHL Holding
Company Limited, Highbury Holdings Limited, Ashburton Properties (Northern
Triangle) Limited, Gillespie (Jersey) Limited, Gillespie Holding Company
(Jersey) Limited, all involved in property development.


long list of commercial partners includes Emirates Airlines (shirt sponsor),
LG Mobile, EDF Energy, Scottish & Newcastle, Nike, O2, Coca-Cola,
Thomas Cook, Ladbrokes and Lucozade, Paddy Power, BT, Sony, and Delaware
North — food and beverage services. Arsenal is developing a soccer
business in

by partnering with BEC-Tero and Electronic Arts and with Hoang Ang gia
Lai in Vietnam. Tiger Beer is the Group’s beer partner in South East
Asia. In addition, Arsenal has a three year agreement with Star ESPN
for the promotion and delivery of Arsenal mobile in Asia. The other
partners include Setanta and Input Media who will provide production

Current Price (GBP) 855,000
Stock Data
52-Week range 4,320-10,450
Market Capitalization (£million) 531.97
Price to Earnings (P/E) 188.90
Stock Adjusted Beta NA
YTD Performance
Bloomberg/Reuters AFC PZ
Business Segments
In £’000 2006 % Weight 2007 % Weight
Gate & match day revenues 32.2% 90,613 45.2%
Broadcasting 54,870 40.0% 44,312 22.1%
Retail 10,218 7.5% 12,064 6.0%
Commercial 11,796 16.6% 19,518 14.7%
Property development 5,115 3.7% 23,792 11.9%
Total 137,098 100.00% 200,299 100.0%

Revenue Segment

major sources of revenue include ticket sales, broadcasting income,
commercial sponsorships, and lately it has also improved its retail
business. Additionally, it also indulges in property development of
previously used properties, by converting them into residential apartments.
The club’s relocation to the Emirates Stadium has increased its capacity
size to make the match day revenues to be the highest revenue source
in recent times. The club’s broadcasting remains another major source
of revenue which includes income from distribution rights from participation
in Champion’s League, Premier League and others.

soccer has become the most famous sport, many corporations have tried
to cash in by teaming up with the clubs in demand. Arsenal’s long
list of commercial partners led by Emirates and others is evidence of
the same. Increasing fan following led by more and more team victories,
has helped the club to boost its merchandise business. The club’s
recently opened stores on the Emirates Stadium site; The Armoury and
All Arsenal are evidence of the significance of this segment.

Fig: Revenue Breakdown

Fig: Revenue Breakdown


player transfers saw the inclusion of Eduardo Da Silva during the season
on a four-year contract. Making twelve appearances and scoring seven
goals for the Croatian national team apart from seventy-three goals
in 104 appearances for Dinamo Zagreb, Eduardo was the Croatian League’s
top scorer in both 2006 and 2007 and was voted the Croatian Player of
the Year in 2004 and 2006. Also during the summer, Arsenal signed Bacary
Sagna from Auxerre, who was recently called up into the French national
squad. Polish international goalkeeper Lukasz Fabianski, who was voted
best goalkeeper in the Polish League for both 2006 and 2007 and won
the Polish League Championship with Legia Warsaw in 2005-06, was another
player acquired by Arsenal. Just at the end of player transfers, the
Club signed Lassana Diarra, a multi-functional player, from Chelsea.

transfer is a common phenomenon in this industry, the main reason being
higher wages and contract values. The team’s biggest loss in recent
times has been the departure of Thierry Henry to FC Barcelona. Henry
had contributed substantially to the club since joining it in August
1999. He was the club’s all-time leading goal scorer with 226 goals
to his credit, and won various titles for the team and numerous individual
awards. Freddie Ljungberg, Jose Antonio Reyes, and Jeremie Aliadiere
were the other players who left the team recently. Such high profile
exits create an imbalance in the team, but Arsenal has sustained these
shocks and the team has continued with its superior performance on the
field. The team’s manager, ArsŹne Wenger, has guided the team to
seven major trophies since his arrival in 1996. His contract has been
renewed through 2011 and he remains a big asset for the team.

Performance – On the Field

The team
ended the 2006-07 season finishing fourth in the Premiership for the
second successive season. This enabled it to qualify for the UEFA Champions
League for the tenth consecutive season, proving the team’s consistency
over the long term.

In the
UEFA Champions League, Arsenal’s top place finish against strong competitors
like Hamburg, CSKA Moscow and Porto was impressive. Unfortunately, this
early form was not continued, and the team lost the first knockout round
to PSV Eindhoven. In the FA Cup, the club’s victories over Liverpool
and Bolton Wanderers in the previous two rounds were blocked by the
defeat to Blackburn Rovers. The club’s victories in start up matches
have been appreciated by fans; however, it needs to play better in important
matches leading to larger fame of the Team Arsenal.

The potential
of the club’s younger players has caused great excitement amongst
supporters. The young players on the team were instrumental in taking
the team to the finals of the Carling Cup. Interest in the youngsters
is demonstrated by the FA Youth Cup record attendance of 38,187 for
the Arsenal youth team’s semi-final first leg at Emirates Stadium
against Manchester United. In the future, this could help the company
generate revenue from the retail business boosted by the two new stores.

The FA
Women’s Premier League saw phenomenal performance by the Arsenal Ladies,
who won all 22 matches followed by victories in the League Cup and FA
Women’s Cup. The team also became the first British side to win the
UEFA Women’s Cup.

All teams
of the club are playing well, displaying lower risk to the income generation
in the near term. However, if Arsenal’s main team proves its caliber
by winning more important matches and getting closer to finals, the
revenue stream can boost with increase in attendance. This will also
help push the group’s ticket sales, attract more sponsors and escalate
merchandising sales.

Performance Highlights

The club’s
new home, Emirates Stadium remains to be the focus of financial highlights,
which has driven revenues to staggering heights. The group’s turnover
touched £200 million, up by 46.35 percent, which was largely due to
gate and other match day revenues which increased by 105.46 percent.
Retail revenues, which hold a small piece in the revenue pie, also showed
improvement on account of new stores openings and higher match attendance.
This was partly offset by broadcasting revenue on account of early exit
from the UEFA Championship last season. The club’s peripheral business
of property development increased manifold to £23.8 million due to
the sale of the development site at Drayton Park. The commercial segment
also saw an increase in revenue due to the club’s shirt and stadium
naming rights.

The club’s
overall operating expenses increased 25.7 percent mainly due to rise
in staff costs, apart from property development and other expenses.
However, operating margin of 11.64 percent against the previous year’s
loss of 2.87 percent showed great improvement. This was largely on account
of lower staff increases, in comparison with the rise in match day revenues
and commercials. Net income was, however, down by 64.36 percent due
to lower player transfer income and substantially higher interest expense.

In 2007,
the interest cost was a whopping £36.7 million. This includes £21.4
million of exceptional finance cost as a consequence of the refinancing
of the stadium funding debt.



The club
recently shifted its home ground to Emirates Stadium from Highbury.
The 2006-07 season has been the first at Emirates Stadium, which has
helped to increase the capacity by 22,000 to about 60,355 seats for
every game. With average attendance of more than 59,900, the stadium
has helped produce average match day revenue of around £3.1 million
per match, an increase of 97 percent compared to Highbury. This has
enabled the total match day revenue to touch £90 million, thus making
the gate and other match day revenues the largest revenue segment of
the group. The naming rights deal with Emirates Airline worth £42 million
has also generated significant additional revenue.

£430 million capital expenditures in Emirates Stadium remains the largest
investment. The investment resulted in the group incurring debt of £260
million, raised through a project finance loan, later replaced by a
credit wrapped bond with a fixed interest rate. The new loan is availed
at 5.14 percent for £210 million and another £50 million at 5.97 percent.
Arsenal’s annual cash requirement of servicing the debt is £20 million,
which looks significant considering the club’s operating profit of
£26.9 million in 2007. The group is, however, confident of increasing
its revenue stream strongly considering the long-term benefits of the
stadium and its revenue generating capacity.

Capital Structure

recently raised debt for development of Emirates Stadium which has led
the debt equity ratio to alarming figures. The 3:1 leverage is surely
not in the club’s long term target zone and remains an area of concern.
This has also led the interest coverage ratio to around 1.75 times,
displaying the risks in case of a bad season. While the group believes
that increase in revenue due to substantially bigger stadium and its
associated earnings will take care of the risk, the recent player transfers
could pose a threat to its winning streak.

loans comprise 75 percent of the total debt which was mainly raised
in the current year for stadium development. Thus, it is evident that
the company expects and requires the new stadium to remain a strong
revenue driver.

Major Shareholdings
Lady Nina Bracewell-Smith 15.9%
D.D. Fiszman 24.1%
Red and White Securities Limited 21.0%
KSE UK Inc. 12.2%

equity is mainly held by the directors, who in all hold around 45 percent
of the shares, thus having a hold on the club’s decision making. Other
major shareholders include KSE UK, and Red and White Sec, whose chairman
is the former vice chairman of Arsenal. Red and White owner Alisher
Usmanov was recently in the news for increasing his stake in the club
to 23 percent, stating that he plans to remain a long term investor
and agrees with the company’s policy of reinvesting the profits.

Management Profile

chairman is Mr. Peter Hill-Wood while the managing director remains
Mr. Keith Edelman. Substantial investment by the board of directors
demonstrates their faith in management. Management intends to reinvest
profits to improve the club’s facilities, thereby leading to better
functioning and higher revenue generating capabilities.


is already in the second round of the UEFA Championship, and stands
at the top position in the Barclays Premiership. The outlook of the
team, therefore, remains positive allowing the club to play the most
number of matches and improving the revenue pie from match day revenues.

The move
to Emirates Stadium is a significant achievement for Arsenal, and now
it remains to be seen how the club drives the benefit and manages the
risks attached thereto. Apart from the increasing ticket sales on account
of higher stadium attendance, the club is taking various initiatives
to improve profitability. It hopes to utilize Emirates Stadium for various
other purposes, which can enable it to take advantage of the operating
and financial leverage.

Fig: Revenue Projections

Fig: Revenue Projections

is looking for additional opportunities like the staging of international
fixtures and other activities. The commercial business is also a good
prospect considering the recent launch of Arsenal TV and improved relations
with various partners like Emirates and other international associates.
In 2007, Emirates Stadium hosted around 300 events including TV shows
and wedding ceremonies.

Fig: Operating Profit

Fig: Operating Profit

efforts to grow the revenue pie looks promising.

Highbury and Queensland park property sales are expected to add about
£90 million over the next three years. Even though this remains a secondary
source of revenue, its contribution could be substantial. The group’s
level of debt associated with the Highbury Square project will increase
over 2007-08, as construction and development work is undertaken. The
first phase of apartment sale completions is scheduled for summer 2008,
but management’s apprehension on its completion remains an area of
concern. Thus with a higher debt-equity ratio, the dependence on Team
Arsenal’s good performance has increased. This has led to a greater
risk for the team, but at the same time, presents bright prospects for
generating revenue.

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Olympique Lyonnais


Lyonnais, popularly known as Lyon (or OL), are the reigning champions
of France, for the sixth time running. Lyon has won six Trophées des
Champions, three Ligue 2 Championships and Coupe de France titles, as
well as seven participations in the UEFA Champions League. Lyon has
dominated the top French level, Ligue 1, in the early years of the twenty-first
century. After their second-place finish in 2001, OL won six consecutive
Ligue 1 titles (2002-2007), becoming the first club in French history
to do so. However, Lyon’s European ambitions have meanwhile never
been realized beyond the quarter-finals of the Champions League.

Lyonnais play their home matches at the 43,051 Seater Stade de Gerland,

Current Price 21.25
Stock Data
52-Week range 26.00-16.01
Market Capitalization (£million) 281.73M
Price to Earnings (P/E) 14.63
Stock Adjusted Beta NA
YTD Performance -1.3%
Bloomberg/Reuters OLG
Business Segments
In €million 2006 % Weight 2007 % Weight
Ticket sales 32.2% 90,613 45.2%
17.508 7.7 7.7% 4.1 22.1%
Television and radio rights 127.5 56.4% 92.9 49.8%
Sponsorship & ads 55.4 24.5% 34.5 18.5%
Player registration 5.2 2.5% 41.5 22.2%
Other revenues 19.9 8.8% 9.9 5.3%
Total 225.5 100.00% 186.6 100.0%

Revenue Segment

The revenues
are dependent on the total number of matches played by the team during
the season. The participation of the team in major leagues and competitions
like the French League Cup and the Champions League increases the revenue
from this segment. The club has implemented price optimization and yield
management at Gerald Stadium.

Fig: Revenue Breakdown

Fig: Revenue Breakdown

revenues come mainly from the sale of season tickets and single game
tickets to people watching OL games at Stade de Gerland (League 1 and
UEFA Champions League). Although the club seeks to maximize season tickets,
it also aims to reserve a substantial number of tickets to be sold on
a game-by-game basis.

agreements with brands like Accor and Umbro are the essence of the sponsorship
stream of revenue. Another factor which affects sponsorship is the development
of hospitality seats at Gerland Stadium. Additionally, substantial revenue
is generated from selling advertising space on shirts.

The broadcasting
rights revenue is comprised of the rights from French clubs, Champions
League and other seasonal campaigns. Seasonal campaigns like the recently
concluded “Goal Scoring Challenge” add to the revenue from this

revenue streams comprise merchandising and OL images. As the popularity
of the players and the club increases, so does this stream of revenue.
The company distributes a range of products such as soccer kits, soccer
balls, scarves and clothing. Another component of the revenue stream
comprises gains from the sale of players’ contracts to other clubs.
This is recurring revenue.

The total
revenue in 2006-07 increased 28.9 percent to €214.1 million driven
by revenue growth from the transfer of player contracts and sponsorship
and advertising revenue surge. There was also modest growth in gate
receipts revenues, broadcasting rights revenue and other revenue.

Fig: Segmented Revenues

Segment heads 2005-06 2006-07 % change
Gate receipts 21 21.5 2.4%
Sponsorship and advertising 13.9 18.1 30.2%
Broadcasting rights 68.9 69.9 1.5%
Other revenue 23.8 31 30.3%
Revenue from player transfer contract 38.4 73.5 91.4%
Total revenue 167.50 214.6 28.1%

The gate
receipts revenue increased 2.4 percent to €21.5 million as the number
of matches played by the team increased from twenty-six matches in 2005-06
to twenty-seven matches in 2006-07. The club’s participation in the
French League final compensated for the team’s elimination before
the quarterfinals of the Champions League.

The sponsoring
and advertising revenue increased 29.8 percent to €18.1 million driven
by major sponsoring contracts with Accor and Umbro along with the development
of hospitality seats at Gerland Stadium.

The broadcasting
rights revenue increased 1.4 percent to €69.9 million as the rise
in domestic rights revenues and “the Goal Scoring Challenge “ benefits
offset the decrease in international revenue due to elimination of the
club before the quarterfinals of the Champions League.

revenue increased 30.6 percent to €31.0

driven by revenues from OL images and merchandising revenues.

The revenue
from transfer of player contracts increased 91.3 percent to €73.5
million. The net capital invested by the team was €5.1 million.

Fig: Expense Breakdown

Costs 2005-06 2006-07 % change
Personnel costs 75.2 93.5 24.3%
External costs 12.4 14.1 14.1%
Purchases 16.2 17.7 9.1%
Costs of player contracts 7.1 28.8 307.4%
Total expenses 140.33 186.1 32.6%

costs increased 24.3 percent to €93.4 million due to increased remuneration
for better quality players and support staff.

Player Transfers

In the current 2007-08 season, the club acquired four new players and disposed of six players. The club has spent €36.6 million on acquisitions of
the following players:

  • Kader Keita, a versatile player who can also play on the right and left wings in midfield, was acquired from Lille OSC for €18.0 million.
  • Fabio Grosso, who plays left back was acquired from Internazionale for the
    consideration of €7.0 million.
  • Bodmer, who plays as central midfielder, was acquired from Lille OSC for €6.5 million; and
  • Cleber Anderson who plays as a defender, was acquired from Benfica for €4.0

The club received proceeds of €31.5 million from the sales of the player contracts for:

  • Florent Malouda, sold to Chelsea for €21 million;
  • Berthod, sold to AS Monaco for €2 million;
  • Remy Riou, sold to Auxerre for €0.8 million;
  • Gregory Bettiol, sold to Troyes for €0.3 million;
  • A.Diarra, sold to Bordeaux for €7.8 million; and
  • Wiltord, sold to Rennes for €1.5 million.

Season Performance – On the Field

Lyon was
in the Group E of the Champions League along with Barcelona. Thus far
in the 2007-08 season, Lyon has ten points from their six matches played.
The team has performed well by drawing against Barcelona on November
27, 2007, and also won against Rangers on December 12, 2007. As
of December 17, 2007, in domestic league, Lyon had thirty-eight points
as it had played eighteen matches, won twelve and drawn two. Lyon scored
thirty-seven goals, while only allowing fifteen.

Capital Structure

The market capitalization was €264.5 million on December 18, 2007.

Fig: Shareholding Structure

Fig: Shareholding Structure

Source: Company data


and financial liabilities (greater than one year) as of June 30, 2007,
amounted to €16.6 million compared to €13.6 million in the previous
year. Liabilities on acquisition of player contracts (for greater than
one year) amounted to €8.0 million compared to €13.4 million in
the previous year.

Net Value of Player Contract

contract values was €53.2 million compared to €77.5 million in the
previous year.

Management Profile

Jean-Michel Aulas

(Chairman and Chief Executive Officer)

In 1987,
Mr. Jean-Michel Aulas became Chief Executive Officer of Olympique Lyonnais
and became involved in professional soccer at the national level (Vice-President
of the National League of Professional Football (Ligue Nationale de
Football Professionnel)) and Aulas sits on the Committee of Wise Men
of the Lyon Chamber of Commerce and is a commercial adviser to the Bank
of France.


The team
has been consistently standing at the top position for the past six
years in the French Domestic League. On the basis of excellent performance,
Lyon consistently participates in the celebrated Champions League. Unfortunately,
Lyon has never been able to get past the quarter-finals. The assumption
is made that the team will be eliminated again in the quarterfinals
of the Champions League. The revenue growth is assumed to remain constant
for the next two years.

Fig: Revenue Projections

Fig: Revenue Projections

Source: Company data & projections

The club’s
growing popularity and the strength of the OL sports brand have led
to growth in the fan base, on which all revenue growth depends.

The OL
land project aims to build a modern, well-equipped stadium to host not
just OL games but other types of entertainment and shows and take advantage
of Lyon’s brand appeal to develop sports and commercial infrastructure
around the stadium.

Fig: Profit Projections

Fig: Profit Projections

Source: Company data & projections

The new
stadium will have a capacity of 60,000 spectators. It will also offer
an improved range of premium seating, with a greater number of executive
boxes. As a result, ticket and hospitality revenues should increase
substantially. Other sports and entertainment events are planned, and
so these revenues should no longer depend exclusively on OL football
games. The improvement in stadium facilities should also increase per-spectator
revenues compared to those at Stade de Gerland.

The OL
land project is scheduled for completion in the 2010-11 season. The
group’s aim is to have the new stadium sponsored by a commercial partner.
The group intends to grant naming rights in 2008.

The OL
land project could include a range of amenities around the stadium (hotels,
entertainment, a shopping center etc.), which could generate additional
income independent of OL’s on-field results.

The group
also plans to step up the international development of the OL brand.
This effort will be helped by the large number of French and foreign
internationals in OL’s squad, and will involve commercial initiatives
targeted at certain markets

sales synergies with large purchasing centers outside France). It will
also involve the OL website, which helps raise the club’s profile
in Europe and the rest of the world, along with promotional tours outside

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Tottenham Hotspur Football Club


Hotspur Football Club is the first soccer club to be listed on
the London Stock Exchange. Founded in 1882, the club has consistently
played in the English Premier League.

The club
performs its operations via its subsidiaries which include Tottenham
Hotspur Football & Athletic Co. Ltd., a professional soccer club;
White Hart Lane Stadium Limited, which is engaged in the provision of
soccer entertainment; Tottenham Hotspur Finance Company Limited, an
issuer of loan notes; Paxton Road Limited, Stardare Limited and Star
Furnishing Limited, all three of which hold certain properties on behalf
of the company.


The club’s
two main commercial partners are: MANSION, international gaming and
entertainment group, the club’s shirt sponsor with whom its agreement
extends to another three seasons and PUMA, its technical sponsor, with
whom it will work for at least four more seasons.

In 2006-07,
three new official partners joined the club’s commercial program:
Thomas Cook, as travel services supplier; BT, as broadband supplier;
and Willow Water, as water provider. Apart from these, the club also
has a few other sponsors which include: Carlsberg, MBNA, Britannia,
Endsleigh, TNT, BMW, Glyn Hopkin and Football Villages.

Current Price (£) 132
Stock Data
52-Week range 71.25-168.5
Market Capitalization (£million) 123.07
Price to Earnings (P/E) 6.49
Stock Adjusted Beta 0.477
YTD Performance 65%
Bloomberg/Reuters TTNM
Business Segments
In £’000 2006 % Weight 2007 % Weight
Gate and match day revenues 44,099 32.2% 90,613 45.2%
Broadcasting 54,870 40.0% 44,312 22.1%
Retail 10,218 7.5% 12,064 6.0%
Commercial 22,796 16.6% 29,518 14.7%
Property development 5,115 3.7% 23,792 11.9%
Total 137,098 100.0% 200,299 100.0%
Financials 2005 2006 2007
Sales (in ’000) 138,395 137,098 200,299
Sales Growth (%) -0.9% 46.1%
EBIT * (in ’000) 105,764 125,775 158,685
EBIT Margin (%) 23.6% 8.3% 20.8%
Net Income (in ’000) 8,293 7,552 2,816
Net Margin (%) 6.0% 5.5% 1.4%

* EBIT margin excludes player transfers


its inception in 1882, the club has won a number of championships and
league matches. The club has won the FA cup eight times, the Football
League Cup three times and the prestigious UEFA Cup twice. The club
also won the European Cup-Winners’ Cup to become the first British
club to win a major European competition.

Revenue Segment

The club
earns its revenues from the following segments: gate receipts, sponsorship
and corporate hospitality, media and broadcasting, merchandising and
other. The club’s revenues for fiscal 2007 rose by 39 percent from
the previous year from £74 million to £103 million, breaking the £100
million mark for the first time in the club’s history. All the segments
saw an increase in revenues as compared to the previous year.

Gate Receipts

Hotspur earns gate receipts via two means, the cup competitions and the Premier League. The club’s performance in the cup competitions and Premier
League along with its growing popularity makes this segment a major
revenue contributor. For fiscal year 2007 the gate receipts made up
30 percent of the club’s total revenue. The total gate receipts from
the cup competitions increased to £13 million as compared to £0.1
million in the previous year. This increase was on the back of the club’s
performance in the three cup competitions: the UEFA Cup, the Carling
Cup and the FA Cup, wherein it reached the quarter-finals, semi-finals
and quarter-finals of the competitions respectively. The gate receipts
from the Premier League increased by 4 percent to £18 million as compared
to £17.4 million in the previous year. Moreover, the club is planning
to build a new large capacity stadium which will have a positive effect
on the gate receipts due to the increased number of seats.

Sponsorship & Corporate Hospitality

The club’s
sponsorship and corporate hospitality segment comprises of the sponsorship
revenues received from the club’s sponsors. It was one of the
major contributors towards the revenues for 2007, making up 25 percent
of the total revenue. The income from this segment increased 62 percent
from the previous year. In the fiscal year 2006-07, two new sponsorship
deals were signed by the club. The first was with MANSION who became
their main sponsors, commencing a four year deal, and the second was
with PUMA who signed a five year deal to be their new technical sponsor.
With these new additions the revenue from sponsorships is expected to
reach new highs in the coming years.

The club’s
highly-regarded corporate hospitality facilities are also big contributors
towards revenue as the club’s executive boxes and variety of executive
lounge facilities were in great demand from a wide range of international,
national and local businesses. The increase in the corporate hospitality
income was largely aided by the eleven extra home cup matches played
during the season.

Media & Broadcasting

The media
and broadcasting segment is by far the biggest contributor to the revenue
stream, totaling 40 percent of the total revenues in 2006-07. The segment
earns its revenues from the TV coverage of matches and other TV revenues.
With over 400 games being broadcasted live per season in over 204 territories,
Tottenham Hotspur is one of the top five broadcasted clubs in the FAPL.
Revenues from this segment increased by 17.6 percent and touched the
£34 million mark. The increase was mainly due to significant TV revenues
through the merit award payment and live TV match appearance fees as
the club bagged the final league position of fifth place in the Premier
League for the second successive season. Apart from the TV income, the
prize money from the cup matches also contributed towards the increase
of this segment. The TV rights revenues is expected to rise further
due to the new central FAPL TV deal that comes into force this season.

Fig: Revenue Breakdown

Fig: Revenue Breakdown

Merchandising & Other

The merchandising
segment generates revenues from the sale of the club’s kits and other
goods. The merchandising and other segments together contribute around
13 percent of the total revenue with merchandising alone comprising
7 percent of the total revenue. This segment is expected to grow significantly
in the coming season aided by the launch of new kits, including a special
kit to mark the club’s 125th anniversary. Moreover, the club is expanding
its retail selling space through the introduction of mobile units, which
can be used at various points in and around the stadium. This segment
is also expected to gather additional revenue through online sales with
the increase in its international memberships.

The revenues
from merchandise sales increased 36 percent to £7 million but the revenues
from other segments saw a dip of 15 percent to £6 million in 2006-07.

Operating Results

The club
generated an operating margin of 31 percent as the operating profit
before soccer player trading and depreciation increased to £32 million.
The operating expenses were kept under control as they increased only
by 2 percent with player salaries being the club’s biggest cost. The
staff costs constituted about 49 percent of the total operating expenses
in 2005-06 which were reduced to 47 percent in 2006-07. While the club
expects more money to come in from the central FAPL TV deal, it is also
keeping a tight control on its significant cost base.

Player Trading

trading has a major impact on the club’s financial statements. The
club is inclined towards nurturing home grown players along with buying
young talent. The club has been investing heavily in the players but
the sale of players coupled with strong cash flows has enabled the club
to be well positioned to sustain continued investment in players and
ensure it has moderate debt as a result.

The sale
of Michael Carrick to Manchester United in July 2006 for £12 million
along with the sales of Calum Davenport to West Ham United and Stephen
Kelly to Birmingham City for £2 million and £1 million, respectively,
increased the club’s player trading revenue by 52 percent to £19
million. The revenues were also helped by the performance related receipts
on player registrations.

The club
invested £67 million in the playing squad during the year which included
the signings of Dimitar Berbatov, Didier Zokora, Hossam Ahmed Mido,
Pascal Chimbonda, Benoit Assou-Ekotto, Steed Malbranque, Ricardo Rocha,
Darren Bent and Gareth Bale. Younes Kaboul and Kevin-Prince Boateng
were added further for a total of £14 million.

The club’s
approach of nurturing both home grown talent and acquisitions through
the transfer market has been successful for the club so far. The recent
player trading activities is expected to help the team to secure future
success on the pitch.

Recent Performance Highlights

The first
team reached the quarter-finals of the UEFA Cup, the quarter-finals
of The FA Cup, the semi-finals of the League Cup and bagged a 5th place
in the Premier League and re-qualified for the UEFA Cup in 2007-08.
This is a big achievement by the team and will surely improve the standing
of the club in the future.

fiscal year 2007, sixteen of the club’s first team professional players
were called up to represent their respective national teams. This shows
that the quality of its current squad of players is very good and they
have the potential to reach new highs in the coming season.

The youth
academy participated in four international youth competitions and was
successful in winning the prestigious Verona Tournament. During the
pre-season the U18s won the Eurofoot Tournament, proving that the younger
players are ready to make their position in the first team.

The team
returned victorious from the pre-season tour of South Africa in the
Vodacom Challenge and also established an extended association with
South Africa with the announcement of its partnership with SuperSport
United, a Premier Soccer League team owned by SuperSport that will see
the clubs’ academies working together.


Training Center

The club
has been planning to build a new training center at Bull’s Cross,
Enfield. The club had submitted a new planning application for such
facility with The Planning Committee of the London Borough of Enfield,
which was approved. The club has recently purchased Whitewebbs Sports
Club providing it with the opportunity to significantly remodel the
layout and design of the site, leading to a positive planning balance.
It’s a proposal which will have less impact on the Green Belt land,
with only 3 percent of such lang comprised of buildings.

The Training
Center is expected to play a significant role in sustaining the club’s
position in domestic and European competition. The Center will help
the club to develop home grown talent which will be beneficial for the
club as well as the national team.

The Stadium

The club
is working out various options for building an improved and larger capacity
stadium. The club’s current stadium is White Hart Lane which has a
capacity of 36,236 seats.

The club
has zeroed in on a limited number of potential sites in the London Boroughs
of Enfield and Haringey along with considering the expansion possibilities
of the existing stadium. The club has formed a team to work on this
project and is in talks with council bodies, the LDA, Transport for
London, the GLA, the mayor’s office and local and central government


The club’s
debt to equity ratio is 1.25 which shows a healthy picture of the capital
structure when comparing with Arsenal which is much bigger in size,
but has a debt to equity ratio of three. The club’s total debt is
around £60.6 million, which is divided into the following components:

Fig: Debt Components

Fig: Fig: Debt Components

The bank
loans are secured and charged quarterly on a reducing basis at a rate
which tracks the Bank of England base rate. These loans are secured
by the group’s assets and on certain freehold properties, and are
being repaid over twenty-three years starting from September 2004.

The club
had issued £10 million secured notes at 7.29 percent and £20 million
worth of secured notes at 7.29 percent in November 2002 and 2006, respectively.
These together form the “other loans” part of the debt which are
secured against the White Hart Lane Stadium, and future gate and corporate
hospitality receipts generated at the stadium. The first part of the
loans was used to repay the short-term debt and to fund the group’s
general working capital requirements and are repayable over twenty years
starting in 2003. The second part has been set aside by the group to
the First Team and the Football Training Center project and is payable
over sixteen years starting in 2007.

The club’s
equity share capital is around £48.5 million. The club’s total fully
diluted share outstanding on conversion of the convertible redeemable
preference shares facility (CRPS) at 2007 year end is 184,463,721 shares.
The ENIC International Limited is the major shareholder of the group
with 66.8 percent of the total shares outstanding. Fleming Mercantile
Inv Trust holds about 4.4 percent of the shares.

Management Profile

The club’s
management team is highly committed and experienced. The board is responsible
for the development of commercial strategy, monitoring and approval
of major business matters and the approval of the financial statements.
The key members of the board are:

Levy – Executive Chairman

Mr. Daniel
Levy holds the Executive Chairman’s post in the club. He is a graduate
from Cambridge University with a First Class Honors Degree in Economics
and Land Economy and has wide experience in corporate finance and retail
management. Mr. Levy also holds the position of Managing Director of
the ENIC Group of companies since 1995 and is a Non Executive Director
of a number of other public and private companies.

Collecott – Executive Director

Mr. Matthew
Collecott holds the position of the Executive Director of the ENIC Group
of companies. He is a qualified chartered accountant and worked for
Price Waterhouse in Europe and Africa before joining ENIC.

Davies- Non Executive Director

Mr. Mervyn
Davies is the non executive director of the club and also serves as
the Chairman of the club’s audit committee and serves on the remuneration
committee. He is also the Chairman of Standard Chartered PLC and a Non-Executive
Director of Tesco PLC. Mr. Davies is a banker with extensive experience
in London and in Asia, especially Hong Kong and China.


at the current 2007-08 performance of the club in the Barclay’s Premier
League, it looks very unlikely that the team will end up in the top
six of the league. Keeping this in mind it can be assumed that the club
will not qualify for the UEFA Cup in the next season. The team has played
sixteen matches, winning three, drawing six and losing seven. The team
currently stands in thirteenth position in the league and still has
twenty-two matches to play. With the coaching change and its present
performance in the Carling Cup as well as the UEFA Cup where it tops
its group, it can be expected that the club will finish somewhere between
sixth to fifteenth position.

support for the club during 2007 reached record levels with over a million
fans coming through the gates at White Hart Lane. Due to continued success
of the FAPL, which continues to grow in stature, it can be safely assumed
that the gate receipts from the Premier League will remain constant.
Taking this fact into consideration, the gate receipts per match from
the Premier League is estimated to be £0.45 million. Similarly, the
club ended up fifth in the Premier League last season, due to which
it could qualify for the UEFA Cup so the gate receipts from the cup
competitions is estimated to be £0.6 million in 2008. But due to its
ongoing poor performance in the Premier League this 2008 season, it
is assumed that the club will not qualify for the UEFA Cup in 2009 and
its gate receipts per match from cup competitions will fall drastically
to £75,000 in the next year.

Fig: Revenue Projections

Fig: Revenue Projections

The fan
base for the club has increased measurably, both domestically and on
an international basis, with 4.3 million fans around the world, and
1.4 million in the UK. Almost 400 games are now broadcast live per season
in over 204 territories. Tottenham Hotspur is one of the top five broadcasted
clubs in the FAPL, so expect that media and broadcasting revenue per
match will remain almost the same, around £0.3 million.

The club
has signed two new sponsorship deals in 2006-07. The first was with
MANSION who became their main sponsor, commencing a four year deal,
and the second was PUMA who signed a five year deal to be their new
technical sponsor. Moreover, with the increasing demand for the club’s
executive boxes and variety of executive lounge facilities, it is expected
that the sponsorship and corporate hospitality revenue per match will
remain at around £0.24 million per match for 2007-08. But due to the
poor performance by the team in the current season it is expected to
be around £0.2 million in 2008-09.

The continued
expansion of the club’s retail selling space through the introduction
of mobile units, which can be used at various points in and around the
stadium and the launch of new kits, including a special kit to mark
the club’s 125th anniversary, the merchandise revenue per match is
expected to be £60,000 for the coming two years.

All the
operating expenses and the profits from disposal of intangible fixed
assets as the percentage of revenues are expected to be in line with
previous years. The club’s interest payable is expected to be around
two percent of the EBIT and taxes are expected to be charged at the
rate of 30 percent which is the corporate tax rate in U.K.

Fig: Net Profit & EPS Projections

Fig: Net Profit & EPS Projections

all the above facts, the net profit for the year ending June 2008 was estimated to be around £7.2 million and a projected £6.1
million for the year ending June 2009.

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along with its subsidiaries, is principally engaged in the operation
of a professional soccer club, with related and ancillary activities.
The group’s holding company, Celtic F.C Ltd, holds a 100% stake in
The Celtic Football and Athletic Company Limited, which is involved
in soccer club management and promotional services. Glasgow Eastern
Developments Ltd is another subsidiary engaged in the management of
the properties development business. The group’s other subsidiaries
include Protectevent Ltd, which operates as a stewarding and security
services company. Celtic also holds an investment of 8.33% in the equity
share capital of The Scottish Premier League Limited. The club’s home
ground, Celtic Park, is the club’s largest asset and the major revenue

Current Price 64
Stock Data
52-Week range 33.25-65.75
Market Capitalization (£million) 56.61M
Price to Earnings (P/E) 3.58
Stock Adjusted Beta 0.234
YTD Performance -1.3
Bloomberg/Reuters CCP
Business Segments
In £’000 2006 % Weight 2007 % Weight
Prof Football 26.6 46.4% 34.3 45.6%
Multimedia & Comm. 11.8 20.7% 23.2 30.8%
Merchandising 14.3 25.0% 13.3 17.8%
Stadium Enter. 2.7 4.8% 2.6 14.7%
Youth Development 1.7 3.0% 1.6 2.2%
Financials 2005 2006 2007
Sales (£ million) 62.1 57.4 75.23
Sales Growth (%) -7.7% 31%
Operating profit (£ million) -6.2 -1.9 7.2
Operating profit margin (%) -10% -3.4% 9.6%
Net Income (£ million) -9.17 -4.22 15.0
Net Margin (%) -15% -7% 20%

Commercial Partners

major partners, Nike and Carling, apart from other long standing relations
with Phoenix, T-Mobile, Radio Clyde and Ladbrokes, have helped attract
new partners. Celtic finished its first year with Thomas Cook who is
the club’s travel partner, enhancing the club and supporter’s travel

The success
of the Celtic FC credit card through MBNA has increased the club’s
partnership in the financial sector, which now includes the Soccer Savings
and financial advice with Celtic FC Money, operated by Dutch company
AEGON. The club’s new overseas partners include Polish airline Centralwings,
Spanish property partners The Village and betting partners Bluechip,
which are helping to grow the brand internationally.

Revenue Segments

Fig: Revenue Breakdown

Fig: Revenue Breakdown

derives its revenues largely from ticket sales; however, the club has
other streams providing substantial proceeds. Professional soccer, which
comprises 45 percent of the club’s total revenue, includes income
from tickets at home and away matches, apart from match fees received
from playing friendly matches. Multi-media remains another major source
of revenue and includes television rights sales, sponsorship, publications,
Internet products and joint marketing initiatives with commercial partners.
With soccer fever catching up, various clubs have taken advantage and
served their fans by selling football fashion materials. Celtic’s
merchandising business, which operates stores at the Celtic Park,
generates revenue by exploiting the Celtic brand.

sources of revenue include the stadium enterprise business, which derives
revenue through catering and banquet services, stewarding revenues,
and hiring of Celtic Park for soccer and non-soccer events. The club’s
youth development operations include the running of a soccer school
and the Celtic visitor center, which also contribute to the revenue


The club
saw exceptional numbers during the 2007 year from their participation
in the UEFA Champions League and from player trading. Celtic’s revenue
grew by 31 percent to £17.83 million as a result of playing four more
games due to the progression in the UEFA Champions League. Rise in revenue
was largely due to the 29 percent growth in the professional soccer
segment, apart from the multimedia segment rise of 95 percent.

profit increased by more than three times, by around 329 percent reflecting
lower increases of labor and other overhead in comparison to the group’s
turnover. Their total labor to revenue ratio reduced by 820bps to 48.4
percent, led by an increase in match revenues offsetting the increase
in wage cost.

exceptional items accounted during the year include the provision for
impairment to intangible assets of £2.88 million owing to certain employment
contracts. This has led to the reduction of players for the club.

Football Investments & Player Transfer Activities

constantly looks at options to invest in the club by hiring players
whose inclusion could be crucial to the team’s success. In the 2006-07
season, the club invested £14.4 million in acquiring soccer players.
This would enable the company to improve its first team squad thus leading
to superior performance in domestic as well as other European ties.
The club’s new signings have included Miller, Paul Hartley, Stephen
Pressley, Mark Brown and Jan Vennegoor of Hesselink during the soccer
season and Scott Brown, Massimo Donati, Chris Killen and Scott Macdonald
following the end of the season. In addition, contracts were extended
for a number of first team players, including Aiden McGeady and Darren

With offers
to players from various clubs, transfer activity is a normal routine
of any club. Celtic’s recent investments in player acquisition were
largely funded by the club’s transfer activity. This enables it to
cut costs by planned trading of players. During the season Roy Keane,
Mo Camara, Stilian Petrov, Stan Varga and Ross Wallace left in 2006
through the summer transfer window with Stephen Pearson, Alan Thompson
and Shaun Maloney all leaving in January 2007. Neil Lennon, David Marshall
and Craig Beattie departed following the end of the season. The gain
on sale of players was £9.40 million, which helped the club to cut
costs and manage the high increase of wage rates.

Highlights – On the Field

the Bank of Scotland Scottish Premier League and the Tennent’s Scottish
FA Cup and reaching the final 16 of the UEFA Champions League, the club
reached new heights in 2006-07.

the season Celtic played fifty-three matches, winning thirty-five and
losing eleven, with seven draws. The club retained the Bank of Scotland
Premier League title by a significant margin for the forty-first time,
sealing its place in the Championship at Kilmarnock way before the end
of season. The club’s victory over Dunfermline at Hampden enabled
them to lift the Scottish FA Cup for the thirty-fourth time. Celtic
achieved new highs in Europe by qualifying for the last sixteen of the
UEFA Champions League for the first time by defeating Manchester United
at its home ground. This enabled the club to increase the matches played,
thereby pushing up revenue figures.

Capital Structure

With a
debt to equity ratio of around 0.24:1, Celtic’s capital structure
is not highly leveraged. Besides, the composition of debt mainly consists
of bank loans at competitive rates which has provided the group with
a low cost of debt. Also the £12 million bank loan is not designated
to be serviced in the recent time, thus giving the company room to breathe.
Celtic’s interest coverage ratio of more than fifteen times offers
appropriate liquidity. Thus, any capital expenditure done by the company
should be done by raising debt after employing the reserve; this would
enable the company to reduce its cost of capital.

capital shares are mainly held by directors and certain other institutions.
Around 40 percent of the club’s stake remains with the directors,
thus giving them the power in decisive matters. Line Nominees Ltd holds
around 40 percent of the company’s capital share.

Management Profile

Rt. Hon. Dr John Reid, MP — Chairman

the Board as an independent non-executive director in October 2007,
Dr. John Reid assumed the position of the Chairman. His qualification
includes a PhD in history from Sterling University.

Dr. Reid
has been a Member of Parliament since 1987. His political career revolves
around posts of Government Minister, Defense, Transport. In addition,
he’s been a Cabinet member holding various posts as a Secretary of
State, and culminating as Secretary of State for Home Affairs.

Peter T Lawwell — Chief Executive

Mr. Peter
T. Lawwell joined Celtic in October 2003 from his position as commercial
director with Clydeport, a port facilities and service company. He has
held senior positions with ICI, Hoffman-La-Roche and Scottish Coal.
Currently the Non-Executive Chairman of Intelligent Office Limited,
his experience in managing various companies enables smooth running
of the company.

Future Outlook

has topped the Scottish Premier League and qualified for the UEFA Champions
League continuously for the past two years. It is the only club that
represents Scotland in the Championship. In the last season Celtic
progressed to the last sixteen of the UEFA Champions League for the
first time, and domestically the Tennent’s Scottish Cup was secured
in addition to winning the Bank of Scotland Premier league. This win
has confirmed its place in the UEFA Champions League 2007-08. In the
tournament the club has played eight matches which include two qualifying
and six group matches. The club has already reached the last sixteen
of the League and holds the second position in its group with nine points,
the first being AC Milan. Looking at the current position of the club,
it will play at least two more matches in the Champions League. This
will be by far the best performance of the club in the UEFA Champions

Last season
the club ended up sixteenth in the league and ended up playing fifty-three
matches in all during the 2006-07 season. This not only increased Celtics
fan following but also positively affected its financial performance.
Going by the contributions of each segment to the club’s revenue stream
in the last season it can be expected that the contributions from these
segments will almost be same for the year 2007-08. Looking at the current
position of the club in the Champions League it is certain that the
club will at least play a total of fifty-five matches in 2007-08. Going
by the current performance of the club it is expected that the revenue
per match from the professional football operations will increase from
£648,000 to £660,000.

Fig: Revenue Projections

Fig: Revenue Projections

Source: Company filings, estimates

Company filings, estimates

The company’s
contract with Nike and the launch of a new international jersey and
a new away jersey, along with the successful launch of the fortieth
anniversary Lisbon Lions home stadium, is expected to take the merchandising
revenue from around £0.25 million in 2007 to £0.26 million in 2008.
The revenue from the multimedia segment is expected to report a strong
growth in the coming year as well with the launch of DVD-quality streaming
video service, Channel 67 Premium. The other two segments as of 2008
are expected to remain approximately the same as the year ended June

holds the top position in the league where it has played seventeen matches
in all, out of which it has won eleven, ending with thirty-six points.
However, the Rangers, who have played only fifteen matches are standing
at the second position with thirty-four points. As a result, the Rangers
now have two games in hand but only trail Celtic by two points. If the
Rangers capture first place in the League, Celtic will have to play
the qualifying matches to qualify for the UEFA Champions League. Taking
the worst case scenario, if the club does not qualify for the Champions
League, it will end up playing only two league matches but if it qualifies,
it will play at least eight matches in the Champions League which includes
the two league matches. Both these cases have been taken into account
in the profit projections for the year ending 2008-09. It is expected
that revenue streams will be similar to the previous years, so the revenue
per match from each segment has been estimated as the average of the
last four years.

Fig: Profit Projections

Fig: Profit Projections

Source: Company filings, estimates

All operating
expenses and profits are expected to be in line with the previous years.
The club’s interest payable is expected to be around 8 percent, derived
by taking the average of the rates of last three years of the creditors’
amounts falling due after more than one year, which is assumed to remain
constant for the coming two years. Considering all the above facts,
the net profit for the year ending June 2008 is expected to be £5.36
million and that for the year ending June 2009 is projected to be £5.73

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founded on November 1, 1897, is not only one of the premier Italian
soccer clubs but a marquee name in the world of soccer. It became the
first club in the history of European soccer to have won all three major
European trophies (UEFA Champions League, UEFA Cup Winners Cup and UEFA
Cup). According to research by Italian newspaper La Repubblica, Juventus
has the highest number of Italian soccer fans amounting to over 11 million.
Juventus has a fan following of 21 million in Europe alone, particularly
in the Mediterranean countries.

played their home games at the Stadio Olimpico di Torino while their
full-time stadium, Stadio Del Appi was undergoing structural changes
in preparation for the 2007-08 season.

went through a dark phase where the team had been found guilty of match
fixing. The Italian Football Federation punished Juventus by relegating
it to Series B and was stripped of 2005 and 2006 titles. Nine points
were also deducted which meant that it could not participate in the
2006-07 UEFA Champions League. However, the club has made a comeback
to Series A in 2007-08 after a gap of two seasons under former Chelsea
manager Claudio Ranieri. This development augurs well for the financial
and brand profile of the company.

Current Price € 0.93
Stock Data
52-Week range 1.83-0.90
Market Capitalization (£million) 188.15M
Price to Earnings (P/E)
Stock Adjusted Beta 0.820
YTD Performance -0.043
Bloomberg/Reuters JUVE.MI
Business Segments
In €million 2006 % Weight 2007 % Weight
Ticket Sales 17.5 7.7 7.7 4.1
Television and radio rights 127.5 56.5 92.9 49.8
Sponsorship & ads 55.4 24.5 34.5 18.5
Player registrations 5.17 2.5 41.5 22.2
Other revenues 19.8 8.8 9.9 5.3
Total 225.4 100 186.6 100
Financials 2005 2006 2007
In €million
Sales 205.44 -7.7% 31%
200.72 176.77 7.2
Sales Growth (%) 12.37 -2.29 -11.93
EBIT -20.1 -36.09 6.47
EBIT Margin (%) -9.79 -17.98 3.66
Net Income -3.02 -36.48 -0.93
Net Margin (%)

Revenue Segment

Fig: Revenue Breakdown

Fig: Revenue Breakdown

Source: Company data

Ticket sales

Ticket sales include revenues from friendly, season and daily ticket sales.
The ticket sales benefit from the number of games played by the team
and by the promotion of the team to higher series.

Television Rights, Radio
Rights & Media Revenues

from media rights are clearly the most important source of revenue for
the club. The revenues received from broadcast rights relate to home
and away matches. This stream, much like ticket sales, is a function
of the number of matches and their profile.

from Sponsorship & Advertising

revenues are received from the principal sponsor of the team (currently
the Fiat Group) and kit sponsors Nike. There are other brands, such
as Banco Papolare, Birra Moretti and Sky Life, which are often associated
with Juventus.

Revenues from Players’ Registration Rights

revenues include the revenues generated from sale and/or player sharing
contracts with other teams. The player transfer campaign played a major
contributor to these revenues.

Revenue Streams 2005-06 2006-07 % change
Ticket sales 17.508 7.742 -55.8%
Television and radio rights 127.525 92.995 -27.1%
Sponsorship & ads 55.399 34.497 -37.7%
Player registration 5.713 41.529 626.9%
Other revenues 19.878 9.915 -50.1%
Total revenues 226.023 186.678 -17.4%


revenues include revenues from non-soccer related activities of the
club, like the use of the Del Appi stadium for musical events.

Operating Results

The total
revenues decreased by 17.4 percent over the previous year to €186.6
million driven by decreases in ticket sales, television and radio rights,
and sponsorship advertisements but partially offset by a rise in revenue
from player registration.

sales decreased 55.8 percent over the previous year to €7.7 million;
this was primarily due to demotion of the team to Series B. The revenues
dropped because of an absence of revenue from European cups and lower
ticket sales.

and video rights decreased 27.1 percent over the previous year to €92.9
million primarily due to non-participation in the Champion’s League
and renegotiation of contracts with Sky Italia.

from sponsorship and advertisements decreased 37.7 percent to €34.5
million primarily due to demotion of the team to Series B and exclusion
from Champion’s League.

registration revenues surged 626.9 percent over the previous year to
€41.2 million driven by a player transfer campaign initiated by the
company to get the team back into the Champion’s League.

Fig: Expense Breakdown

2005-06 2006-07 %change
External services 37.2 28.398 -23.7%
Player wages &
technical costs
127.3 95.017 -25.4%
Other expenses 42.341 23.98 -43.4%
Total operating
206.864 147.395 -28.7%

The total
operating costs decreased 28.7 percent over the previous year to €147.4
million driven by declines in player wages and technical costs and external
services costs.

The player
wages and technical costs decreased 25.4 percent to €95.0 million
mainly due to savings from the release and temporary transfer of player’s
registration rights.

The external
services costs decreased 23.7 percent over the previous year to €28.4
million due to reductions in commissions to intermediaries, costs of
player’s assets and wages, insurance coverage and costs related to
match participation.

Seasonal Highlights

As of
December 9, 2007 Juventus had played fifteen matches, won eight, lost
two and drew five matches. Juventus was the third highest goal scorer
at 30 goals after Inter Milan and Roma.

Trading Campaign

to the efforts of the new team manager, Claudio Ranieri, the team managed
to be promoted into the Series A, following which the company embarked
on a reinforcement plan for the team. As per the first quarter results,
six new players were acquired (Cardoso Mendez being one of them from
Lyon) and five players were released (including Federico to ACF Florentina).
The total capital invested for acquisition was €53.2 million while
the proceeds received from disposals was €9.2 million. Hence the net
capital invested under 2007-08 Trading Campaign was €44.0 million.
Losses related to this campaign, which impacted the income statement,
were €16.3 million.

Stadium under Development

In July
2007, Juventus signed an agreement with the Turin Municipality allowing
it to make changes to the project for the new stadium. However, the
company has not yet come to a final decision and is considering various
proposals requiring different amounts of capital expenditure. Juventus
may consider refurbishment projects of the Del Appi.

Season ticket Campaign 2007-2008

The campaign
ended on the September 8, 2007 which sold 17,173 tickets generating
gross revenue of €3.5 million.,


The net
financial position was €21.7 million on June 30, 2007 compared to
a negative balance of €12.9 million on June 30, 2006. The company
has liquid assets of €40.5 million and a financial lease obligation
of €18.8 million.


The shareholders
equity as of June 30, 2007 amounted to €116.3 million.

Net Book Value of Player’s Registration Rights

The book
value amounted to €53.1 million on June 30, 2007 as compared to €107.4
million on June 30, 2006, net of amortization of player’s registration

Management Profile

Cobolli Gigli -Chairman

A manager
with years of experience in the publishing business and commerce, Mr.
Giovanni Cobolli Gigli is also a diehard Juventus fan. Mr. Gigli has
been Chairman and Director of Juventus Football Club Spa. since June
28, 2006.

Jean-Claude Blanc-Managing Director

Mr. Jean-Claude
Blanc has been an Independent Non-Executive Director of Juventus Football
Club SPA of Ifil – Finanziaria Di Partecipazioni SPA since May 11, 2005.
He has been Chief Executive Officer and Managing Director of Juventus
Football Club SPA since June 2006.

Future Outlook

The total
matches played by the premier team of the club were assumed to be taken
as the driver for the revenues. It is also found the progress of the
team depends on the number of matches played by the team for the season.
For example, the last season the team was relegated to Series B and
was ousted from the Champions League and the number of matches played
dropped to 45 compared to the 2005-06 season where it played 52 matches.

For the
two seasons 2006-06 and 2006-07, the revenue stream per match is calculated.
The average revenue per match was then used to drive the projections
for the years 2007-08 and 2008-09.

The key
assumption made is that the team plays 50 and 55 matches in seasons
2007-08 and 2008-09, respectively. This assumption is found to be reasonable
as on December 9, 2007 the team had played fifteen matches, won eight
matches, lost two matches and drew five matches.

Fig: Revenue Projections

Fig: Revenue Projections

Source: Company data & projections

The team
has ventured into a sponsorship agreement with the Fiat Group. Additionally,
the team was promoted to the Series A, which also affected ticket sales
and broadcasting rights revenue for the first quarter ending September
30, 2007.

The season
ticket campaign for the 2007-08 season was concluded on September 8,
2007. 17,173 season tickets were sold for gross revenues of €6.3 million.

September 30, 2007 the contracts with the players Del Pierro Alessandro
and Legrottaglie Nicola were renewed until June 30, 2010.

On October
2, 2007 the transfer of shares of Campi Di Vinovo to Costruzioni Generali
Gilradi was concluded with the receipt of the first installment of €1.1
million. As of October 2, 2007, Juventus had no shareholding in Campi
Di Vinovo.

soccer offers several opportunities for investors seeking exposure to
a relatively high risk and potentially high return asset class. While
business models in Europe differ considerably than American sports leagues,
they hold greater potential due to their global appeal and several emerging
avenues for generating returns. While there are a number of clubs across
the region that are potential investment opportunities, the UK has been
most successful at attracting foreign investors due to its regulatory
environment and the attractiveness of its premier clubs. There are several
channels available to investors that seek to acquire stakes in clubs
and other soccer related ventures that provide them with a strong exposure
to the sector.

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Comparative Analysis of the NFL & European Soccer

A comparative
analysis of business models for the NFL and European soccer indicates
some clear differences in characteristics. The NFL is the wealthiest
sports league in the world and the most successful sports franchise
in the US.


In 2006,
NFL revenue topped $5.8 billion. The league generates more income than
any other sports league from broadcasting. It achieved this feat by
redesigning the game to suit television. During that season, the league
signed the richest series of TV rights deals in history, worth more
than $23.9 billion through 2013. Meanwhile, game attendance broke records
in 2006 when stadiums were filled to 90 percent of capacity.

The NFL,
like other US professional sports leagues, is based on a franchise system:

  • The number of franchises is controlled by votes, and only rarely are new
    franchises added.

  • There is no promotion and relegation, but franchises can move to cities willing to pay to attract them or where a larger population offers better economic opportunities. Because there is no relegation, losing is not catastrophic, and teams can afford to conserve resources and record profits.

  • Teams also engage in restrictive agreements, which they claim increase competitive balance but which also tend to raise profits by restricting competition.

    Key to NFL Success

    The key
    to the league’s success is its revenue sharing model which ensures
    that NFL broadcast profits are distributed among all teams instead of
    being horded by a few winning franchises that received most of the broadcasters’
    attention. The gate receipts and other day-of-game revenues are split
    between opposing teams and allows each team to generate or lose some
    revenue based on performance, quality of venue, and in-city competition
    from another football franchise. Around 75 percent of the broadcast
    revenues go to the thirty-two franchises. Under this system and with
    the help of a strict salary cap, teams and their fans could realistically
    dream of winning any game or reaching the Super Bowl in any season.

    In the
    NFL, it is the teams that are the brands rather than the superstar player
    culture that is more prevalent in many other leagues. As a result, teams
    can be rebuilt when players are lost due to trades, free agency or injuries
    and labor relations are more effectively managed. The NFL’s salary
    cap limits player salaries to 57 percent of league revenue. However,
    the teams can work around this limitation by paying big signing bonuses
    that are amortized over the life of the contract.


    are some disadvantages of the revenue sharing model. The model can encourage
    free-riders. The Cincinnati Bengals were the NFL’s fifth-most-profitable
    team during the 1990s despite winning the fewest games during the decade.
    The team simply skimped on avoidable costs, such as talent scouts, and
    raked in revenues from the rest of the league.

    With the
    NFL being the most aggressive of all major US sports, the average life
    of a player is only four years. As a result, the players have been unable
    to form strong unions which would allow them to extract better terms
    from the league management. The administrators’ skillful negotiations
    with players have also ensured that they are able to prevent player
    wages from spiraling out of control.

    The revenue
    sharing and cost management model has ensured that the NFL has been
    able to derive the full benefit of its commercial success with the average
    team in 2007 valued at $957 million, 7 percent more than the previous
    year. The league also had the highest average profitability among major
    American sports leagues at $17.8 million on average revenues of $204
    million. The NFL clubs also lack a close revenue/value relationship
    due to a high level of competitive balance and relatively short seasons.
    Intangibles contribute considerably to the final value of these clubs.

    Differences with European Soccer

    European soccer has also enjoyed considerable commercial success over
    the past decade, the game has also suffered from imbalances, spiraling
    wage costs and numerous clubs going into bankruptcy. The club business
    models are driven by:

    Limited Revenue Sharing

    the NFL, most European soccer leagues have only limited revenue sharing
    which allows leading clubs to garner a greater share of the proceeds,
    thereby often perpetuating a club hierarchy wherein a few leading clubs
    have a greater share of the overall revenues while a majority of other
    clubs derive considerably lower revenues and often have very low to
    no profitability.


    The system
    of relegation, which is not present in the NFL, is characteristic of
    the way European soccer leagues function. Relegation ensures that lesser
    performing clubs are at a significant financial disadvantage to higher
    performing clubs, perpetuating a vicious cycle for these lower ranked
    clubs. Due to their poor performance, these clubs are unable to generate
    sufficient revenues to invest in better talent that would in turn allow
    them to win matches. Relegation poses significant risks to the club’s
    finances. The significant imbalance in revenues between leading clubs
    and lower ranked clubs across Europe has raised fears of reduced competition
    and an increase in predictability in performance between unequal teams.

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    History of US Investments

    US investments
    in European soccer have almost exclusively been in English clubs. The
    relative freedom offered to foreign investors by English authorities
    and the attractiveness of the English Premier League as the most successful
    commercial soccer league in the world have contributed to this investment
    trend. The most significant investment, $1.49 billion, was made by American
    sports billionaire Malcom Glazer in Manchester United.

    In 2006,
    the English club Aston Villa was acquired by Randy Lerner, who owns
    the NFL’s Cleveland Browns, for $119 million. The most recent acquisition
    by a US investor was the takeover of five-time European champion Liverpool
    in 2007, for $428.5 million. The new owners of the club are George Gillett,
    who owns the NHL’s Montreal Canadiens, and Tom Hicks, owner of the
    Dallas Stars and the Texas Rangers.

    The West
    London club, Arsenal, may also potentially face a hostile takeover
    bid from Colorado businessman Stan Kroenke who currently holds a 12.19
    percent stake in the club and is closely associated with David Dean,
    the former Vice Chairman of the club who also holds a 14.6 percent stake
    in the club. The stake was acquired by Kroenke for $128.1 million.

    the UK, foreign investment in European leagues is very limited as the
    investment environment is not sufficiently friendly to foreign investors.
    Local restrictions and prevailing ownership structures in some regions
    are other factors which have resulted in limited foreign interest in
    clubs outside the UK. Cultural and linguistic differences have also
    contributed to the lack of sufficient interest in continental Europe
    among US investors.

    foreigners have faced criticism from existing shareholders and fans
    with regard to their management style and commitment to the game, US
    investors are expected to continue to be attracted to European soccer,
    especially the Premiership clubs, driven by the glamour of the sport
    and financial returns from broadcasting and sponsorship opportunities.
    European soccer clubs are expected to increase profits over the next
    few years as they build new stadiums, increasing ticket and merchandising
    revenue. The stadium construction boom, now mature in the US, is ongoing
    in Europe and is expected to turn the game into a family outing, increasing
    revenue opportunities for clubs and providing improved prospects for

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    Investment Channels

    The continued
    popularity of European soccer and its commercial potential will continue
    to attract investors to the game. The game is likely to continue to
    attract millionaire businessmen, hedge funds and other financial institutions
    that seek to profit from the game by investing in teams as well as successful
    talent. Football related assets have a higher risk profile as compared
    to other investments avenues although they hold the promise of a potential
    gold mine with the right strategies and effective cost management. Investments
    in clubs, which provide the most obvious means of gaining exposure to
    this industry, may however prove difficult due to local regulations
    and ownership structures.

    means of investing in the sector include debt deals, investments in
    players or teams, public offerings and private placements.

    Football Funds

    Some hedge
    funds which operate in high risk, high return assets provide exposure
    to soccer clubs and players. Investors can subscribe to such funds to
    gain exposure to the European soccer industry. Investments in players
    and teams through these funds do carry some risks such as injuries and
    even relegation for teams. If a player sustains major injuries during
    the course of the contract which renders him unavailable during the
    contract period, then the investment may result in considerable losses.
    Another greater threat to returns from such funds is the relegation
    of the teams in which investments have been made. Relegation will result
    in significant losses from potential match day revenues and commercial
    income. One such example is the Singer & Friedlander’s Football
    Fund, in which investors lost 75 percent of their original capital.
    Recently, UK-registered funds such as Sports Asset Capital and Hero
    Investments have offered a stake in soccer players’ transfer rights
    in the same way that consumer goods companies often own a player’s
    image rights.

    Investments in Soccer Bonds

    in securitized debt issued by soccer clubs is one mode for investors
    seeking exposure to European soccer. Between late 1999 and 2003 there
    were a number of soccer securitizations in the UK that raised millions
    of pounds for the clubs. Insolvencies, however, are a major risk while
    considering such investments as there have been weaknesses in the legal
    and financial structures of these securitizations in the past. The recent
    improvements in soccer finances, however, may encourage a revival of
    this investment channel. Benign conditions in the bond markets are also
    a major factor in allowing for these transactions. Arsenal instigated
    the largest football securitization to date, in July 2006, raising £260

    in securitized soccer bonds can buy the bonds if they are rated as ‘Investment
    Grade’ securities by the credit rating agencies and therefore offer
    investors reasonable rates of return. Credit rating agencies such as
    Moody’s Investor Service, Fitch and the Standard and Poor’s Corporation
    provide investors with an assessment of the riskiness of the securities
    by assigning grades to securities.

    The securitization
    model employed in soccer differs somewhat from the standard asset-backed
    securitization that is used by most other corporations. The reason for
    this stems largely from the type of cash flow selected by the clubs
    to pay off the debt. Clubs do not tend to have a significantly large
    static asset pool of contractual debts to securitize. Instead, their
    main source of revenue still tends to come from ticket sales. Therefore,
    in most soccer securitizations the most important selected cash flows
    are the anticipated future gate receipts, usually supplemented by hospitality
    income. The utilization of such cash flows by the clubs makes sense
    financially because the long-term future revenues would be helping to
    pay off the low cost, long-term finance that the club has raised to
    fund modernization or expansion of the club’s stadium.

    Direct Equity Infusion

    may also gain a direct exposure to the clubs through a negotiated acquisition
    of a stake from the existing promoter/management. Many clubs are owned
    by high net worth individuals with a passion for the sport. However,
    they are often unable to generate sufficient financial resources necessary
    to improve infrastructure and recruit and develop a strong talent pipeline.

    In the
    last few years, a number of lower ranked clubs, especially in the UK,
    have gone into bankruptcy due to the huge costs of managing the teams
    and poor cost management. These clubs cannot access the public markets
    and would necessarily need to seek capital via the private placement
    route to rescue them. In France, Colony Capital, Butler Capital and
    Morgan Stanley bought PSG (Paris Saint-Germain) for €41 million from
    Canal Plus, the pay-TV arm of Vivendi. The deal, closed in June 2006,
    resulted in each party taking one-third of the business.

    Acquisition of Stakes via Public Markets

    Europe, soccer clubs have used the equity markets as a means of raising
    capital to fund their player and operational costs. However, the close
    links between on-field performance and stock price movements have meant
    that soccer stocks are very high risk and volatile in nature. Poor emphasis
    on cost management also resulted in many clubs being mired in losses
    and some have even gone into bankruptcy (especially in the U.K.). In
    countries like France, soccer clubs could not list on the stock markets
    due to regulations. However, this regulation was changed in 2006 followed
    by the listing of the country’s leading club, Olympique Lyonnais.
    Most European soccer stocks are poorly traded and have shown poor returns
    over a 10 year period with considerable volatility.

    In recent
    years, investors including many high net worth individuals acquired
    stakes in these listed clubs with the objective of eventually taking
    them private.

    Investing in Broadcast & New Media

    can also invest in a media franchise or other business that gains significantly
    from the soccer industry. The rise of the pay TV market in Europe has
    created significant opportunities for traditional broadcasters to generate
    revenues from increasing viewership. The rising penetration of Internet
    broadband networks is also likely to provide online media firms with
    the opportunity to carry games to online users and also develop associated
    commercial content around the game.

    popularity of the game in overseas markets such as Asia also provides
    investors with the opportunity to invest in companies that leverage
    growth in these new markets for European soccer. In early 2007, Broadband
    TV, owned by Hong Kong telecommunications firm PCCW, paid $200 million
    in a three-year exclusive rights agreement to broadcast England’s
    Premier League and Europe’s 2008 Championship Tournament in Asia.
    With 20 percent of global viewership, China offers the most significant
    opportunity in Asia. Chinese Internet portal,, will carry live,
    online coverage of all 1,140 English Premier League matches for the
    next three seasons through 2010 on its broadband service. Sina also
    obtained the rights to provide live, online broadcast of the Italian
    Series A in China.