Soccer as a Business

 

The event, somehow, became an epiphany, in that from now on, the richest club wins. I have always been the biggest United fan. I grew up watching the Class of ’92 on TV, with Paul Scholes showing what football perfection was all about. The golden era of Fergie’s youngsters was like a paragon of virtue. This was what a football club should be made up of. Those days are long gone.

 

Today, top-flight football seems to be relevant only in terms of showbiz. It is no longer history or passion for the club that matters, but rather clubs with premium compliance and benefits offered to top-notch players.

The shift in the view of football players was started by Real Madrid’s Los Galacticos. The Spanish giant broke several records with big-name signings. What is interesting, despite lackluster achievements compared to capital injected, the Galacticos model was a success, financially. According to Deloitte’s annual report — comparing the two Spanish giants Real Madrid and FC Barcelona — signing talents a la Real is more profitable than FC Barcelona’s youth development model.

One major problem, however, is that the transfer market price gets heavily distorted. In the English Premier League transfer market, prices have more than doubled from 2006 to 2010. Everyone blamed it on Chelsea and Manchester City and their multi-billionaire owners. The thing is, most of clubs’ revenue goes to players’ salaries. You can easily tell which club is most likely to get into the Premier League’s Big Four — it is the most heavily monied-up ones. Distorted transfer market prices warp the real value of a player. Big-time offerings make it harder for clubs to retain players. They are faced with the choice of increasing the player’s wage or releasing him.

Take a look at Manchester United, for instance. The club has been having difficulties ever since notorious American businessman Malcolm Glazer took over the club. If the club had not sold Christiano Ronaldo for big money, it would have sunk into bankruptcy. And yes, a major component of United’s debt was players’ salaries.

Fostering locals and hoping that in time they will be household names is no longer an option for football clubs. You might argue that football is not merely about money: it takes long-term commitment for any player to succeed at a club. But I am talking about business sustainability here, and investors are, in most cases, risk averse. Youth development is quite an expensive gamble to some.

 

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