By Marc Jones
LONDON (Reuters) – The departure of six-time Ballon d’Or winner Lionel Messi from Barcelona has confirmed what many fans have feared for years – the salaries of star players are now so stratospheric that they risk bankrupting even the bigger clubs.
The charts below show some of the mind-boggling numbers involved in the world’s richest leagues, where financial strains are most acute, and how COVID-19 has compounded the problems.
Barcelona president Joan Laporta said the club were forced to let Messi go as his salary demands would have compromised his future.
He estimated that the Argentine’s new contract would have meant the club paid more on wages than they earn – 110% of their earnings to be exact. Without Messi, it will be around 95%. “The club are above everything, even above the best player in the world,” said Laporta.
Chart: Salary / income ratios in the best European football leagues – https://fingfx.thomsonreuters.com/gfx/mkt/akpezgllkvr/Pasted%20image%201628255753945.png
Ten years ago, salaries in the Big Five leagues were around 5.6 billion euros ($ 6.6 billion), estimates Deloitte. Salary-to-income ratios – the money clubs pay players and other staff – stood at 51% in Germany, 70% in the Premier League and 75% in Italian Serie A and French Ligue 1.
Last season, this combined European payroll had swelled to 17 billion euros.
However, COVID-19 and empty stadiums caused league revenues to plummet by 11% on average. This meant that salary-to-income ratios had increased to 73% from 61% in 2018-19 in the British Premier League, to 67% against 62% in the Spanish La Liga, to 78% against 70% in Italy, 56% against 54% in Germany and 89% against 73% in France.
Chart: Salary / income ratios at the best football clubs in Europe – https://fingfx.thomsonreuters.com/gfx/mkt/movanmredpa/Pasted%20image%201628263391131.png
“UEFA have historically said that a salary-to-income ratio of 70% should be the upper limit for clubs to target, but we could see a number of big clubs exceed that number and maybe even exceed 100% short term.” Sam Boor, a senior executive at Deloitte’s sports business group, told Reuters in April.
Even before COVID-19, the salary-to-income ratio in the England Second Division Championship was already 107%, he said.
WORTH THE PENALTY
The combined value of Europe’s 32 best teams has grown by more than 50% since 2016, according to the Football Benchmark team at accounting firm KPMG, which examines the overall ‘enterprise value’ of clubs – their owners’ equity, plus total debt less cash.
Chart: Revenue Growth of Europe’s Big 5 Football Leagues – https://fingfx.thomsonreuters.com/gfx/mkt/rlgvdzqznvo/Pasted%20image%201619093328235.png
The increase had been driven – until at least last year – by an overall annual increase of 11% in total operating revenues. This was led by the 65% jump in broadcast revenue that clubs generated between 2016 and 2020 and respective increases of 22% and 39% in average game revenue and commercial revenue.
Olympique Lyonnais experienced the strongest individual growth over this period with 193%. Tottenham Hotspur jumped 158%, from € 800m to just over € 2bn, while Manchester United and Barcelona posted gains of 15% and 16% to around € 3.3bn and 3 , 2 billion euros.
Europe’s top 20 clubs generated € 8.2 billion in revenue in the 2019/20 season, according to Deloitte’s annual Silver Football League report file: /// C: / Users / u8017043 / Downloads / deloitte-uk-deloitte-football-money-league -2021.pdf.
Chart: European football club share prices – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwmbdmvo/Pasted%20image%201628262233793.png
This was down from 9.3 billion euros in 2018/19, and although it was partly skewed by the fact that COVID-19 caused some broadcast revenue to carry over to the next fiscal year, the pandemic would have cost these 20 clubs more than 2 billion euros in lost revenue to date.
The figures also show that the dozen or so clubs in the ‘Super League’ escaped plan that failed this year earned just over € 5.5bn – 67% – of the € 8.2bn total. last year.
In a subplot of the Messi saga, Barcelona and Madrid were infuriated by a proposed € 2.7 billion trade rights deal between La Liga and private equity firm CVC. A consortium comprising the company failed with a similar bid in Italy earlier in the year.
Many clubs now have significant debts due to the cost of purchasing players and building or improving stadiums.
KPMG calculates England’s Tottenham Hotspur, who just built a new stadium, had the highest overall debt at € 685m in 2019/20, after things like transfer fees still owed to other clubs were deleted.
Chart: Net financial debt of the best European football clubs – https://graphics.reuters.com/SOCCER-FINANCES/qzjpqzdklvx/chart.png
Manchester United and Juventus followed with € 524 million and € 390 million in debt, respectively. Barcelona and Real Madrid had 318 million euros and 170 million euros. German champions and Champions League winners Bayern Munich were debt free and clubs like Paris Saint-Germain and Chelsea, at least on the surface, have more money on their books than interest-bearing loans. .
Others argue that these numbers do not give the full picture, as some owners of very wealthy clubs offer interest-free “low interest loans” that are not always accounted for.
Deloitte estimates Chelsea’s debt would be £ 1.3bn ($ 1.8bn) and the biggest in the Premier League if owner Roman Abramovich’s ‘low-rate loans’ were included.
The companies also estimate that the cumulative net debt held by Premier League clubs reached a record high of almost £ 4bn in 2019/20, up from 3.5bn in 2018/19 and 2.9bn in 2017/18. .
That debt accounted for 88% of the Premier League’s combined revenue, down from 67% the previous season, although the record £ 3.3bn in 2008/09 represented 167% of this season’s revenue.
($ 1 = 0.8503 euros)
($ 1 = 0.7211 pounds)
(Reporting by Marc Jones; Editing by Giles Elgood and Emelia Sithole-Matarise)