Commercial revenue is made up from sponsorship links with companies, deals with shirt makers (Liverpool with Adidas) and shirt sponsors (Manchester United with AON). This is a very good representation of a club’s ‘size’ as a commercial deal is reflective of a club’s historical achievements and present day success.
For example, Liverpool who may have not achieved great domestic success in the last ten years, received more money in commercial deals in 2010 than Chelsea. This is because Liverpool has a history of such greatness attached to it, that a company would rather be associated with Liverpool than Chelsea, who have won 3 Premier League titles in the last ten years.
Of the 20 richest clubs in Europe in 2005, their revenue through commercial deals was as follows. In 2005, Manchester United were ahead of Barcelona. However, looking at the same side’s commercial revenue from 2010, you see that is no longer the case.
|Commercial Revenue 2005 (£m)||Commercial Revenue 2010 (£m)|
|Man United||48.7||Man United||81.4|
In 2005, Barcelona earned less than Manchester United (England’s richest club). By 2010 they earn £20m more. However, unlike with broadcasting deals (where Spanish clubs organise private TV deals), and match-day revenue (where some clubs have old stadiums), the reason for the gap between the best English clubs and their Spanish counter parts is not obvious.
One answer may be the following. Looking at Barcelona as a brand, they are very individual and marketable. The style of football they play is synonymous with the football club. And it is attractive football. They have also seen more on-field success than Manchester United in the last 5 years.
Furthermore, Barcelona’s side is made up of almost the entire World Cup and European Championship winning Spanish team. For these reasons, the club draws in supporters from all over the world. The amount of support of Barcelona is reflected in their commercial deals.
Real Madrid, the other Spanish giant, have secured lucrative sponsorship deals as well as extremely high shirt sales. The earned £60m more than Manchester United through commercial deals in 2010. One contributing reason for this is because of their signing the best players in the world, or ‘galacticos’. In the last two seasons Real Madrid have spent more than €300m on players. Firstly, they bought Cristiano Ronaldo, Kaka, Xabi Alonso and Benzema at the start of the 2009/10 season, and then Khedira, Ozil and Di Maria, who had all starred in the World Cup, in 2010.
To some extent, the margin between Manchester United and the Spanish giants could be down to the weakness of the pound compared to the Euro. If the pound was still as strong, the gap would not be as severe. But you could also argue that it is down to the extra TV money they receive.
The increased revenue from television allows Spanish clubs to spend more money on their players and therefore they become more marketable, thus they generate more money through commercial deals. The more the Spanish clubs spend, the more marketable they become.
This fact, that that spending can increase commercial revenue, is highlighted most glaringly looking at Arsenal and Manchester City. When comparing the data from 2005 and 2010, you will notice that Arsenal slip off the list and Manchester City creep on to it.
|Commercial Revenue 2005 (£m)||Commercial Revenue 2010 (£m)|
Arsenal have not spent anywhere near the money on players in the last two years as Manchester City. While Arsenal, like Barcelona, play a famously attractive style of football, they have not had the same on-field success to rival Barcelona’s marketability. The attraction of Arsenal may be recognised by supporters but companies are not as willing to sponsor them.
On the other hand, the commercial revenue of Manchester City has more than doubled in the last year. Firstly, since their take-over, Manchester City have established many new links with businesses in the Middle East. But secondly, like Real Madrid, their profile has also been increased by some serious spending on players. What this shows is that, although Man City may be currently spending much more than they make, their revenue is increasing as a result of their increased spending.
This growth in revenue is not restricted to commercial deals alone. Manchester City’s match-day revenue has also flourished in the last year. The average home attendance in 2010 was 6% larger than it was in 2009. This is no doubt, in part, due to big name signings. Emmanuel Adebayor, Yaya Toure, James Milner, David Silva, Carlos Tevez, Joleon Lescott, Mario Ballotelli and Edin Dzeko have all played for Manchester city in 2010, and cost over £20m .
The point is that while they may be reliant on their chairman for their growth, in time their revenue will grow and could potentially match their spending. The question for Manchester City is if they can grow their revenue to be big enough by the time the financial fair play rules come into action.
The biggest worry for a club like Manchester City (or Chelsea) will be that the Fifa rules will require a club to become ‘self-sufficient’. This will mean that Manchester City will either have to dramatically increase their current revenue or reduce their current costs. Given the fact that Manchester City’s ‘pre-sugar daddy revenue’ was 30m short of Chelsea’s, and their spending is now equal to Chelsea’s, this might look like an impossible task.
But, Manchester City have increased their revenue by 50% in the last year, despite playing in the second tiered European competition. Champions League football would see Manchester City increase their revenue on match-days (there would be more home games and more sell-out games) as well as give them a huge boost in broadcasting rights and commercial deals.
Furthermore, in Eastlands, they have a more recently developed Stadium than Stamford Bridge. As I have already discussed, this could be the difference between a club like Manchester City attaining self-sufficiency and a club like Chelsea.
It is a large, but not impossible task for Manchester City to achieve self-sufficiency within the next 5 years. This may hinge, most importantly, on continued Champions League qualification.