Last week the annual Deloitte “Football Money League” was published for the 2013/14 season, breaking down the financials of the top 20 grossing soccer clubs in the world. For the tenth year in a row, Real Madrid tops the list as the richest club in the world, at least in terms of generating revenue. The Spanish giants raked in roughly $613 million last season, finishing a cool $35 million above 2nd place Manchester United, and were the only club in the world to break the $600 million threshold.
Real Madrid, Manchester United, and Bayern Munich are the only three clubs to have stayed in the top 10 of the “Football Money League” since its inception. The below figure illustrates these clubs’ growth over the last ten years:
Like Real Madrid, Manchester United and Bayern Munich both have seen steady growth over the last ten years, really surging since the 2010 season. This is true for almost all clubs included in the “Football Money League”, and it is driven by several macroeconomic trends whose impacts we are starting to see translate into the soccer industry.
The 2010 FIFA World Cup seemed to reinvigorate the global passion for soccer and ignite a fire in “developing nations” within the industry. These are not necessarily synonymous with the areas of the world that people would typically associate with this term, but rather represent markets throughout the globe where soccer has not yet matured to a full saturation level and has room for rapid growth, like the United States, China, and India. The 2010 tournament in South Africa coincided with a year that saw the digital and social media industries really finding their stride in mainstream markets, which has led to a whole other dimension within the sports and sponsorship worlds that previously was not yet tapped – at least not fully.
Four years later, for the 2014 World Cup alone, FIFA re-tooled its website to include a “global stadium” feature designed specifically for smart phones that aggregated all news from the tournament in one centralized location, it used Twitter to communicate and engage with fans in real-time, and sponsors like Budweiser used social media for “Man of the Match” fan voting. Second-screen viewing was at an all time high for the World Cup, with an estimated +50% of viewers watching via a device other than a traditional television, depending on which report you read. According to a FIFA news release, the 2014 World Cup set new records for streaming data traffic around the world, and broke viewership records across multiple areas of the globe. These trends seen at the global level for the World Cup also made their way to the club level throughout the years in between the big tournaments in South Africa and Brazil, and it shows in the numbers.
The below figure illustrates the growth of the three main revenue streams used by Deloitte in their annual study: Matchday, Broadcasting, and Commercial (previously discussed by Business of Soccer in “How Do Soccer Clubs Make Money?”):
Traditional broadcasting and commercial deals for clubs now incorporate components that address social media and mobile or second-screen viewing, which has driven the costs of these deals up significantly versus the world before these trends existed. In the end, it’s all about exposure – both on the broadcasting side, as well as commercial. Broadcasters now have a slew of ways to bring matches to their viewers on multiple different screens, platforms, and with various levels of engagement. This is now taken into account when evaluating the value of a broadcasting rights deal – if the broadcasters’ revenue increases at substantial rates, clubs and leagues will negotiate their costs to align with that growth so that they see the benefits from these trends as well.
This holds true for the commercial revenue bucket as well. With the digital and social media revolution comes a dizzying number of new ways for a club’s brand to have exposure with its fans, or potential fans, and clubs are starting to leverage that power with their commercial partnerships. It now means so much more for a brand to be on the front of a shirt, or to have supplied that shirt, for a top club than it did ten years ago, and we’ve seen just how much more with record breaking kit supplier deals and shirt sponsorship deals both at Manchester United in the last year alone.
The globalization of soccer is the piece that compounds the growth seen in broadcasting, and especially in commercial revenue over the last four years or so. As clubs continue to branch out into all corners of the globe, regional sponsorships and broadcasting rights deals have started to emerge as a vehicle for clubs to partner with local and relevant brands and companies within each target market. We have only begun to scratch the surface in this regard, and as more and more clubs follow the example set by the likes of Real Madrid, Manchester United, and Bayern Munich, the red and green lines above will climb at even steeper rates in the years to come.
Clubs can only sell so many tickets to each match. Sure, there are stadium additions and enhancements happening across the world all the time, but these take time and a lot of investment. Short of a consistently harsh raise in ticket prices every year, which your fans won’t thank you very much for, matchday revenues will not yield the sort of growth and sheer dollar contribution that broadcasting and commercial revenues will. Since 2004, matchday revenues have grown approximately 1.5 times their initial figure. Broadcasting and commercial revenues have increased about 2 and 3.3 times their 2004 figures respectively. In 2004, only 3 of the top clubs in the “Football Money League” garnered the majority of their revenue from the commercial revenue bucket. Today, 10 of them do (half). For the other half that do not get the most money from commercial revenues, they get their majority from broadcasting rights sales. The trend has already taken hold, and it will only continue to expand the gap between broadcasting and commercial revenues and matchday revenues. There are examples in leagues all over the world of clubs already capitalizing on these trends and engraining them into their every day strategy. Those that can effectively grow their clubs with local relevance on a global scale will see their crests atop the “Football Money League” in the years to come.
*Currency conversions from Google Finance on 1/25/2015 ($1:€1.11)
What do you think about the globalization of soccer and the impact of digital and social media on the source of revenue for soccer clubs? Let us know in the comments section below, or via Facebook or Twitter.