The football ‘rich league’

Around February each year the newspapers all carry the same story about the ‘richest’ football clubs. Business students every year spot the same problem: is revenue the same thing as profit?

The BBC show the league table of wealthiest clubs with Real Madrid first, Manchester United second and interestingly, Chelsea in fifth position.

Deloitte’s Football Money League, based on financial information for the 2007/08 season, features seven English clubs in the top 20 positions. English clubs would have finished even higher, and Man Utd would have been first if the pound had not fallen so far against the euro over the last 12 months. That depressed the value of their earnings from an international perspective.

United won the English Premier League and UEFA Champions League in 2008, posting a significant 21% pound-denominated revenue growth. But the list’s authors said that this year’s Money League is based on figures available largely before the global economic downturn started. Some commentators have compared the finances of football unflatteringly to other ‘bubbles’ that have recently burst. The BBC quote a more optimistic Paul Rawnsley, director in the Sports Business Group who said: “The unique nature of the football industry will enable major clubs to be relatively resistant to the economic downturn. Clubs’ match attendances are holding up well and clubs in each of England, Germany, France and Spain have TV deals secured well into the future at enhanced levels. Given the worldwide popularity of the Premier League there is likely to be further uplift in value from overseas rights when they are marketed later this year.”

But knowing about revenues doesn’t tell you much until you know about costs. On the same day as the media were covering the news of Chelsea’s £213m revenues, there was a following story explaining the club’s overall losses of nearly £66m. The team’s owner has sunk a mind boggling £710m into the business. That just can’t continue.

Check this year’s figure against last here.