8.5 C
New York

How Do Football Clubs Make Money and Earn Profit?

During the 2017 transfer window, French club PSG bought Brazilian striker Neymar Jr. from Spanish club Barcelona for $263 million, which was the highest player transfer record ever. On the other hand, Barcelona is spending a total of $1.5 billion on its new stadium and facility renovations. Generally, a football club spends hundreds of millions of dollars per season on salaries for club players, coaches, physicians, managerial staff, and other employees, along with the stadium and training ground maintenance, and bonuses. But where do the clubs get this huge amount of money?

Overview

With a worldwide fan following of 4 billion, football is at the top of the list in terms of popular sports. Officially, football is played in nearly 200 countries around the world, and the FIFA World Cup is called the “Greatest show on earth”. Although the World Cup is held every four years, various football activities, including international matches, occur throughout the year. However, club football is one of the most popular football activities that occur every year. And among club football, the European leagues are the most popular around the world. Notable European leagues are the English Premier League, La Liga, Bundesliga, Champions League, etc. Among these, the English Premier League is at the top in terms of popularity, and around 3.2 billion people follow this league worldwide. Next is La Liga, which has an audience of 2.5 billion globally.

Among these, the English Premier League is at the top in terms of popularity, and around 3.2 billion people follow this league worldwide. Next is La Liga, which has an audience of 2.5 billion globally.

No matter how large or small, all clubs participating in these popular leagues have their own home grounds, training grounds, gymnasiums, state-of-the-art medical centers, swimming complexes, souvenir shops, museums, and even bars and restaurants for players and visiting guests. In a word, these stadium complexes are like a small city. Besides, most European clubs have a rich history. The history of clubs like Manchester United, Barcelona, ​​Real Madrid or AC Milan is rich with various league trophies and seasonal achievements. Apart from fan following and accomplishments, these football clubs are also financially prosperous. Currently, in terms of valuation, La Liga’s Real Madrid ($5.1 billion) and Barcelona ($5 billion), Premier League’s Manchester United ($4.6 billion) and Liverpool ($4.45 billion), and Bundesliga’s Bayern Munich ( 4.275 billion dollars) occupy the top spot.

Currently, in terms of valuation, La Liga's Real Madrid ($5.1 billion) and Barcelona ($5 billion), Premier League's Manchester United ($4.6 billion) and Liverpool ($4.45 billion), and Bundesliga's Bayern Munich ( 4.275 billion dollars) occupy the top spot.

These clubs spend huge sums of money on onboarding players to their clubs during each season’s transfer window. For example, English club Chelsea spent a maximum of $280.40 million in the summer transfer window of the 2022-23 season. In addition, Manchester United and West Ham United spent around $239 million and $181 million, respectively. Apart from the transfer window, a club has to spend hundreds of millions of dollars on salaries and wages for the club’s players, coaching staff, management staff, and other employees. For example, PSG, which plays in France’s League 1, has megastar players like Messi, Neymar, Mbappe, Ramos, and the club’s wage bill in the 2021-22 season was more than $625 (625.45) million dollars, which is 37 percent of the wage bill of the entire league. On the other hand, in the 2021-22 season, the English Premier League club Manchester United spent more than $800 (802.72) million dollars behind the management of the entire club. In the same season, La Liga club Barcelona spent more than $850 million, and Real Madrid spent about $718 million. Besides this massive expense, the clubs also generate tremendous revenue every season. For example, the highest-earning clubs in the 2021–22 season include Barcelona and Real Madrid, whose total revenue was $1 billion and $731 million, respectively. But from what source did the clubs generate this amount of income?

the highest-earning clubs in the 2021–22 season include Barcelona and Real Madrid, whose total revenue was $1 billion and $731 million

How Makes Money?

Matchday Sales 

The major revenue generated by football clubs is from ticket sales at home venues or own stadiums on match days and from providing various types of hospitality services such as food and drinks to the audience attending the matches. In any football league, each club faces the opposition once at its own home ground, and once at the opponent’s home ground – a total of two encounters. Clubs earn money from ticket sales to food and other services on match days at home grounds. The higher the capacity of the club’s stadium, the higher the income from the match day. Clubs offer several types of tickets based on the seating arrangement and type of seat in the stadium, including general seats as well as exclusive seating arrangements such as sky box, VIP box, and executive box. In addition to seating arrangements, stadiums have their own catering services to serve food and drinks to the spectators, with multiple food and drink corners, bars, and restaurants within the stadium. Besides, VIP customers are also offered various services like complimentary welcome drinks, and customized food choices.

The major revenue generated by football clubs is from ticket sales at home venues or own stadiums on match days and from providing various types of hospitality services such as food and drinks to the audience attending the matches.

Ticket prices also vary based on these facilities. According to statistics from Football Critic, Manchester United’s home ground, Old Trafford, is the largest stadium in the UK and can hold a total of 74,310 spectators. The lowest ticket price at Old Trafford starts from $3.48, and the VIP section ticket prices range from $208.8 to $638. In the 2021-22 season, Manchester United earned $147 million from matchday sales. Again, the largest home ground among football clubs in Europe is Camp Nou in Barcelona, ​​where a total of 100,000 (99,354) spectators can watch a match. Ticket prices per match at Camp Nou range from $18.89 to $636.39. In the 2021/22 season, the club earned $103.53 million from match-day sales.

Manchester United's home ground, Old Trafford, is the largest stadium in the UK and can hold a total of 74,310 spectators. The lowest ticket price at Old Trafford starts from $3.48, and the VIP section ticket prices range from $208.8 to $638
Ticket prices per match at Camp Nou range from $18.89 to $636.39. In the 2021/22 season, the club earned $103.53 million from match-day sales.

Sponsorship

Sponsorship is another significant source of income for football clubs. Clubs earn money through various sponsorships, including titles, kits, media, stadiums, technical, regional, and international. For example, one of the wealthiest clubs in the world, Real Madrid, signed a contract with Fly Emirates as their title sponsor until 2026, from which the club will earn at least $68.6 million per year. Again, they will receive about $109.5 million per year from kit sponsor Adidas and a percentage based on jersey sales. Generally, clubs earn between 7.5 percent and a maximum of 15 percent from the sale of jersey kits. Besides, global brands like BMW, EA sports, and Adobe are international sponsors of Real Madrid, and brands like PlayStation and Coca-Cola are regional sponsors of the club. On the other hand, Liverpool earns about $46.4 million per year from their title sponsor “Standard Chartered” and about $34.80 million from kit supplier “Nike”. Manchester City gets about $78.3 million per season from their main sponsor, “Etihad Airways,” and $75.4 million from the kit sponsor “Puma” earned. Besides, global brands like BMW, EA sports, and Adobe are international sponsors of Real Madrid, and brands like PlayStation and Coca-Cola are regional sponsors of the club. In addition, clubs also generate income by selling stadium naming rights. For example, in the 2022/23 season, Barcelona sold the naming rights of Camp Nou to Spotify for 12 years for $433.07 million. Henceforth, the stadium will be known as Spotify Camp Nou.

Clubs earn money through various sponsorships, including titles, kits, media, stadiums, technical, regional, and international.

Broadcasting Rights 

The European leagues are the most active of all the soccer activities conducted worldwide, and billions of dollars in business are generated yearly around these leagues. Broadcasting rights for league matches is one of these clubs’ money-making sources. But these broadcasting rights are sold by the League Management Committee to various broadcasters. Football clubs receive a portion of this revenue from the league governing body, a great source of income for the clubs. According to a report by The Times, between 2022 and 2025, the English Premier League will generate $14.2 billion in revenue from broadcasting rights, including $7.1 billion from international deals and $6.9 billion from domestic deals. 50 percent of the English Premier League’s domestic broadcasting rights are divided equally among the clubs. Of the remaining 50 percent, 25 percent is distributed among the clubs as a match broadcasting facility fee, and the remaining 25 percent is given as prize money based on the clubs’ position at the end of the league.

 50 percent of the English Premier League's domestic broadcasting rights are divided equally among the clubs. Of the remaining 50 percent, 25 percent is distributed among the clubs as a match broadcasting facility fee, and the remaining 25 percent is given as prize money based on the clubs' position at the end of the league.

In addition, international broadcasting rights revenue is distributed among the clubs at fixed rates. Domestic broadcasters of the Premier League include Sky Sports, BT Sports, and Amazon Prime. The league also has media companies like NBC Sports, Star Sports, Tencent Sports, NENT, and Rambler as international sponsors. Among the top clubs in the English Premier League for the 2021–22 season, Manchester City earned $122.13 million from TV rights, Liverpool $123.3 earned million, and Tottenham received $121.1 million.

Among the top clubs in the English Premier League for the 2021–22 season, Manchester City earned $122.13 million from TV rights, Liverpool $123.3 earned million, and Tottenham received $121.1 million.

Prize Money

Another source of income for football clubs is prize money earned from various leagues. Based on the English Premier League points table, clubs receive more than $3.13 million for each position in the league table. For example, in the 2021-22 season, the 20th team at the bottom of the English Premier League points table received 3.13 million dollars, and the 19th team received twice that amount, 6.26 million dollars. As such, season champion Manchester City received $61.56 million, and runner-up Liverpool’s prize money was $58.42 million. On the other hand, similarly in La Liga, the league’s governing committee disburses 25 percent of their total revenue as prize money based on the position of the participating teams. As a result, La Liga prize money in the 2021–22 season was $359.8 million, of which champions Real Madrid received $61.02 million and runners-up Barcelona $53.85 million. In addition, Real Madrid earned another $22.6 million as UEFA Champions League winners in the 2021/22 season.

Transfer Window 

Football clubs also earn by transferring their players to other clubs. However, in the case of big clubs, more money is spent on buying new players than the money earned from the transfer window. English Premier League clubs spent $2.23 billion in the transfer window before the start of the 2022-23 season. In this transfer window, football club Ajax earned a maximum of $215.8 million by selling their three-star players. Apart from Ajax, Manchester City earned $198.1 million, and Benefica $132.4 million in the same transfer window. Again, football clubs also generate additional income by adding release clauses to player transfer contracts. Manchester City signed Erling Haaland from Borussia Dortmund for $59.2 million in the early 2022 summer transfer window. At that time, Real Madrid was very interested in bringing Haaland to the team. Man City set Haaland’s release clause at $201.8 million. If Real Madrid wants to buy Haaland before his contract with Man City ends, then Real Madrid will have to pay $201.8 million to Manchester City.

Membership

In every European club, there is a membership and community system. From there, members can book tickets and receive benefits from tickets to many other areas, such as discounts on club jerseys or stadium tours, printed copies of club magazines and reports, ticket booking benefits, club statues, badges, personalized diplomas, etc. For example, the annual fee for joining Real Madrid’s “Madridista” community is only $34.84, and in addition, Real Madrid has several membership programs that range in price from $50.83 to $148.53. Again, Barcelona operates a membership program with an annual fee of $194.13.

David Martin
David Martin
David Martin is a financial expert working for a New York-based business consultancy firm. He has been monitoring a number of businesses and startups closely and guiding them for more than a decade now. Besides the regular job, he is passionate about blogging as he wants to be an effective finfluencer. With his deep understanding of business analytics, David Martin aims to assist young entrepreneurs in growing and building their brands.

Latest news

Related news

LEAVE A REPLY

Please enter your comment!
Please enter your name here