Taking a Dive : Europe's Elite Football Clubs May Be Spending Themselves into the Ground
Underhill, William, Newsweek International
This was the world cup the French would rather forget. Fans confidently expected the 1998 winners to bring home another trophy from Asia. Instead the Blues returned without a single goal to their credit--an ignominious first for a defending champion. Even Zinedine Zidane, the superstar with a reported $5.5 million salary, couldn't carry the team on his well- compensated shoulders. "Twisted and blinded by success and money," ran a typical editorial in Le Figaro, "the players and those around them neglected the most important thing: the football field."
The charge is a familiar one across Europe, where most of the sport's superstars play for salaries that have an obscene number of zeros in them. The worry, however, is less that footballers are becoming too spoiled to play well than that their teams are driving themselves to financial ruin. The desire to win--and the promise of vast TV earnings--has pushed clubs to spend outlandish sums to field competitive teams: last year Real Madrid forked over a record-breaking $70.2 million to acquire Zidane from Juventus. Major teams like Marseille and Lazio now find themselves in the red, and clubs have begun to explore once scandalous concepts like salary caps and performance-related contracts. Football is now all about money, and despite a 10-year boom there may not be enough to go around.
Each of the major footballing nations has its own specific problems, but the bottom line for many clubs is the same. "The increase in expenditure has simply exceeded the increase in revenue," says Thomas Kurth of G14, the loose association that groups Europe's top clubs. Earlier this year the German football league Bundesliga was forced to appeal for bailout funds from the state. Real Madrid had fallen $382 million into debt before selling off its training ground to developers last year. Last season one of the greatest names in Italian football, Fiorentina, ran out of cash to pay its players. "Their debt-to-profit ratio would sink any corporation," says a spokesman for Italy's elite Serie A league.
The scale of such debts is tough to square with the massive uptick in revenues the sport as a whole has enjoyed over the past decade. Rupert Murdoch set the ball rolling in 1992 when he outbid the BBC for the rights to show live matches of England's Premier League on his BSkyB satellite channel. Competition intensified as other TV magnates quickly recognized the game's potential as a means of pushing their new pay channels. Within the decade the value of European TV rights had risen more than tenfold, to $2.5 billion.
The television deals have pulled in other backers. Games from the Premier League, the world's most popular, now reach 450 million homes in 150 countries. A handful of megaclubs claim worldwide followings of more than 15 million apiece. Such numbers delight advertisers. Says Tim Crow of Karen Earle, a London-based sponsorship-marketing consultancy: "If you are a serious global sponsor you need to be attached to a big global player, and there aren't that many around." Top clubs now command massive sponsorship deals: this year Manchester United begins a 13-year contract with Nike worth a stunning $458 million.
Yet television money has proved both blessing and curse. Teams' fortunes are becoming increasingly dependent on those of their media paymasters. In the Big Five European leagues--England, France, Germany, Italy and Spain-- broadcasting now provides clubs with nearly half their income. …