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  • February 2006

    Football MoneyLeagueChanging of the guard

  • Edited byDan Jones

    AuthorsAustin Houlihan and Rich Parkes

    Sports Business Group at Deloitte 201 Deansgate, Manchester, M60 2ATTelephone: +44 (0)161 455 8787Fax: +44 (0)161 455 6013Email: sportsteamuk@deloitte.co.ukwww.deloitte.co.uk/sportsbusinessgroup

    February 2006

  • 3

    Football Money League

    Introduction 4by Dan Jones

    The Deloitte Football Money League 6

    Leagues within the Money League? 22by Rich Parkes

    The Real deal 25by Austin Houlihan

    Contents

  • 4

    Football Money League

    premium content remains critical to the business models of Pay-TVbroadcasters. Just look at the collapse of Premieres share price afterlosing the Bundesliga rights, or the recent deals in Italy and France,for clear evidence of this. Recent deals have confirmed our view thatthe often forecast collapse in broadcast revenues has not materialisedand will not happen. In the major European countries the value oftop class broadcasting rights continues to rise. We have recently seena large increase in the value of the German Bundesliga Pay-TV deal,following the huge French deal announced in 2005 whichcommences next season. And content providers continue toinnovate. In Italy, for example, we have seen live rights split into Pay-TV and Digital Terrestrial, with further financial rewards for the clubs.

    However, many clubs are rightly continuing to concentrate day today on the areas over which they have direct control. The stadiumdevelopment boom, started in the early 1990s in the UK, and mostrecently seen in Germany, has provided the perfect opportunity forclubs to enhance their revenues. We believe further opportunities in

    By Dan Jones, Partner, Sports Business Group at Deloitte.

    Introduction

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    Welcome to the 2006 Deloitte Football Money League. This isthe ninth year of the publication, profiling the largest clubs in theworlds most popular sport for the 2004/05 season. A number ofmethods may be used to determine the size of a club includingmeasures of fanbase, attendances, TV audiences, or on pitchsuccess. However, for the purposes of this publication, we look atthe best publicly available measure of financial muscle: revenuefrom day to day football business operations. We only rank the clubson the money coming in. We do not consider a clubs budget foroutgoings or what someone might pay to buy, or invest in, a club.

    The Deloitte Football Money League is the most contemporaryand reliable analysis of clubs relative financial performance and isreleased less than nine months after the end of last season, as soonas the relevant clubs accounts are available to us.

    The big news this year is that, after eight consecutive seasons at thetop of the Money League, Manchester United has been overtakenby Real Madrid. Real have transformed their revenues, doublingthem in only four years. What may make other clubs look moreclosely at Real is the method by which they have delivered much oftheir revenue growth. The mainstay of Reals revenue growth is notmatchday revenues, as we have seen in many of the UK clubs, orbroadcasting revenue, as we have seen and continue to see inItaly, but strong progress in realising their commercial potential.

    Real have concentrated on improving their commercial revenue,both in terms of developing a progressive and extensive partnerprogramme, and in turning the clubs strong international supportinto revenue for the club. To date both these objectives have beenvery successful, helping to propel Reals commercial revenue wellabove any other Money League club. We profile Reals commercialrevenue, and comment on how they have made it to number one,in one of our feature articles. Whilst not every club has Realsparticular strength of brand and history, we hope there are someinsights that others may find comparable to their own situation.

    Football remains a growth sport, especially at the highest level. Thecontinued high level of interest in the sport both public andcommercial is reflected by another year of strong growth. In ourfirst Money League in 1996/97 the 20 clubs combined revenue was 1.2 billion. This year, the total broke the 3 billion barrier for thefirst time after growing by 6%.

    The catalyst for this remarkable long term growth was thebroadcasting rights revolution of the 1990s, fuelled by soaringinterest in the game, new technology and deregulation of thebroadcast markets. Despite the maturing of broadcast markets,

    Source: Deloitte analysis.

    Chart 1: Total revenues 2004/05

  • We have used, for each club, the figure for total revenueextracted from the clubs annual financial statements, or otherdirect sources, for the 2004/05 season. In some cases, the annualfinancial statements do not cover a whole season, but are for the calendar year, in which case we have used the figures for themost recent calendar year available.

    We use the terms revenue and income interchangeably.Revenue excludes player transfer fees, VAT and other sales relatedtaxes. In a few cases we have made adjustments to total revenuefigures to enable, in our view, a more meaningful comparison ofthe football business on a club by club basis. For instance, whereinformation was available to us, significant non-football activitiesor capital transactions have been excluded from revenue.

    Based on the information made available to us in respect of each club, to the extent possible, we have split revenue into threecategories being revenue derived from matchday, broadcast andcommercial sources. Clubs are not wholly consistent with eachother in the way they classify revenue. In some cases we havemade reclassification adjustments to the disclosed figures toenable, in our view, a more meaningful comparison of thefinancial results.

    Matchday income is largely derived from gate receipts (including season tickets and memberships). Broadcast incomeincludes revenue from television and radio and from bothdomestic and international competitions. Commercial incomeincludes sponsorship (mainly derived from brand/name placing on team shirts and around stadia), conference, catering andmerchandising.

    The publication contains a variety of information derived frompublicly available or other direct sources, other than financialstatements.

    We have not performed any verification work or audited any ofthe information contained in the club financial statements for thepurpose of this publication.

    All figures for the 2004/05 season have been translated at 30 June 2005 exchange rates (1 = 1.4806). Comparativefigures have been extracted from previous editions of theDeloitte Football Money League.

    There are many ways of examining the relative wealth or value offootball clubs and at Deloitte we have developed sophisticatedmodels of anticipated future cash flows to help potential investorsor sellers do just that. However, for an exercise such as this, there is insufficient public information to do that. Here in the DeloitteFootball Money League we use revenue as the most easilyavailable and comparable measure of financial wealth. Revenue, likesalary for an individual, is not the be all and end all of wealth, butall would agree that as a starting point it is better to have morethan less, and the choice of how to spend it.

    How we did it

    5

    Football Money League

    this area still remain for all clubs to increase matchday and non-matchday income. These can include ticket yield management andsegmentation techniques, and the development of enhancedcustomer packages all of which do not require great capitalinvestment (but which do require careful thought). Targetedresearch and consulting with the market can assist clubs in ensuringthat they are meeting the ever changing demands of the customer.In some cases the immediate financial benefits can be dramatic. Inall cases the customer welcomes the interest in their views.

    We have seen only three changes to the composition of the 20Money League clubs since last year. In common with on pitch leaguetables, we have lost the three clubs in last years relegation zone(Olympique Marseille, Aston Villa and Rangers). They have beenreplaced by Everton (making their first appearance in the Top 20)and the return of Olympique Lyonnais and Valencia. Our Top 20clubs are shown in the chart on the previous page. The revenuedifferences between clubs at the bottom of the table are small, anda number of familiar names remain slightly below the Top 20.Marginal differences in on pitch performances can be the differencebetween appearing in the Money League and just missing out.

    Our focus this yearIn addition to our usual prof

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