- Data on the Football Benchmark portal suggests that, over the period 2011/12 to 2013/14, proportionately, the number of clubs across the “big five” European leagues spending above 80% of total revenue on total staff costs has decreased.
- However, a number of Italian clubs are continuing to spend more on total wages than they generate in total revenue. Two of those clubs – AC Siena and Parma FC – have recently faced bankruptcy with a third, Genoa CFC, denied entry to the UEFA Europa League. UC Sampdoria recently reported a total staff cost figure higher than its total revenue for a second consecutive year.
- In 2013/14 Getafe CF’s spending on total staff costs equated to approximately 160% of total revenue – the highest figure recorded, to date, on the Football Benchmark database.
Measuring a football club’s spending on total staff costs in comparison to how much it generates in total revenue has become one of the most often used high level indicators of performance. The resulting calculation can give a snapshot of the financial health of a football club, demonstrating how efficiently it manages its resources.
Whilst a club is always, and quite rightly, striving for better on-pitch performances, spending a high proportion of, or in some cases more than, what is being brought into the organisation in total revenue calls into question a club’s viability. Although a one-off year where total staff costs exceed total revenue may be manageable, a continued period of excessive spending jeopardises the long-term sustainability of a club.
With this in mind, it is widely known in the industry that those authorities responsible for administering the game in Europe, UEFA along with domestic league bodies, have sought to introduce regulations aimed at trying to improve clubs’ operating position, moving them, along with other initiatives, towards a position where revenues and costs are balanced.
As the chart below illustrates, with these efforts by the authorities on-going, the information available indicates that overall, year-to-year, the number of instances where clubs in the ‘big five’ European leagues spend more on total wages than they generate in total revenue is relatively static. Nonetheless, there continues to be cases where individual clubs across the ‘big five’ leagues in Europe have spent more on total staff costs than they have generated in total revenue.
A number of the clubs in the chart have experienced additional consequences following their excessive spending, for instance:
- Two of the four Italian clubs – AC Siena and Parma FC – have recently faced bankruptcy proceedings.
- A third Italian club, Genoa CFC, have been denied entry to the 2015/16 UEFA Europa League based on the results of their financial statements.
- Two clubs - Queens Park Rangers FC and AJ Auxerre - experienced relegation in the season of their excessive spend.
- The 2013/14 financial figures reported by Getafe CF showed expenditure on total wages equivalent to approximately 160% of total revenue - the highest figure recorded, to date, on the Football Benchmark database. Whilst the club has been able to retain its La Liga status in the past two seasons, according to media reports, the president of the club has recently had to pay part of the club’s outstanding debt to the Spanish tax authority to prevent the club having relegation imposed on it. As financial statements for the 2014/15 season are not yet disclosed, it will be interesting to observe whether the club’s spending showed any improvement in the season just completed.
The evidence in the chart suggests that, as a country, the situation may be more critical in Italy than in any of the other ‘big five’ leagues. Apart from the problems experienced by Parma FC and AC Siena, UC Sampdoria have recently reported their 2013/14 financial results which showed a second consecutive season of spending on total wages above 100% of total revenue. In addition, whilst their 2013/14 financial statements are not yet published, Genoa CFC have made public statements about their financial performance which suggests their results may not be too dissimilar from 2012/13 when their spending on total wages equated to 123% of total revenue.
When widening the sample size of clubs, to incorporate all those in the ‘big five’ leagues spending above 80% of total revenue on total staff costs, the evidence suggests that, over the 2011/12 to 2013/14 all, the number of clubs tending toward excessive spending on total staff costs is actually falling. Indeed, data available on the Football Benchmark portal suggests that the proportion of clubs across the “big five” leagues spending 80% or more of their total revenue on total staff costs has fallen from approximately a quarter in 2011/12 to just above 10% in 2013/14.
These initial observations prompt three immediate questions:
- Where clubs have made improvements in this performance indicator, is the key driver revenue growth, wage restraint or a mixture of both?
- Given the performance of Italian clubs, to what extent are the footballing authorities in the country imposing regulations domestically to monitor the actions of clubs and ensure that the preservation of their long-term sustainability is a high priority?
- Is there evidence of clubs outside of those in the ‘big five’ leagues improving their performance in this indicator?
Further investigation of these questions, as well as other analysis of industry data, can be undertaken by KPMG’s Sports practice. The subject matter experts within the group can also assist stakeholders assess and interpret the potential impact on their organisations of the results from a particular piece of research, identify reasons why a specific trend is being observed, or ascertain potential solutions and future scenarios.