The UEFA Champions League quarter-finals are about to get underway, highlighting once more the concentration of European club football at the highest level - recognized “superpowers” Real Madrid CF, FC Barcelona and FC Bayern München will feature for the seventh consecutive season. At the same time, Sevilla FC’s qualification at the expense of the most valuable and richest football club, Manchester United FC, also revealed that clubs with less financial power are also able to reach the later stages of the competition. In this article, the KPMG Football Benchmark team provides a financial comparison of the elite eight contenders in this year’s Champions League.
As it is widely accepted, the most dominant clubs are generally the most successful; the 2017/18 Champions League, as usual, underlines the relationship between off-and-on pitch success as four out of the five most valuable clubs (namely Real Madrid CF, FC Barcelona, FC Bayern München and Manchester City FC) are still competing for the trophy. Extending the scope, only two clubs, namely AS Roma and Sevilla FC, are outside the top 10 in terms of Enterprise Value. Indeed, Sevilla FC’s victory over Manchester United FC was certainly unexpected when examining the clubs’ financials: the Enterprise Value of the Red Devils is nearly 12 times more than the Andalusian club. Sevilla FC’s achievement may act as inspiration for AS Roma, whose Enterprise Value is six times lower than their opponents in the quarter-finals, FC Barcelona.
The higher the market value of the squad, the better the chance of achieving good sporting results. Among the elite eight contenders, FC Barcelona top the ranking with an overall value of EUR 957 million. In this regards, the English derby is the most balanced tie as Manchester City FC’s market value is “only” EUR 250 million ahead of Liverpool FC’s value.
The analysis of the operating revenues reveals several insights around the business profiles of the quarter-finalists. The models of the highest turnover-generating clubs mainly rest on commercial revenues; in this space, FC Bayern München recorded the highest dependence with 58%. On the other hand, Juventus FC and Liverpool FC, despite reporting similar sales performances, show noticeable differences: while TV rights account for 42% of the Reds’ total income, the Bianconeri’s “teledependence” reached 57% in the 2016/2017 season. A high share of Broadcasting rights in total revenues is also a trademark of smaller clubs: AS Roma (60%) and Sevilla FC (76%) confirm this finding, mainly depending on the appeal of their domestic leagues and UEFA competition participation.
Unsurprisingly, the highest earners are also the biggest spenders. Compared to the revenues chart, the staff costs’ ranking is almost identical, with only two exceptions: Manchester City FC and Juventus FC spend more than FC Bayern München and Liverpool FC, respectively. However, football is invariably unpredictable and this year there has been space for a “giant-killing”: Sevilla FC eliminating Manchester United FC despite spending approximately one third on staff costs.
One of the main challenges affecting football clubs in recent years is the sustainability of their business. Despite eye-catching transfer deals and spiraling staff costs, football clubs’ profitability is no longer out of reach. Indeed, seven out of eight clubs recorded a pre-tax profit in the 2016/2017 season. While FC Bayern München confirmed themselves as one of the best-managed clubs, with the highest pre-tax profit recorded over the past six years, Juventus FC also experienced a year of record financial performance. Beyond on-pitch success, the profit on the disposal of Paul Pogba was one of the main drivers in enabling the Italian side to multiply their pre-tax result fourfold on the previous season. On the other hand AS Roma, due to failure to participate in last-year’s Champions League, are the only club showing a pre-tax loss.
Real Madrid CF and FC Barcelona extend their domination to the social media field as both clubs have three times as many followers as third-placed FC Bayern München. Although The Citizens are the fourth most followed club, their audience is comparable to both Liverpool FC and Juventus FC, that can rely on a strong historical fan base. On the other hand, both AS Roma’s and Sevilla FC’s social media following reflect the lack of visibility on the international level, and the two clubs will most likely exploit their coming fixtures to showcase their skills on the broader stage.
Football is a growing business, and that trend is confirmed by the fact that this years’ elite eight have generated higher turnover than last year (EUR 3.6 billion vs. EUR 2.9 billion). There is strong evidence that the richer clubs are more successful - when looking at the elimination rounds in the Champions League of the past two seasons and the current campaign, in 78% of ties, the clubs with higher revenues were successful. Will this trend continue in the latter stages?
KPMG Football Benchmark team can help clubs to analyze their revenue streams and identify potential growth opportunities and competition organizers to find the best revenue sharing methods and mechanisms.
 As per KPMG "Football Clubs' Valuation: The European Elite 2017".