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Beware, Inter & Arsenal - Schalke's rise up Deloitte's Money League proves the financial importance of the Champions League
The Ruhr side's remarkable run in Europe's elite tournament saw their revenue unexpectedly soar last season, but some teams are structured to depend on such results to survive
Feb 10, 2012 8:30:00 AM
Getty
ANALYSIS
By Clark Whitney | German Football Editor
Without doubt, the biggest surprise in the 2010-11 Champions League was Schalke's improbable run to the semi-finals. The Gelsenkirchen side have long been a big team in Germany, but have gone more than half a century without winning the Bundesliga, and had only once before reached the last eight of Europe's elite club competition.
It was therefore no shock to see Schalke climb from 16th to 10th place among Europe's top-earning teams over the course of the last 12 months. As revealed in the 2012 edition of Delotte's annual Football Money League report, the Ruhr outfit saw revenue skyrocket from €139.8 millon in 2009-10 to a whopping €202.4m in 2010-11.
With their business structure centred around commercial gains, Schalke are capable of balancing their books without the extra income that comes from participation in the Champions League. Such sales are largely resistant to large annual shifts - between 2009-10 and 2010-11, commercial revenue increased a modest 15 per cent, €79.0m to €90.9m - and are intended to make up around 50% of the club's turnover.
It is a model typical of Bundesliga sides, and very different from those in other top European leagues, where greater emphasis is placed on more volatile sources of income, such as ticket sales and broadcast fees, which can be greatly altered by a team's participation (or lack thereof) in the Champions League.
As a result of their model's high dependence on commercial sales, Schalke's dramatic increase in broadcast and matchday revenues - almost all of which can be attributed to their Champions League run - served as a windfall.
Expenses were higher than usual last year due to a slew of summer signings, but the Ruhr side were not counting on a strong run in Europe. As a result, a significant portion of the €50.7m increase in revenues from non-commercial areas will be put towards paying off debt. In simplest terms, Champions League football is a luxury that can help Schalke reach new heights, not a necessity to the club's survival.
The same cannot be said for many of Europe's top teams. A staggering 58% of Inter's income in 2010-11 came from broadcast fees, a significant portion of which was due to participation on the continental level. With their business model relying so little upon commercial revenue, the Nerazzurri have planned their finances on the assumption of consistent performance, both domestically and in the Champions League. Should they fail to finish among the top three in Serie A this season, the repercussions could be devastating: sales may be required to balance the books, which due to the implementation of Financial Fairplay is becoming more and more a necessity.
Inter are not the only team reliant upon Champions League success in order to maintain their level of competitiveness. Arsenal and Chelsea respectively draw 80% and 75% of their earnings from broadcasting and matchday income. A significant portion of these monies are due to the Premier League's lucrative television deal and the willingness of fans to pay relatively steep ticket prices.
But in both cases, failure to participate in the Champions League could remove a significant amount of revenue. And as it stands, both clubs are at risk of failing to finish in the top four of the Premier League.
In the current season, Manchester United stand to lose some €20-30m due to their early exit from Europe's showpiece club competition. The Red Devils earned €53.2m and €46.4m from Uefa distributions in 2010-11 and 2009-10 respectively, and their success has been a big help given the club's massive debt. After their elimination in the group stage this season, earnings from Uefa are expected to be in the region of €20m.
Of all the top 10 teams in Deloitte's 2012 Football Money League, Schalke and Liverpool are the only two clubs not to compete in the Champions League this season.
Both have been able to attain financial success through an emphasis on commercial revenue, with the German side having earned just €900,000 less in that category than European giants AC Milan. S04 are accustomed to fluctuations in performance, and as a business, are able to ride the results roller-coaster. But many of Europe's traditional powers are not as well prepared. And with success quite clearly not guaranteed, the future is far from certain.
The times are changing in Europe, as some of the usual big guns slip and new powers emerge. And with Financial Fairplay beginning to take effect, top teams will no longer be able to call upon wealthy owners to bail them out of debt. Teams that have relied on Champions League success are in serious danger in the coming years. Manchester United have already taken a hit, and we will soon see its lasting effects. And now Inter, Arsenal, Chelsea and more stand to take heavy losses.
Schalke will not mind at all: they might have missed out on the Champions League this year, but their commercial revenue will hardly take a hit. S04 will be back in the European Cup next year, and their participation will only help the club grow, not save it from collapse.
Follow Clark Whitney on
By Clark Whitney | German Football Editor
Without doubt, the biggest surprise in the 2010-11 Champions League was Schalke's improbable run to the semi-finals. The Gelsenkirchen side have long been a big team in Germany, but have gone more than half a century without winning the Bundesliga, and had only once before reached the last eight of Europe's elite club competition.
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It was therefore no shock to see Schalke climb from 16th to 10th place among Europe's top-earning teams over the course of the last 12 months. As revealed in the 2012 edition of Delotte's annual Football Money League report, the Ruhr outfit saw revenue skyrocket from €139.8 millon in 2009-10 to a whopping €202.4m in 2010-11.
With their business structure centred around commercial gains, Schalke are capable of balancing their books without the extra income that comes from participation in the Champions League. Such sales are largely resistant to large annual shifts - between 2009-10 and 2010-11, commercial revenue increased a modest 15 per cent, €79.0m to €90.9m - and are intended to make up around 50% of the club's turnover.
It is a model typical of Bundesliga sides, and very different from those in other top European leagues, where greater emphasis is placed on more volatile sources of income, such as ticket sales and broadcast fees, which can be greatly altered by a team's participation (or lack thereof) in the Champions League.
| SCHALKE REVENUE DISTRIBUTION |
As a result of their model's high dependence on commercial sales, Schalke's dramatic increase in broadcast and matchday revenues - almost all of which can be attributed to their Champions League run - served as a windfall.
Expenses were higher than usual last year due to a slew of summer signings, but the Ruhr side were not counting on a strong run in Europe. As a result, a significant portion of the €50.7m increase in revenues from non-commercial areas will be put towards paying off debt. In simplest terms, Champions League football is a luxury that can help Schalke reach new heights, not a necessity to the club's survival.
The same cannot be said for many of Europe's top teams. A staggering 58% of Inter's income in 2010-11 came from broadcast fees, a significant portion of which was due to participation on the continental level. With their business model relying so little upon commercial revenue, the Nerazzurri have planned their finances on the assumption of consistent performance, both domestically and in the Champions League. Should they fail to finish among the top three in Serie A this season, the repercussions could be devastating: sales may be required to balance the books, which due to the implementation of Financial Fairplay is becoming more and more a necessity.
| SCHALKE REVENUE BREAKDOWN |
Inter are not the only team reliant upon Champions League success in order to maintain their level of competitiveness. Arsenal and Chelsea respectively draw 80% and 75% of their earnings from broadcasting and matchday income. A significant portion of these monies are due to the Premier League's lucrative television deal and the willingness of fans to pay relatively steep ticket prices.
But in both cases, failure to participate in the Champions League could remove a significant amount of revenue. And as it stands, both clubs are at risk of failing to finish in the top four of the Premier League.
In the current season, Manchester United stand to lose some €20-30m due to their early exit from Europe's showpiece club competition. The Red Devils earned €53.2m and €46.4m from Uefa distributions in 2010-11 and 2009-10 respectively, and their success has been a big help given the club's massive debt. After their elimination in the group stage this season, earnings from Uefa are expected to be in the region of €20m.
Of all the top 10 teams in Deloitte's 2012 Football Money League, Schalke and Liverpool are the only two clubs not to compete in the Champions League this season.
Both have been able to attain financial success through an emphasis on commercial revenue, with the German side having earned just €900,000 less in that category than European giants AC Milan. S04 are accustomed to fluctuations in performance, and as a business, are able to ride the results roller-coaster. But many of Europe's traditional powers are not as well prepared. And with success quite clearly not guaranteed, the future is far from certain.
The times are changing in Europe, as some of the usual big guns slip and new powers emerge. And with Financial Fairplay beginning to take effect, top teams will no longer be able to call upon wealthy owners to bail them out of debt. Teams that have relied on Champions League success are in serious danger in the coming years. Manchester United have already taken a hit, and we will soon see its lasting effects. And now Inter, Arsenal, Chelsea and more stand to take heavy losses.
Schalke will not mind at all: they might have missed out on the Champions League this year, but their commercial revenue will hardly take a hit. S04 will be back in the European Cup next year, and their participation will only help the club grow, not save it from collapse.
Follow Clark Whitney on
| Sign up with 188BET for a FREE bet up to £25 – Great Prices, Every Game |
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| Open an account with Sportingbet today and get up to £50 in free bets! |
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| Sign up with William Hill for a free bet up to £25 |
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| Sign up with bet365 for a free bet up to £200 |
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| Sign up with Paddy Power - Bet £10, Get £20! |
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