Mad Money in Sports

If you took just one squad list of a mid-table strength English Premier League football club and you tallied up the total cost of the players (from their transfers), you’d be forgiven for questioning the sanity of all and sundry involved in the sport and just generally in any sport. I mean forget the Cristiano Ronaldos, Gareth Bales, etc., and the rumours surrounding Paul Pogba’s possible move to Man United. Those are special cases, but even just looking at the team roster of the average team will have you wondering whether or not you aren’t in fact in the wrong profession.

I’m not at liberty to disclose the details, but the financial institution for which I’ve worked for a while now has a couple of professional football clubs under our management, for which we facilitate all their financial affairs. From an insider’s point of view, looking at a football club as more of a business or institution takes all the madness out of what appears to be some mad, mad numbers. When you get the bigger picture of all the financial affairs of a football club, you realise that it is indeed a business and the numbers generally tend to balance out in the end, as big as they may be.

I know it’s hard to imagine still, given the players’ colossal weekly wages in addition to the total value of the team’s roster. In the average mid-table-finishing club competing in the English Premier League, it’s not uncommon for the weekly wages of the average player to sit at around the £20,000 to £40,000 mark. Crazy? Perhaps, but again, you look at all the other numbers concerning the financial transactions completed by a football club and it all starts to make a bit of sense, even though the numbers are huge.

Yes, a professional footballer earning an average of £40,000 naturally appears to be insane in the average eyes of the onlooker, but that’s not much really in relation to what the club typically brings in. Firstly, there are sponsorship deals, which typically run into millions per season. A football club also typically has more than one sponsor – a technical one and a few commercial sponsors, one of which would be the main one (the one whose logo you’ll normally see on the jersey).

Each club then also gets a grant from the league they’re participating in, which is primarily a share of the collective television rights the league sells to various broadcasters.

Each club usually also has their own merchandising business, through which they sell official player replica jerseys and perhaps some gear from their technical sponsors. Clubs also get to keep the gate-takings from the tickets they sell, which they do in many different ways like selling season-tickets, VIP booth seats, etc.

Believe it or not, but all of these sources of income are usually more than enough to cover the seemingly crazy salaries paid to the footballers and other staff, but even then, there are only a few clubs in the world playing in the big leagues (La Liga, Ligue 1, Bundesliga, Premier Lague) which are actually turning a successful business-like profit, year in and year out.

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The madness seems to be creeping right back into the sport however because a lot of clubs are being bought up by billionaires who in a sense turn them into their pet-projects. Those are usually the bigger clubs though, with a bit of pedigree and history to their names. Some of these clubs then operate at a net loss, but since they’re backed by a seemingly unlimited supply of their rich owners’ money, it’s all the same and the madness continues.

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Alison

Finance Blogger at Payday Jester
I have a passion for all things finance and business so if I can help you in anyway then please get in touch and if you have any comments or feedback please leave a message.