Most Americans, if asked, would tell you that either the New York Yankees or the Dallas Cowboys were the most profitable teams in professional sports and either of those would be a good guess for an American centric audience. However, those guesses don't take into account the worldwide phenomenon that is global soccer. No sport captures the imagination of sports fans around the world in quite the same way as soccer.For years, the revenues of the largest soccer teams in Europe have been growing exponentially due to ever increasing television revenue. Since not all European leagues distribute television money equally, or even negotiate league wide television deals, the disparity between clubs in the same league can vary even more widely than it does in Major League Baseball. The two teams sitting atop the Football Money League, compiled annually by Deloitte demonstrate just how much the powerful club at the top of perch make in comparison to the rest of the league. Real Madrid, the richest, highest grossing professional sports club in the world, generated 438 million euros (roughly $603 million at today's exchange rates) in 2009/10 about 40 million Euros more than second place FC Barcelona and a staggering 100 million Euros more than third place Manchester United.
Real Madrid had a relatively even split in revenue sourcing among the three main drivers: broadcast, commercial (sponsorship and merchandise) and gameday. For a sense of scope, Real Madrid received 158.7 million Euros in broadcast revenue pursuant to a contract it holds individually since La Liga allows its clubs to negotiate individually rather than through a centralized league contract as in the English Premier League, or all major North American leagues. That contract gives Los Blancos more broadcast revenue than half of the Money League clubs combined. Real Madrid receives over 150 million euros in commercial revenue, one of only two Money League clubs to do so. It has a 20 million euro contract with Bwin for jersey sponsorship that runs through 2012/13. However, that contract has recently been challenged in court as being contrary to Spanish competition laws.
In contrast, the highest grossing MLB club, the New York Yankees, made $441 million in revenue last year, $319 million of which came from gate receipts (gameday in paragraph above). That is less than Manchester United, the third place club on the Money League list.
The value of broadcasting contracts is significantly higher in the NFL than in MLB. In fact, the total value of the NFL's various broadcast contracts was in excess of $3.4 billion in 2009, and it grows annually, assuming no lockout this year. The Dallas Cowboys, the NFL's most valuable franchise grossed $420 million in 2009, of which only $112 million came from gate receipts. Could explain the recent interest of NFL owners in purchasing European soccer clubs.
Real Madrid had a relatively even split in revenue sourcing among the three main drivers: broadcast, commercial (sponsorship and merchandise) and gameday. For a sense of scope, Real Madrid received 158.7 million Euros in broadcast revenue pursuant to a contract it holds individually since La Liga allows its clubs to negotiate individually rather than through a centralized league contract as in the English Premier League, or all major North American leagues. That contract gives Los Blancos more broadcast revenue than half of the Money League clubs combined. Real Madrid receives over 150 million euros in commercial revenue, one of only two Money League clubs to do so. It has a 20 million euro contract with Bwin for jersey sponsorship that runs through 2012/13. However, that contract has recently been challenged in court as being contrary to Spanish competition laws.
In contrast, the highest grossing MLB club, the New York Yankees, made $441 million in revenue last year, $319 million of which came from gate receipts (gameday in paragraph above). That is less than Manchester United, the third place club on the Money League list.
The value of broadcasting contracts is significantly higher in the NFL than in MLB. In fact, the total value of the NFL's various broadcast contracts was in excess of $3.4 billion in 2009, and it grows annually, assuming no lockout this year. The Dallas Cowboys, the NFL's most valuable franchise grossed $420 million in 2009, of which only $112 million came from gate receipts. Could explain the recent interest of NFL owners in purchasing European soccer clubs.
The calendar has not been turned back several months and today is not April 1. The owner of the Boston Red Sox, New England Sports Ventures, has apparently won a bid to purchase Liverpool FC despite opposition from the current owners Tom Hicks and George Gillett. Hicks and Gillett are in default on some 200 million pounds to the Royal Bank of Scotland and have been unable to refinance the debt.
The sale is likely to be the subject of protracted legal wrangling before it's finalized. The board of the club accepted the offer from NESV only after an attempt by Hicks and Gillett to remove the board members in favor of the sale. The Chairman of the Liverpool board, who Hicks tried to sack, is confident the sale will be completed next week, however, Hicks and Gillett have promised to take the whole matter to court. The battle over the ultimate ownership of the club should be one of the more entertaining legal battles to follow, if you're not a Liverpool fan, this side of the McCourts divorce proceeding.
I thought I would put up a few links to articles I had been reading lately since it's been a bit hectic around here these last couple of days. Hope you enjoy:
Origin of NFL nicknames (CNN),
Remember last year's AFL throwback uniforms, you know, the Bronco's vertical stripe brown socks, well here's the story on where they came from (Mental Floss),
Reggie Bush returns Heisman Trophy, now what (LATimes)
Taxpayers still on hook after stadiums abandoned (NYT)
It's matches like last week's Spain v. Argentina that fuels clubs anger with FIFA over calendar (NYT)
NFL's highest paid players: inappropriately skewed towards rookies and unproven players (Forbes)
Did you know that Coach K and Team USA won the World Basketball Championship with the Redeem Team left at home? (SI)
Origin of NFL nicknames (CNN),
Remember last year's AFL throwback uniforms, you know, the Bronco's vertical stripe brown socks, well here's the story on where they came from (Mental Floss),
Reggie Bush returns Heisman Trophy, now what (LATimes)
Taxpayers still on hook after stadiums abandoned (NYT)
It's matches like last week's Spain v. Argentina that fuels clubs anger with FIFA over calendar (NYT)
NFL's highest paid players: inappropriately skewed towards rookies and unproven players (Forbes)
Did you know that Coach K and Team USA won the World Basketball Championship with the Redeem Team left at home? (SI)
When you're on a roll, the rule is to ride the hot dice and MLS is certainly doing that. Coming on the heels of a very successful men's World Cup with never before seen fan interest in the US, a successful expansion franchise launch in Philadelphia this year and the opening of new stadia in New York and Philadelphia, MLS could rightly consider itself as well on the way to firmly establishing itself in the nation's sporting firmament. Expect the roll to continue as the league will be expanding by three more in 2011 and 2012 with franchises in Portland, Vancouver and Montreal coming on board.
Adidas has recognized the new reality voluntarily opening its ten year sponsorship agreement with the league and extending it until 2018, from its original expiration date of 2014. In addition, the agreement is now worth more than $200 million, according to Sports Business Journal, making it one of Adidas largest investment in the sport. That's a raise from the $150 million, 10 year deal, which the parties signed in 2004. Of course, the league is certainly different than it was then, as I only highlighted above. There are seven new soccer specific stadiums, one football stadium filled with soccer crazed fans (Seattle, where no soccer specific stadium is necessary) and new deals with both ESPN and Univision. Another soccer specific stadium is on the way in Kansas City. Attendance is up, sponsorship is up, viewership is up and the league is clearly headed in the right direction.
All is not completely rosy, however. There is still competition issues, most evident in CONCACAF Champions League games, even if nobody really cares about the results. MLS teams still have trouble competing with Mexican league teams, not to mention teams from South America. It would be great if MLS could work with the South Americans to figure out a way to integrate MLS into the Copa Libertadores competition. It would be great for the level of play in MLS and it would help the US Men's team. Until then, I guess the CCL is all we have, so we'll have to make the best of it.
Adidas has recognized the new reality voluntarily opening its ten year sponsorship agreement with the league and extending it until 2018, from its original expiration date of 2014. In addition, the agreement is now worth more than $200 million, according to Sports Business Journal, making it one of Adidas largest investment in the sport. That's a raise from the $150 million, 10 year deal, which the parties signed in 2004. Of course, the league is certainly different than it was then, as I only highlighted above. There are seven new soccer specific stadiums, one football stadium filled with soccer crazed fans (Seattle, where no soccer specific stadium is necessary) and new deals with both ESPN and Univision. Another soccer specific stadium is on the way in Kansas City. Attendance is up, sponsorship is up, viewership is up and the league is clearly headed in the right direction.
All is not completely rosy, however. There is still competition issues, most evident in CONCACAF Champions League games, even if nobody really cares about the results. MLS teams still have trouble competing with Mexican league teams, not to mention teams from South America. It would be great if MLS could work with the South Americans to figure out a way to integrate MLS into the Copa Libertadores competition. It would be great for the level of play in MLS and it would help the US Men's team. Until then, I guess the CCL is all we have, so we'll have to make the best of it.
Gillett has countered by telling the banks he is negotitating with Syrian businessman Yahya Kirdi, a former international soccer player. By the terms of their loan agreement, Gillett and Hicks have the first right to sell the club and the banks have to consider any plan and prospective owners they present prior to any others, i.e. Huang. With Huang reportedly having already held talks with most of the team's on field executives, and Fernando Torres, its start striker, Gillett and Hicks better hope that this Syrian businessman is the real thing because otherwise they should wake up next week with no European assets.
Here are some links to kick off your week:
Real Mallorca, co-owned by Rafael Nadal, barred from the Europa Cup due to finances (Guardian)
Competitive cheerleading held not to be a sport for Title IX purposes by US District Court in Conn. (NYTimes)
Despite dropping $9 million due to his "troubles", Tiger still leads the US athlete money list by a whopping $30 million over Mickelson (SI.com
Rafa be the new tennis number one, but Federer tops the foreign money list for the first time, by more than $15 million over Lionel Messi; Nadal comes in ninth (SI.com)
Manchester United tops Forbes list of the 50 most valuable teams in sports, clocking in at $1.83 billion, the Cowboys are second at $1.65 billion (Forbes)
Interesting assesment of the state of college basketball from coaches in the big six conferences (espn.com)
The most dominant athlete in his sport ever pitches...horseshoes? (NYTimes)
Sorry for my absence from the blog this week. I came back to the Bluegrass from a brief visit to Chicago to visit relatives and immediately upon returning to the Ohio Valley Steamroom was felled by some ailment caused no doubt by the thick layer of ozone that has been hanging over the Valley for the last couple of weeks. I know the Northeast got 100+ days this week, but we've had something like 25 90+ degree days since June 1 with no end in sight. The humidity has been hovering around 90% and it's not safe for man or beast out there.
Enough complaining. I'm finally returning to some semblance of a normal life so it's back to the blog. I know you struggled through The Decision without me but I'm sure you managed better than Dan Gilbert did. Someone must have taken his lithium away. Good luck to the Heat - if they don't win a championship this year, there will be hell to pay in South Beach.
I haven't been able to keep up with much this week, so here's a few links to carry you through the weekend:
Why not a seventh Canadian team for the NHL, a TSN, Globe and Mail series (TSN, Globe and Mail)
Is there a sinister bias for calling fouls in soccer? (Paul Kedrosky)
ACC lands a new media deal with ESPN for about $1.86 Billion though 2022-23. The deal should double each school's current television revenue. (News&Observer, ACC)
Fatwa issued in UAE against vuvuzelas above 100 decibels (The National via Bloomberg)
How different are major league baseball stadiums - at least those without roofs? (Snippets)
Enough complaining. I'm finally returning to some semblance of a normal life so it's back to the blog. I know you struggled through The Decision without me but I'm sure you managed better than Dan Gilbert did. Someone must have taken his lithium away. Good luck to the Heat - if they don't win a championship this year, there will be hell to pay in South Beach.
I haven't been able to keep up with much this week, so here's a few links to carry you through the weekend:
Why not a seventh Canadian team for the NHL, a TSN, Globe and Mail series (TSN, Globe and Mail)
Is there a sinister bias for calling fouls in soccer? (Paul Kedrosky)
ACC lands a new media deal with ESPN for about $1.86 Billion though 2022-23. The deal should double each school's current television revenue. (News&Observer, ACC)
Fatwa issued in UAE against vuvuzelas above 100 decibels (The National via Bloomberg)
How different are major league baseball stadiums - at least those without roofs? (Snippets)
It really must be a cold day down under, and I don't mean Australia or South Africa. Sepp Blatter the major domo of FIFA has finally had enough of a World Cup plagued by inexcusably poor officiating and blatantly missed goals being disallowed. Blunder masters Uruguayan referee Jorge Larrionda of the missing English goal against Germany and Italian Roberto Rosetti of the missed offsides allowing an Argentine goal to stand against Mexico have been let go for the balance of the tournament. Sepp's also sorry about the mistakes and sends his apologies.
More significantly, Sepp has said that finally he is willing to discuss the use of technology to determine if a ball has actually crossed the goal line. This will come too late to help anyone in this World Cup, sorry Brits, but, if he is really serious, then it just might be in place for Brazil 2014. Make no mistake, there is only one opinion that counts here. As long as Sepp is breathing, his opinion is the only one that matters and the his willingness to discuss technology, instant replay in any form is still verboten, is a major step forward. It will still require demonstrating that it is in the natural flow of the game and doesn't detract in any way from the play on the field, which a properly set up system should not do. If Sepp is seriously willing to listen, then a system should be approved.
Here is a link to a video of Sepp's apology.
More significantly, Sepp has said that finally he is willing to discuss the use of technology to determine if a ball has actually crossed the goal line. This will come too late to help anyone in this World Cup, sorry Brits, but, if he is really serious, then it just might be in place for Brazil 2014. Make no mistake, there is only one opinion that counts here. As long as Sepp is breathing, his opinion is the only one that matters and the his willingness to discuss technology, instant replay in any form is still verboten, is a major step forward. It will still require demonstrating that it is in the natural flow of the game and doesn't detract in any way from the play on the field, which a properly set up system should not do. If Sepp is seriously willing to listen, then a system should be approved.
Here is a link to a video of Sepp's apology.
For its part, Bavaria has agreed to respect FIFA's marketing policies through 2022 and each party would release all claims against the other.
All is well that ends well I suppose but the whole affair leaves a bad taste in one's mouth. FIFA once again displays an incredible lack of public relations savvy, giving Bavaria far more publicity than they would have ever received by ignoring the girls altogether. After all, the girls were only wearing orange dresses free of Bavaria logos and practically indistinguishable from the rest of the crowd, except perhaps from the extraordinary good looks and short miniskirts - it is winter in South Africa. There is a good way and bad way to enforce your licenses and FIFA has yet to figure that out.
ESPN should be happy with the ratings it is receiving so far for its vast World Cup investment, whose production costs have been estimated at greater than $300 million. Early returns show ratings are at least double what they were for Germany2006. According to Bloomberg, reporting on an emailed statement from ESPN/ABC, the first five games averaged 4.94 million viewers, more than double 2006.
The USA-England match on ABC was the most watched game for the US Men's National Teams since a 1994 round of 16 World Cup game against Brazil, held in the US.
The USA-England match on ABC was the most watched game for the US Men's National Teams since a 1994 round of 16 World Cup game against Brazil, held in the US.
With the start of the World Cup just days away, take a look at the surprisingly extensive yet readable guide to the economics of the World Cup that Goldman Sachs has put together. It is not, as the title might lead you to believe, a report on the dollars and cents (or rands) being generated at the World Cup or being paid in tribute to FIFA, but an outlook on the tournament using economics as a predictive guide. I don't know what their past batting average is, but if you're looking for help filling out your office bracket, this could be the ticket.
Additional previews from the quant departments of investment banks JP Morgan can be found here, and from UBS here.
Additional previews from the quant departments of investment banks JP Morgan can be found here, and from UBS here.
Apparently Don Garber hasn't learned any lessons from Gary Bettman and his disastrous hitherto disastrous television deal with Versus. Granted, the deal has looked substantially better since the playoffs began, but that hardly makes up for a regular season in which the league was essentially MIA on television. So how is this relevant to MLS?
According to a report in Broadcasting and Cable, MLS has opened discussions with Versus on a possible television deal beginning next season. Currently, the league's television partners are ESPN and Fox Soccer Channel. Fortunately it is the Fox contract which ends following the end of this season so the league is not stupid enough to put the ESPN contract at risk. Nevertheless, Fox Soccer Channel, while still having some distribution issues, is a much friendlier home for a soccer network than Versus would be. Soccer fans are used to going to FSC to get a soccer fix and it is natural to find MLS there. So, let's just hope that MLS officials are using Versus just to drive up the price of renewal with FSC.
UEFA has now adopted Financial Fair Play rules, to be phased in over a six year period, which will require that clubs break even over a rolling three year period if the clubs wish to play in the Champions League or Europa League. The clubs will also be assessed on a risk basis taking into account salaries and debt. While this new rule will not eliminate the advantage held by high revenue clubs like Man U and Real Madrid, it will restrain the spending of owners with virtually limitless funds who care more about winning than about the money spent to get there, such as the owners of Chelsea, Manchester City and AC Milan. It will begin to restore a modicum of balance to European soccer.
Whether the new rule will work as intended will not be known for a number of years. It is, however, the first attempt at bringing some element of rationality to player salaries in European soccer and is to be commended as such. There is no salary cap in any major European league that compares to anything found in any North American professional league and, at least partly as a result, the competitive balance of the major soccer leagues in Europe is non-existent. Each year, the battle for the championship and places in the Champions and Europa Leagues involve mostly the same clubs and the more interesting competition is found at the bottom of the league. The most intense competition comes at the bottom of the table at the end of the season as clubs battle to avoid relegation and the resultant loss of tens of millions of dollars. It is usually much more exciting than the same old fight at the top. Hopefully, over the next decade, this rule will begin to change that.
I've heard plenty of reasons, and no doubt you've thought of few yourself, as to why Russian billionaires have taken to buying professional sports franchises in western sports leagues, i.e. Roman Abramovich's Chelsea and Mikhail Prokhorov's Newark/Brooklyn Nets. One of the more interesting reasons I've seen is in this post from the Business Insider, in which Henry Blodgett suggests the purchases are basically protection against a hit from the Kremlin in the event the oligarch loses favor with Putin. It's a plausible reason given what's being happening in Russia lately and, of course, one we'll never be able to know for sure. I wouldn't be surprised to see it in the next Daniel Silva novel.
You see, when the Glazers bought Manchester United, they borrowed most of the purchase price. In 2006, the family reorganized the club's debt, borrowing at least 500 million pounds from accommodating banks. However, that was not quite enough, as they also took out a 138 million pound loan from a number of hedge funds and other like investors. That loan was a payment in kind loan, with no payments due until the whole loan comes due in 2017. The PIK loan originally bore interest at 14 1/4% and carried numerous financial and other covenants meant to rein in the Glazers ability to manage the club for the benefit of just themselves. The club is in breach of those covenants, so the rate bumps to 16 1/4%.
With the rate that high, the Glazers will be paying an additional 75 million pounds in interest. The repayment amount now rises to 662 million pounds in 2017 and that is a tough number to make for any club, even the top grossing club in the world. What that might mean for ManU's operations is simple: the Red Devils are not likely to be active in the top end of the transfer market where crosstown rival Manchester City is throwing money around like a, well, soccer mad Arab sheik. The club may also begin looking at the roster to see who might be shopped for cash. There has been no public indication from either the club or Sir Alex that sales are coming, but sitting out the transfer market looks to be almost a sure thing.
I don't usually do two linkfests in one week, but I have a number of stories that are worth reading or just shaking your head at, and wanted to get them out there:
As NBA ownership officially goes internationally, a look at why Bruce Ratner failed so miserably as the owner of the Newark/Brooklyn Nets (WSJ)
Who is going to win, and profit from, the World Cup (FT Alphaville via Abnormal Returns)
The details on Anheuser-Busch's big bet on the NFL, which we reported earlier (SBJ)
New York Magazine's cover story on why LeBron should become a Knick; (my take:he should stay with the Cavs provided they go out and find him a team to play with - also a problem with NY) (NY Mag)
Texas high school basketball player arrested for impersonating a high school player - since he was 22 and had used up his eligibility in Florida - school was Permian of Friday Night Lights fame (Dallas News)
Do soccer players and goalies act rationally in playing penalty kicks? (Cognition and Culture)
How stock traders are like callers to sports talk radio (Chris Perruna via Abnormal Returns)
Wilpon family and Mets look to add soccer, Islanders and arena to Flushing (NYT)
Super Saver, the Preakness morning line favorite at 5-2, draws post position 8, right next to main rival Luckin' at Lucky, who is at 3-1 and is in post position 7 (Baltimore Sun)
As NBA ownership officially goes internationally, a look at why Bruce Ratner failed so miserably as the owner of the Newark/Brooklyn Nets (WSJ)
Who is going to win, and profit from, the World Cup (FT Alphaville via Abnormal Returns)
The details on Anheuser-Busch's big bet on the NFL, which we reported earlier (SBJ)
New York Magazine's cover story on why LeBron should become a Knick; (my take:he should stay with the Cavs provided they go out and find him a team to play with - also a problem with NY) (NY Mag)
Texas high school basketball player arrested for impersonating a high school player - since he was 22 and had used up his eligibility in Florida - school was Permian of Friday Night Lights fame (Dallas News)
Do soccer players and goalies act rationally in playing penalty kicks? (Cognition and Culture)
How stock traders are like callers to sports talk radio (Chris Perruna via Abnormal Returns)
Wilpon family and Mets look to add soccer, Islanders and arena to Flushing (NYT)
Super Saver, the Preakness morning line favorite at 5-2, draws post position 8, right next to main rival Luckin' at Lucky, who is at 3-1 and is in post position 7 (Baltimore Sun)
MLS is considering a second team in New York as a twentieth club. Discussions had been held with the Wilpon family, who own the Mets. Those discussions were put on hold ostensibly due to the family's need to focus on the opening of CitiField, but also, perhaps to assess the impact on the family and its business of their investments with Bernie Madoff. MLS is likely to try and resume those discussions shortly. St. Louis, Atlanta and Miami have also expressed interest in a club.
There is no question that competing in the Champions League is very valuable to any club, from those eliminated in the first round to those who make the championship game. The question is how much is it worth to make it into that championship final? In 2009, it has been estimated that FC Barcelona's win was worth up about 110 million Euros, after factoring in television revenue, prize money, increased ticket sales, increase in squad value, sponsorship and media rights. Similarly, Manchester United's win in 2008 has been estimated to be worth about $110 million, factoring in all of the same factors mentioned above.The immediate impact on team value was starkly represented yesterday following Olympique Lyon's loss to Bayern Munich on Tuesday night. At the close of Wednesday's trading, shares in Lyon had fallen 15%, reflecting the loss by Lyons and its loss of no less than $65 million, which is the value attributed to the loser of the championship game in 2009. The stock was unchanged in today's trading.
