Should European Football Adopt a Revenue-Sharing Scheme?

Today more than at any other time in the history of sport, fans are aware of the way the rules governing money influence the fate of their teams. We follow the money game—who taps into what markets, who accrues what debt—with a savvy that would have seemed bewildering, and perhaps a little depressing, to fans half a century ago. Knowing what’s going on behind the scenes at a club, as we’ve seen with Liverpool and Manchester United this month, is simultaneously a defensive tactic for fans concerned about the rapid expansion and commercialization of sport, and an outgrowth of the apparently illimitable interest that is driving the expansion.

But I wonder if we’re not paying too little attention to the money game as it affects the larger problems in sport, rather than problems at specific clubs. Every Man Utd fan can name the exact amount of the annual interest payment, but when we think about issues like “competitive imbalance” or “disregard for fans,” we’re still much more likely to direct our blame at individual people or general social change than at the financial structures that underlie the problems.

Love United Hate Glazer

For instance: despite the enormous, and growing, resentment felt by many fans of European football toward the concentration of power among a few elite teams, there seems to be very little serious discussion about instituting an American-style revenue-sharing system within European leagues. The obstacles in the way of doing so would be intimidatingly large, but surely not more so than the difficulties of changing human nature or reversing the flow of time, which is what we demand of ourselves when we blame David Gill or “the Sky revolution” for everything wrong with football.

The general problem in football—or at any rate the outline that seems to emerge from the most common fan complaints—is

  1. That the consolidation of wealth, especially from television revenue, among top clubs has created a competitive environment in which it is unfairly difficult for smaller clubs to advance, or for any but a few superclubs to compete for top honors.
  2. That survival for smaller clubs, and success for larger clubs, has begun to require a prohibitive investment from fans, in the form of higher ticket prices, increased tolerance of risk, and submission, in many cases, to the primacy of the larger television market.

We might add a third category, the mismanagement of clubs by unscrupulous owners. But it would really be an extension of the first two, as it’s the influx of television money that’s made clubs vulnerable to profit-seeking owners in the first place.

Museum of Communism

Is there any other practical solution to these problems but a revenue-sharing scheme? A system designed to redistribute wealth from large clubs to small clubs and from upper to lower divisions, and perhaps to place a limit on the amount of money clubs could spend on player salaries, would have (at least) the following benefits:

  1. Smaller clubs would be able to compete in the transfer market and, as a result, to challenge for trophies. This would almost certainly spell the end of the big four in England (and its variations in other countries), and lead to significantly more parity within domestic leagues and international club tournaments. Increased competition would make the game more exciting for everyone.
  2. The survival of many smaller clubs, and the preservation of their role in local communities, could be secured regardless of their performance or ability to exploit new markets: meaning that local clubs could stay local without passing missed-opportunity costs along to their fans.

Isn’t that more or less what everyone wants? And yet how many “profit-sharing is the way forward for European football” columns have you read compared to the number of “greed is destroying football” columns? Greed is not going to abandon football until the last dollar is had; so isn’t the sensible thing to advocate a system that would keep greed in check, keep clubs from being run like playthings, and ensure some competitive balance?

Before and After

The difficulties…well, the difficulties you can foresee. Chelsea will not like being told to share their television income with Kettering Town. The Premier League itself largely exists as the top clubs’ collective refusal to do so, which means that some degree of legal coercion would most likely be required to force their compliance and end the threat of future breakaway leagues. And the EU will have to be involved, since preserving the integrity of international competition will mean establishing UEFA-wide requirements for revenue sharing within national leagues. Then there’s the problem of maintaining open leagues—preserving the promotion and relegation ladders—while ensuring an equitable distribution of income; something no American league has had to contend with, and that will be fiercely complex to work out.

Revenue sharing in European football is, in other words, an unfeasible, unlikely idea. But football administrators at top levels, Blatter and Platini included, are in favor of it, and surely if the popular clamor became loud enough the smaller clubs and larger politicians would begin to take it up. It would have costs—in American sports, it’s arguably lowered the standard of play of the best teams—and complications that I am not able to estimate. But shouldn’t we at least be talking about it? Online, I see academic papers on the subject, studies, research reports…but very little discussion from bloggers or fans, even the ones most likely to object to the current system. Isn’t this a conversation that we ought at least to start?

Brian Phillips is thinking he’ll probably go for a Subcommandante Marcos-style black mask at The Run of Play.

Photo credits: hugovk; Dunechaser; cool-baby

14 thoughts on “Should European Football Adopt a Revenue-Sharing Scheme?

  1. Tom Dunmore

    One further impetus to this could well be the Webster ruling, which is likely to see salaries rise and transfer fees fall. Both those things benefit the big clubs who can afford talent (though even they might start to see the value of a salary cap), and the latter will particularly hurt smaller teams who rely on transfer revenue as a measure of financial redistribution.

  2. Davyd Trunyov

    Good job Brian, you covered all the possible angles.
    Personally i’m against revenue-sharing with exception of the TV revenues sharing system similar to the one already in place. Soccer club will go through difficult periods, some will disappear or change and this is not new. The system we have in North American sports of keeping mediocre, poorly supported franchises in place looks very artificial and designed to protect the owners and increase franchise’s value.
    In my opinion FA should play a role in distributing money though the soccer pyramid. FA governs all professional clubs, but as far a i know it’s income does not include any input from the clubs. Clubs will contribute certain percentage to FA, that money will be used to increase FA Cup purse and invested into improvement of grassroots soccer.

  3. ursus arctos

    Excellent as always.

    You will recognize this comment, but I thought it was worth repeating over here.

    The concept definitely deserves exploring and to my mind would be very much a good thing.

    The three most significant factors working against it, in my view are, in no particular order:

    1) the absence of any kind of pan-European (let alone worldwide) regulation in this regard, which leads teams like the English big four to see themselves as competing primarily with the likes of Italian Big Three, Spanish Big Two and German Big One, thereby creating a situation in which any league or country that is the first mover will find itself at a disadvantage vis a vis its competitors.

    2) Fierce competition across what the French call the “audio visual landscape” for product, which leads media companies (especially new entrants) to try to break apart collective rights agreements in the hope that they can get a marquee attraction and/or bid beyond their means for other contracts. This is at the root of the mess in Spain at the moment, lay at the root of the Kirch debacle in Germany and its ITV digital counterpart in England and can also be seen in the escalation of fees in France and the emergence of Setanta as a player in Britain.

    3) The increasing role of financial investors in football clubs, whose business models (and, more importantly, plans for servicing their often massive debt) are predicated on keeping the lion’s share of the revenue they believe that they generate (notwithstanding the fact that they have to play against somebody).

    Those factors make the issue a very hard nut to crack, as the Prodi government found when it tried to impose collective bargaining for television rights in Serie A.

    Though those obstacles, and the additional ones you describe above (with the “open league” point being especially important in my book) shouldn’t mean that we throw up our hands in despair. Incremental steps can also have positive results, and television revenue is clearly the place to start. If Platini and his team are genuinely committed to the concept (and not to the vapid platitudes that came out of Zagreb yesterday), they can start with the Champions League, and they may have actually have a better chance of doing that now that the G-14 is effectively the G-108.

  4. Jan

    Just a thought: Wouldn’t forced revenue sharing potentially make clubs from smaller nations even less competitive than they are now? I don’t know how things are handled in e.g. the Netherlands. But at least hypothetically clubs like Ajax could get a lot of money out of individually selling the rights to their games, to regain at least a small percentage of economic competitiveness.

    And then: TV money isn’t the deciding factor in every league. It plays a comparatively small role in the Bundesliga. Commercial income plays a greater role. Top clubs like Bayern or Schalke earn €20m a year from their shirt sponsors, while the bottom of the league gets between €1m or €2m. A 10:1 or even 20:1 ratio vs the 2:1 ratio clubs agreed to be the amount separating the best and worst team in the league in terms of TV money. Then there is matchday income. A big club may average 70000 per game vs around 20000 for a smaller team, which very likely won’t be able to sell as many completely overpriced VIP lounges and business seats as the big club either. So the difference should again be at least 4-5:1. Next up is the Champions League, which again pumps far more money into the three or four top clubs (only counting the best 6 leagues here) each year, compared to the rest of the league. Then you got the global market. I’m an FC Cologne fan, which can bank on a quite large fan base in Germany, but doesn’t play any part in the global marketing game unless they play seven consecutive Champions League seasons sometime in the future. Maybe I could come up with more factors separating the clubs.

    That’s an awful lot of revamping and redistribution work to be done.

  5. ursus arctos

    That’s quite an interesting take, and my immediate reaction is that you are right in that the likes of Ajax, Porto and Anderlecht would potentially be weakened by compulsory domestic revenue sharing. I don’t know how television revenue works in any of those countries either, but would think that it is at least theoretically possible that any such disadvantage could be offset to some extent by broader distribution of Champions League cash (though all three of those clubs have benefitted from the current system over the last five years).

    I think that the relative insignificance of television in the revenues of German clubs is a bit of anomaly, and one that is directly linked to the Kirch collapse. This somewhat out of date chart makes that very manifest: http://news.bbc.co.uk/nol/shared/spl/hi/pop_ups/05/business_manchester_united_in_figures/img/1.jpg

    None of which means that your points aren’t very well taken, they are. The focus has been on television and UEFA revenues because those (together with gate receipts) are the easiest ones to restructure (at least in theory, we all agree that it would be devilishly hard in practice). The National Football League in the US has a common marketing contract, but the French League’s attempt to impose adidas on all of its First Division clubs failed to survive a legal challenge, and I tend to think the same would be true of a “UEFA Properties”-type arrangement (even if one were possible, the NFL obviously doesn’t have to deal with shirt sponsors, which dramatically change the economics of any such system).

  6. Davyd Trunyov

    Few links (www.eufootball.biz is alway a good source for money football news) and one question.
    – Cabinet approves collective TV rights sale : http://www.eufootball.biz/Television/040108-Italy-collective-TV-rights-sale-.html
    – KPN throws in bid for football league TV rights (not allot of information regarding how television revenue sharing works, but based on this article and few other i accuse they have one and it is similar to the one in England)
    http://www.eufootball.biz/Television/220108-KPN-Eredivisie-TV-rights.html
    – No TV revenue sharing in Portugal
    Sport TV holds rights to broadcast both first and second division matches on a pay-per-view basis. All clubs negotiate individually with the channel.

    Q: Why should Chelsea share it’s revenues with Kettering Town, or Real Madrid with Chernomorets Odessa?

  7. Brian

    Thanks for the thoughtful replies.

    Davyd, your objections seem very important to me and may well be reasons why a revenue-sharing system would be undesirable (for the record, I’m not entirely sure whether I’m for or against the idea myself—I just think the potential benefits match up so neatly with the most common fan complaints that it’s worth a serious conversation).

    In particular when you point out that football clubs are subject to historical process and can’t all last forever, you raise a useful point, not just for clubs at the bottom but also for the balance of power at the top. Right now it looks like the structural advantages of the big clubs are so great that they’ll never be challenged, but inevitably they will be, when some development we can’t currently foresee turns the football world on its head. And it doesn’t necessarily make sense to change rules wantonly to try to control or accelerate the natural evolution of the sport. It might, however, if we were convinced that the natural evolution had gone ruinously off track.

    Also, when you ask, “Why should Chelsea share its revenues with Kettering Town?”—the answer may be that they should share them because all of football benefits from strong leagues top-to-bottom, and the rewards (for Chelsea, too) would be greater in a system with more competitive balance. But it’s a different question to ask whether Chelsea should be forced to share their revenues with Kettering Town, and I think it’s a question that has to be faced as the chances of their entering into such an agreement voluntarily are slim. Personally, I’m uncomfortable with the idea of using government to force a football club to share its profits with another football club, and I would be much more committed to the idea of revenue sharing if there were a chance of achieving it without that kind of intervention.

    The argument in favor of forced redistribution is that football clubs are so important to communities, and by extension to society, that they effectively transcend elements of the social contract, like property rights. If that’s true, then there’s a public interest in preserving them in a certain form, and that would in turn justify a greater degree of state control than currently exists. I don’t believe it, though. The whole idea of football as a transcendent aspect of the cultural order strikes me more as an outgrowth of fan passion than as a defensible position. There are many aspects of culture, even in England, that are at least as important as football, and that no one would approach with the same kind of reasoning without looking completely absurd.

    In America, if I understand the history correctly, revenue sharing was entered into voluntarily by individual teams as a condition of joining to the top leagues. They can un-join, and cease to be subject to the agreement, if they choose (though none of them would do so). That same freedom couldn’t be extended in Europe because no revenue-sharing system would work if the top clubs formed a breakaway superleague. I’m not sure how others feel about that, but it’s a sticking point in my mind, at least.

  8. ursus arctos

    For me, the essential point that David illuminates is the one of the breadth of any revenue sharing system that could be adopted. The closed nature of North American leagues (no promotion or relegation, growth through franchises awarded by the league that can easily be conditioned on acceptance of the current regime) provides a natural answer. The open nature of virtually football leagues, on the other hand, means that a line has to be drawn by the proposed system itself, wether that is the “top flight”, all “professional” teams or something even broader. No matter how broad any system is, however, there will be teams that miss out; the Catalan version of a pub side sponsored by Chico’s Bail Bonds isn’t going to be getting a slice of Barca’s revenue.

    Like Brian, I am sceptical of State-mandated regulation in this regard (only partially because I live in a State that can’t collect garbage), and therefore look to more voluntary schemes, and especially to UEFA, as I am convinced that any system that isn’t at least Europe-wide is doomed to failure. Access to UEFA competitions, on the other hand, is at least in theory the kind of carrot that could make the stick of some kind of revenue sharing more acceptable, and the expansion of what used to be the G14 to more than 100 clubs would seem to make progress in that regard more likely than it was before.

    None of which means that it will be simple, or even that it is likely.

    The cultural issue that Brian raises in his latest comment is a fascinating one, and no doubt worthy of several separate discussions. I will therefore limit myself to noting that local and regional government subsidies were a driving economic force in French football in the 1980s that was in many cases more important than either television or commercial sponsorship. Those governments were convinced that the cultural and social standing of their local football clubs did in fact merit the kind of subsidies that had previously been reserved for museums, opera houses and symphony orchestras. An essential part of the reasoning behind that conclusion was the belief that those clubs served a different part of the population than did “high cultural” institutions, and that a less elite-centered and more inclusive approach was in line with the general principles of Mitterand’s France. The supporters also were convinced that having a well known football club increased the profile of the city and region in a way that yielded tangible economic benefits. That period didn’t last (in part due to corruption concerns, in part due to changes in the political and economic landscape), and the practice was eventually banned by legislation, but I would argue that the underlying question is not as easily answered as Brian’s response (likely inadvertantly) implies.

  9. Brian

    Ursus, I’d draw a distinction between a subsidy designed to help a struggling football club and a mandate prohibiting a club’s owner from dissociating the club from a league. In the latter case, I think the bar for the civic importance of football has to be set a great deal higher; it’s the difference between giving a struggling homeowner a subsidy and passing a law forbidding him to move to a different house. I agree that if museums and symphonies can legitimately receive state assistance then there’s an argument for football clubs being able to do so as well. But it doesn’t follow for me that football clubs are therefore so important to culture that the state ought to be able to intevene drastically in the way successful clubs are run, which is why I agree with you that a voluntary, UEFA-led revenue-sharing system would be the most desirable outcome.

  10. ursus arctos

    I fully agree that enforced revenue-sharing would be significantly further down the scale of State action than subsidies*, I was only pointing out that actions along that scale were already in play.

    *Interestingly enough, the subsidies were in no way limited to “struggling clubs” or even focused on clubs in crisis. Clubs like OM and PSG, who have greater access to other revenue sources than pretty much any other club in the country, were among the primary beneficiaries.

  11. Brian

    Ursus, that’s really interesting. I hadn’t realized that there was any western European analogue to the kind of state assistance U.S. teams are routinely given to build new stadiums. The French version slightly more positive and less exploitative (i.e., less based on the threat of a team moving to another city), though.

  12. ursus arctos

    To be fair, it was a very different dynamic. The amounts in play were nowhere near as significant, and the blackmail threats that we North Americans are used to were pretty much absent and in any case different (I recall a few cases of owners threatening to sell the club if they didn’t get a subsidy, but the idea of a club actually moving was of course never broached).

  13. Keegan Reilly

    television revenue is such a big source of how well a club team will perform. The smaller team just have to stick it out and hope they can come up with a winning team to bring in the television markets.

  14. Ryan M Liddell

    Hello everyone.

    Very interesting and educated discussion. I have few points / clearifications I believe are worth hearing.
    Revenue sharing, as it stands in American leagues exists in two dimensions:

    1. That revenue generated by merchandising, marketing, advertising on an individual club basis – but consolidated under the umbrella of a league
    2. That revenue generated by the League as an individual entity, then distributed among member franchises.

    The NFL, for example, consolidates all merchandise revenue purchased through NFLShop.com regardless of which franchises sell how much. That revenue is then distributed throughout the league.
    As well, negotiated television contracts are done through the National Football League office, not individual member clubs. That revenue is evenly distributed throughout the league – regardless of appearances.

    The premiss originated with Pete Rozel. He was convinced NOT that each team diserved an opportunity to compete, but that each franchise was a representation of the LEAGUE – and said League has value. When you watch an NFL game, you are watching an NFL product. When you buy a San Diego Chargers jersey, you are buying an NFL product.

    I believe the UEFA could draw a destinction between revenue generated by member clubs’ ability to tap global markets through various campaigns i.e. replica kit sales, advertising, global tours, friendlies – some perhaps out of reach for certain clubs…and that revenue generated by the League i.e. the national television contract. A step in the correct direction wuld be to let Manchester United, Liverpool, Real Madrid, Bayern, Barcelona keep revenue generated by themselves – but split evenly that revenue derived from the national television contract. Barcelona has no more right to its piece of that pie as Osasuna. Both are member clubs in La Liga for that season. Both complete the La Liga fixture list. Both contribute to securing a television watching fan base and subsequent advertisers.

    I’m pretty sure the EPL / Sky Sports contract includes appearance fees. This disproportionally values Manchester United over Fulham. Yes, Man Utd is the marquee draw for the advertisers who contribute to the contract and watching fans, but SKY’s contract is with the EPL / FA – not Manchester United. As well, the increased revenue to clubs like Fulham is not going to prevent relegation. Any threat of the Man Utd’s of the world rebelling against “no appearance fees” should be a mute issue, as they require increased exposure to further global marketing campaigns.

    You could make the same case for UEFA competitions as well. The broadcast contracts should be negotiated with UEAF Champions League or Europa Cup – not the participating clubs.