May 05, 2021

Webinar Thinking Football: Economic Impact of Professional Football (PART 1)

 

The economic impact of Professional Football under debate

 

The debate session on the reality of Professional Football continued on May 5th, with a special focus on its economic impact. Subjects such as the economic vitality of a club participating in the UEFA Champions League or the professionalization that has been experienced in Liga Portugal in recent years were under discussion, among other topics, moderated by the Assistant Director of the Record newspaper, Sérgio Krithinas.

The first session brought together Miguel Farinha, EY partner, Telmo Viana, Financial Director at Liga Portugal, António Gaspar Dias, President of FC Penafiel and André Varela, Financial Director at Sporting CP, who analysed the figures of the Professional Football Yearbook and the impacts of the last season, marked by COVID-19.

This was one of several webinars to be held until November 2022, the date of the Thinking Football Summit, which aim to analyse current issues of Professional Football and put into perspective this great event that will be hosted at the Super Bock Arena - Pavilhão Rosa Mota, in Porto.

 

IMPACT OF THE PANDEMIC

Miguel Farinha, EY partner

"It is a pleasure to be talking about the 4th Yearbook, a result of an already lasting partnership with Liga Portugal. This is a particularly atypical year, given the pandemic situation we are currently facing, which is having a huge impact on football. There are four key figures I'd like to highlight."

"Firstly, the GDP impact of around €494 million, which represents an 11% reduction compared to the previous season. A decrease that is very much related to the pandemic, and to the drop in revenues, ticket sales, corporate spaces, among others."

"Then we have a revenue drop to €734 million, compared to the approximately €850 million from the previous season. This represents a significant drop, which can be explained by having only one club competing in the Champions League, as opposed to the two teams in the previous season. It directly represents 60 million euros less due to this simple fact, and that has an impact on the final accounts.

"The number of people working in the football industry has also increased significantly, in an absolutely atypical year, to 3,160 employees, which represents a growth of around 20% compared to the previous year. If the Big-3 teams were already doing this, this also shows an effort to strengthen and structure the "smaller" teams, with greater investment in various areas. It is a very significant figure."

"As a final point, the impact of taxes over the past year has also been noted, at around €142 million, representing a decrease of around 5% compared to the previous year, with VAT, Social Security and personal income tax being the most significant items.

 

António Gaspar Dias, President of FC Penafiel

"The impact of the pandemic was felt all over the world, in society, in all business sectors and of course in Football. It represents an undoubtedly brutal and dramatic impact on our ordinary income. This impact was felt in all Sports Societies, from Liga Portugal bwin to Liga Portugal SABSEG".

 

André Varela, Financial Director at Sporting CP

"It is very significant indeed. When we talk about football, we are also talking about a sport made for fans, so it is strange to have stadiums without their presence. Regarding Sporting CP, Gamebox sales, advertising and sponsorships were strongly constrained, which clearly had an impact on our operating income. We had to take action and look for alternative ways, as was the case with our online store, which, on the other hand, saw a growth in demand that allowed for an increase in revenues. But basically, clubs have had to sell assets and have lost some competitiveness with this pandemic context, given that, without having to resort to funding, this is the other way to search for any capital to cope with this period. And the fact is that selling players is normal, especially as this is an essential step to keep finances in order, as well as to the competitiveness of the clubs themselves, with this process having to be allied to a strong investment in youth training, something we have been able to do very successfully at Sporting CP."

"In the case of academy football, the medium-term impact is still difficult to account for. We have tried to mitigate that effect, but in fact, stopping competitions at such young tiers involves the need to skip some steps. I believe that strengthening investment in these youth tiers can play an important role here and we will do everything we can to mitigate these effects. This season we have been able to launch quite a few young players to the highest tiers, which proves that we are doing a good job in that regard."

 

PROFESSIONALISATION OF FOOTBALL

Telmo Viana, Financial Director at Liga Portugal

"It was undoubtedly unthinkable 20 years ago that we would reach the level we have today, an absolutely exceptional level of professionalisation. It is pleasing to see that Sports Societies, unlike a few years ago, do not just focus on the game within the pitch, the players and the refereeing officials, but rather all that is involved, everything that improves the spectacle, everything that creates talent, everything that generates credibility and aggregation, should also be part of the game."

"There have been many developments in several areas. Liga Portugal has made a big investment in the training and qualification of its agents, for example through its post-graduate courses, in order to enable all sports agents to develop a much more interesting work."

"The current board of Liga Portugal, on yet another occasion that aggregates all the Sports Societies, created the Working Groups in 2015-16, allowing all the Sports Societies to aggregate around specific themes. Only a small number of Sports Societies attended these sessions in the beginning, but today we are witnessing a very high incidence rate: out of 34 Sports Societies, 26 actively participate in all financial decisions".

"This means that there has been an improvement in all the clubs. The Sports Societies with a more robust structure were just required to align some details, whenever necessary, but the other Sports Societies, namely the Liga Portugal SABSEG ones, were gradually adjusting themselves to stay at the forefront in various aspects, realizing that this way could bring them positive results in the promotion of the spectacle and of their own brands. Thanks to the persistence and resilience of those who manage the Liga and those who run the Sports Societies, it was possible to achieve this growth today, as a result of the entrepreneurial vision required within the Sports Societies."

 

António Gaspar Dias

"Professional Football for some time now, has been one of the sectors that has contributed most not only economically, but also in terms of employability and professionalisation. All this results from self-regulation, imposition and constant monitoring, and rightly so, that Liga Portugal imposes on the Sports Societies, of the two competitions, to comply and be increasingly professional.  If FC Penafiel have better and more professionals, I'm sure they will be increasingly better in all aspects, whether in football or in other activities. This is a result that ends up professionalising and making competitions more and more appealing. There is no comparison between the Professional Football of today and ten years ago. The improvement is clear."

"I hope that the heads and shareholders who are in charge of the Sports Societies will sustainably progress internally so that we can all grow in Portuguese Football."

 

COST REDUCTION

André Varela

"It's a challenge. It is difficult to make that adjustment and take that decision, especially by the public opinion and supporters. But then there is a conflict between the rational and the emotional here. We have managed to put reason over emotion many times and this has led to positive results, which is very gratifying. And of course those adjustments have to be made, in a somewhat cyclical way."

"And we did it. We are a country that develops talent and we have some of the best players in the world, and the proof is that yesterday three Portuguese players qualified for the final match of the UEFA Champions League. Sporting CP has that know-how, and is always looking to develop players and nurture our national teams. So in this training process, it's very important for the players to feel that their individual development and performance component outweighs the team's ranking."

"Looking at Football as a business, it is clear that we want to generate profit and revenues, but the main objective is not to generate money, but to win titles. Sport is good for Portugal and pushes the country into the international scene, something that the political authorities appreciate. But then I think there is a lack of support, and that has become clearer in this pandemic context. We do not want to set up an exemption system, but neither do we want to be excluded, as is the case with the VAT situation. After almost a year and a half with the stadiums closed, it would be a good measure for the recovery and to not lose the quality of our product."

"As for the work developed in the Working Groups, I can only stress how great it was. The clubs are united, in convergence, and have done everything in defending Football!"

 

THE IMPORTANCE OF QUALIFYING TO THE UEFA CHAMPIONS LEAGUE

André Varela

"It is indeed a game changer. Not only for Sporting CP, in particular, but also for all clubs. If Portuguese Football wants to be competitive it has to be present in UEFA competitions and, in particular, in the Champions League. And for that, competitiveness is needed."

"The world of Football changed about six/seven years ago when TV rights values skyrocketed. And here I include UEFA's revenues, where the value of the prizes has increased significantly. In this sense, it was very important for Portuguese football to be able to enter the Big-5 list and overtake France's fifth place that currently occupies, and it was very important, in the middle of last season, for Portugal to have secured two direct entries in the Champions League and one in the play-off round, as it increases internal competitiveness.

 

Miguel Farinha

"It is an inevitability that clubs live off the money that comes from the Champions League. The 155 million euros have decreased to 95 million euros. It bears a gigantic weight and is an absolutely essential amount."

 

CENTRALISATION OF TV RIGHTS

Miguel Farinha

"There is one prior point, when António spoke about Penafiel FC. The ticketing revenues are not very significant for the smaller clubs, probably in terms of effective value, but in terms of percentage values, they end up being very significant, because if we consider that the teams that finish from the 7th to the 18th place in the Liga Portugal bwin and the entire Liga Portugal SABSEG, 50% of the clubs' revenues come from television rights. It is the most significant aspect of them all and fortunately the one that has not suffered a great impact during this whole process. But all the rest about these clubs derives from ticketing, merchandising. And last year, the clubs that in the remaining 10 matchdays of the competition did not face the so-called 'Big 3' had a massive negative impact compared to those that were able to play them in the previous rounds."

"Answering the very specific question, Liga Portugal, who has done a fantastic job in that regard, has to deal with the well-known process of centralising television rights in order to generate more revenues. This is essential for Football, even for the competitiveness of the League, because it is very important that every club becomes more powerful. This will require more money and more investment from the clubs and the obvious way to achieve this is through a better redistribution of television rights. I am not implying taking from the bigger clubs and giving to the smaller ones. We're talking about having a centralised sales process that can maximise the football product and thereby be able to give more revenue to the smaller clubs."

 

Telmo Viana

"Studies do exist regarding this matter, and we believe that together we will be much stronger. These values include other contracts, such as sponsorship or television deals, and there are several assets that are also included. We can only conclude that in the future, with the centralisation and work done well, all together we can achieve a better share for all, which is what is intended."

 

André Varela

"Without knowing the rules of the game, it is clearly a risk. But we also see this as an opportunity to get a bigger share. We look at the example of Spain, which was a success, as all the clubs managed to increase their revenues as well as the competitiveness of the league itself."

"But it's going to be a big challenge, partly because the operators have also centralised themselves and ended up all becoming Sport TV shareholders. Our big upside is in the International market, and for that we have to be competitive, because that is the only way International Football will look at us with attentive eyes."

 

FISCAL FRAMEWORK IN PORTUGUESE PROFESSIONAL FOOTBALL

Telmo Viana

"Professional Football has extreme relevance, which materialises not only, but also, in job creation and contribution to the State."

"Today we carry out salary checks four times a year. Virtually all Sports Societies were able to demonstrate salary compliance even before the first notification. Naturally, all these procedures that we have undergone were fostered by the transition of the clubs' designation to Sports Societies in 2013, a turning point that allowed us to move towards better self-regulation, promoted by the Sports Societies that meet every year to improve their own self-regulation measures. Nowadays we see, at the end of June, the licensing for the following season, where Sports Societies have to show compliance with a high set of requirements."

"We don't want to be treated differently from others, we fight for equality, but just look at the fact that VAT on a spectacle like football is still at 23%, with the implications it brings. We need to have the best assets in addition to the ones we already have. We need to establish competitive frameworks, support, enhancement, to ensure that these major assets feel attracted to play here."

"These are all issues that we continue to look forward to, with letters addressed to the rightful authorities, with public stances taken in a constructive way, but undoubtedly football, and this business, has a great notoriety and compliance - today, we comply with every aspect of the UEFA licensing process - but we have not seen a set of real policies that promote this business, on the contrary."

"We will, along with the Sports Societies, work to ensure that football is recognised as it should be, as an equal in compliance. This is something that the Sports Societies do not want to lose sight of, they want to be supported as they should be supported, in their endorsement, given the value they have at state level."

 

António Gaspar Dias

"The Sports Societies, more or less, have made use of what the State has provided... It has already been said how important the Football industry is for the GDP and for the economic impact. I think the State "has forgotten" the brutal losses that Professional Football had due to the pandemic. Everything that Football has to pay in terms of taxes was not reflected afterwards in the aid given by the State. I think we should have been approached differently."

"I think we have to look at the evolution that Football has had in Portugal in recent years. If we want more professionalism and make the Football product marketable and appealing at an international level, we have to bring in better professionals, which implies higher costs and an increase in salaries. It is very complicated to ask for the best of both worlds. First, we have to look at the revenues and how we can increase them, and then adjust the wage bill and costs. We can't possibly bring Cristiano Ronaldo without having a pay rise afterwards."

"In advance, I would like to thank Liga Portugal and EY for making this yearbook. Perhaps we would not be here talking about these indicators if this compilation of data were not made. I think that the salary increase in recent years is just a natural consequence of the professionalisation and competitiveness of football. We have to look at the revenues and maximise the opportunities. If we can adjust them to the current juncture, in this case of pandemic, it would be great to successfully overcome this ongoing tragedy.

 

Click here to access the summary of the second part of the webinar

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