Football: 10 rules of the Business Francisco Hernández-Marcos 11 Goals & Associates Moscow March 26th, 2015 This document has been produced by 11 Goals & Associates. It is not complete unless supported by the underlying detailed analyses and oral presentation.
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Football: 10 rules of the Business
Francisco Hernández-Marcos 11 Goals & Associates Moscow March 26th, 2015
This document has been produced by 11 Goals & Associates. It is not complete unless supported by the underlying detailed analyses and oral presentation.
6) Broadcast revenue drivers: domestic league value and team distribution, and success on international tournaments
18 18
Football big-ticket sponsorships
Shirt
Source: Forbes; The Economist; other
Note: Stadium ranking is not exhaustive
BACK-UP
80
45
40
39
31
Manchester United (Chevrolet)
FC Barcelona (Qatar Airways)
Bayern Munich (Deutsche Telekom)
Real Madrid (Fly Emirates)
Liverpool (Standard Chartered)
Kit
41
39
38
38
37 88
Real Madrid (Adidas)
Liverpool (Warrior)
FC Barcelona (Nike)
Bayern Munich (Adidas)
Manchester United (Nike)
Signed Adidas for
USD 88 mill. for 13
seasons beginning
15/16
•Manchester United -and other English teams- are pushing hard by signing very profitable big-ticket contracts. The reason behind why they sell at higher price might be that the English Premier League has more TV eyeballs.
•We may infer that RM, FCB and BM must be very good at the rest of the Comercial revenue drivers: long-tail contracts, loyalty cards, summer tournaments, etc. or that part of the revenues of the players are invoiced through the club.
•Stadium’s naming rights deals are a great potential source of new revenues in the future. However clubs are reluctant to hear offers that are not large and long enough (Real Option framework).
•75% of US clubs have sold stadium naming rights. •Business much more developed than in Europe. Perhaps because sponsors have developed a better ROI framework. •Best deals in recent years. •European Football teams can and should be able to reach similar deals for their global audience.
Source: own analysis based on Annual Statements (2013/14); UEFA (2012)
ILLUSTRATIVE EXAMPLES
Ratios to revenue
44% 48%
74% 69% 69% 69% 61% 51%
65%
17% 12%
Real Madrid
FC Barcelona
Average Turkey
Average Italy
Average England
Average Russia
Average Spain
Average Germany
Average UEFA
Other Amortization Wages
•Team wages account for the most part of an average club costs •There are significant differences in cost management among clubs (e.g. wage steps) •57% of UEFA member clubs are loss-making •Cost is the main driver of a Club’s profitability. Most Clubs are loss-making because they are not enough diligent on the cost base •UEFA is concern about these issues and is implementing “Financial Fair Game” policies
0% -8% -11% 2% -8%
Net profit to revenue ratio
EBITDA: 164 M.€
EBITDA: 134 M.€
-9% -22%
23 23
Football: The rules of the Business
1) Football has social value, and business value too
2) The better players the team has (measured by market wage), the better the team does on the pitch
3) Revenue drives long-term team’s performance
4) Commercial the most important source of revenue: larger and growing faster
Strategic Digital Transformation in Football (SlideShare)
• Same Business Model, different processes • Incremental innovation • Seeking efficiency, but not always • Low risk, medium return • Suboptimal strategy, but creates value • Ex.: Most large commercial banks such as BBVA or Grupo
Santander
Performance DT
Strategic DT
• New Business Model • Disruptive innovation, but it does not have to affect the core
business if execution plan is well shaped • Seeking revenue growth • High risk, high return • Optimal strategy, but not easy to execute • Ex.: Netflix, Coursera (~Stanford), edX (MIT, Harvard)
•Revenues growth rates are not only not maturing, but accelerating •Growth is specially driven by Commercial •Matchday is maturing •The marginally decreasing rates until 08/09 are explained by the crisis
23,8%
14,2%
11,6%
3,6%
Source: Deloitte Football Money League; own analysis
•Taking only the 4 most “advanced” teams we see no pattern of exhaustion •Total revenues grow strong again after the crisis, driven specially by Commercial •Matchday is maturing
-0,7%
9,0%
9,9%
16,4%
Source: Deloitte Football Money League; own analysis
6) Broadcast revenue drivers: domestic league value and team distribution, and success on international tournaments
7) Commercial: Big-ticket contracts (dependant on TV audience) are key. Stadium naming rights will bring significant growth soon
8) Main cost driver is team wages. It determines (un)profitability
9) Business models: Survival->Factory->”Lucky”->Commercial->Digital?
10)Commercial Biz Model yet to grow, but Digital ready to disrupt like Stadium, TV and Commercial did in the past
•Strategic consulting services in technology and digital marketing for top executives
•We advise companies on digital transformation
Francisco Hernández
•MBA London Business School. • IEP University of Chicago. •11 years of digital experience. •Ex Director Online Strategy Real
Madrid C.F. •Other companies: ABN Amro,
Abengoa, McKinsey&Company. •Professor at ESCP Europe. •Lecturer in Europe, Latam and
Asia •PWC: 10 e-Business talents in
Spain.
Sonia Fernández
•MBA Stanford. •15 years of digital experience. •Ex CEO Vindico Europe. •Ex CEO Match.com Spain. •Ex CEO MercadoLibre Spain. •Other companies: Fon, Grupo
Prisa, 3i, Lehman Brothers. •Professor at OBS-UB, EOI and MIB •Lecturer at universities and in-
company training •Author of two books on
networking and social networks published in 2004 and 2001