2006 was a defining, although bittersweet year for Italian football. The Calciopoli match-fixing scandal tainted the achievements of the national team winning the World Cup, leaving Italian football suspended in a state of recovery.
The reputation of the sport in Italy has no doubt been damaged. Many remain sceptical about the degree of corruption within the Serie A league and, in addition, there is a problem with fan violence – a concern which has, in part, impacted negatively on match attendance levels. Italian football is simply not as powerful as it once was.
The continued success of the English Premier League has hardly helped, further undermining the position of Serie A in relation to the rest of the world. It is no secret that England has the most lucrative domestic league in the world: combined revenues of Premier League clubs reached a record £1.93bn last year, nearly £900m more than that recorded in Italy. And when Premier League clubs completed a clean-sweep over Italian rivals in the UEFA Champions League this year – Roma, Juventus and Inter Milan were beaten by Arsenal, Chelsea and Manchester United consecutively – Serie A could no longer argue England’s superiority was solely financial.
For the Italians, this is not a satisfactory position, and so it has been decided that the time has come for a change. With this in mind, Serie A clubs have voted in favour of a new commercial structure, in an attempt to emulate the achievements of the Premier League.
The proposed idea is to make Serie A an independent league, detached from the rest of Italian football and governed independently. It is a model similar to that currently deployed in England – where you have the Premier League and then the rest (i.e. the Football League) – although ultimately developed from the commercial approach to professional sport set by the United States (through the NBA, MLB and NFL).
Undoubtedly, the primary motive behind this move towards independence concerns the sale and distribution of television rights.
Television rights deals make up for approximately one-third of a football club’s annual income, which is why rules surrounding distribution represents such a significant and contentious issue.
Up until now, clubs in Italy have sold their broadcast rights independently to media channels. This has tended to favour the bigger clubs in the sense that a higher price can be commanded for a club with a large following, who have the biggest stars and who are likely to compete in important matches. In turn, these clubs can then better afford to buy certain players, and so on.
As a result, there now exists a cycle which has, ultimately, helped to create a greater disparity between the rich and the poor in Serie A. Last season, for example, Inter Milan sold their TV rights for a fee in excess of £85m, whereas Chievo – a comparatively smaller club, although one that still competes in Serie A – sold theirs for only £4m. A similar policy exists in Spain where the cost for the top clubs is, in fact, even greater. In 2006, Real Madrid sold their global television rights for a record-breaking £1.1bn over seven years, helping them to officially become the richest club in the world.
Yet there is a catch, at least as far as the big clubs in Italy are concerned. In exchange for these revenues, Serie A clubs currently contribute a proportion of the proceeds – ordinarily about 20% – to their counterparts in Serie B. In terms of a collective total, this typically amounts to around £90m (although it was negotiated down to £60m for the season just gone).
Because each club’s contribution is proportional to the size of their TV deal, Serie A clubs have, at least up until now, been happy to accept the policy: it did not cost particularly much for the smaller clubs and, for the bigger clubs, it was a small price to pay to ensure the continued benefits of large broadcasting deals so, relatively-speaking, everyone was satisfied.
However, since clubs in Serie A voted for the league to be run independently, the rights for those clubs in the top division will now be sold collectively. This means that, much like that which occurs in the English Premier League, media firms will buy Serie A rights as a whole, and the cumulative cost will be split almost evenly across the division. No direct compensation will be paid to Serie B.
The implications of such a change are significant. The idea is to improve the overall state of the league, financial and otherwise. In principle, a more even distribution of money will improve the competitiveness of all clubs – not just the big four of Juve, Milan, Inter and Roma – which will, in turn, lead to a stronger and more-balanced league.
In reality, however, the change offers mixed prospects.
In the short-term, this will upset the big, ‘upper-class’ clubs – such as Juventus, Inter, AC Milan and Roma – who will no longer be able to command such disproportionately high fees for TV rights. However, these clubs are likely to be able to make up for this loss in the long-term, assuming the overall and eventual impact of this new deal is as positive (financially) as is hoped.
The change will greatly benefit the ‘middle-classes’, strengthening the position of medium-sized clubs such as Genoa, Cagliari, Lazio and Parma. More money will be available to these clubs which should, in theory, allow them to compete more readily in Europe to afford the best players, invest in better stadiums and facilities etc. Having high-profile players, for example, attracts more high-profile players which, in turn, leads to increased demand, which allows for higher prices to be charged, better television rights deals, and so the cycle goes on.
The proposed change is, however, bad news for second division clubs in Italy. The majority of clubs in Serie B are already losing money: on average, clubs lost around £5m each last season, and that is after the compensatory money received from Serie A.
In terms of operating costs, these clubs have been paying wages comparable to those in the Coca-Cola Championship in England, despite the fact that average attendances are about one-third – and stadium revenues about one-tenth – of those in the English second division.
Yet, despite this dilemma, Serie A clubs simply cannot afford to continue bailing out the poorly-run business practices of Serie B. In this respect – and unless a compromise is established – the future looks precarious for Serie B clubs, particularly for those clubs that enter the division through relegation from Serie A.
In England, relegation from the Premier League has seen a number of clubs forced into administration, and that is after the provision of significant ‘parachute’ payments that are issued to relegated clubs. For all its achievements, the success of the Premier League has made it very difficult for clubs not competing in the top tier to contend financially, meaning there is now an increasingly imposing divide between the rich and the poor.
It does not take a rocket scientist to see the similarities between the circumstances that have existed in England and those now likely to impend upon Italy. And with the increasing prospect of Serie A becoming something of a new Premier League, Italy must be wary not to lead its nation’s football league too far down a similar path.
Indeed, there are a number of lessons to be learnt, most notably surrounding takeovers that have been largely funded by debt. Manchester United, for example, were not in debt before being bought by the American, Malcolm Glazer, in 2005. However, Glazer funded his takeover by borrowing money secured against the club's future earnings. A similar situation also exists at Liverpool, where George Gillett and Tom Hicks took out a £185m loan in order to finance their takeover of the club.
In the case of clubs like Chelsea and Manchester City, the situation is different, but concerning in another way. These clubs are essentially funded by interest-free loans from the personal finances of wealthy individuals (such as the oligarch, Roman Abramovich). This means that, although they have access to large amounts of money at present, there is an issue of vulnerability in terms of their operative sustainability; that is, these clubs may not be able to meet their costs should investors suddenly pull out.
Similar circumstances are imminent in Italy.
Just this week, in Rome, a Swiss consortium led by soccer agent Vinicio Fioranelli, became the latest group to have been linked with a takeover of AS Roma. Fioranelli’s group represent the fifth potential buyer to have emerged in the last year; the others including American billionaire businessman George Soros, the dynastic Flick family of Germany, pharmaceutical magnate Francesco Angelini and a group of unnamed Arab investors.
Although no bids have so far been accepted, Roma’s long-standing owners, the Sensi family, are believed to be under pressure to find investment owing to increasing debts already suffered, not by Roma itself but, by the club’s current majority owners, Italpetroli. Italpetroli is an oil storage company controlled by the Sensi family which, essentially, acts as a holding company to AS Roma. Roma’s inherent debts are currently estimated in the region of £350m, relative to Italpetroli’s 64% stake in the club. In this sense, Roma are hardly strangers to the concept of debt and takeovers.
Historically, the majority of clubs in Italy have been owned by dynastic families – such as the aforementioned Sensi family of Roma – few of which have ever intended to sell off what they see as a family tradition.
But money talks, especially in football. Given, too, that there are currently no explicit sets of laws in place to prevent a barrage of foreign investment in Italy, Roma may well be paving the way for other such clubs to do the same. Brace yourselves, Europe. The Romans are coming (again)…
The reputation of the sport in Italy has no doubt been damaged. Many remain sceptical about the degree of corruption within the Serie A league and, in addition, there is a problem with fan violence – a concern which has, in part, impacted negatively on match attendance levels. Italian football is simply not as powerful as it once was.
The continued success of the English Premier League has hardly helped, further undermining the position of Serie A in relation to the rest of the world. It is no secret that England has the most lucrative domestic league in the world: combined revenues of Premier League clubs reached a record £1.93bn last year, nearly £900m more than that recorded in Italy. And when Premier League clubs completed a clean-sweep over Italian rivals in the UEFA Champions League this year – Roma, Juventus and Inter Milan were beaten by Arsenal, Chelsea and Manchester United consecutively – Serie A could no longer argue England’s superiority was solely financial.
For the Italians, this is not a satisfactory position, and so it has been decided that the time has come for a change. With this in mind, Serie A clubs have voted in favour of a new commercial structure, in an attempt to emulate the achievements of the Premier League.
The proposed idea is to make Serie A an independent league, detached from the rest of Italian football and governed independently. It is a model similar to that currently deployed in England – where you have the Premier League and then the rest (i.e. the Football League) – although ultimately developed from the commercial approach to professional sport set by the United States (through the NBA, MLB and NFL).
Undoubtedly, the primary motive behind this move towards independence concerns the sale and distribution of television rights.
Television rights deals make up for approximately one-third of a football club’s annual income, which is why rules surrounding distribution represents such a significant and contentious issue.
Up until now, clubs in Italy have sold their broadcast rights independently to media channels. This has tended to favour the bigger clubs in the sense that a higher price can be commanded for a club with a large following, who have the biggest stars and who are likely to compete in important matches. In turn, these clubs can then better afford to buy certain players, and so on.
As a result, there now exists a cycle which has, ultimately, helped to create a greater disparity between the rich and the poor in Serie A. Last season, for example, Inter Milan sold their TV rights for a fee in excess of £85m, whereas Chievo – a comparatively smaller club, although one that still competes in Serie A – sold theirs for only £4m. A similar policy exists in Spain where the cost for the top clubs is, in fact, even greater. In 2006, Real Madrid sold their global television rights for a record-breaking £1.1bn over seven years, helping them to officially become the richest club in the world.
Yet there is a catch, at least as far as the big clubs in Italy are concerned. In exchange for these revenues, Serie A clubs currently contribute a proportion of the proceeds – ordinarily about 20% – to their counterparts in Serie B. In terms of a collective total, this typically amounts to around £90m (although it was negotiated down to £60m for the season just gone).
Because each club’s contribution is proportional to the size of their TV deal, Serie A clubs have, at least up until now, been happy to accept the policy: it did not cost particularly much for the smaller clubs and, for the bigger clubs, it was a small price to pay to ensure the continued benefits of large broadcasting deals so, relatively-speaking, everyone was satisfied.
However, since clubs in Serie A voted for the league to be run independently, the rights for those clubs in the top division will now be sold collectively. This means that, much like that which occurs in the English Premier League, media firms will buy Serie A rights as a whole, and the cumulative cost will be split almost evenly across the division. No direct compensation will be paid to Serie B.
The implications of such a change are significant. The idea is to improve the overall state of the league, financial and otherwise. In principle, a more even distribution of money will improve the competitiveness of all clubs – not just the big four of Juve, Milan, Inter and Roma – which will, in turn, lead to a stronger and more-balanced league.
In reality, however, the change offers mixed prospects.
In the short-term, this will upset the big, ‘upper-class’ clubs – such as Juventus, Inter, AC Milan and Roma – who will no longer be able to command such disproportionately high fees for TV rights. However, these clubs are likely to be able to make up for this loss in the long-term, assuming the overall and eventual impact of this new deal is as positive (financially) as is hoped.
The change will greatly benefit the ‘middle-classes’, strengthening the position of medium-sized clubs such as Genoa, Cagliari, Lazio and Parma. More money will be available to these clubs which should, in theory, allow them to compete more readily in Europe to afford the best players, invest in better stadiums and facilities etc. Having high-profile players, for example, attracts more high-profile players which, in turn, leads to increased demand, which allows for higher prices to be charged, better television rights deals, and so the cycle goes on.
The proposed change is, however, bad news for second division clubs in Italy. The majority of clubs in Serie B are already losing money: on average, clubs lost around £5m each last season, and that is after the compensatory money received from Serie A.
In terms of operating costs, these clubs have been paying wages comparable to those in the Coca-Cola Championship in England, despite the fact that average attendances are about one-third – and stadium revenues about one-tenth – of those in the English second division.
Yet, despite this dilemma, Serie A clubs simply cannot afford to continue bailing out the poorly-run business practices of Serie B. In this respect – and unless a compromise is established – the future looks precarious for Serie B clubs, particularly for those clubs that enter the division through relegation from Serie A.
In England, relegation from the Premier League has seen a number of clubs forced into administration, and that is after the provision of significant ‘parachute’ payments that are issued to relegated clubs. For all its achievements, the success of the Premier League has made it very difficult for clubs not competing in the top tier to contend financially, meaning there is now an increasingly imposing divide between the rich and the poor.
It does not take a rocket scientist to see the similarities between the circumstances that have existed in England and those now likely to impend upon Italy. And with the increasing prospect of Serie A becoming something of a new Premier League, Italy must be wary not to lead its nation’s football league too far down a similar path.
Indeed, there are a number of lessons to be learnt, most notably surrounding takeovers that have been largely funded by debt. Manchester United, for example, were not in debt before being bought by the American, Malcolm Glazer, in 2005. However, Glazer funded his takeover by borrowing money secured against the club's future earnings. A similar situation also exists at Liverpool, where George Gillett and Tom Hicks took out a £185m loan in order to finance their takeover of the club.
In the case of clubs like Chelsea and Manchester City, the situation is different, but concerning in another way. These clubs are essentially funded by interest-free loans from the personal finances of wealthy individuals (such as the oligarch, Roman Abramovich). This means that, although they have access to large amounts of money at present, there is an issue of vulnerability in terms of their operative sustainability; that is, these clubs may not be able to meet their costs should investors suddenly pull out.
Similar circumstances are imminent in Italy.
Just this week, in Rome, a Swiss consortium led by soccer agent Vinicio Fioranelli, became the latest group to have been linked with a takeover of AS Roma. Fioranelli’s group represent the fifth potential buyer to have emerged in the last year; the others including American billionaire businessman George Soros, the dynastic Flick family of Germany, pharmaceutical magnate Francesco Angelini and a group of unnamed Arab investors.
Although no bids have so far been accepted, Roma’s long-standing owners, the Sensi family, are believed to be under pressure to find investment owing to increasing debts already suffered, not by Roma itself but, by the club’s current majority owners, Italpetroli. Italpetroli is an oil storage company controlled by the Sensi family which, essentially, acts as a holding company to AS Roma. Roma’s inherent debts are currently estimated in the region of £350m, relative to Italpetroli’s 64% stake in the club. In this sense, Roma are hardly strangers to the concept of debt and takeovers.
Historically, the majority of clubs in Italy have been owned by dynastic families – such as the aforementioned Sensi family of Roma – few of which have ever intended to sell off what they see as a family tradition.
But money talks, especially in football. Given, too, that there are currently no explicit sets of laws in place to prevent a barrage of foreign investment in Italy, Roma may well be paving the way for other such clubs to do the same. Brace yourselves, Europe. The Romans are coming (again)…
