Globalization has changed football. What only used to be only enjoyed and savoured in and around a few countries has been spread far and wide to all parts of the world with fanbases thronging to see their favourite superstars play week in week out or midweek in case of Champions League football it has no doubt shaped what people now call it as “modern football”.
Sporting-wide a change from “boring” defensive football to fast paced attacking football is being implemented. Owners want their teams not only to win but to play attractive football that “wow” crowds and bring in more supporters and keep them entertained. That is how football is being propositioned and marketed.
The advancements and changes have not only affected on the field but it has caused huge off the field changes as well. Clubs are now seen as whole-scale business who pay unheard figures to their players thanks to huge commercial revenue the club earns
In this article we will take a 3- step approach in the form of
1. How clubs make money
2. Milan’s latest financials
3. How Milan can improve in these segments
Please note that the data presented here is based on the season 2018-19 as the club is yet to release data based on this season as it is not over yet. So Here we go …
1. MATCHDAY INCOME
The most basic revenue stream of all clubs is the matchday revenue or the ticket sales that is generated through fans attending the match in the stadium. The San Siro has been home to both to A.C.Milan since 1925 and for Inter since 1947. The stadium belongs to Milan muncipal corporation since 1935 and both clubs have been it’s tenants ever since. San Siro has a seating capacity of 80,018 making it one of the largest stadiums in world football and the largest in Italy. In the prosperous days Milan fans used to pack San siro and matchday income was very high. Season ticket subscription was high and fans use to throng in queues to see the best players win trophies
Current Situation
Even though Milan has the second highest average attendance (52~54,000) Milan only made €34 Million while Inter made €47M and Juventus made €71 million even though the Allianz Stadium has a maximum capacity of 40,000 only. Milan made €5 Million less from 17/18 due to dynamic ticket pricing strategy to bring in more fans to the stadium.
Not to mention how Milan do not own the stadium and have to pay rent to the corporation reducing the income further and putting a burden on the finances of Milan.
How Milan Can Improve
Ever since the Chinese came in, serious talks with the municipality and mayor of Milan have been underway for a new stadium which would once again be shared between the 2 Milan clubs. While San Siro is a monument for many great players and moments for European football if not Italian football recent studies have suggested how it is also unsafe due to wear and tear of the structure since the last 90 years and is not suited to modern requirements. With Roma constructing it’s own stadium and many clubs building stadiums (Tottenham) clubs have realised the need for a structure to not only host games but also become a commercial spectacle.
2 new designs have been present by a joint council of experts consisting experts from Milan and Inter and the muncipal corporation and mayor Sala is edging towards an agreement towards the spring which was slowed down by the corona pandemic in Italy.
2. COMMERCIAL
Expanding their brand, clubs now have their logo on everything people use everyday. From bags, watches, cellphone back covers, headphones, clothing, accessories and what nots. All available on the official Milan store at a price and purchased by people all over the world online thanks to globalisation and its multiple features. With mulit-national corporations expanding their brands to multiple corners the revenue and size of the contract with clubs increase.
Various commercial partnerships include naming rights for stadium like how Allianz paid Juve to name it’s stadium after the company.
Another commercial partnership is with kit sponsors. Milan currently work with Puma who offer Milan €15 Million + 20-30% bonus dependent on how much jerseys get sold to the public.
We also have other sponsors like Bioscalin, Fly Emirates, RO Investing, Skrill etc involved in various sponsorships with the club.
Current situation
Milan earned €76 Million in the year 2018-19 from commercial sponsorships which is a €2M loss from 2017-18. This can be attributed to the fall in sponsorships of the club due to fall from grace. This is in contrast to Juve’s 187 Million and Inter’s 166 Million.
Milan earn €15 Million from Puma which is the second shirt sponsor in Serie A but it still nowhere close to Juve’s €51 Million.
How to Improve
A lot of improvements are dependent upon Milan’s on-field performances. Brands will always look to side with teams that have more pull with the fans to make the brand’s more famous. Once Milan return back to the top it will be easier to attract investors for the club.
Some of the improvement lie on the negotiations and social networking skills of current C.E.O Gazidis. He should be able to convince multi-national corporations and big investors that Milan is still a attractive avenue to invest.
3.PRIZE MONEY
Winning trophies is the dream of everyone associated with the club. The prestige, the bragging rights and the rise to fame all accompany winning a trophy. Perhaps the most prized aspect of Milan is it’s exploits in the European scence where it has won 7 UEFA Champions League which to date remains as the highest number of trophies won only behind Real Madrid.
Every year we can see how club not fighting for the title always end up in a war to qualify for the champions league. Although for some clubs winning a champions league would be a miracle they still participate year in year out because the qualification towards the highest club competition brings in an enormous amount of money that makes a lot of difference.
The Europa league althought not as lucrative as the champions league brings in a fair amount of money into the club. Still it presents an opportunity for clubs to come away with extra money along with the money won in the league.
Milan’s Current Situation
Ever since Milan got kncoked out by Atletico Madrid from the champions league in 2013, Milan have qualified for Europa League only twice. Hence Milan’s prize money from both campaigns is a meager €29 Million due to non participation. Meanwhile Juventus have earned €481 Million, Roma €285M and Napoli €188 Million. Even Inter earned €54 million from their Uefa Champions League group stage exit which in itself shows how much Milan are missing out.
How To Improve the Situation
Well it’s not rocket science to understand that the only way to win more prize money is through efforts on the field. Milan needs to be competent on the pitch so that Milan can win more prize money and bankroll high budget transfers.
4. SALE OF PLAYERS
The most easiest and a quick way of making money for any club is to sell their players. Clubs have seen windfall gains (high profit) through player sales which helps to balance their books as well fund their transfer market. For example Juventus who bought Pogba for a free transfer sold him back to Manchester for €105 Million and made an enormous €105 Million profit.
Milan’s Performance
Milan last season only made a profit of €12M from the sale of players through Locatelli’s sale to Sassuolo. Locatelli was a academy player and hence gave Milan a pure gain of €12M.
In the last 5 years, Milan have only collected €55M profits from the sale of players. This is compared to Juventus making €417 Millions and Roma €391 Million.
How to Improve
Selling players is an important part of infusing capital into the clubs coffers and replenishing a depleted budget to buy players. You can see how in the last few years all top teams have sold their best players to finance other transfers and balance the books
1. Real Madrid = €100 Million for Ronaldo
2. Liverpool= €150 Million for Coutinho
3. Barcelona= €222 Million for Neymar
4. Juventus= €100 Million for pogba, €40 Million for Moise Kean
5. Inter = €50 Million for Icardi
6. PSG= Guedes €40 Million, Pastore €25 million
7. Atletico Madrid= Griezmann €120 Million
For a club like Milan it is important that they sell low and buy high. Recent reports of Bennacer having a release clause of €50M surfaced via respected journalist Mohammed Bouhfasi. If activated it could result in Milan making a whopping €34M profit on the player. However it would result in a dip for Milan on the field for which Milan would need able scouting and a strong sporting area. With Rangnick rumours growing stronger Milan can make sure that no matter who leaves a cheaper replacement is on the way. As shown by the clubs above selling your best player and replacing them with equally good players would be a balancing move for Milan on and off the field
Milan also need to strengthen its youth academy. As shown by Ajax, Dortmund, Porto, Benifica youth players come to the club at no cost and selling these players comes as a windfall gains for the club. So far the 2019 summer window was financed by selling cutrone for €22 Million to wolves. More quality would make the bids higher like how Juve got €40 Million for Kean.
5. TV DEAL
Keeping the most obvious for the last, TV dealings is the what matters the most and has helped in forging a wedge between the Premier League and other league in tv revenue. With almost every houshold owning a television and match day telecast viewing increasing day by day clubs make a huge chunk of their revenue today from television revenue.
Current Situation in Milan
Italian Serie A like English Premier Legaue have sold their rights collectively to Sky Sports Italia and DAZN.
According to Forbes the current valuation of the deal is around €937 Million. This has made Serie A to be 5th in terms of tv deals with English Premier League earning around €3 Billion.
Serie A TV money is distributed as follows: 50% equal share; 30% performance (15% last season, 10% last 5 years, 5% historical); and 20% profile (number of supporters). The new 2018/19 deal increased the equal share from 40% to 50% and placed more emphasis on recent performance.
Milan with this split recieved €77M which Juventus recieved €85 Million.
How to make more money
Being a collective tv rights deal, it is not in the hands of Milan regaridng the sale of the rights. Gazetta Dello Sport reported that Spanish company Medipro is keen on taking over Tv Rights deal and offered €1.4 Billion for the rights. Negotiations between the group and the FIGC is going on as we speak.
The gap between the premier league and other leagues are phenomenal. You can see how even clubs like Atletico Madrid make less money than a relegated Fulham. It would be quite a task to reach upto the standards of the premier League who under the guidance of Richard Scudamore went through a whole rebranding excperience in 1992 and to this day.
CONCLUSION
In a report by Auditing firm KPMG Milan is the only top club that saw its value fall in the last 5 years by 3.5%. A lot of the avenues could see a rise in money making if Milan play better and start qualifying for the champions league once again.
Milan have worked a lot on shedding unwanted salaries. At the end of this seaosn Milan will have offloaded salried of Biglia and Bonaventura. Milan also look to raise budget for the upcoming coach with sales from Kessie, Paqueta and Calabria. If option is excercise by Sevilla, Milan will also be making a pure capital profit of €23M. Milan are once again trying to climb up the ladder of the money league parallely to the league standings.
The Milan Blog 