GUEST ARTICLE on Milan’s finances from Mikael.
We rarely hear about it. We rarely talk about it. But yet finances
are the single most important thing for a football club to able to
compete at the highest level. If you do not have the money, you do not
have the best players. It is as simple as that. However, the topic of
football finance is an uncommon topic. Many people want Milan to buy the
best players even though the same people do not how the club’s
financial state is. In the following article I will try to give a brief overview of how
Milan’s financial state is. And in my opinion, it is very poor. But
there is ground for optimism if the right choices are made.
But why are Milan’s finances so poor. Let me start by giving an overview of the accounts since 2006:
NB: Expected result after tax 2011: 67,3 million euro!
As the table indicates, in the past 5 years there has been a total
loss of nothing less than 186.1 million Euros. Before I look into the
cause of the loss I will start by looking into the revenue of the club. Every year Deloitte publishes their football money league report
where the top 20 clubs in football are listed. The figures listed in the
table above are based on the annual reports from AC Milan. The club’s
financial year follows the actual year whereas the Deloitte report
follows the actual football season year. In order to compare Milan’s
revenue to other clubs I have decided to use the Deloitte report.
The report establishes three different categories of revenue:
Broadcasting, Match Day and Commercial. I will go through the three
categories in the following.
Broadcasting
“Broadcast revenue includes revenue from both domestic and international competitions.”
As the table indicates Milan have a somewhat reasonable income when
it comes to broadcasting. In last season, the club’s revenue in this
area was 108 million euro. Even though this is the largest revenue
contributor it is actually a quite massive drop from previous years. The
year before it was actually an impressive 141.1 million. The drop in
this area has a simple explanation as Serie A in the summer of 2010
began to have collective broadcast deals. Before, the clubs were able to
negotiate their own TV-deals. Milan along with Juventus and Inter were
punished for this change as at it means a decrease in TV income.
However, if it is taken into a European context the club was in sixth
place regarding broadcasting income. This is not bad at all considering
the club was beaten at an early stage in the Champions League. Next year
this area should be higher as the club went through to the
quarterfinals of the tournament. Out of the 108 million 25.8 million was
from the Champions League. As long as Italy has the collective
agreement the only possible way to increase broadcasting income will be
through Champions League improvement.
Commercial
“Commercial revenue includes sponsorship and merchandising revenues.”
Last season commercial revenue beat all records at the club and in
Italy in general. Milan’s revenue was no less than 91.8 million Euro. It
was a significant increase compared to the previous year where it was
63.4 million Euro. When it became clear that Milan was about to lose a
large amount of its Broadcasting income the club decided to focus on the
commercial area instead. The club signed a deal with Infront who
changed the sponsor strategy of the club with less sponsors but more
lucrative deals. This has resulted in the 91.8 million Euro seen last
season. In fact Milan was only beaten by four other clubs which is
actually quite impressive. However, there is a long way up to the giants
at top where Bayern earn an astonishing 178 million Euro. Even though
Milan is at the top of the table in commercial revenue there is still a
lot of room for improvement. Especially compared to the shirt sponsor
deal with Adidas where Milan gets 13 million Euro a year. This may seem
as a huge number but is nothing compared to the 30 million of Real, 25
million of Bayern and 24 million of Chelsea. All clubs who also have
Adidas as shirt sponsors. Other clubs such as Barca and United get 30
million from Nike while Liverpool also receives 30 million from Warrior
Sports. In this light it is not reasonable that Milan only receive 13
million. When looking at the other shirt deal with Emirates it does not
get better as Milan receive 12 million each year from the Airline
Company. Even though it is the best in Italy it is not near close to the
best in Europe where Barca (30), Bayern (25), United (24), Liverpool
(24) and Real (20) receive much more than Milan does. There is really
room for improvement in this area. However, as the club does have long
term deals with both Adidas and Emirates there will not be any sort of
improvement in the near future.
Match Day
“Match day revenue is largely derived from gate receipts (including season tickets and memberships)”.
Milan’s match day revenue is where the club is really suffering
compared to the elite of Europe. Match day revenue was only 35.6 million
last year and – even though it was an increase of 4.3 million- the club
has many challenges in these areas. The main reason why Milan does only
earn so little on match days is the fact that the club does not own its
own stadium. As everybody knows the city of Milan owns San Siro. On top
of this, the stadium is in poor condition and does not have the
facilities to host sponsors and VIPs etc. For the same reasons the
stadium are mostly half full as fans are not presented to the pleasant
facilities a modern stadium must have. Therefore the club must have its
own stadium in order to improve the revenue and being competitive with
the best clubs in Europe. However, the club sadly has not expressed
desires of any plans of a new stadium in the near future. Instead Milan
and Inter are currently renovating the San Siro in order to make it
eligible for the 2016 Champions League final. It should be said that
Barbara Berlusconi has expressed her desire to build a self owned
stadium for the club. Juventus have already built a new stadium and they
will profit greatly from this in the future. After looking at the income of the club the following will look into
the expenses of the club. The numbers used are from the annual reports
published by the club.
Wages
There is one main reason why Milan is in so big financial
difficulties and that is the incredibly high wages the club pays to its
players. Last year the clubs wage expenses was no less than 192.8
million Euro. This is an incredibly number considering that the revenue
is only 235 million. This means that 88% of the Milan’s income is used
on wages. In fact, last year Milan was the club which paid the third
highest amount to its players and staff only surpassed by Barcelona and
Real:
If you take the revenue into consideration it is just poor management
that the club pays so much to its players. Clubs like Real and Barca
pay more to their players but their revenue is about twice the amount of
Milan’s which means that they can afford to pay the wages they do.
According to the Gazzetta Milan’s players are paid 160 million Euro excluding bonuses:
| Player Name | Position | Age | Yearly wages (€) |
|---|---|---|---|
| Zlatan Ibrahimovic | Forward | 30 | 9,000,000 |
| Mathieu Flamini | Midfielder | 28 | 4,500,000 |
| Gennaro Gattuso | Midfielder | 34 | 4,000,000 |
| Philippe Mexes | Defender | 30 | 4,000,000 |
| Alexandre Pato | Forward | 22 | 4,000,000 |
| Robinho | Forward | 28 | 4,000,000 |
| Thiago Silva | Defender | 27 | 4,000,000 |
| Mark Van Bommel | Midfielder | 35 | 3,500,000 |
| Gianluca Zambrotta | Defender | 35 | 3,500,000 |
| Massimo Ambrosini | Midfielder | 34 | 3,000,000 |
| Antonio Cassano | Forward | 29 | 3,000,000 |
| Clarence Seedorf | Midfileder | 36 | 3,000,000 |
| Kevin-Prince Boateng | Midfielder | 25 | 2,500,000 |
| Alessandro Nesta | Defender | 36 | 2,500,000 |
| Ignazio Abate | Defender | 25 | 2,000,000 |
| Christian Abbiati | Goalkeeper | 34 | 2,000,000 |
| Alberto Aquilani | Midfielder | 27 | 2,000,000 |
| Daniele Bonera | Defender | 30 | 2,000,000 |
| Urby Emanuelson | Midfielder | 25 | 2,000,000 |
| Taye Taiwo (left in January) | Defender | 27 | 1,800,000 |
| Marco Amelia | Goalkeeper | 30 | 1,500,000 |
| Luca Antonini | Defender | 29 | 1,500,000 |
| Antonio Nocerino | Midfielder | 27 | 1,500,000 |
| Mario Yepes | Defender | 36 | 1,000,000 |
| Filippo Inzaghi | Forward | 38 | 800,000 |
| Stephan El Shaarawy | Forward | 19 | 500,000 |
| Flavio Roma | Goalkeeper | 37 | 500,000 |
This is far too much and means that the club has to slash wages in
order to get near a healthy economic shape. Bear in mind that when the
Gazzetta is stating Zlatan is earning 9 million Euro it is his net
income. It actually costs Milan 18 million Euro to pay Zlatan his 9
million euro annually.
Amortization
Another important expense for the club is player amortization: This
is actually where it can be seen what the club spends on transfer. When
football clubs buy players the price of a player does not only affect
the accounts the year he was bought. Let me give an example: If Milan
were to buy Tevez for 20 million euro on a 4 year contract the 20
million would be divided by the length of the contract (4 years). This
means that the transfer is affecting the accounts with 5 million a year
for 4 years (20 divided by 4). In Milan’s case this post is not as high
as the club is not known for spending big on the transfer market. Simply
because cannot afford to spend.
Debt
Another concern for Milan is the fact that the club has gigantic dept
compared to the revenue the club generates. Last year the dept was
298.8 million Euro. Half of this was bank loans while the other half was
other sorts of loans such as factoring etc. This is actually a great
problem for the club as it means it cannot afford to borrow the fund
necessary to buy the stadium which is so important in order to increase
revenue.
With the expected loss of 67 million euro in 2011 it is to be seen
whether Berlusconi will cover the loss once again or the club must
obtain even more debts.
Financial Fair Play
Many people might ask: Why is it important to understand the club’s
finances as Berlusconi have all the money in the world to cover the
expenses? Well yes, it is true that Berlusconi always has paid when the
club has had losses as it was evident last year where Berlusconi covered
a massive loss of 70 million Euro and in 2011 he covered the 67,3
million Euro. However, from this summer on it is no longer possible for
Berlusconi to cover these losses as UEFA has introduced its Financial
Fair Play which basically means that the club no longer is allowed to
receive his money. From this summer on it will no longer be possible for
wealthy owner to spend big as the clubs must be able to generate the
revenue necessary without help.
There is however a starting phase which allows Berlusconi to cover
losses up to a combined 45 million euro over the next three years. But
from 2015 the owner must only cover a loss of 30 million euro.
This means that Milan is in danger of being banned from UEFA competitions if they do not comply with the rules.
Some people might say that Berlusconi could just make a massive
sponsorship deal with Milan in order to get around the rules. But UEFA
has to approve the accounts and if the accounts show that a sponsor deal
is above market value it would not be permitted. For instance, Milan’s
biggest sponsor is Adidas who pays 13 million euro. If Berlusconi would
suddenly give a sponsor deal worth 30 million, UEFA might not allow this
as it is well above the market value.
The Future?
As you can imagine Milan faces many challenges in the future as the
financial state of the club is very poor compared to the major clubs in
Europe. If Milan is to be competitive in Europe the club must be able to
increase revenue by building its own stadium as well as getting better
sponsorship deals. Furthermore the club has to slash the wages of the
players as the club pays to high wages compared to the income. It will
be very interesting to see what the club will do in order to meet the
demands of FFP in the future. One thing is certain. Milan has a tough
climb ahead of them.
sumber: http://www.rossoneriblog.com/2012/05/04/milans-financial-state/
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