Monday, 29 January 2018

There’s something seriously wrong with Football Economics

According to financial information collated by the accountants Deloitte, the combined turnover of the top 20 football clubs in the world (Europe) is GBP6.97bn or circa HK$73bn. Manchester United was identified as the top club in terms of revenue with a figure of GBP581m (say HK$6bn).  


On the face of it these look like quite large numbers but are they really? Personally I think they are surprisingly small. Arguably Manchester United is one of the world’s best known brands up there in terms of recognition with the likes of Apple, Amazon, Alibaba, etc and yet its turnover figure is miniscule in comparison, as illustrated by the wafer thin bar in the chart below.


Considering the global reach and appeal of both football and the top brands such as Manchester United not to mention the ubiquitous TV/media coverage, the amount of money actually being generated by the clubs is rather pathetic. And of course most of these clubs have huge debts and make a financial loss every year. Operationally the loss can be (at least in part) attributed to the fact that an unsustainable amount of revenue is going on player wages. If the stories about the salary being paid to Sanchez at Man Utd are true, then he alone is getting over 4% of the club’s entire revenue. It’s not unusual for the playing staff alone to account for significantly more than 50% of turnover. Some of the recent transfers have also been ridiculous. My own club Liverpool recently paid GBP75m for a defender (a very good one it has to be said) which is 20% of the club’s annual turnover.

I’m not blaming the clubs by the way. They have little choice in paying vast sums of money to players and their agents. It’s market forces and if they want to stay at the top, they simply have to fork out ever increasing astronomical amounts. The problem as we know is that many fans are being priced out of the market altogether.

The main point I am coming round to making however is that there are even bigger amounts of money being made out of football that never goes near the clubs.

And I’m not talking about the Leagues or even the Governing Bodies such as FIFA. The Premier League generates a lot of money by selling the TV rights (GBP8.4billion between 2016-19) but a large proportion of that goes back to the clubs and contributes to the turnover figures above. FIFA generates money from the World Cup but that gets recycled into football activities and programmes mainly through Member Associations. So in these cases the football ‘product’ is being used to fund football – I have no problem with that.

The problem I have is that the organisations making the most money from football invest nothing in the ‘product’ of football or the infrastructure of football or give much back. They use the ‘product’ of football as a cuckoo uses another bird’s nest. I’m talking about betting companies.

The global football sports betting market is worth HK$7.8trillion (US$1trillion) per annum. That’s US$ 1,000,000,000,000 or not far short of the GDP of Australia. How much of that goes back to the clubs or football in general?

Just one of the many UK betting companies Bet365 had a turnover last year of around four times that of Manchester United and made a healthy profit margin of over 20%. How football clubs would like margins like that!

The Hong Kong Jockey Club generates revenues from football betting (not including horse racing) in excess of the collective turnover of the world’s top 20 football clubs. It’s an astounding amount of money but at least in this case a large percentage of the profit generated goes to good causes (and the Government in tax). Similarly, in England 1% of the ‘pools’ (national tote) money has been used to fund the Football Foundation and this investment has helped to transform grassroots football.

I’m not name dropping but in December I was having lunch with FIFA President Gianni Infantino and he was rightly bemoaning the fact that football sees very little of the money generated from commercial football betting. He mentioned that in France there is legislation to ensure that 1% of betting turnover goes to the sport that generates it. If this model was followed internationally and if my maths is correct it would result in an additional US$10 billion investment back into football. Imagine the power of this money to change people’s lives through social responsibility programmes, grass roots football initiatives and even in tackling the problems caused by football betting such as match-fixing, addiction etc!

Undoubtedly, some of this money should go back to the owners of the ‘product’ that created the wealth in the first place i.e. the clubs as long as there were safeguards in place to stop all of the extra money going to mercenary players and greedy agent! Lower ticket prices maybe? It’s high time that there was a much closer and global symbiotic relationship between football and football betting.


Mark Sutcliffe CEO, January 2018

    

32 comments:

  1. Dear Mark,

    HKJC should be providing prize funds for local football competitions. Imagine if there was a $1 million prize for each HKPL league match win, split by the two clubs if they draw, then there is already a much reduced chance of match-fixing and much improved livelihood for the local players. $1m is like $40,000 for each player if there are 25 players in the club. If a player wins half the HKPL league matches with his club, then he is getting $400,000 per season on top of his basic salary which is not bad at all.

    There are something like 90 HKPL league matches in a season, so the outlay from HKJC is "just less than HK$1 billion", which is peanuts for them.

    Regards,

    Allan

    ReplyDelete
    Replies
    1. Hi Allan, thanks for your comment. If my maths is correct I think what you are suggesting is actually a tenth of a billion on the basis that there are a thousand million in a billion. So it's an even smaller peanut. The problem is that under the Charities Ordinance the HKJC can't directly support private enterprises like most of our Premier League clubs. To be fair to them, they do support good causes and football like the capital grant they have given for the cost of our new Training Centre.
      Football needs to persuade the HKJC and the Government that money will be well spent. Football betting does generate a huge amount of money though, that's beyond doubt.
      Regards
      Mark

      Delete
    2. HOW I BECAME A VICTOR AFTER SO MANY FAILED ATTEMPT OF GETTING A LOAN.

      I feel so blessed and fulfilled. I've been reluctant in applying for a loan i heard about online because everything seems too good to be true, but i was convinced & shocked when my friend at my place of work got a loan from Progresive Loan INC. & we both confirmed it and i also went ahead to apply, today am a proud owner of my company and making money for my family and a happy mom. Well i'm Annie Joe by name from Pauls Valley, Oklahoma. As a single mom with three kids it was hard to get a job that could take care of me and my kids and I had so much bills to pay and to make it worst I had bad credit so i couldn't obtain a loan from any bank. I had an ideal to start a business as an hair stylist but had no capital to start, Tried all type of banks but didn't work out until I was referred by my co-worker to a godsent lender advertising to give a loan at 2% interest rate. I sent them a mail using their official email address (progresiveloan@yahoo.com) and I got a reply immediately and my loan was approved, and I was directed to the Bank site where I withdrawed my loan directly to my account. To cut the story short am proud of my hair stylist company and promise to testify to the world how my life was transformed.. If you are in need of any kind of loan, i advise you contact Progresive Loan INC and be financially lifted Email: progresiveloan@yahoo.com OR Call/Text +1(603) 786-7565


      Delete
  2. This comment has been removed by a blog administrator.

    ReplyDelete
  3. Dear Mark,

    On Friday, Hong Kong Pegasus versus Lee Man only recorded 161 spectators who actually bought tickets at the vast Hong Kong Stadium.

    Is it still sensible for a local club to play its league or cup matches at the Hong Kong Stadium?

    More fundamentally, how does HKPL expect the minor league or cup matches between the lesser clubs to attract crowds? Obviously we have no problem when Kitchee play Eastern with Kitchee playing Diego Forlan at the start. But that has no impact for HK Pegasus vs Lee Man.

    I am not sure there are enough local fans interested in the minor clubs. Biu Chun said they will not stay in the HKPL next season, I say good riddance. Biu Chun is clearly training their players in public. I am not sure anybody is interested to pay and watch young players going through their training.

    Regards,

    Allan

    ReplyDelete
  4. Dear Allan,
    Thank you for your comments. You make some good points.
    It's actually the club's choice to play at the HK Stadium. Clearly having so few spectators there means that the atmosphere is poor on the other hand it is a good pitch and an accessible venue. There are pros and cons.
    The more fundamental point about the level of interest in the league and particularly the 'minor' clubs is perhaps the biggest challenge we are facing right now. We are not hitting our targets in terms of spectator numbers and the Government is currently undertaking a mid-term review of our Strategic Plan. In my report to them I have stated that this is the biggest weakness in Hong Kong football and that in my opinion the 'evolutionary' approach we have taken to trying to generate more interest in professional football hasn't worked (for reasons too lengthy to put into this reply). A more 'revolutionary' approach is required now and I have suggested that all of the stakeholders get together to discuss options for the league moving forward.
    I'm not going to comment on Rangers specifically, suffice to say that it is right that the worst team gets relegated.
    Mark Sutcliffe

    ReplyDelete
  5. Dear Mark,

    Did you see the AFC Cup match between Benfica Macau and Hang Yuen of Taiwan?

    https://youtu.be/jijqHsyw58M

    I once again ask you to consider working with Macau FA to see if it is possible to bring at least one Macau club to play in Hong Kong. With the opening of the Zhuhai-Macau-HK mega bridge later this year, the trade and commerce between HK and Macau will be much more convenient and frequent. There must be sponsors either on HK side or Macau side who will want to take advantage.

    Currently Benfica Macau is sponsored by Sun City Group, which used to sponsor HK Pegasus, so they know HK football and how things work.

    In the Autumn Macau FA does not organize any senior 11-a-side matches. Maybe HKFA can invite Sun City Group to sponsor the 2018-19 Senior Challenge Shield, in return HKFA will invite Benfica Macau to take part? I guess HKFA may need to modify the format of the shield so Benfica Macau can play more than one match, but it is worth considering and it will be interesting for HK fans and Macau fans.

    Regards,

    Allan

    ReplyDelete
    Replies
    1. Dear Allan,
      Thank you for the post and idea. We will discuss this.
      Regards
      Mark

      Delete
  6. This comment has been removed by the author.

    ReplyDelete
  7. I concern about number of teams for HKPL in next season. Rangers will be relegated. At the same time , Hong Kong Football Club will be qualified to enter HKPL for next season(for high chance, being champion of first division)​. Will HKFA allow amateur teams like Hong Kong football Club to join HKPL next season?
    Will HKFA invite teams from Marcau or Japan to join HKFA? Yokohama F.C. from Japan joined few years ago.

    ReplyDelete
  8. So, thanks to Philip Lee, fans start to speculate about the coming season much earlier than previous years. Thinking positively we would once again meet the target of 12 teams in the 2018-19 HKPL.

    All 10 teams are expected to stay.

    Rangers is always crying wolf- If you look at Rangers' history in top-tier football, you will know that Rangers will do whatever they can to stay. They have been exempted from relegation four times due to insufficient teams. In 2008, Philip Lee applied for a sponsor membership and get around relegation under the name of Four Seas, after HKFA rejected their application to stay. I guess this is just a typical crying wolf from Philip as the end of season approaches. They will be there in the HKPL next season.

    Albirex Niigata could be taking the R&F path- Albirex Singapore established a company in HK last year and it is expected that they would expand their football business and would probably apply to join HKPL.

    Many Japanese players left Albirex Singapore after a change of rule in S.League with age restrictions imposed. Is HK their next stop?

    Promotion - If one the teams from the 1st Division is interested in promotion, then we will have 12 teams.

    ReplyDelete
    Replies
    1. Hi there,
      We are already having meetings internally to discuss the league next year. Getting to 12 teams would be good as long as the standard of teams is not too diverse. No-one wants to see teams winning 10-0. This year we have asked all of our Member clubs to tell us the end of this month which Division they intend to play in next season. That's much earlier than in the past and once we have an indication we can start to plan more and discuss things with both existing and new clubs.
      The sustainability and professionalism of the top flight in Hong Kong is a major issue for us. As mentioned in a response above, it is a key part of the Government's 'mid-term' review of our strategy. There is much room for improvement.
      I will endeavour to keep people posted over the coming weeks as things progress.
      Regards
      Mark

      Delete
  9. Hello Mark,

    HKFA has formed partnership with JFA for quite a while now. Is there any chance of becoming one of the J.League Partner Nations?

    It would open doors for HK players to try their hand in Japan.

    ReplyDelete
    Replies
    1. Hi there, it's a very good question. Maybe after the excellent performance of Kitchee the other night against a team from Japan there may be interest in some of our up-coming young players. I don't know what it takes to become a partner nation but I will ask our Japanese Elite Development Coach to find out. I see that Thailand, Vietnam, Myanmar, Cambodia, Singapore and Malaysia are partner nations so why not Hong Kong?
      Thanks for the suggestion. Regards
      Mark

      Delete
  10. Dear Mark,

    It is near the end of March now, will the TKO training centre open on schedule in April?

    Regards,

    Allan

    ReplyDelete
    Replies
    1. Hi Allan,
      I was at the Centre a few days ago and I'm pleased to say that it is virtually finished and looking good! The contractor is just putting the finishing touches on minor items and we have started to install equipment etc. We can't open it until the Government inspections have been successfully concluded and all the in-coming services connected. All of this should be sorted in April. At the moment the plan is for a 'soft' opening in May, i.e. HKFA use, official opening in June and public use soon after that.
      Regards
      Mark

      Delete
  11. Hello Mark,

    According to Ming Pao, the Board will discuss whether to promote someone from within or to start a worldwide search to fill the vacant Head Coach position in the coming meeting.

    HKFA vice chairman PUI Kwan Kay seems wary about appointing an unfamiliar foreign coach. He asked whether splashing money on a foreign coach will bring results, citing the recent defeat of Chinese national team in the China Cup under Lippi. I am not sure whether that is an appropriate example, but I understand where he is coming from - historically many foreign coaches failed to see out their contracts.

    In fact, most of them resigned due to lack of full support from the football community, members of the Board included. Talented coaches will do wonders for the team, only if they get full support. Teams have to work together with the HKT and allow their players and coaches to join the national camp when called up.

    I know they say Hong Kong football could not attract top-notch talents. That does not mean we would not get a right person for the role - someone who have the required man management skills, used to a tactical style that fits HK and willing to develop young players.

    If HKFA gets budget approval from the Government, I can see no reason not to conduct a worldwide recruitment exercise to identify more options and thus make a more informed decision. After all these years, I trust that the decision makers would not be easily seduced only by exotic CVs or their embellished presentations.

    I am sure HKFA coaches would love to watch and learn from a talented coach. And the relatively huge sums will be worth it if the Coach is given full support from the whole football family.

    ReplyDelete
    Replies
    1. Dear hkgoalgoalgoal,
      As far as I know there is no such agenda item on the Board meeting scheduled for April. The position of Head Coach is funded by the Government and we are still waiting for the 'green light' to advertise the position.
      There are certainly pros and cons of appointing a foreign coach. Even though the position has not been advertised we have received considerable interest from coaches from all over the world. Some are vastly experienced. I don't think we would have a problem attracting a good foreign coach but we do need to make sure that if we go down that route, they could do their job effectively.
      I'll try and keep you posted.
      Regards,
      Mark

      Delete
  12. Dear Mark,

    I would like to ask about HKFA Regulations regarding HKPL player status. Refering FIFA regulations, if a China/Macau player plays in HKPL as a foreign player for 2 years, he is eligible to represent HK representative team. However, he is ineligible to get the HKSAR passport yet and base on HKFA's Regulations Annex II, does that mean he still has to play in HKPL as foreign player even he can represent HK team? Or he can turn into local player in HKPL already?

    The 'local' player status is important for clubs and players, if it is the latter case then everything is good. Otherwise, will HKFA further optimize the regulations, so that we can still attract quality China/Macau players to play in HKPL, and most importantly, represent HK team like the old days?

    We can even refer AFC's regulations on player that can represent multiple associations with 1 citizenship. If he 1) is eligible to represent HK team, then it will be in total 2+1 years to become 'local' player, or 2) already represented HK team in official competition, then it will be in total 2 years to become 'local' player.

    Regards,
    Jason

    HKFA Regulations on the Status and Transfer of Players
    http://www.hkfa.com/upload/rules/HKFA_Regulations_on_the_Status_and_Transfer_of_Players.pdf

    ReplyDelete
  13. When will the new Head Coach of Hong Kong football team be selected?

    Also, will hkfa arrange friendly for Hong Kong football team in 2018?

    ReplyDelete
  14. Dear Mark,

    http://www.straitstimes.com/sport/football/football-arsenal-paris-saint-germain-and-atletico-madrid-confirmed-for-icc-singapore

    Singapore is hosting the International Champions Cup again. I just wonder why Singapore gets to host it year after year but Hong Kong does not? I am not questioning you I am just interested to know what advantage Singapore has over Hong Kong for this tournament. Is it hardware or is it a promoter issue?

    Regards,

    Allan

    ReplyDelete
  15. Hello Mark,

    Would the HKFA Disciplinary Committee follow-up on the Pegasus case after court procedures are completed?

    ReplyDelete
  16. Dear Mark,

    Every year HKFA has to ask clubs for their intention for promotion etc, is there any chance the league might as well copy A-league and forget promotion once and for all? The skill level between div 1 and the HKPL is just too big, and even if there's promotion, it ends up having the same players playing for a diff club the next season anyway.

    Having the A-league system gives investors confidence with the stability and can ask investor to pledge to the future by say, like commit for 5 years minimum with a minimum spending of 7-8m a year? (The inaugural A-league required 5m AUD investment if I remembered correctly.) Having a min amount of investment protect players' salary and with the limitation in training ground and stadium, clubs can invest more in connecting with the public knowing they will be around for a lengthy time.

    Australia had a population of ~22 million when the A-league started they had 8 teams and only in the last few years it grew to 10.... HK has a third of the population, and we want to have 12 teams with promotion and relegation seem to be pushing it. I believe a revamping of the league system to have a fix 8-10 teams would be good to start with, then whoever wants to join, with the right amount of investment can then apply for a licence once the spectator numbers grow....

    ReplyDelete
    Replies
    1. We all know the gap between HKPL and 1st Div. is huge. It would be ideal to have a more professional (but still semi-professional) reserve league and a more professional (again, but still semi-professional) 1st Div league so that we have a larger pool of players ready for Premier League breakthrough. For all these to happen we need more football owners and more commercial support. But that is still a challenge.

      Two years ago, I suggested something similar, i.e. to require clubs to submit a 2-year plan for the club licence. On second thought, I was really naive.

      Requiring owners to commit for more than a year seems to be pushing it as well. One year is already a burden for some owners. They would rather quit if they have to get even more sponsors in order to stay in the league. Some potential sponsors would be scared away. The league would become even less sustainable.

      South China applied to relegate last season, now Yuen Long appears to be the next team that follow.

      Disband the team after winning the Senior Shield? That is the way it is, this is Hong Kong football.

      Delete
  17. Hello Mr Sutcliffe,

    What is the rationale for HKJC not taking bets on local football? Presumably they think it might encourage match-fixing? - I personally don't find this argument convincing, and like you said, just a fraction of this revenue if directed correctly can reduce the risk of match-fixing and improve the livelihood of local footballers. Furthermore, a quick search on the internet reveals a number of overseas bookies offering odds on HKPL, so HKJC's gesture is rather pointless.

    Regards

    Trev

    ReplyDelete
  18. We are direct mandate to providers and facilitators of all types of Bank Guarantee (BG), SBLC for Lease and Purchase. We engage in MTN, PPP programs, MT109, MT799, MT760, Loans, Sale and Lease of Financial Instruments. In addition we have a
    track record of 100% deliverance rate with the best workable procedures in the Financial Instruments industry. Our providers are very reliable and ready to transact.


    We have an excellent relationship with top rated banks in both Europe and Asia, Stock brokers and financial institutions all over the world. Within a short and transparent transaction period we can provide the SBLC/BG for your Heavy/Light project funding.

    We look forward to your cooperation as we establish a successful business relationship. Anticipating your inquiry

    Email: tekstructuredfinanceltd@gmail. com
    Skype: tekstructuredfinanceltd

    Regards
    David Thomas
    TEK STRUCTURED FINANCE LTD
    BROKERS ARE WELCOME

    ReplyDelete
  19. We are direct mandate to providers and facilitators of all types of Bank Guarantee (BG), SBLC for Lease and Purchase. We engage in MTN, PPP programs, MT109, MT799, MT760, Loans, Sale and Lease of Financial Instruments. In addition we have a
    track record of 100% deliverance rate with the best workable procedures in the Financial Instruments industry. Our providers are very reliable and ready to transact.


    We have an excellent relationship with top rated banks in both Europe and Asia, Stock brokers and financial institutions all over the world. Within a short and transparent transaction period we can provide the SBLC/BG for your Heavy/Light project funding.

    We look forward to your cooperation as we establish a successful business relationship. Anticipating your inquiry

    Email: tekstructuredfinanceltd@gmail. com
    Skype: tekstructuredfinanceltd

    Regards
    David Thomas
    TEK STRUCTURED FINANCE LTD
    BROKERS ARE WELCOME

    ReplyDelete
  20. Do you want to start up a new business? And you need huge finance to start your business today??? Do you need a trustable loan company with a low interest rate of 3%??? Contact Mr Thomas at Thomasrivera101@outlook.com or call +1-631-542-4685

    ReplyDelete
  21. We are direct mandate to Certified Financial Instrument providers in United Kingdom. Our providers engage in Lease and Purchase of Bank Guarantee {BG}, Standby Letter of Credit {SBLC}, Medium Term Notes {MTN}, Loans and financial instruments issued from AAA Rated banks mainly HSBC London, Deutsche Bank AG Frankfurt and Barclays Bank. Our providers are very reliable, Ready, Willing and able to complete BG/SBLC between 10M-5B EURO/USD

    We will be glad to share our working procedures with you upon request to proceed towards establishing a successful business relationship. Feel free to contact below

    Email: heywoodfinanceltd@gmail.com
    Skype: heywoodfinanceltd

    Leasing Price: 4%+1%
    Buying Price: 32%+2%

    Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved.

    Regards,

    Henry Neville Moser
    HEYWOOD FINANCE LTD

    ReplyDelete
  22. Are you in urgent need of a loan? We offer fast approval and quick transfer with an interesting interest rate of 3%, This company offer loans for personal, business and corporate purposes. Contact Mr Thomas now on (Thomasrivera101@outlook.com)

    ReplyDelete