Business

Super League plans to level financial playing field between elite clubs

Leaked plans for a European Super League of the world’s leading football clubs show an unprecedented effort to level the financial playing field between the sport’s wealthiest teams.

The measures, which range from revenue-sharing arrangements to strict spending limits, were confirmed to the Financial Times by people with direct knowledge of the agreements and closely resemble the structure of top North American sports competitions.

A dozen top clubs including England’s Manchester United, Spain’s Real Madrid and Italy’s AC Milan, have signed up to join the breakaway contest that threatens to shatter the existing power structures in the world’s most-watched sport. 

Despite uproar among fans, European politicians and football pundits, the Super League clubs are pushing ahead with a project they believe will raise upwards of €4bn a season from global broadcasting and sponsorship rights. That figure is roughly double that of the Champions League, the continent’s top club contest, which the Super League is designed to supersede.

According to those familiar with the agreement, the 15 “founding clubs” of the Super League would share 32.5 per cent of these commercial revenues. A further 32.5 per cent would be distributed between all 20 participating teams, including the five sides invited to play in the competition each year. Twenty per cent of revenues would be allocated on “merit” or be dependent on performance in the competition. The final 15 per cent would be shared based on broadcast audience size.

A person directly involved in the deal said the distribution model ensured the competition winner would receive just 1.5 times more than the bottom side. By comparison, that ratio in Spain’s La Liga is closer to 3.5 times. However, clubs will be also allowed to retain all revenues from gate receipts and club sponsorship deals.

Weekly newsletter

Scoreboard is the Financial Times’ new must-read weekly briefing on the business of sport, where you’ll find the best analysis of financial issues affecting clubs, franchises, owners, investors and media groups across the global industry. Sign up here

The model is closer in design to North American sports leagues such as the National Basketball Association and National Football League, in which franchises strike joint commercial agreements, and use collective bargaining agreements with players and other measures to lessen the financial advantages between teams. 

Those competitions are “closed” meaning that teams are guaranteed their place every year, ensuring reliable revenues and steady profits for owners. 

But the Super League structure represents a fundamental break with how European football has been governed for years, with its “pyramid” structure that ensures any team, through on-pitch success, can reach for the top prizes.

Many of the Super League’s main architects, such as Manchester United, Liverpool and AC Milan have US owners, while the €3.25bn launch cost is financed by a debt deal underwritten by US investment bank JPMorgan Chase.

Yet the driving force behind the project is Florentino Pérez, Real Madrid’s president who has been named chair of the Super League. He has pointed to the financial crisis at top clubs, many of which have suffered steep revenue shortfalls due to the pandemic and are heavily indebted, saying in a Spanish TV interview that they “are ruined”.

Bar chart of ratio of wages to revenue, 2019/20  (x) showing the wage burden of clubs seeking to join the new Super League

Another common feature of US franchises is strict spending limits. Super League clubs have committed to using only 55 per cent of their revenues on “sport spending”, such as player salaries, transfer and agent fees, according to people familiar with the terms. European clubs typically spend 70 to 80 per cent of their income on footballers’ wages alone.

Super League clubs have also signed up to a “tax equalisation” clause so that “income tax on salaries shall be normalised and calculated at a rate of 45 per cent”, according to people with direct knowledge of the contracts. This would ensure clubs in Spain, where footballers pay a higher top rate of tax than in Italy or England, are not at a competitive disadvantage when the spending limits are assessed.

The documents add that Super League clubs must have “positive trailing earnings before interest, taxes, depreciation and amortisation and net profit”. This is intended to break with the past dynamic, where many clubs, particularly those with rich owners, have racked up huge losses to acquire the best players in the pursuit of silverware.

The Super League declined to comment on the numbers, but said its model was based on higher “solidarity” payments to smaller teams and an effort to create a “sustainable model for the whole of the football pyramid”.


Source link

Related Articles

Back to top button