Financial Fair Play is incompatible with business

Gary Tipper_PalatineGary Tipper, managing partner at Palatine Private Equity, discusses the business of football, and how the new Financial Fair Play rules are incompatible.

 

 

 

Almost every business in every sector is built upon the idea of competitive advantage. Firms will do whatever it takes to find a gap in the market, including accepting losses for the first few years. Sadly, it seems that one of the UK’s most lucrative industries, and one Manchester is particularly good at, seems not to agree.

I am, of course, talking about football. Having seen Manchester City spend and lose millions over the first few years after being taken over by Sheikh Mansour, UEFA decided to solve a problem that never existed by creating the Financial Fair Play (FFP) regulations. As a hardened City fan, the words Financial Fair Play are enough to make my blood boil, especially when considering the fair aspect.

Before the regulations were announced, I think most football fans thought the idea of FFP was to make sure clubs were not taken over by disreputable owners. The likes of Leeds and Portsmouth have experienced this in recent years, with mis-management leaving the clubs debt-ridden and ultimately heading for administration. No one wants to see this happen again, as in the end it is the fans that really suffer.

However, what UEFA have come up with is a system that effectively means that the clubs with the largest turnovers are the ones that can spend big in the transfer market, protecting the old order of European football. No other industry in the world blocks new money being invested in it, which is essentially what UEFA is effectively doing to European football. Whether fans like it or not football is now a huge global industry and should be dictated by market forces not by an industry body trying to protect the old order.

Imagine if this sort of protectionism had happened in the technology sector, which in the 1960s and 1970s was dominated by the big hardware players like IBM. Had rules stopping businesses losing money been in place, companies like Apple, Google, Amazon and Facebook would not exist. Each of these household names lost millions if not billions in their development years, enabling them to become the large organisations that ultimately transformed an industry and broke up the old monopolies that existed.

Why should football be different? If money hadn’t come into the likes of City, Chelsea, PSG and others, European football would be an oligopoly for the foreseeable future – making it incompatible with business.

Here football can learn a few lessons from business. Instead of the current rules, make any new owner put up to two years running costs in a blocked account that is used if they decide to remove their support, ensuring clubs avoid administration. This would also have the effect of keeping away the buyers without any real financial substance.

When looking at sustainability, it is also important for the rules to focus on debt levels. In the past too much debt has led to the downfall of many clubs, but under FFP, it is currently seen as acceptable for United to have £500m of debt and Real €600m of debt while City are punished despite being debt free. The £50m fine handed to the Blues is another clear example of the real aim of FFP – further establishing the status quo.

As a global industry, the rules governing football should be along the lines of the rules that govern businesses. With the current rules being incompatible, they should be challenged as I think it is best for business. Manchester has had a great footballing history and with the emergence of City in the last five years should have an even better future, dictated not by UEFA, but by market forces

Financial Fair Play in football has given marketing and data management a major boost

sa_blog_header_0 The FIFA World Cup is now a distant memory and we’re back to the domestic merry-go-round as we head towards the new season. Which players are your team signing? How much are they spending? How much are they allowed to spend?

FIFA’s legacy to the club game, Financial Fair Play (FFP) is shaping a new approach. FFP is a rule which prohibits clubs spending more than they earn. For some it’s an unnecessarily restrictive practice that only football could bestow upon itself, while for others it’s a justified, protective napkin placed in the lap of clubs who can’t feed themselves properly. Fans (naturally) don’t like it, teams are (predictably) wrestling with it, but for the marketers, I think it presents a tremendous opportunity.

The focus, of course, is on transfer budgets, player salaries and overall accountability, but has anyone stopped to consider how FFP will impact upon a club’s day-to-day diet of customer relationships and one-to-one marketing?

The demand that spending should be balanced by operational income means the link to data management is, for me, fairly obvious.

FFP drives the whole issue of income beyond the owner’s pocket and into regular revenue streams. If approached correctly, FFP is not restrictive, it’s a massive marketing opportunity.

The need to generate income is reflected in everything a data management company like Sports Alliance, does for its clients. Product and business development is a process which effectively ‘talks’ to the true supporters who follow the club and spend money. The club wants more of that type of fan of course, but the fan is also a vehicle to support wider income generation. At the top level, massive TV exposure brings in shirt sponsors and kit manufacturers who love the guaranteed visibility. Clubs sell the branded shirts to the fans and visibility feeds popularity – popularity feeds visibility.

TV revenue is wonderful in its own right but the bonus-ball is that live games project your ‘brand’ across the globe to all those who can’t come to the ground. Based on ‘eyeballs’, it’s a tremendous deal all round and yes, it certainly helps the shirt-selling business.

But what if the TV companies become less interested? For starters, if you don’t continue putting ‘bums on seats’ and the stadium looks empty, the product becomes diluted. The conundrum is that TV provides an opportunity to watch outside the stadium in homes across the world, but the stadium still has to be full to make it appealing. While it is, you have a marketing opportunity with the billions who are watching across the oceans so it’s in your interest to ensure the mystique of a competition that’s played thousands of miles away doesn’t dissipate. It’s the fans that give it gravitas, so the fans must be embraced. Good CRM conducted by clubs can safeguard that process and actually support growth over the long term.

Behind the FFP headlines, it’s clear that clubs are now looking to tap into good data management and customer relations and thus, increase their longer-term earnings. It works for clubs at any level too because the local market is still vital and one you ignore at your peril – even if if you’re world famous. This is exactly where data control comes into play – whatever level you play at – and where the next step, Propensity Management then comes into its own.

On a supporter database, the propensity for a fan who watches on TV in Asia to actually buy a season ticket for their favoured club, is clearly going to be less than a supporter of any club who lives locally. But the fan in Asia can still buy merchandise. Good CRM will afford greater earning power over the longer term and Propensity Management identifies the likelihood of a fan anywhere in the world to engage in a certain way. Understanding what they’re likely to want – or not want – then develops a communications’ relationship that is enjoyed by both sides of the deal.

FFP dictates that in the coming years, the level of equity investment an owner can make to offset operational losses will diminish, so something has to give. Operational income is being given far greater emphasis by FFP than before, because non-compliance can result in competitive sanctions or even tournament bans.

Of course, there is always the short-term option of making the most of your current contract-driven popularity and adding another nought to the next sponsorship deal. All you do then is shove the players on yet another plane for one more exhibition game. But what about all those eyeballs finally viewing the players at close quarters? If you can tap into their potential, you can use a solid CRM approach to develop a long-term income stream that eases the path towards FFP compliance.

In which case, why wouldn’t you?

www.sportsalliance.com

The Business Success of the Champions League

In 2013 UEFA reported a global audience of 172.6 million viewers when Bayern Munich defeated Borussia Dortmund at Wembley Stadium.  As the final for this year approaches it is expected that the global viewership will surpass these numbers when Real Madrid and Atletico face off in Lisbon.

So why is the UEFA Champions League such a successful ¨product¨?

If we analyze the tournament from a business perspective we can come up with the following conclusions:

Marketability

The Champions League is one of the most well-marketed sports properties in the industry.  The best way to measure the success of a property is by analyzing its audiences and the levels of engagement and interest that it generates.  As is stated above, the Champions League matches are eagerly anticipated every year drawing huge global audiences throughout the season making it an attractive property for commercial sponsors.

UEFA´s UCL sponsorship program is one that has adopted the ¨less is more¨ approach with only eight official sponsors (Gazprom, Heineken, MasterCard, Sony, Unicredit, HTC, Adidas and Ford, soon to be replaced by Nissan) allowing for true partnerships that add great value to the engagement for both sides.

Furthermore, sponsors get a huge impact in the form of commercial airtime along with on-ground benefits that can be activated during the eight-month duration of the competition, along with logo placements at pre and post-match interviews and VIP ticket allocation.

Branding

UEFA has mastered the art of branding its star product.  Every football fan across the world recognizes the tournament’s official logo and anthem, and regardless of whether a match is played in London, Barcelona or Milan, all stadiums look exactly the same on television.

In addition, all matches are played at exactly the same time on Tuesday and Wednesday evenings having created what is known in the industry as an ¨appointment to view¨ for the past 20 years, building massive brand strength for the property.

Structural Strength

The tournament is made up of the best football clubs from across Europe who in turn have the best players on the planet.  This leads to very competitive matches that are attractive to audiences in neutral markets.  (For example, a match such as the recent semifinal between Atletico Madrid and Chelsea FC is not only viewed in the UK and Spain, but in fact performs very well in many ¨neutral countries¨).  This means that the competition is not only attractive in local markets, unlike many other football leagues and tournaments across the world.

So wherever you may be on May 24th watching the final between Atletico Madrid and Real Madrid, remember that behind all the marketing and commercial success of the Champions League there is a fantastic football product.

Written by:  Diego Valdes, Program Director, Sports Business Institute Barcelona

-The Sports Business Institute Barcelona provides online sports management training for the football industry.

www.sbibarcelona.com
@SBI_Barcelona
@DiegoValdesBCN

Euro 2016 Logo Launch

The opulent surroundings of Pavillion Cambon Capucines in the centre of Paris provided the perfect back drop to the unveiling of the Euro 2016 logo.
The hustle and bustle of the city is equalled by its beauty and as the gathered dignitaries mingled, there was a noticeable excitement in the room as we waited for UEFA President, Michel Platini to begin proceedings.

A giant video wall wrapped half of the conference hall upon which the history of the European Championships was played out leading to the visual identity created for the tournament.

With French culture and the beauty of the game as its inspiration, the theme is one of ‘Celebrating the Art of Football’ bringing together the creativity that defines French culture and the beauty of the game.

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And so to the logo, made up as a representation of different art moments from Avant Garde, Art Deco and Art Brut combined with football elements wrapped around the Henri Delaunay trophy.
‘France providing will provide the perfect canvas for football.’

So now, with 1079 days until the start of the tournament, we wait to see if beauty of football will match the marketing man’s dream.

Exclusive pictures from Champions League final

Well, someone was always going to do it. Some wags have mocked up how they see the 2012 Champions League final panning out.

I’m sure Chelsea and Bayern fans will have something to say about it – but it’s still a laugh and worth sharing.

Also, anyone to stingy to pay for picture rights may find this picture comes in handy!

Safe Standing?

This week UEFA and its 53 national Football Associations agreed on the centralisation of commercial broadcasting rights for international games, a deal which, for the smaller FA’s will bring a much needed cash boost.

But what caught my eye most this week was the Football Supporters’ Federation’s (FSF) campaign to reintroduce safe standing in England’s Premier League and Championship stadiums.

Safe StandingThe FSF argue that standing areas can be safe and that clubs and fans should be given a choice of whether they stand or not. Casting envious glances at Germany’s Bundesliga, the FSF believes there is enough support and evidence to back the move to relax the rule that governs stadiums must be all-seater.

Many believe that the introduction of all-seater stadiums was the renaissance of English football. Purpose built stadiums sprang up to replace the outdated, dilapidated, often Victorian era stadia. The game grew, the crowd demographic changed and now we have a game that attracts a global audience with the Premier League’s overseas TV rights worth billions.

But there are always two sides to every story and on this one it’s a matter of where your principles lie. The FSF believes that football is becoming too expensive for the ordinary fan and that watching football has become sterile. The Premier League has said they would oppose any move to reintroduce standing, whilst sports minister, Hugh Robertson stressed that no current Government would back the plans.

In an age of savvy consumers, choice is the buzz word but can we really go back to standing?

The Champions!

Love it or loath it, you just can’t beat the excitement that surrounds the UEFA Champions League knock out stages.

This morning’s quarter final and semi final draws had the F.C. Business office at a standstill, each with our own predictions on the likely pairings.

Tie of the round, Man Utd v Chelsea? For me, Tottenham v Real Madrid.

Last week Arsenal where comprehensively beaten by Barcelona, two teams with a football ethos that attracted a worldwide TV audience of over 300m.

But what is brilliant about the Champions League is the branding. The consistency of its look and feel from the title music, to the days games are played and the time of kick-off, everything is consistent. The use of colour and imagery promotes an air of prestige.

So whilst the competition and cup itself is steeped in history, UEFA bit the bullet, looked to the future and have produced a competition that is unrivalled anywhere else.

The English FA are currently working on plans to revamp the FA Cup. Maybe it’s time for some far reaching changes to its format or is the real key to reigniting this grand old competition, in its branding?

The FA Cup has lost its way, and whether anyone likes it or not, they should look to how UEFA have developed the Champions League and give the FA Cup the presence it deserves!