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UEFA report: European football profitable but gap between super-clubs and rest remains

UEFA's latest benchmarking report shows every European top-flight club being profitable, but it doesn't mean the game is in a good place yet.

Each year, for the past decade, UEFA have released their "Benchmarking Report," a sort of "State of the Game" across the top flights of every European league. As ever, it's filled with interesting nuggets and takes time to sift through.

Here's a Q&A to help make sense of it.

Q: So what's the top-line, major takeaway?

A: Well, for the first time in the report's history -- and probably the first time ever -- European top-flight clubs were profitable last year, to the tune of some $700 million. When you consider that last year they had a loss of $400m, it's quite a turnaround. And if you go a little further back? Well, in 2011 it was a whopping $1.9 billion.

What's more, it's not as if it's just the very richest clubs in the richest leagues who are profitable (although they obviously make the most). Of the 98 clubs in Europe's Big Five leagues, 77 turned a profit. As a whole, midtier leagues like Portugal, Holland, Belgium and Austria were also profitable.

Q: That's good, right?

A: Sure. The old maxim whereby owning a club was like owning a racehorse -- a vanity pursuit where you had to bankroll losses every year -- is out the window. Of course, that part was also something of a myth: it's not that owners of yesteryear were all altruistic or romantic uber-fans. Plenty made money out of football in other ways, whether it was free advertising for themselves or their other businesses, gaining local political clout and standing or funnelling money out of the club to themselves.

But now the game has become a real business, where you can get real returns and where real investors can put their money. Because, with some exceptions, to lose money at a top-flight club, you have to be either incompetent, extremely unlucky or hugely irresponsible.

Q: What caused this turnaround then?

A: UEFA would say it's financial fair play, and no doubt that has been a big contributor in keeping costs down. Those $1.9bn in losses? They occurred in the final year before FFP was introduced. Limiting spending obviously drives down costs, and by making owners cover losses by putting in equity, it staves off the sort of "chain reaction" losses we used to see in the past.

Ceferin, the UEFA president, has vowed to tackle the wage inequality in soccer next, now that FFP has helped to turn teams and leagues around.

But that's only part of the story. Revenue from media rights has skyrocketed too; so too has commercial income, driven in part by globalization. That has nothing to do with FFP but simply due to more media companies and sponsors willing to pay more money in more parts of the world.

It's not surprising, then, that virtually every club out there is a big fan of FFP. That said, it has also had negative side effects. It unquestionably contributed to the polarization in the game, which is also chronicled in the report. Manchester United, for example, make more than Zenit, Atletico Madrid and Schalke combined. Real Madrid's wage bill ($462m) was almost as high as that of Tottenham Hotspur, Roma and AC Milan combined.

That's why Aleksander Ceferin, the UEFA President, has vowed to address this. He hasn't ruled out luxury caps and limits on squad sizes, as well as relaxing financial fair play rules. Previously, it would have been difficult. But now that football has become a profitable business, there's scope to go further and allow more in the way of losses to help build a team.

Q: So things are going great, and it's a golden age of football, right?

A: Yes and no. For a start, the broadcast rights income won't keep growing forever. The other aspect is that those bottom-line profit numbers are boosted by player trading like never before. In fact, the value of transfer activities has doubled in the past three years, which is helping to boost bottom-line profits at many clubs.

Q: How does that work? One club sells, the other club buys -- shouldn't things net out?

A: Nope, and that has to do with accounting practices.

When you buy a player, you spread out the fee over the length of the contract, but when you sell, you book the entire fee immediately. So if you buy a player for £10m, give him a five-year deal and sell him after two years for £10m, you've actually made an accounting profit of £4m (£10m, minus the £6m residual value on your books). Alhough in cash terms, you simply got your money back. It can catch up to you eventually, but as long as transfer spending continues to increase, you're fine. But some clubs are increasingly relying on this to show a profit, and that has to be a concern in the long term.

Manchester United remain one of the giants of European football despite a difficult season, making more than other giants Zenit, Schalke and Atletic Madrid combined.

Q: So overall, are we doing OK?

A: More than OK, I'd say. Attendance is as high as it's been in the past 10 years, and while as a proportion of revenue, gate receipts make up an increasingly small percentage, that's mostly because other revenue streams have grown faster. Across Europe, the highest yield per match attendee (a very rough way of saying average ticket price) was just under $30. The highest was Paris Saint-Germain ($99), followed closely by Chelsea ($98) and Arsenal ($97). But the average of the Big Five leagues was $39: not cheap, but judging by attendances, it's in line with what folks are willing to pay.

As I mentioned, football is now a real, investible business that ought to bring more stability, which is ultimately what most fans care about: that they continue to have a club to support. And it might also mean that FFP is loosened -- we've already seen the first steps with the introduction of "voluntary agreements," whereby clubs can get permission to exceed FFP requirements if they present a credible business plan and comply down the line -- since there are plenty of wealthy investors queuing up to put in money.

That could help broaden the base of "super-clubs," but further down the food chain, polarization continues to be an issue. And, of course, the vast sums circulating will also attract speculators and, well, crooks. That's why transparency and oversight not just from UEFA and other regulators, but suppoters' groups too, has to be part of the plan going forward.

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