Juventus losses highlight importance of Champions League

This article is contributed by Gareth McKnight:

This article is contributed by Gareth McKnight:

Italian club Juventus has this week announced that the club has made a 39.5m Euros (£24.3m) loss in the first half of the 2010/11 season, with further losses expected for the remainder of the campaign; one reason for this deficit is the club’s absence from this year’s Champions League. The Champions League has become a cash cow that funds the participating clubs financial drive for success, allowing them to buy new players and pay higher wages, whilst still being able to balance the books. But are the so called bigger clubs depending too much on Champions League money, and what happens to the profit and loss account when they fail to qualify for the competition?

Juventus have had expenditure and factors that could explain the drop in financial performance other than their seventh place finish in 2009/2010; they have invested in a new stadium and a spokesman for the club complained of restructuring of the domestic television rights money as contributing factors to the club’s 29% drop in revenue from 125m Euros to 88.8m Euros. However the spokesman also identified failure to qualify for Europe’s top club competition as a reason for financial depression.

“Economic trends in the 2010/11 financial year were negatively influenced by the club’s failure to qualify for the UEFA Champions League, implying lower revenues from European competitions. Accordingly, on the basis of the information currently available and in the absence of any extraordinary events, the 2010/11 financial year is expected to close with a significant loss”, a club spokesman revealed.

So how much exactly is qualification and progression in the Champions League worth? For the winners, the pride of being Europe’s elite is matched in the board room by the prize money of almost 35m Euros, and this is before ticket revenues and increased merchandise sales that are common when a team is doing well, not to mentioned the television rights money split between competitors of the tournament. Just getting into the group stages is very lucrative, and this extra income does much to make a club’s finances look a lot more attractive.

Looking closer to home, the so called ‘Big Four’ of Manchester United, Arsenal, Chelsea and Liverpool have dominated English football for the last ten years, and have been the qualifiers to the Champions League on more occasions than not; but last season Liverpool were surpassed  by Tottenham and missed out on the financial spoils of finishing in the top four. Subsequently, Liverpool did not have the same appeal to players without the promise of Champions League football, and didn’t have the cushion of knowing that vast sums of money would be coming in through their participation in the tournament this season. This has led to another poor season for The Reds, the sale of their prize asset Fernando Torres and what will be another year without Champions League football in the 2011/2012 season. In Deloitte’s annual review of finance, Liverpool dropped a place from seventh to eighth in Europe’s rich list, and the club will have to now budget for next season without the multi-millions of Champions League income again, which can turn into a spiral that leads to poorer performance on the field because of lack of resources available to strengthen the squad off it.

If Liverpool were to try to spend what they would if they were in the Champions League regardless of their absence, they are threatening the club’s financial security and future; one only has to look at the fall of Leeds United from a Champions League semi-final and a third place Premiership finish, to relegation to the third tier of English football in the form of League 1 after Peter Risdale had overspent his hand and the club relied on Champions League funds that did not come when they failed to qualify for the tournament in 2002.

So to conclude, Champions League money plays a massive part in the leading clubs financial well-being and subsequent success on the pitch, and failure to qualify for the competition damages the teams bank balance and on-field resources. However in the modern day of multi-million investors creating fantasy football, if you spend over and beyond your means, you could end up with bankruptcy and massive debts. With Juventus currently sitting in seventh place in Serie A after a 2-0 home defeat to Bologna, things are not looking bright for next season’s playing or financial years either, and not only Juventus but all club’s aiming to qualify and play in the Champions League face a chicken and egg situation; you can’t qualify for the Champions League without spending big, and you can’t spend big (sensibly) without qualification for the Champions League.

To read more from Gareth visit www.ninetyminutesonline.com