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JULY 19, 2004
Football's Finances Need a Kick European clubs tend to carry too much debt and have loose controls. Governing bodies have to provide stricter oversight Imagine that your company has just begun selling a new product, and this is what happens: The streets swell with cars, horns blaring. Joyous passengers lean out the car windows waving flags with your company logo. And the demographics are unbelievable. Kids run along the streets dressed in your company colors, while grandmothers stand on street corners chanting the name of your product. That's obviously a fantasy for most consumer industries, but not for European football -- soccer to Americans. Consider the scene when Portugal beat the Netherlands June 30 in the semifinals of the European championship. Lisbon's hilly streets became almost impassable as they filled with cars and people, even though it was close to midnight. Young children dashed down the sidewalks wearing the Portugese flag like superhero capes. Elderly ladies stood on street corners shaking their fists and chanting, "Por-tu-gal! Por-tu-gal!" SCRAPING BY. You can't bottle that kind of enthusiasm -- which is just as well. If football was just another product or form of entertainment, it would never stir such passion. Especially when players doff their professional team colors and play for their countries, as they did in Portugal during June, football is about solidarity and shared triumph or defeat. But football is also about money, of course. Even Greece's 1-0 victory over Portugal in the July 4 final had a marketing subtext: Greece wore blue-and-white Adidas uniforms with the familiar three stripes on the shoulders while Portugal's red, green, and yellow uniforms featured the Nike swoosh. It sometimes seems that such sponsors' support is the only thing keeping European football alive. Most teams are private associations that don't release sales and profit figures, but it's clear many of them are carrying too much debt and just scraping by financially. Many insiders are very worried, particularly about Italian teams. "Soccer in Italy has been living beyond its means," says a manager at one major club. "This is a moment of truth, and there will be some bankruptcies." AN EXPLOSION SOME DAY? What can be done? First, the governing associations should exercise stricter financial controls to keep clubs from being led to financial ruin by overspending on players. Too many teams have gotten in trouble by betting everything on an ultimately futile bid to qualify for lucrative post-season tournaments such as the UEFA Champions League. "Relatively few teams are well managed because emotion tends to get in the way of stark business reality," says Robert S. Collins, a professor at Swiss business school IMD International. The Union of European Football Associations, or UEFA, the Geneva-based organization that overseas the game in Europe, has begun to take a few steps, such as requiring team to prove they're paying players on time. That's a start, but much stricter oversight is needed. "The national federations have to make sure this is something that doesn't explode some day," says Adidas CEO Herbert Hainer. The UEFA should also be more generous in sharing revenue it generates from events such as the recent European championships. After all, the national teams take players away from their duties at the pro teams. "For us that's lost sales," says Bernd Schiphorst, a former executive at German media giant Bertelsmann who's now president of Berlin's Hertha BSC, a team that plays in the first-division Bundesliga. Football has the potential to be both great entertainment and good business, but only if the passion of the fans is offset by sober management in the boardroom.  By Jack Ewing in Lisbon with Maureen Kline in Milan Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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