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International -- European Business: Sports
Football's Rich Clubs May Run the Rest off the Field (int'l edition)
As disparities grow, national leagues are jeopardized
The Sept. 9 football match in Manchester's Old Trafford stadium wasn't much of a contest. Manchester United midfielder Paul Scholes whacked in a goal a mere 13 minutes into the game, and two more easy Manchester scores put away a weak Sunderland opposition. It wasn't even Sunderland's worst defeat at the hands of Man U: Last time, it was beat 4-0. Although it's only three weeks into English football's 10-month season, BBC announcer Gary Lineker pleaded on air to Man U, which has won the FA Premier League championship five out of the past seven years: "Please leave us some suspense."
That's not likely. In fact, things may get more one-sided for Europe's most popular sport, even as it rakes in more money than ever. The trouble is that the bonanza is unequally distributed: With player salaries soaring, only rich organizations such as Man U can afford to field the best teams, leaving the poorer teams with second-tier talent.
Now, the European Commission in Brussels wants to abolish the fees that teams receive when their contract players are signed by another team, a critical revenue source for smaller clubs. "The polarization between the haves and the have-nots is bound to increase dramatically in coming years," says Robert Elstone, an author of Deloitte & Touche's "Annual Review of Football Finance." That could take the thrill out of the sport by crimping competition.HEAD OVER HEELS. The off-field conflicts have heated up in the wake of several lucrative TV deals. In June, BSkyB, NTL, and other British stations agreed to pay a combined $2.5 billion for the next three years for rights to televise the Premiere League, which groups Britain's top 20 teams. That's twice the amount of the previous three-year contract. "Soccer is the main driver attracting pay-TV subscribers in Europe, and the subscribers only want to see the top teams," explains Nick Gawne, an analyst at Kagan World Media in London.
Proceeds from the new TV contracts will be divvied up among all the League's members, though the bigger teams such as Man U get about twice as much as smaller competitors. In addition, the top teams are capitalizing on their allure by cutting separate deals whose profits they don't have to share. Man U, for instance, has started its own cable channel to show its game highlights.OUT OF HAND. Fat-cat teams are spending big for top players, pushing wages up 25% a year in Italy, Spain, and England. Stars such as Manchester United's Roy Keane and Inter Milan's Christian Vieri now earn $5 million a year. But the bidding war is getting out of hand. This summer, Real Madrid paid a world record $53 million to Barcelona for Portuguese striker Luis Figo--even though the club is $200 million in debt.
Indeed, many teams are already losing money. The bottom-line pressures are bound to increase if the European Commission does away with the current system of compensation and mandates free agency. As it now stands, a club is entitled to a "transfer fee" if another club poaches one of its players. Some of the smaller teams need these funds to survive. Amsterdam Ajax, famed for its youth training programs, got $20 million--one fifth of its total income--from selling players last year. The EC argues that not having to pay such fees would allow weaker clubs to go out and acquire more top players, increasing their competitiveness.
Yet, as in American sports, free agency would give players more bargaining clout. "If you can leave any time, the pressure will be on the clubs to pay more--and this will further widen the gap between small and big clubs," says Antonio Marchesi of Deloitte & Touche in Milan.
To restore a semblance of competition, Europe's richest and best teams could create a Super League in place of today's national leagues. But opposition to such an approach remains strong among traditionalists who cherish national leagues and fear for the future of small local clubs. "We must have solidarity in football," says Joseph S. Blatter, President of FIFA, football's top governing body. True enough. But for the sport's own good, ways must be found to give Man U a real challenge--and the Sunderlands a chance to take a game once in a while.By William Echikson in BrusselsReturn to top