never have bothered buying into English football without United’s example.
Pre-tax profit/loss of Premier League clubs by league position, 1997–2016
For most English clubs, our graph shows that there was not even a connection between changing league position and changing profits. In 45 per cent of all cases, when a club changed its league position, its profits moved in the opposite direction: higher position, lower profits, or lower position, higher profits. Only 55 per cent of the time did profits and position move in the same direction. Had there been no correlation at all between winning and making profits, that figure would have been much the same, namely, 50 per cent. Clearly, winning games was not the route to making money. As Francisco Pérez Cutiño noted in an MBA thesis at Judge Business School in Cambridge, it’s not that winning matches can help a club make profits. Rather, the effect works the other way around: if a club finds new revenues, that can help it win matches.
For almost all of football’s history, it proved almost impossible to run a club like a solid, profit-making business. This is because there were always rival owners – the Cragnottis, the Abramoviches, or the long-time ruling family of Libya, the Gaddafis, who owned a chunk of Juventus – who didn’t care about profits and were free to spend whatever it took in the hope of winning trophies. All other club owners were forced to keep up with them. If one owner refused to pay large transfer fees and salaries, somebody else would, and that somebody else would get the best players and win trophies. The consequence is that the biggest slice of money that football makes has hitherto been handed over to the best players. As A. T. Kearney said, you could even argue that football clubs are nothing more than vessels for transporting football’s income to players. ‘The players are completely free to move [although as we will explain later, this is not quite true],’ explained Hembert. ‘They are a key factor in winning, and also in the ego, in pleasing the fans. And they all have pretty savvy agents who are able to maximize their bargaining power.’
This meant that even the cautious Sugar types could not make decent profits in football. In fact, because his team won fewer matches than its free-spending rivals, some fans deserted him. That ate further into his profits. From 1991 to 1998 average attendance in the Premier League rose 29 per cent, but Tottenham’s crowds fell 5 per cent.
‘I thought we could make it [QPR] profitable, definitely,’ Fernandes admitted to us. ‘I haven’t yet,’ he added, laughing. Even in the 2011–2012 season, when the club survived in the Premier League, it lost £22.6 million. The next season, when it kept buying players but got relegated regardless, it lost a lot more. ‘On the pitch it was just a disaster,’ said Fernandes. He mused: ‘Football has survived on benefactors. Shareholders coming in and pumping money in, and then the next sucker comes in and pumps money in.’ Did he consider himself a sucker, a benefactor, or a businessman in football? ‘Now I would define myself as a sucker,’ he replied. ‘And benefactor. And I hope I will become a benefactor-stroke-businessman.’ He hasn’t. By 2016 QPR, still stuck in the Championship, had debts of nearly £200 million – the fifth-highest of all the clubs in Europe, according to UEFA.
In fact, very few club owners in history have even aspired to act like businessmen. Stefan and the Spanish economist Pedro Garcia del Barrio (of the Universidad Internacional de Cataluña) studied the behaviour of Spanish and English clubs between 1993 and 2005 to see whether the clubs were chiefly pursuing profits off the field or victories on it.
If a club wanted to make profits, clearly it would have to spend less than it earned. That would mean limiting its players’ wages. Any club that paid players less would suffer on the field, because as we have seen, paying high wages wins football matches. It’s a trade-off: if you want glory, you have to forget maximizing profits. If you want maximum profits, give up hope of glory. Stefan and Pedro estimated, for instance, that if Barcelona wanted to maximize profits, it would have to aim to finish fifteenth in the league, because it would need to slash its wages. A profit-driven Real Madrid should expect to finish a mere seventeenth, just above the relegation spots. Most other teams – such as Atlético Madrid, Athletic Bilbao, Sevilla or Villareal – would maximize their profit potential by playing in the second division. There they could save a lot of money on players’ wages.
On the other hand, if a club’s main aim was to win matches, it would have to spend every cent it earned (and borrow more besides). So what were clubs chasing, profits or wins?
Stefan and Pedro estimated how each club in the top two Spanish divisions would have behaved on average in the 1994–2005 period if it were pursuing profits, and how it would have behaved if it wanted wins. Then they looked at how clubs behaved in real life. Their unambiguous finding: clubs didn’t care about profits. They were spending what it took to win games. ‘On average,’ Stefan and Pedro concluded, looking at ten years of league tables, ‘the Spanish teams were twelve places above their profit-maximizing position over the sample period, but less than half a place below their win-maximizing position.’ In short, club presidents were spending way more than they would have done if they were hard-headed businessmen out to make profits. Though many of the presidents were in fact hard-headed businessmen in real life, they weren’t treating their football clubs as businesses. Nor was there any sign that any other actors – lending banks, say – were pressuring them to make profits.
Building magnates like Florentino Pérez and Jesús Gil y Gil seemed especially prone to blowing what looked like absurd sums of money on players. Possibly they were pursuing a business logic after all: they may have reasoned that making a name in local football would help them befriend bankers and get planning permission from local government for their construction projects. That would have boosted their non-football businesses. Fred Wilpon, the real estate developer who took over the New York Mets, discovered that a similar effect operated in baseball. To quote a profile of Wilpon in the New Yorker magazine:
He didn’t anticipate that owning the Mets would boost his seemingly unrelated business interests. ‘No one had heard of us before we bought the Mets, and afterward the change was dramatic,’ Wilpon told me. ‘I don’t think someone has not returned one of my telephone calls in thirty years. It’s a small club, owning a baseball team, and people want to be near it.’
Owning a football team might help the owner’s other businesses. But all Spanish football clubs tended to pursue wins rather than profits. In a sense, they had to. If your rivals are spending whatever it takes to win, then you must as well. Any team that pursued the highest possible profits would probably end up being relegated, because it wouldn’t be spending enough to hire good players. And if the club got relegated, it would lose much of its revenues. So Spanish football became an arms race: every club overspent for fear of the neighbours.
No matter how much money Spanish clubs got their hands on, they spent it. In the decade that Stefan and Pedro studied, the average revenues of a club in the Spanish first division (Primera División) rose nearly fourteenfold, from €4.3 million in 1994 to €59 million in 2004. (By 2015 the figure was €130 million.) Yet the share of revenue that clubs spent on player wages didn’t drop much throughout the period: in that decade, first-division clubs paid over an average of 62 per cent of their revenues to their players. In other words, the clubs weren’t able to save all the additional money or do much else with it, such as build new stadiums or cut ticket prices. Most of the money that came in just went straight out again into players’ bank accounts. In the second division, a whopping 93 per cent of clubs’ revenues went to the players. These clubs really were just vessels for transporting money to players. The clubs weren’t simply content with giving the players what money they had. They also gave them money they didn’t have, and some clubs ended up seriously in debt.
By the standards of a normal business, this sort of spending is nuts. But for football clubs, it made sense: the only way to win matches was to overspend. Historically, nobody ran a football club to
