Jean-Francois Brocard Economist at the Center for Sports Law and Economics, Limoges
The seasons follow one another and the structural deficits of elite clubs, unable to adopt a virtuous economic strategy, worsen. Despite recent decisions taken by the Professional Football League (LFP), the short-term outlook does not look great.
What is the economic health of Ligue 1 clubs?
They are coming out of an extremely complicated period with the Covid and the Mediapro broadcaster fiasco, which has reinforced their structural deficit. Little money comes in and they are experiencing cash flow difficulties. Seventeen clubs were in deficit in 2020-2021 compared to ten a year earlier. Losses are estimated at 646 million euros. For 2021-2022, it could be worse. The League has decided to deal with the most urgent matters by creating a commercial company, in which an American pension fund, CVC Capital Partners, has become a 13% shareholder for 1.5 billion euros, in order to provide cash. The League sold part of the family jewels, it is a very short-term operation, which is open to criticism, because it is a pity to give an investment fund the possibility of receiving part of the future income, but at the same time the current situation was untenable for most clubs.
Is there a correlation with the takeover of more and more clubs by foreign shareholders?
Yes, since 2019, L1 and L2 clubs have accumulated 1.8 billion losses. That’s why many are for sale, because owners are tired of always putting their hands in the wallet, knowing that most of those who have bought in recent years had envisaged a quick appreciation with a short-term resale. and it didn’t materialize. French clubs remain very cheap compared to English, Spanish or Italian clubs, and German clubs are not for sale. But there is starting to be a lot of competition, because all the investment funds have the same strategy: trading (buying young players with high potential and reselling them quickly for much more money – editor’s note) and less and less training , which is expensive and takes several years. So not everyone can make it, especially since the transfer market is sluggish.
In May, the League introduced a structural club development plan. What do you think ?
It’s going in the right direction. To receive the money from CVC, the clubs will have to present and respect a plan for the use of the sums collected. This plan is put in place to attract investors like CVC, which does not want the clubs to spend the money only on the purchase of talents but also to invest in infrastructure, training, digital. It is therefore consistent that CVC ensures that the product it will sell tomorrow will be of better quality. It’s a shame to have to go through this to force clubs to structure themselves, but that’s the reality.
The League also plans to limit the payroll of clubs to 70% of their turnover…
It’s an accounting ratio that makes sense. Clubs are spending huge amounts to buy talent as competition becomes too much in the market and drives up prices. It’s a race for shallots and, despite the difficulties, they still think that their deficits will be offset by positive transfer balances. Except that there are fewer and fewer clubs that manage to train a lot of players and fewer and fewer countries able to buy them. Ideally, the clubs should have a payroll of around 50%, but 70% is really the ceiling to prevent them from doing anything. Clubs often sign players to three-year contracts with high wages and automatic pay-rise clauses each season. And as soon as income drops, they find themselves in difficulty.
The League is counting on CVC to multiply its revenues by 2.3 within eight years and reach 1.8 billion euros. Is it realistic?
It’s very ambitious. The League is betting on an increase in domestic but above all international TV rights (75 million euros per year until 2024 against ten times more for the Spanish Liga – Editor’s note). They are undervalued because the League does not have the know-how to sell them. She brought in CVC, which has more of a network and is used to selling abroad. For domestic rights, it will depend on the evolution of demand. Will the channels compete with each other or get along? And there is also all the commercial income, like digital, where the League is not very good either. Have…
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