European Super League – a risky game

10th May 2021

The proposed European Super League (ESL) came crashing down in April after nine of the 12 founding members pulled out following huge international backlash. The controversial competition, which aimed to supersede UEFA’s Champions League (currently the continent’s top annual club competition), was undone by an unlikely united coalition of fans, football governing bodies, pundits and governments.

Debt financing

The planned invite-only elite breakaway league was set to receive €4bn billion in debt financing from JPMorgan Chase over a 23-year period with clubs keen to exploit the international football market at the expense of the domestic “home-grown” fan.

The US investment bank has now taken a step back after the Standard Ethics downgraded their sustainability rating from ‘adequate’ to ‘non-compliant’ stating:

We clearly misjudged how this deal would be viewed by the wider football community and how it might affect them in the future. We will learn from this.

Why the risk?

Three clubs have doubled down on their original stance and still remain in the ESL – including Juventus, Barcelona and Real Madrid. So why are these clubs risking their brand reputation?

The clubs famously have some of the best players in the world (including Messi, Ronaldo and Hazard) but the majority are also in crippling debt. Barcelona’s net debt more than doubled to €488m in the year to last June while for Real Madrid, the figure was €354.3m and for Juventus it was €357.8m  – we can expect the updated 2021 finances to be even more eye watering.

Overall, there are three main sources of revenue for a football club: broadcasting, commercial, and matchday revenue. Despite COVID-19 being quoted as the primary motive for the ESL, due to the devastating impact playing behind-closed-doors has had on the latter revenue stream, the clubs have been exploring a number of alternative ways to increase revenue for years.

The ESL is just one of these with the proposed joining grant of around €100m to €350m and a fixed payment of €264m a year each which would help elevate the debt. There are other proposals including the English Premier League exploring the fast-growing market for “non-fungible tokens” (more on this here).

The financing of football

Now the dust is starting to settle a wider conversation on the financing of football is due to be held – a wide-ranging UK Government review is already underway with potential changes to ownership models, governance, finance and how to give supporters a greater say in the running of the game all being top priorities.

In the meantime the clubs now await the wrath of the regulators (FA, UEFA and FIFA for the English clubs) with sanctions, fines, point deductions and even expulsion from the domestic leagues all on the cards.

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