Football Business: How clubs can run like a business entity?

[This writing is based on the analysis of 3 project reports along with 2 case studies. Manchester United and Exeter city are the two clubs taken as cases and discussed the plans and opportunities of those clubs for their success. And all the data on Indian football are taken from a confidential report of the AFC on Indian football]

 

“ Sports is an industry. The companies own football clubs, this makes football clubs a BRAND”

                                                                      ---Phillip Kotler (The marketing guru)

My previous writings on this blog are about identifying the problems in Indian football and trying to find the solution on that. But if we have the solution, then why AIFF or Indian football clubs are not implementing those solutions? Indian football is lacking with a proper vision and planning. With this writing, I would like to discuss two case studies about two football clubs. After reading this column, the readers will understand in a better way that where an Indian football club is lacking? Where we need to change? Even how the changes can occur?

Let’s start this discussion with a general view. Try to identify the costs-revenues model of a football club. [Based on A T Kearney football club business model]

Costs: Players wages, Transfer spending, Manager’s wage, Support staff wages, Merchandising, Asset maintenance, Administration or ground staffs wages.

Revenue: Various sponsors, Sales per activity- Match day ticket and program sales, Broadcasting television rights; By-products-Travel,Soccer schools, Real estate, Broadband, Finance, Catering services etc.; Asset Utilization-Stadium Significance and its right issues, Player transfer or sell, merchandising, and many other activities under the brand name of the football club.  

Now I am going to discuss the business structure of two different football clubs of different category.
My first case is on the world’s most model football club Manchester United, the world’s richest football club, which is worth GBP 1.4 billion. It’s not only a football club it is a business entity. That’s why their home stadium is called as ‘Theatre of Dreams’. Manchester United not only means a football playing club, it’s meant the Entertainment, the Business.
Manchester united have the largest fan base around the world. According to a recent survey Manchester United have around 659 million current fans all around the world, most popular football club in the world, and the number is still rising. Why they have such a strong fan base? 

Apart from football what else Manchester United means to us?

•      Global Reach

•      Continuity

•      Visibility

•      Recognition

•      Trust

•      Respect

•      Brand Conscientiousness

•      Propensity to buy

Now lets see how they earn so much money. They are running this club form basic things. The Management tries to earn from the smaller to smaller issues. Match day activity is the biggest thing to earn their money. Now see how a single match can earn so much money for the club.
         Match day activities (29%)

–      Tickets

–     Season and separate suites Tickets

–     Travel, programs, Catering and Hospitality

         Broadcasting and Media (44%)

–     TV deals for Domestic Matches

–     TV deals for European Games

–     TV rights Worldwide

        Sponsorship and Commercial (27%)

–     Sponsorships

–     Non Match-day Activities (Catering, Tours)

–     Branded Products

–     Other Activities (Finance, Betting)

The numbers of present sponsors of Man Utd are mentioned as below: 

      •     AON - Official kit sponsor

•      DHL- Official logistic partner

•      EPSON-official office equipment partner

•      Hublot-Official timekeeper partner

•      Airtel/STC/3/PCCW/TM/Globacom/VIVA/Turk Telecom/MTN/Zong/Beeline/Globul

                              -Official integrated telecommunication partner worldwide

•         Nike - Official kit manufacturer

•         Turkish Airlines - Official airline

•         Thomas cook-Official travel partner

•         Audi - Official automobile and dugout seat provider

•         A.P Honda-Official Motorcycle partner in Thailand

•         Betfred - Official gambling partner

•         Singha/Casillero Del Diablo/Smirnoff - Official beer/wine/drinking partner

•         Mister Potato-Official Snacks partner

Also Man Utd has special corporate suites and special facilitated seating arrangements within Old Trafford to watch a match. Lots of rich people spent a lot money to watch a match from those places and Man Utd earns a huge money by selling tickets of those special seats. Also Manchester United Soccer Academy and Manchester United Soccer Schools around the world is the biggest asset for the club to generate more revenue and establish the brand-Manchester United among the masses of the world. This activity makes them world’s one of the strongest brand.

The richest football club-Manchester united also shows us a great organizational structure to run a corporate house or a business entity.

Manchester United initially have 6 activities wings: Football club, Merchandising, Catering, Media, Hotel, and Other commercial activities. Each and every department have their respective officials responsible for more revenue in club funds. Football clubs earn from match day tickets and sponsors. Domestic and international merchandising of Man Utd with different local collaborations and sponsors worldwide. The catering service is managed not only on match day but also on non-match day on the ground or for private parties. The international broadcasting like MUTV, MU Now, or other telecommunication partners worldwide is managed through media department. Also websites are managed by this department. Example, Manchester United website enabling subscribers to take virtual penalties against their No 1 keeper. Other commercial includes Travel, Magazines, Resturant, Finance facilities. These are the special ventures of Man Utd to generate more revenue. MU Travel, MU Finance, MU coffee shop or MU Hotels are now spreading all over the world for more prospect and more opportunities. Recently in Singapore Man Utd is planning to issuing public shares and in India they have opened a soccer school and live coffee bar to grab more fan base. Even these all steps help Man Utd to recover from the debt very well and make them world’s richest football club.

My second case is a developmental  football club from southwest England, Exeter city FC, restructured after 2003 and back in mainframe in English football from 2008-09 season. ECFC Positioned at the ‘ heart of its community and with the Supporters’ Trust as its majority stakeholder, its leads the way in offering an ‘alternative way’ for top class football in England. All stakeholders in the club; staff, fans and business partners buy into the unique contribution. ECFC makes to the whole sub-region with it ‘family first’ approach to match days and 365 days a year usage of its leisure, shopping, meeting and social facilities.

At 2009-10 the management had put a vision of 20/20. And within 2020 they want to make the Exeter City FC a championship club with financial stability. I am going to discuss about their vision and plannings to ensure their goal.

Corporate objectives:

•         To experience Championship Football by 2015

•         To be an established Championship Club by 2020

•         To be financially secure

•         To retain Supporters’ Trust ownership

They have started to take actions for this. The actions are:

•      Ensure appointment of independent non-executive chairman

•      Agree corporate objectives and strategic plan

•      Produce year one budget which is challenging but realistic with a baseline that is profitable

•      Recommend organizational structure capable of delivering the medium term strategy and empowering management team

•      Identify ways to transform non-match day revenue from bars and conferencing

•      Build manageable sales campaign within which specific corporate customers can be targeted with relevant products

•      Ensure season ticket prices are at a financially viable level

•      Begin process of communicating with a fan base as individuals (CRM)

•      Support the community base, raise profile with city and county councils and support the family focus of the club.

The Management has a very solid, unique and acceptable strategic statement to endure the vision for the entire ECFC community. The strategic statement is as below:

•         The fundamental strategy of ECFC is one of continuous progress as a professional football club, with financial stability ensuring its survival in the football league.

•         A solid infrastructure within the trust ownership model and strong business leadership will provide recreational and social services for the wider community of Exeter and Devon.

•         This entails the development of the stadium, the people who run the club and the ongoing support of its many stakeholders.

ECFC  Board and Management Team Structure

(A) Chairman, Vice-Chairman, &Club CEO

(B) Chairman has direct control on: Secretary, Trust, Legal, Finance, and Ad-Hoc committee

(C) Vice-Chairman has control over: Manager, COE, FIC

(D) Club CEO has control over: Accounts, Food/Beverages, Promotion, Customer, Sales, Materiel, Security

(E) Also HR department works under CEO's observation.

The objectives behind the organizational structure of ECFC:

•      To achieve 2020 vision strategic aims

•      To streamline decision making process

•      To provide leadership and management for club officials

•      To ensure the future of ECFC is assured through control of expenditure and maximization of income

•      To provide monthly financial statements to the Trust and Club non-executive directors

•      To provide the executive directors with sufficient authority, responsibility and accountability to drive ECFC forward.

To reach to their 20/20 vision ECFC trusts have started different departments with different responsibility as their strategic plans. They have started their 7 different segments: Marketing, Human resource, Football and Youth, Community and Environment, Physical resource, Financial, and Communication. Also they have renovated their home ground and started corporate boxes and other facilities there. Actually they have started to commercialize their club for financial stability. And as a result ECFC have started to raise their turnover year after year. And during the 2009-10 season their turnover is increased by 49%. So they had also increased their football budget by 54% than the previous season.

Indian football clubs are in a like the situation of ECFC before 2004/05. So following the ECFC way can be very fruitful for the betterment of whole Indian football. A vision of 5 years and plan to commercialize the entire football club will be the biggest boost for the financial rise of Indian football. 

In a recent AFC report I have read that, currently the amount of revenue in Indian football is around $54,29,000. And the maximum amount of revenue comes from the clubs main(single) sponsor, which is  around 82.2% and form sub sponsor the clubs earn only 6.48%. Remaining revenues are from the areas like, merchandising: 0.15%, Gate receipt: 1.03%, Revenue from the league (provided by organizing authority) : 1.17%, and 8.97% is other income. But unfortunately the membership fee percentage is almost 0 in this calculation. 

When the average annual salary is increasing by almost 100% during the last 2 season, the source of revenue is still conventional like before by the Indian football clubs. Even they are not trying to discover the new ways to earn more money from various different ways as shown in 2 case studies in this writing. Even the whole revenue of an Indian football club is going only for the salary of players and coaching staffs. Nothing is used for the development of the marketing department or community development of those clubs. 

If we consider the profitability of any football clubs of India, we can see that apart from Mumbai FC ( in profit by a little margin), every club is bearing huge losses of around $ 12,00,000. Now readers can compare the entire Indian football market revenue analysis with a developed and a developing club of world football.  And they can also get the answers to my questions.

AFC have also given a few suggestions in that document to increase the popularity of football in India and the ways to increase the revenue for an Indian football club. According to AFC report Indian clubs need to establish few more departments in their football clubs like marketing, media & PR, finance. Suggestions are as below:

•      Clubs to look into establishing marketing department to help boosts the club’s popularity and to increase match attendance

•      Clubs to look into additional sponsors of the club instead of relying on singular sponsor. Possibility on I-League committee helps to negotiate a packaged plan with specific sportswear brand.

•      I-League to help clubs to increase its brand value, acquire more fans and increase match attendance

•      Ticket Sales

–     Grant each club to sell the home match ticket

–     Club understands the needs of their fans best

–     Increase the club promotion

•      Increase the inside and outside of the stadium and provide suitable Stadium Facilities to everyone

–     Broadcast Facility: Increase the value of the League matches, clubs own tv shows.

–     Hospitality Facility (e.g., corporate suites): Increase revenue and sponsor’s satisfaction

–     Concessions to be fully controlled by the League: Increase revenue and provide better service to fans

•      Merchandising

–     I-League to explain and insist on club’s merchandising

–     Necessity of centralized control by the league and the corresponding club

•      TV Rights

–     League to consider more effective distribution formula

–     League to provide host broadcasting obligation to produce more live feeds

•      Match day experience

–     Clubs to create fan zone around the stadium during match days

•      League to develop the branding program

–     Stadium dressing, anthem

–     Better services for supporters in stadium

•      Have a qualified team media officer who can supervise all the media related activities and programs

–     Media relations

–     New Media

–     Data & contents

–     Public relations

–     Team related media matters

•      With an adequate plan, it is important to launch a website for every team.

–     Production plan of contents

–     Required resources

–     Maximization of club’s communication capability through new media

•      Clubs produce contents on/off line which can help provide rich and entertaining information to fans and media such as match day programme, fan guide book, club magazine and etc.

•      The Pre-match press conference in a professional form of communication with the media. It is a tool to promote the match before the game

•      Club builds adequate facility and equipment at team training sites which will help media work in a comfortable environment

•      Under the leadership of I-League and AIFF, it is advised to find a solution in a possible partnership between the exclusive rights holder and local TV stations or with club’s official tv programme, which can help promote the games through broadcasting among masses.

•      League (&AIFF) establishes a match data/report distribution system in cooperation with clubs which can help media receive an official data / report right after the match

•      Clubs should exploit other source of income such as gate receipt and merchandising to increase their revenue.

Now it's high time to follow the AFC guidelines by our football clubs and break the conventional way and try to discover some new avenues for making a football club more professional and popular within their fan base. So that the clubs can be more financially stable in future. We want to see more professional football clubs in India to start, like the way of Shillong Lajong FC, United Sikkim FC, or Pune FC, or Mumbai FC,but not to close down the football clubs like on the way of Mahindra United or JCT FC.