"LFS"-SOCCER, BUSINESS AND GLOBALISATION; ITALIANS, HOW TO REACT?

Investments from China are demonstrating: to invest passion, investing to image, to invest in huge profits. LFScouting analyzes the stock according to an entrepreneurial perspective: how the business models of clubs has evolved over time to become a global business, capable of influencing the GDP of many countries, and to generate income millionaires, which often go beyond the mere game on the pitch. 

Football is an industry that is going through a significant change over the past decade. Nowadays football is not just a game and a passion, but became a huge money machine that annually produces a value of about 10 billion euros, more than the GDP of many countries.

This is because, in an increasingly global, all major football clubs have become aware of all the possible economic benefits in accepting the challenge of globalisation, attempting to turn the strong social and cultural influence that football has a product worth billions and billions of dollars, expanding their brand into unexplored markets in order to attract new supporters, tv rights and sponsors in Europe.

What are the incentives that prompted the top teams to take on this challenge?

The first was the global recession: in the second half of 2000 the bosses of major football clubs could not afford to continue with a repayable investment policy unconscious.

The second consists in the fact that, starting in the 90, paesi uninterested in football such as India, Japan, the United States and China in particular (with the main objective of hosting the World Cup 2030) have begun to seize the business opportunities of the sport and have fueled the desire to import the football culture from Europe in order to create synergies by following the following business model : investment in exchange of know-how.

From a chronological point of view, we can divide the evolution of the football industry towards a globalised business into 3 major periods.

The first period lasted until 1995, when, after the famous “Bosman ruling”, soccer began to be conceived as a business.

In fact, the second period, from 1995 to around 2005, where football has become a mass phenomenon and tv-addicted.

The third period, after the last process of globalization that has occurred in this decade, may be analysed the changing business model of football clubs before and after globalization

TRADITIONAL BUSINESS MODEL: If one considers only the mere ownership of a club, football until 20 years ago could not be considered to be a very profitable business. We analyze the business model according to the following pattern:

The main strategic partner of a football club were usually

• companies in the television industry,
• players ‘ agents,
• national sponsors
• the Scottish Football Association;

 

key resources at the disposal of the shareholders were

• the players and the technical staff and management,
• the stadium,
• the youth sector
• the history and culture of the team, with its logo and its colors;

 

The main activities include

• the plater trading,
• scouting
• the daily training.

 

To better understand the business model, we can immerse ourselves in the example of Juventus FC,

 

At that time, the Turin club was one of the largest and richest clubs. In 2005 its total revenues amounted to 229.3 million. As explained above, those revenues matured mostly from television rights (54%), purchased by broadcasters in order to increase subscriptions and advertising sales and revenue from.

The remaining sources of revenues came from match-day, sponsors, (especially technical and commercial), the transfer market and merchandising.

 

In any case, those revenues were almost never were able to recover the annual costs (operating expenses, commissions for agents, and depreciation of assets/footballer + their salary).

 

Later that year, for example, Juventus had a net loss of € 3 million. In 2004 the Red was ben 18.5 million, and net debt totaled 16.4 mln.

 

It was obvious that such a business model was not sustainable because it does not diversified at all. The transformation of the old “champions” in the new and richer “Champions League” marked the birth of a global event with a rich product budget from television rights and sponsors.

 

This basically meant that revenues from international soccer team became closely linked to participation in the Champions League and its revenues from television rights.

 

NEW BUSINESS MODEL: after the process of globalization, the business model of a football club is completely changed: now the revenues are not tied exclusively to a source.

• Large teams of the Premier League, for example, entered into new markets, and are strongly increasing the number and the economic value of their fans, in terms of revenue, merchandising, and revenues from Stadium;
• They introduced new distribution channels such as the Internet and Social Media, in addition to tv companies and Stadium.
• They signed new partnerships with other football clubs to create synergies,
• And have drawn new resources: fresh capital from new investors and new sponsors, eager to penetrate the European market; they introduced new international trade strategies as key tasks. Therefore, although transmission revenues continued to rise, this new business model does not depend on the rights of the Champions League (Tv and sports shows) more.

THE NEW STRATEGY

. How can football clubs to develop a new strategy that is consistent with the new business model?

Let’s take the example of Juventus f.c. S.P.A.

This could be considered a special case of a successful strategy of a company that is still lagging behind move “first movers” in the Premier League.

In 2005 the Juventus soccer team was stronger in Italy and one of the best in Europe.

However, its financial situation, as seen before, not allowed to finance itself: and the typical situation for almost all Italian teams was even worse.

However, the great entrepreneurs of the main Italian soccer teams have continued to invest and generate losses: since football is seen as a mass phenomenon, the main Italian entrepreneurial families had historically decided to invest in this sector primarily for marketing reasons: increase their popularity and attract new customers to their core business.

At the same time, in the years 2000, most European countries, swamped by financial problems, has begun to develop a sustainable and diversified strategy.

These clubs have begun to value their brand, and to sell their product in a globalised context. Manchester Utd, for example, after a major marketing campaign in Asia, is receiving 1 billion € in 10 years from Adidas, which can increase its value in the Asian market, though the current sports results of the Manchester club are not bright.

And Juventus? Sitting on his sporting achievements at the beginning of the new millennium, underestimated and missed the first train of gains offered by the new global context.

In addition, following the 2006 calciopoli scandal, the damage received from a financial standpoint became dramatic.

Develop a new strategy has become not only a necessity but also a great opportunity.

1. The first step was the construction of a stadium. Until that time the Italian football teams were the only ones in Europe not to have a stadium, but were renting (and still rented) by the municipalities. This resulted in two major costs: first, the costs of annual fees; secondly, obsolescence and the danger of old structures, which limited the spectacle of a football match, disincentivava families and children to attend matches. Therefore the photo Series A was fouled by episodes of violence, and the economic value extrapolated was not maximized.

   The “Juventus Stadium” opened in 2012, was the first Italian-owned Stadium and the first Italian without separating. It is considered one of the most modern stadiums in Europe. Thanks also to the surrounding areas, characterized by restaurants and shops, annual revenues went from 11 million in 2011 to 51 in 2015.

   Along with the J-stadium, with an additional investment of 15 million, was also implemented the project J-Museum, one of the highest technological museums around the world.

   Finally all these investments have also caused an indirect effect on accounts-and-whites: they contributed to the enhancement of the brand “Juventus”, so that we can be exported and monetized even overseas.

2. The second step was to develop a merchandising strategy directed towards global expansion: in 2015 Juventus have closed a deal with Adidas: 23.25 million per year for sponsorship + 6 m fixed merchandising management controlled by the technical sponsor. At the end of that year, but Juventus decided to directly manage licensing and merchandising: believes to earn this way at least another 15 million a year, developing synergies with global marketing campaigns.
3. The third step was to renew the branding strategy, focusing on the following puntia. The Organization of summer friendlies in emerging countries: after attempting to penetrate the American market, in order to exploit the synergies of Fiat-Chrysler and Jeep brand over the past two years, Juventus has decided to be the first mover into markets such as Indonesia, Singapore and Australia. And success in the Italian Supercup last year in Shanghai has helped to increase the pool of fans in China. The Juventus Legend Team, which often performs in friendly matches, helps to enhance the reputation and image of the club b. Increased investment in the youth sector at the global level: Juventus is recently by opening several J-Accademies worldwide, c. Digital Marketing strategies. Juventus are the third Club that has grown more in Social Media in 2015, with a total of 22.6 million followers.

   d. The development of international trade strategies: to take advantage of the direct management merchandising, Juve have opened 6 new online stores in Asia. Also, you are trying to create joint ventures and partnerships with local brands from around the world. In may 2015 Tecate, a Mexican beer really popular, became official Juventus sponsor regional.

   e. Naming rights: to date, no sponsor has already decided to invest in Juventus Stadium naming rights. However, the Swiss is not worried, because the Sports Marketing company SportFive has paid 75 million to ensure the management and the revenue from naming rights for the next 15 years.

Processes to work on for the futur

e. In 2015 the Juventus reached the final of the Champions League, in 2016 won consecutive “Scudetto” 5° and for the first time developed a turnover approaching 400 million. Despite being the first team in Italy and tenth in the world in terms of revenues, however, really far from the 5 best European clubs. This difference can be explained by an international strategy-commercial that still is not at the levels of its competitors: while Juventus receive only 54 million revenue from Marketing, for example Manchester United if he hoards 241 per year.

What could pry lambs and Maddy to reach the level of the top clubs in terms of revenue? We highlighted 5 points:

1. Create synergies with the best European clubs in order to change the current format of the Champions League in order to increase the number of matches between clubs no longer supported, and therefore to increase the performance and value of competition.
2. Develop synergies with other Italian teams and the Football League, in order to design a strategy to restore value to the Brand Serie A and export it in the new countries:
3. Intensify the creation of Sport multinationals, as is already making Manchester City. Actually the Juventus already has partnerships with small Italian and European Football Club in order to Park young talent acquired worldwide to forestall competition. But it’s still not enough
4. Fight contraband merchandise, common in Italy.
5. Strengthen Marketing strategy, aiming eventually to listing in emerging markets such as Asia, in order to seek new financial partners.

The 5 point is all the more important, since the more difficult to achieve, especially for a club at the beginning of its process of globalisation: the obstacles are the fierce competition and large barriers to entry to penetrate new markets. And this could in fact trigger a vicious circle.

Juventus, despite being club with a strong tradition, and while acting as a model in Italy, finding themselves in a situation of “competitive disadvantage” compared to other top clubs should now focus better on steps 1-4.

Only once has been able to differentiate itself from a commercial point of view not only in a national context, but also internationally, then the application of point 5 in the strategy we analyzed the may allow you to create absolute and sustainable competitive advantage.