Literature Review

It is undoubtedly true that football is one of the most popular sports in the world. Ingle and Glendenning (2003) point out that millions of football fans regularly go to the stadiums to support their favorite team. According to a survey conducted by the Federation Internationale de Football Association (FIFA) published in 2001, the number of registered male and female football players is over 38 million in total. FIFA also announced in 2007, more than 0.26 billion people from over 200 countries play football steadily and over 1 billion audiences watch football match on TV. Based on FIFA records, more than 3 million football clubs registered in the FIFA and subordinate organizations. Large numbers of the club made up the various league in different level under the leadership of relative football association. It is evident that: “Soccer is, without any shadow of doubt, the world’s most popular sport.” (Murphy, Williams & Dunning, 1992).

Szymanski & Kesenne (2003) discussed it is widely considered that competition balance among every team is a significant parameter to measure a league whether successful, because match will be more uncertain and therefore the match will be more interesting. It is seemed that a football team which wants to be successful would continuously increase its competitive strength. Partech (2009) pointed out when the successful team won more and more bonuses, it was able to invest more funds to strengthen the athletics level, and thereby it could obtain greater success in the future. However, not all of the clubs are able to obtain high bonuses from their league. Therefore, in a great deal of commercial operations may have become one of the primary sources of revenue in numerous football clubs. http://www.ttc-switch.com/Thesis_Tips/Reference/Literature_Review/Kartakoullis and Theophanous (2009) highlighted that commercial activities are one of the main sources of revenue. Czarnitzki & Stadtmann (2002) argued that the business of professional club sports developed rapidly in Europe over these years. Most of the Premier League football clubs have been built up public limited companies in England and clubs in other countries such as Germany also preparing to be organized public limited companies. Sugden and Tomlinson (2005) highlighted that specialization and commercialization is a symbol of modern sports. With the global economy developing rapidly over the years, the football industry is also moving towards in the area of specialization and commercialization. Sugden and Tomlinson (2005) also noted that FIFA has adapted to a business international nongovernment organization from an international nongovernment organization. “Football has been transformed over the years to a gigantic commercial operation.” (Boyopoulos & Milakas, 2005).

However, not every football team has excellent business models. It has warned by Capling (2004) that many football teams are facing serious financial problems in the world. In fact, all professional sport clubs, and football clubs too, revenue has become a common issue in both club officials and supporters. “Unlike industrial or financial business, which is generally valued on cash flow and assets, sport franchises are valued on their revenues.” (Lee & Chun, 2002).#p#分頁標題#e#

A review of literature suggests that there are many factors influencing football clubs revenue. Kartakoullis & Theophanous (2009) pointed out it is evident that primary sources of football clubs revenue involve ticket income for home matchday; TV broadcast rights and commercial activities. This study has chosen four football clubs as the main research samples, which ranks the 10 biggest football clubs in the world based on revenue ( see table 1 for the total revenue of the 10 richest clubs, the table according to ‘Deloitte Football Money League 2008’). They are AC Milan, Arsenal, Real Madrid and Bayern Munich. They not only are super clubs in top 4 leagues in Europe respectively, but also they are typical representative in four different operation models. The study explored various operation models for football clubs which based on the different sources of revenue. These sources can be broadly divided into four categories:
? TV broadcast rights
? Matchday revenues
? Commercial activities
? Players transfer

Table 1. Rankings for the 2006–07 season the 10 biggest football clubs in the world based on revenue
Rank Club Revenue
(€ million) Country
1. Real Madrid 351.0 Spain
2. Manchester United 315.2 England
3. Barcelona 290.1 Spain
4. Chelsea 283.0 England
5. Arsenal 263.9 England
6. AC Milan 227.2 Italy
7. Bayern Munich 223.3 Germany
8. Liverpool 198.9 England
9. Internazionale 195.0 Italy
10. Roma 157.6 Italy

TV broadcast rights
In today of sports industry gradually becomes commercialized and specialization, TV broadcast plays an important role in promotion of sports industry. It is also generally agreed that TV broadcast rights is one of the most important sources of revenue for professional sport clubs. Sage (1998) discussed that cable networks and direct satellite sport broadcasts grows rapidly which happens sport matches are broadcasted thousands of each year. Lee & Chun (2002) found that: “Sport and television coexist in a high-priced equation.” Their research show that, in general, the mature league would sell their TV broadcasting right to the broadcasting companies, it is able to make a high price and then, the association will distribute the revenue to each team. This operation is also quite widespread in the area of professional football leagues. English Premier League earned from TV broadcast rights more than £2.7billion in next three years began from 2006-2007 Season (BBC News, 2007). Szymanski (2001) noted that the broadcasting revenue in England divided into three parts: half of the revenue is divided between twenty the clubs equally; one quarter divided the clubs which based on the final rank of the league and another quarter cost for the maintenance of equipment. Partach (2009) pointed out that different with most other European countries, Spanish La Liga and Italian Seria A have been sold TV broadcast rights by clubs themselves. Based on the ‘Deloitte Football Money League 2008’, the four football clubs which have chosen by the study as the main research objects all have excellent performances in earning broadcasting revenue from national leagues and The European Champion league in total (See the four clubs broadcasting revenue in table 2). AC Milan had been a stunning success in broadcasting revenue. They obtained the broadcasting revenue in exceed of £100 million. Bayern Munich obtained the least broadcasting revenue in four clubs well more than £40 million.#p#分頁標題#e#

Table 2. The four clubs broadcasting revenue in 2006–07 Season
Rank Club Broadcasting Revenue
(million) Country
1. AC Milan €153.6m (£103.4m) Italy
2. Real Madrid €132.4m (£89.1m) Spain
3. Arsenal €65.8m (£44.3m) England
4. Bayern Munich €61.2m (£41.2m) Germany

Matchday revenues
Although each professional sports team is trying to increase ticket income, the ticket income in contrast of other sources of revenue has higher limitation. Hanson & Gauthier（1989）noted that earlier studies showed that influence people go to the stadium is divided into four main factors: economics, demographics, game attractiveness, and other factors. Garcia and Rodriguez (2002) argued that the day of the match is played one of the decisive roles in attendance: attendance on weekend in exceed of attendance on weekdays. They also reported that increasingly people who watching TV broadcast games will reduce the attendance. The stadium facility and capacity are also important factors of decision tickets income. Hawkins (2008) show that the capacity of a stadium plays an important role in determining average attendance. His report show that, moving to a new stadium which has enough capacity can help the club increase matchday revenue. Lee & Chun (2002) found that luxury suites have become one of the most advantageous sources of ticket revenue. Increasing luxury suites are becoming an indispensable strategy in most stadium redevelopment and construction project. Therefore, when a club moves into a new stadium, matchday revenue also is able to become the most important sources of clubs revenue. According to the ‘Deloitte Football Money League 2008’, Arsenal’s matchday revenue reached amazing £90.6 million which is accounting 51% for their total revenue, when they moved into the new stadium in the first season. AC Milan obtain the least matchday Revenue in four clubs, only has £19.3 million (See table 3).

Table 3. The four clubs’ matchday Revenue in 2007
Rank Club Matchday Revenue
(million) Country
1. Arsenal €134.6m (£90.6m) England
2. Real Madrid €82.2m (£55.3m Spain
3. Bayern Munich €54.9m (£37.0m) Germany
4. AC Milan €28.6m (£19.3m) Italy

Commercial activities
Commercial activities have become an indispensable part of profession team sport. Lee & Chun (2002) argued that profession team sport is not only games, but also it is business. Ozanian (1994) discussed that profession team sport franchises are valued on revenue compared to finance which is emphases on cash flow and assets. Commercial activities are main source of revenue except athletics revenue. There is large number of people enjoyed in the commercial activities of professional sport team in the world. Commercial activities main include advertising (Lee & Chun, 2002), sponsorship (Kartakoullis & Theophanous, 2009), named after corporations (Spangler, 2006) and so on.#p#分頁標題#e#
Some instances base on‘Deloitte Football Money League 2008’ as following:
? Manchester United’s chest advertisement of shirt sold to the AIG firm, which had been worth an estimated approximately £14.1million per season.
? FC Barcelona’s contract of kit sponsorship with Nike was extended to 2013, which means FC Barcelona can obtain £20.2 million per season from Nike.
? Arsenal’ obtained £90 million agreement of stadium naming rights and shirt sponsorship with Emirates Airlines in 2006.
In total commercial revenue of the four clubs, Real Madrid earned £91.8 million in commercial activities, which is accounting 39% for their total revenue. AC Milan obtained the least commercial revenue in four clubs well in excess of £30 million (See table 4).

Table 4. The four clubs’ Commercial Revenue in 2007
Rank Club Commercial Revenue
(million) Country
1. Real Madrid €136.4m (£91.8m) Spain
2. Bayern Munich €107.2m (£72.1m) Germany
3. Arsenal €63.5m (£42.7m) England
4. AC Milan €45.0m (£30.3m) Italy

Players transfer
? Players transfer are an important indicate of sports industry commercialization. Player transfer fees are extra revenue which are main determinate by ability of the player. Lee & Chun (2002) pointed out that the most basic principle of professional sports is buying and selling goods, services, and labor. Tervio (2006) explained that transfer fees are the price which the player wants to stop the contract and transfer another club. In his research, he also discussed that there are some clubs which emphasize on invest some young gifted players aim obtain valuable transfer fees from these players. In his opinion, in order to prevent player prematurely transfer, these clubs will offer a long-term contract to young players generally. “European soccer players have generally been considered the property of the club for which they played, and, as in any team sport, the trading of players between clubs is commonplace in soccer.” (Matheson, 2003). There are two famous instance of players transfer as following( see table 5 for top 9 highest transfer fees in history, based on BBC Sports, 2009 and Footballdatabase):
? Cristiano Ronaldo transfer from Manchester United to Real Madrid in summer of 2009. Manchester United obtained stunning £80 million transfer fees.
? Whilst Zlatan Ibrahimovic transfer from Internazionale to Barcelona. Internazionale not only received £60.7 million transfer fees, but also get Samuel Eto'o who is the top goal scorer in Spanish La Liga.
In the four clubs, AC Milan earned £56.1 million from kaka transfer to Real Madrid in the summer of 2009. Real Madrid got £32.5 million from Robinho transfer to Manchester City.
Rank Player From To Transfer Fee Year
1. Cristiano Ronaldo
Manchester United#p#分頁標題#e#
Real Madrid
€ 93.1m(£80.0m)
2009
2. Zlatan Ibrahimovi?
Internazionale
Barcelona
€ 69.0m(£60.7m)
2009
3. Kaká
Milan
Real Madrid
€ 65.1m(£56.1m)
2009
4. Zinédine Zidane
Juventus
Real Madrid
€ 78.0m(£45.0m)
2001
5. Luís Figo
Barcelona
Real Madrid
€ 58.5m(£37.0m)
2000
6. Hernán Crespo
Parma
Lazio
€53.6m(£35.5m)
2000
7. Gianluigi Buffon
Parma
Juventus
€ 49.2m(£32.6m)
2001
8. Robinho
Real Madrid
Manchester City
€49.0m(£32.5m)
2008
9. Christian Vieri
Lazio
Internazionale
€ 48.3m(£32.0m)
1999
Table 5. top 9 the highest players transfer in history
The literature has provided us with some valuable insights into the nature of professional football team sports. I am able to understand clearly that the four main sources of revenue for football clubs. However, further researches are needed due to the limitation of previous researches. First, there has been extensive research regarding one of the four main sources of revenue how to influence the football club respectively, there have been few studies that explore interactions amongst these sources of revenue. Second, I particularly lack knowledge of the operation model combinations of a football club.

References:

Ingle, S. & Glendenning, B. (2003) “Baseball or Football: which sport gets the higher attendance?” Available online at: http://www.guardian.co.uk/football/2003/oct/09/theknowledge.sport

FIFA website (2001) "FIFA Survey: approximately 250 million footballers worldwide”. Available online at: http://web.archive.org/web/20060915133001/http://access.fifa.com/infoplus/IP-199_01E_big-count.pdf

FIFA website (2007) "TV Data". Available online at: http://www.fifa.com/aboutfifa/marketingtv/factsfigures/tvdata.html

Murphy, P., Williams, J., & Dunning, E. (1992). Football on trial. London: Routledge

Szymanski, S. & Kesenne, S. (2004) “Competitive balance and gate revenue sharing in team sports” in The Journal of Industrial Economics 52/1, pp.165-177.

Partech, N. (2009) “Europe’s top football leagues becoming more predictable”. Available online at: http://www.chamber.ua/files/documents/updoc/tax_legal/19/PR_Football_study_2009_Eng.doc

Kartakoullis, N.L. & Theophanous, A. (2009) “Important Parameters of the Football Industry in Cyprus: Challenges and Opportunities” in The Sport Journal 12/4.

Czarnitzki, D. & Stadtmann, G. (2002) “Uncertainty of outcome versus reputation: Empirical evidence for the First German Football Division” in Empirical Economics Vol. 27, pp.101-112.#p#分頁標題#e#

Sugden, J. & Tomlinson, A. (2005). In Allison, L. The Global Politics of Sport – The
role of global institutions in Sport. Routledge -Taylor and Francis Group. London and New York (Quoted from Kartakoullis & Theophanous, 2009).

Boyopoulos, N. & Milakas, D. (2005) A religion without infidels – football. Athens:
Livanis A. A. Publications (Quoted from Kartakoullis & Theophanous, 2009).

Capling, A. (2004) “It’s more than business” in Arena Magazine vol.70, pp.47-49.

Lee, S. & Chun, H. (2002)” Economic Values of Professional Sport Franchises in the United” in The Sport Journal 5/3.

“Deloitte Football Money League 2008” Available online at: http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/UK_SBG_FML08.pdf

Sage, G. H. (1998). Power and ideology in American sport: A critical perspective (2nd ed.). Champaign, IL: Human Kinetics Publishers. (Quoted from Lee & Chun, 2002)

BBC News, 2007. Available online at: http://news.bbc.co.uk/1/hi/business/6273617.stm

Szymanski, S. (2001) “Income Inequality, Competitive Balance and the Attractiveness of Team Sports: Some Evidence and a Natural Experiment from English Soccer” in The Economic Journal vol. 111 pp.69-84.

Hanson, H. & Gauthier, R. (1989). “Factors affecting attendance at professional sports events” in Journal of Sport Management, vol.3, pp.15-32.

Garcia, J. & Rodriguez, P. (2002) The determinants of football match attendance revisited: Empirical evidence from the Spanish football league” in Journal of Sports Economics, 3/1, pp.18-38.

Hawkins, M. (2008) “Size matters” in Deloitte Football Money League, pp.27-30.

Ozanian, M. K. (1994) “The $11 billion pastime: Why sports franchise values are soaring even as team profits fall” in Financial World 163/10, pp.50-63.

Spangler, A. (2006) “A certain brand of soccer.” Available online at: http://www.thisisamericansoccer.com/archives/2006/03/a_certain_brand_1.html
(Quoted from Jensen, Sue & Wang, 2008)

Tervio, M. (2006) “Transfer Fee Regulations and Player Development” in Journal of the European Economic Association, 4/5, pp. 957-987.

http://www.ttc-switch.com/Thesis_Tips/Reference/Literature_Review/Matheson, A. (2003) “European Football: A Survey of the Literature” Available online at: http://www.holycross.edu/departments/economics/vmatheso/research/soccerreview.pdf

BBC Sports, 2009. Available online at: http://news.bbc.co.uk/sport1/hi/football/8085391.stm

Footballdatabase，2009 Available online at: http://www.footballdatabase.com/index.php?page=player&Id=10&b=true&pn=Zlatan_Ibrahimovi?