Sports Business: SOCCER
SOCCER SAYS: GOODBYE HOODLUMS, HELLO BIG MONEY
Corporate cash and fat contracts change soccer forever
It began with champagne. At an evening gathering in Amsterdam in mid-August, the captains of Dutch industry, including Philips President Jan Timmer and ABN AMRO Bank Chairman P.J. Kalff, celebrated the inauguration of the $145 million Amsterdam Arena. After cocktails and dinner, the executives got down to business--watching a soccer match between Ajax and Milan AC, two of Europe's top-ranked teams.
The Italians whipped the locals, 3-0. No matter; the Dutch bigwigs inside their corporate boxes still enjoyed the action. And who wouldn't, given their luxurious surroundings? Until now, most European soccer matches have been played in cramped, outmoded stadiums. The new Amsterdam facility, modeled on Toronto's Skydome, features a retractable roof, well-appointed business boxes, gourmet restaurants, and slick souvenir shops. "This is the first stadium in Europe to bring business and entertainment together--just like in America," boasts arena executive Ronald van der Aart.
As a new European soccer season opens, the game long regarded as a working-class pastime is taking on the trappings of big-league U.S. sports, where players, owners, agents, broadcasters, and advertisers come together in a giant business. Skyrocketing salaries, battles for broadcast rights, huge merchandise deals, ever-more-grandiose stadiums, strife between players' unions and owners, a growing gap between rich teams and poor ones--these factors are changing the game, just as they transformed American baseball and basketball. Says Ted van Leeuwen of the Dutch magazine Voetbal International: "Soccer has changed more in the last year than in the previous hundred."
The arrival of soccer's Big Business era is part of the wave of deregulation sweeping Europe. Dozens of new digital-TV sports channels are using sports programming to win dominance over the old state-controlled broadcasters. The end of most restrictions on transfers is fueling an escalation of salaries and prompting players to change teams in droves. The result is a competitive free-for-all similar to what is happening to Europe's airline and telecom industries.
REVENUES SOAR. Although numbers for all of Europe are hard to come by, the signs point to a new era of prosperity for soccer, which most Europeans call football. If you add up all of Europe's soccer leagues, the total take is now at least $1.6 billion, rivaling America's famously successful professional basketball business.
In Britain alone, the 22 teams in the Premier League had average revenue of $23 million each in the 1994-95 season. Soccer consultants Deloitte & Touche figure revenue has been growing for British clubs at 20% a year. The Union of European Football Assns. (UEFA) thinks the best Continental teams show a similar performance. And such figures don't include the rich harvest of ad revenues and pay-TV fees broadcasters are reaping from televised games. For the 1998 World Cup, organizers are estimating the cumulative TV audience will approach 35 billion--twice the size of the audience for the Atlanta Olympics.
Of course, Europeans have passionately followed professional soccer for decades. But such popularity did little to enhance commercial prospects. Not long ago, fans clogged small stadiums where barbed-wire fences were designed to wall in hooligans. Clubs made their money on ticket sales and on fees they collected by selling players to richer teams. The movement of players was strictly limited, though, and the players themselves took home modest salaries. Europe's public broadcasters paid little for soccer rights and only showed the sport occasionally. "When I was growing up, the sport was more a hobby than a business," recalls Rob de Leede, 36, of the Royal Netherlands Football Assn.
That started to change in the mid-1980s, when Canal Plus, France's first independent pay-TV network, set out to replicate the success of televised sports in the U.S. Today, soccer continues to be Canal Plus's most valuable programming asset. "More than half our subscribers watch the games," says Charles Bietry, the company's director of sports. British Sky Broadcasting, which is 40%-owned by Rupert Murdoch's News Corp., has followed a similar strategy, with tremendous success.
A FRENZY. This year, the media boom in soccer has exploded with the advent of digital television, the technology that will allow pay-TV companies such as Canal Plus, BSkyB, and Germany's Kirch Group to beam hundreds of channels into homes. Soccer games can fill those channels, so Europe's media heavies are raising bids for broadcast rights to unheard-of levels. Earlier this summer, Germany's Leo Kirch paid $2.36 billion for world rights outside North America to the 2002 and 2006 World Cup. This June, BSkyB renewed its contract with the English Premier League for $955 million, four times what it paid in 1992. A new Dutch channel, Sport7, is paying $648 million for national soccer rights--six times what the previous broadcaster had paid. In Spain, a bidding match between Canal Plus and Antena Tres has produced a bonanza for the country's clubs. Last year they earned $48 million from TV rights. This year it's $272 million.
More than $6 billion has been shelled out for broadcast rights in the past four years, and the TV companies have to earn back those fees. On Sept. 3, Canal Plus launched a pay-per-view system for matches. Individual games will cost $10, and French soccer officials hope that by yearend 1997 an average of 100,000 viewers per game will be paying.
Adding to soccer's frenzy this year is the sudden mobility of the best players. Until last December, the system held down player prices by sharply limiting their movement between teams. But the cartel broke down after a disgruntled Belgian player named Jean-Marc Bosman won a landmark suit before the European Court of Justice against UEFA.
Until the lawsuit, teams could field only three nonlocals. But European Union players no longer can be counted as foreigners. And at the end of his contract, a player becomes a free agent and can sign with any team. Until now, clubs could block these departures or insist on big fees before allowing them. As a result the number of cross-border moves has soared along with salaries. A record 32 French players transferred abroad before the start of this season. To hold onto players, Amsterdam's Ajax has had to double its spending on wages from last season. Now, top players command annual salaries of $1 million or more. In a landmark transaction, Newcastle United paid $23 million this summer to buy English striker Alan Shearer from the Blackburn Rovers. This sum went mostly to the Rovers, while Shearer got a hefty bonus.
A push to sell team merchandise reflects the new commercial aggressiveness at many clubs. Manchester United has increased its merchandising income from $3.1 million to $37 million in four years. Ajax, managed by former consultant Maartin Oldenhof, is opening up souvenir stores throughout the Netherlands--and even plans to sell the team's red-and-white shirts over the Internet. "Ajax represents a terrific brand," Oldenhof says.
Given the scale of soccer's commercialization, you would think everyone would be profiting handsomely. That's not true. Sure, Canal Plus and BSkyB reap big profits from soccer broadcasts. And according to Deloitte & Touche, Britain's Premier League earned $10 million in the 1994-95 season on revenues of $500 million. But the country's three lower divisions recorded losses of $32 million on revenues of $225 million. The spike in salaries since the Bosman ruling threatens to aggravate these losses.
NO HOOLIGANS. Violence represents another serious threat to the sport. Deadly disasters occurred at Brussels' Heysel Stadium and at Hillsborough in the 1980s. Since these tragedies, clubs have spent millions beefing up the police presence and replacing dangerous standing places with safer all-seated environments. The formula helped keep this summer's Euro 96 Championships, held in Britain, hooligan-free.
Further commercialization of the sport may lower the chances of hooliganism further. "This is the best way I know to entertain clients," says Jan Koopman, senior executive vice-president for ABN AMRO Bank, as he sips a glass of champagne before the Ajax-Milan match. Plenty more corporate customers are sure to find the soccer teams they like. But other clubs will suffer from a lack of sponsorship. Some will probably even disappear, as the participants of Europe's favorite game learn firsthand the risks and rewards capitalism brings to sports.By William Echikson in Amsterdam, with Heidi Dawley in London, Monica Larner in Rome, and Andrew Robinson in MadridReturn to top