Inter Milan’s Plan to Stop Losing Money, Start Winning Games

  • Italian club to lean on owner Suning for Chinese connection
  • ‘We fail if we don’t win trophies,’ CEO Bolingbroke said

One of Europe’s most storied soccer teams says it has a plan to turn a 140 million-euro deficit into a profit, and fast.

If Inter Milan, an 18-time national champion and winner of three European Cups, can pull off a turnaround, it will accomplish a rare feat. Few Italian soccer teams win games and earn money at the same time -- champion Juventus is only starting to reap the financial benefits of its new stadium.

Michael Bolingbroke, the team’s CEO, drew up a five-year roadmap to profitability in 2014, and early reports suggest the financial engineering is working. The team, which recorded a 140 million euro ($152 million) loss in the 2014-15 season, will on Friday report a loss of about 60 million euros for the 2015-16 season, according to a person familiar with the club’s finances.

Michael Bolingbroke, left.
Michael Bolingbroke, left.
Photographer: Tullio M. Puglia/Getty Images

Michael Bolingbroke, left, and Zhang Jindong, chairman of Suning Corp., look on before a Seria A soccer match.

Photographer: Tullio M. Puglia/Getty Images

Chinese retailer Suning Corp. approved of Bolingbroke’s vision enough to pay 270 million euros for a majority stake in the team in July. The new owners told the CEO, “‘I want you to be consistently in the Champions League. And I want you to make money,”’ Bolingbroke recalled. “‘And your business plan says that within three years of my purchase, you will be profit positive? Great. Off you go.”

It won’t be easy, particularly the way the team is currently playing. Inter has failed to make the Champions League, and earn the money that goes with it, for four seasons in a row. This year, the club which won the European Cup, League Cup, and Italian Cup as recently as 2010, is 14th in Serie A after nine games, 10 points behind leader Juventus. New coach Frank de Boer said he could be replaced after a third straight league defeat on Sunday.

Bolingbroke, who spent seven years with Manchester United before joining Inter, has already tried to clean up the balance sheet. The 140 million-euro loss in the 2014-15 season came after Inter wrote down unsuccessful player purchases, severance payments to former coaches and adding future financial risks -– one-time costs that added up to 50 million euros. The rest of the effort relies on making more money from ticket sales, increasing sponsorship in Asia, and a speedy return to the Champions League, which generates millions of additional revenue.

Italian teams don’t have as many ways to make money as their biggest rivals in other parts of Europe. A.C. Milan, for example, lost close to 100 million euros in each of the last two seasons; AS Roma lost 69 million euros last season. Most don’t own their own stadiums and so, as tenants, pay rent and must share the proceeds from concessions. T.V. deals are less rich. Meanwhile, clubs have overspent in the player transfer market, relying on their owners to bail them out.

Overspending is no longer an option if teams want to participate in European soccer’s biggest competitions. Both Inter and AS Roma were penalized by governing body UEFA for operating with massive losses. Inter has committed to doing better and, by 2019, breaking even.

Other sanctions mean the team’s newest stars, Joao Mario and Gabriel Barbosa, purchased this off-season for a combined 70 million euros, aren’t eligible to play in this year’s Europa League. What’s more, the club will have to sell players to balance the costs of the new recruits.

Chinese Help

Inter’s plan to raise revenue through sponsorships leans heavily on Suning, a Chinese juggernaut with annual revenues of more than $20 billion and more than 1,500 outlets. Bolingbroke said the team can to get 20 million euros a year in deals thanks to the retailer’s contacts in the world’s most-populous country, which has recently embarked on an unprecedented plan to grow its soccer industry.

"With the access they have we have an opportunity we simply didn’t have before they came along," he said.

Next month, the team will open a 12-person Inter sales office in Suning’s home city of Nanjing. That, Bolingbroke believes, will lead to slew of regional sponsorship agreements and perhaps even a naming rights contract for its training apparel and its youth academy.

There are limits to the help Suning can give. UEFA has strict rules that forbid self-dealing. For example, the company couldn’t buy expensive players under the auspices of its Chinese team, Jiangsu Suning, and then loan them to Inter Milan, Bolingbroke said. Suning also can’t overpay to sponsor the team itself.

"If Suning themselves were to suddenly the sponsor the electronics category for a 100 million euros, I think UEFA will set down and say ‘Really?’” said Bolingbroke, adding that there was nothing against the rules with Suning bringing new sponsors to the club.

Bolingbroke is also focusing on filling the 80,000 seats at San Siro stadium, the league’s biggest. Inter attracts a 45,000 fans per game, the highest attendance in Italy and still 35,000 short of selling out.

To get the numbers up, Inter are following a model Bolingbroke used at Manchester United. The club has identified potential supporters who live within 90 minutes of its stadium, something it had never done before.

New fans, new sponsorships, new revenue -- it all depends on winning games, Bolingbroke said, something the team’s been struggling to do. “We fail if we don’t win trophies,” he said.

Before it's here, it's on the Bloomberg Terminal.