{"id":4564,"date":"2024-10-07T21:30:54","date_gmt":"2024-10-07T19:30:54","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=4564"},"modified":"2024-10-07T21:30:54","modified_gmt":"2024-10-07T19:30:54","slug":"what-business-model-for-modern-football","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/10\/07\/what-business-model-for-modern-football\/","title":{"rendered":"What Business Model for Modern Football?"},"content":{"rendered":"

Valerio Casagrande has been the Chief Financial Officer of Parma Calcio since 2018.<\/span><\/p>\n

“The Serie A championship is starting. As Professor Stefan Szymanski often highlights, football clubs are dual-headed entities aiming to generate profits and minimise costs on the one hand, while striving to achieve sporting success by winning trophies and competitions on the other. At the heart of this complex and highly risky business with its narrow profit margins lies a wonderful world, capable of mobilising billions of people worldwide. In Italy, looking at the numbers, it still produces considerable economic results. The turnover of professional teams reaches the remarkable figure of 5 billion euros and, once the impact on tourism, services, transport, and commerce are considered, we reach well over ten billion. It is a system that employs in excess of 100,000 individuals. For all these reasons, it is an interesting sector to analyse from an economic standpoint. We decided to do just that with Valerio Casagrande, the economic and financial manager of Parma Calcio, a club that has just secured promotion to Serie A after three years.<\/span><\/i><\/p>\n

Valerio Casagrande, how does a newly promoted team remain in Serie A when the trend is for differences between big and small teams to grow? What are the elements of the business model that consolidate it, or that one should focus on?<\/b><\/h3>\n

You’ve hit on a defining point of the sector at this time: the dichotomy between ‘big’ and ‘small’ clubs. There’s not just the classic competition between individual teams in the same league but also competition among groups of clubs\u2014’big’ versus ‘small’\u2014within the same league, as well as between different tournaments – primarily between national and international competitions. This is where topics like the new Champions League format and the Super League come into play. Moreover, in Italy, the gap between teams is already quite significant. The distribution of TV rights, which are the main source of revenue for Italian football and generally for global football, produces a rather wide gap between ‘big’ and ‘small’ clubs. A club such as Parma Calcio can only attempt to bridge this gap with a revenue diversification strategy, primarily with long-term and effective player-market planning, based on the development of home-grown talents and their subsequent resale. I would add another equally fundamental condition that is generally less highlighted: the need to remain competitive from a sporting perspective in conjunction with continuous turnover of talent. It’s a far from trivial challenge because, on one hand, it’s necessary to achieve economic results, and on the other, it\u2019s important to remain competitive and thus continue to have an adequate technical-sporting level. This is the magic combination that Atalanta has achieved in recent years.<\/span><\/p>\n

I was just thinking of Atalanta because, with economist Emanuele Pizzurno, we analysed their balance sheet. We were surprised that a club like Atalanta, which won the Europa League this year, generates very little revenue in terms of merchandising. So how is it possible to go from balanced accounts to a great team with continuously growing revenue?<\/b><\/h3>\n

Your question leads to the topic of new foreign ownership, particularly American ownership: within a perspective that frames the football club as a company, they are culturally very oriented towards commercial development. At this moment, the situation in Italy presents ample growth margins. The elements for bridging the gap are varied, including expanding revenue lines, effective management of player-trading mechanisms, and subsequently sporting ascension. In fact, a virtuous circle is created: the better your sporting performances, the more you attract economic resources, and the more the flow of revenue increases, for example from TV rights. Growth is linear with the progress of results and even makes a leap forward when, for example, a club is promoted from Serie B to Serie A or qualifies for European competitions, particularly the Champions League, because in that case, it captures a share of another substantial budget. In Atalanta’s case, forward-looking vision has led the club, among other initiatives, to have its own stadium. That’s an additional revenue source that helps reduce the gap between big and small clubs.<\/span><\/p>\n

I’d like to return to the topic of youth development. Don’t you find that there’s a sort of circuit breaker in Italy where, for some teams, youth development is valued, but then there’s a kind of liquidity trap that leads the same teams to sell young talent too soon and at a relatively low price compared to the increase in value they will have over time? Niccol\u00f2 Zaniolo or El Bilal Tour\u00e9 come to mind.<\/b><\/h3>\n

This is a complex topic that intersects with some measures introduced over the years. I’m referring to the fairly well-known topic of the expatriates’ regime connected to the Growth Decree, and a perhaps less known issue, the clearinghouse for transfers. I’ll start with the latter. In Italy, there’s a unique mechanism where the financial regulation of transfer market operations between Italian clubs involves the interposition of the professional leagues. This is the so-called transfer clearinghouse. For example, if Parma sells a player to Como, the Como club wouldn’t pay Parma directly but would pay the relevant league, which in turn would pay the selling club. The compensation of incoming and outgoing operations determines a net balance for each team. Clubs that have a negative net balance at the end of the transfer market must cover it by depositing a bank or insurance guarantee with the league to ensure the actual fulfillment of the obligation. This mechanism, in principle, has a rational objective and performs a significant function, namely ensuring the market and reducing the risk of bankruptcies in a high-risk sector like football. However, there’s a downside: this is a very costly system because clubs have to obtain the guarantees, which means offering securities to banks or insurance companies and paying commissions. Since this mechanism only exists in Italy, foreign operations are even riskier in terms of collection possibilities but also have lower costs. This is a primary element that has led to favourable ‘arbitrage’ for acquiring foreign players compared to those within Italy. It would be appropriate to introduce modifications to the league’s clearinghouse mechanism for the benefit of Italian clubs and their youth sectors.<\/span><\/p>\n

The second element that favours foreign operations is the Growth Decree?<\/b><\/h3>\n

Essentially, the Growth Decree provided the possibility of having tax benefits in in the form of reducing the personnel costs associated with professional athletes, dependent on certain income and age conditions. The aim was to increase the competitiveness of Italian clubs by providing the opportunity to acquire top players, enhancing the visibility of their brands, and supporting their sporting competitiveness. The objective was certainly legitimate, especially for major Italian clubs competing on international stages characterised by increasing competition. However, it likely entailed two risks: penalising youth sectors by discouraging investment in them in favour of acquiring foreign players, and reducing the competitiveness of the national team, as shown by the performances of the Azzurri in recent European and World Championships.<\/span><\/p>\n

Now that the measure has been repealed, what are the criticisms?<\/b><\/h3>\n

It would have been better to adopt some sort of third way, somewhere between repeal and status quo, with access to the benefit linked not to income levels but to the athlete’s ‘sports record’: matches played, national team call-ups, and other performance data (elements to be obviously defined for age groups and other variables). This third way would have combined the two main objectives of attracting champions and preserving the competitiveness of Italian national teams and the interest in investing in youth sectors. It would have also had a series of other advantages: 1) restricting the pool of actual beneficiaries to genuinely top-level players who could act as a driving force and example for others; 2) better respecting the principle of professional qualification, which is a cornerstone of the overall fiscal framework of the measure; 3) providing a more objective criterion than income (a high salary can just be the result of a bad negotiation deal); 4) allowing access to the Growth Decree even for female players who were effectively excluded due to the income criterion.<\/span><\/p>\n

What can you tell us about the much-discussed proposal by Minister Abodi to create the Economic and Financial Oversight Agency for controlling the finances of Serie A teams? Is it redundant compared to Covisoc, the internal FIGC agency?<\/b><\/h3>\n

It’s a hot topic. I believe any initiative aimed at improving the control system should be welcomed, and I think this is the spirit behind the government’s and the minister’s decision to establish the commission. It’s undeniable, then that, all else being equal, the greater the independence of the body conducting the controls, the better the quality of those controls. That said, in Italian and international professional football, there is already a structured control system\u2014more complex than commonly perceived\u2014that involves numerous entities with significant professional competencies. While there are possibilities for improving control actions, the real issue concerns the sustainability of football clubs’ business models (not only in Italy). A football club is a very particular company that contradicts the view of economic-business literature because the physiological situation is not represented by the condition of independent economic-financial equilibrium and profit achievement but rather by the dependence on the injection of own means for the preservation of business continuity: most of the time, club owners find themselves covering losses with capital injections. So, the big issue is the ability of the football system and its actors to identify business models and conceive consequent initiatives with the aim of containing costs, developing revenues, being competitive, and ultimately being sustainable in the long term. The challenge of controls is fundamental\u2014and not trivial for football in general and Italian football in particular\u2014and must be addressed alongside a culture of sports management.<\/span><\/p>\n

There’s another thorny issue I’d like to address: player contracts and the increasingly powerful role of agents with their demands for hefty commissions and continuous contract adjustments. Can you give us your opinion?<\/b><\/h3>\n

If we look at the American market, there is no ‘transfer fee’ for players – the negotiation only concerns their remuneration. In Europe, however, besides negotiating salaries, there’s the transfer fee for the player. The peculiarity and complexity of the context are evident when looking at a football club’s balance sheet: the player is both a cost in terms of the salary they receive, and an asset whose value is amortised over several years. Agents, therefore, are key players, acting in the interest of their clients whilst also providing services to the clubs they interact with. I don’t have recipes for this, nor do I think there are any: once again, the issue is the complexity of a sector where managerial strategy is constantly required to tackle numerous challenges where multiple factors or actors are involved.<\/span><\/p>\n

In conclusion, what do you think is the priority for Italian football?<\/b><\/h3>\n

I believe the real urgency in Italy is the need for infrastructure investment to modernise or build facilities and stadiums. Owning a stadium represents an increasingly important revenue stream that provides a club with a steady income flow, facilitating strategic planning and adoption of a long-term vision. In Italy, regulatory interventions are needed: the ‘stadium law’ is an excellent first step but requires further actions. The major issue is simplifying the bureaucratic process, which involves interactions between multiple actors or entities: sports clubs, the municipality or other public bodies, and numerous agencies. At Parma Calcio, we have an excellent relationship with the municipality and a positive dialogue that still clashes with the difficulties of a very complex bureaucracy. But it’s not just an issue for the football world. The results of a scientific study that we commissioned at Parma Calcio on the economic and social impacts of our new stadium show the significant positive effects of the project on the economic and social well-being of the Parma and province community. In short, it’s not just a specific issue for football clubs; it concerns the economy and the added value for the country’s system.<\/span><\/p>\n

Bio<\/b><\/em><\/p>\n

Luciano Canova is a lecturer in economics and behavioral economics at the Master Medea of the Enrico Mattei School.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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