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Is Winning at Any Cost Killing the Beautiful Game?

Keeping costs under control remains the biggest challenge to European soccer clubs, with wage-to-revenue ratios worsening in 2009/2010 despite overall revenue increases, according to new research from Deloitte.

Real Madrid coach Jose Mourinho
Dominique Faget | AFP | Getty Images
Real Madrid coach Jose Mourinho

The ‘big five’ leagues in Germany, Britain, Spain, Italy and France saw revenues grow by 5 percent to 8.4 billion euros ($12.3 billion) in 2009/10, with broadcasting revenue up 8 percent to over 4 billion euros.

However, wages in the top leagues of these countries increased by over 400 million to exceed 5.5 billion.

Spain’s La Liga was the only top flight European league to see wages fall in 2009/10 - with the exception of European champions Barcelona and their nearest rivals Real Madrid – and overall wages/revenue ratio of 60 percent marked a 10 year low for the Spanish league.

La Liga also had the highest absolute and relative growth of any of the ‘big five’ leagues with an 8 percent increase, mainly driven by Barcelona and Real Madrid.

In contrast to leagues in the rest of Europe where revenue from broadcasting is distributed evenly among all teams; Barcelona and Real Madrid boost their revenues with individual TV deals.

As a result, the two top Spanish clubs share trophy spoils almost exclusively between them and account for nearly 70 percent of revenue in La Liga.

Mark Roberts, a senior manager at Deloitte told CNBC.com that La Liga is starting to represent the less glamorous Scottish premier league, where the "Old Firm" of Glasgow Rangers and Glasgow Celtic dominate completely.

In Italy and France, wages now exceed the absolute revenues of their respective top level leagues, while in Germany and England the ratios grew by similar amounts.

Overall wages increased by over 400 million euros in all five big leagues to exceed 5.5 billion euros in 2009/2010.

Mixed Picture for the Premier League

England’s Premier League remains the biggest money generator of all, attracting worldwide audiences on a weekly basis and loyal fans prepared to pay high prices for tickets despite the economic downturn.

In 2009/10, the Premiership as it is locally known, generated $2.9 billion (2.4 billion euros), compared to $2.1 billion for the German Bundesliga, Italian Serie A and Spanish La Liga.

However, despite its dominance in terms of revenue, total wage increases outstripped revenue growth, with the league’s wages/revenue ratio hitting an all time high of 68 percent.

“Total wages in the Premier League now stand at 68 percent of turnover, over the last nine years you’ve seen that hover around 60 percent, over the last two years that’s jumped up to 67 and now 68 percent, so we’ve always said that 70 percent is a bit of a warning level and we can see Premier League clubs approaching that level, so that’s a bit of a concern for us,” Roberts explained.

Chelsea, owned by Russian billionaire Roman Abramovich, remains the club with the highest wage bill, spending $286 million on salaries, followed by Manchester City, which was taken over by Abu Dhabi-based Abu Dhabi United Group Investment and Development Limited in 2008.

Manchester City replaced Manchester United as the second highest paying club, spending $218 million in 2009/2010, to Man United’s $217 billion.

Pre-tax losses for the 2009/2010 season also jumped significantly to 500 million euros from 309 million euros, but with financial fair play regulations being implemented by European soccer governing body Uefa in 2012, clubs will be forced to get their finances in order.

“The first financial statements (Uefa) are looking at is 2011/12, so clubs are now moving into that period so clubs have known it’s coming, known these regulations are coming in so they’re going to have to address that,” Roberts said.

The English league, which for so long had been the envy of other soccer-obsessed nations, has seen operating margins dwindle from 16 percent when the lucrative Premier League was created in 1992/93, to just 4 percent in 2009/10.

A dysfunctional business model has developed from an overwhelming desire to win, literally at any cost.

A trend which looks set to continue as English clubs - four of whom now have foreign billionaire owners – chase trophies and attempt to keep up with their European rivals, notably Barcelona, touted as the greatest soccer club in history.

“Various commentators have said the bubble’s going to burst for the past 10 or 15 years and we’ve seen the bubble grow bigger and bigger, albeit that some clubs have seen a trickle of administrations, the most high profile being Portsmouth as the first Premier League club to go into administration,” Roberts told CNBC.

“In the Premier League, it’s a very rich man’s play thing these days to make something of it,” he added.

Contact Europe: Economy

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