Super 'rich' League down but not out?

LONDON • The European Super League is now in tatters but the plan is destined to be revived in the future as long as elite clubs feel they are entitled to a bigger slice of the commercial revenue generated from participating in Uefa's competitions.

For the 2019-20 season, €3.25 billion (S$5.2 billion) was generated, of which Uefa distributed €2.04 billion to all the participating clubs.

However, that sum pales in comparison to what the 12 founding members of the Super League would have gotten had the competition not hit the buffers.

They were guaranteed a "welcome bonus" of around €200-300 million each due to an initial shared pot of €3.5 billion. Solidarity payments were "expected to be over €10 billion" as the league grew.

But a person close to the Super League said the payment was less of a "welcome bonus", but an advance on future revenues that would have to be repaid if any club chose to leave the competition.

The money to launch the league had been provided by JPMorgan Chase and the global investment bank had committed to underwriting a €3.25 billion "infrastructure grant".

It also provided a debt-financing deal amortised over 23 years and secured against future broadcasting rights for the competition.

The Super League's organisers reportedly held early discussions with broadcasters about the competition. They sought to secure deals with the likes of Amazon, Facebook, Disney and Comcast-owned Sky that would raise annual revenues worth €4 billion a year.

While Sky and Facebook later denied that there were any talks, had the competition gone ahead, the clubs could have stood to earn roughly double the amount of the revenue that the Champions League brings in.

That amount would have easily covered the €264 million a year requested by JP Morgan, a debt repayment figure that includes a 2-3 per cent interest rate.

The league's permanent members would jointly own a newly incorporated company in Spain that would have shared all future media and sponsorship rights derived from the competition.

JPMorgan Chase infrastructure grant.

Real Madrid's net debt.

Share of commercial revenues for the 12 founding clubs.

The 12 clubs, plus the three unnamed ones that were set to join, would have shared 32.5 per cent of commercial revenues, with a further 32.5 per cent shared among the eventual 20 teams.

Once the annual tournament was completed, 20 per cent of revenues would be given out on merit and 15 per cent shared depending on each club's broadcast audience.

At present, Uefa decides how to distribute revenue generated from its competitions and that has long been a sticking point with the elite clubs as they believe they should get a bigger slice of the pie.

For example, €30 million was paid out to clubs who participated in last year's Champions League qualifying rounds, regardless of whether they made it to the competition proper, while those who reached the group stage including smaller teams automatically got an allocation of €15.25 million and up.

The winner of the Champions League may not necessarily be the biggest earner as revenue is further dependent on how large is the market which the club represent, how many clubs there are from said market and the final position of each club in the previous season's domestic league.

With Uefa planning to expand the Champions League to 36 teams by 2024, the distribution is set to get even more diluted.

As broadcast rights make up more than 85 per cent of Uefa's total revenue, clubs like Manchester United want a bigger piece of the 85 per cent rights pie, which they could get from doing in-house broadcasts and the Super League would have enabled them to do so.

"If Manchester United could get 10 per cent of their fans to pay £2 (S$3.70) each to watch a match, then all of a sudden, they're making £200 million for sales of a single match compared to £600 million from a full season," academic Kieran Maguire told the BBC.

The Super League could have opened the door for the clubs to individually negotiate lucrative TV markets around the world, and outside the control of Uefa.

With the likely adoption of centralised trademark licensing and data-use policies similar to those emerging in the National Basketball Association (NBA) and Major League Baseball (MLB), this would mean more control of their revenue streams.

Teams who had signed up to the Super League would have had permanent membership and would not need to qualify each season in a structure similar to the "closed" franchise system of US professional sports.

Along with Real Madrid president Florentino Perez and Juventus chairman Andrea Agnelli, three Americans were reportedly the other ringleaders - Arsenal owner Stan Kroenke, Liverpool owner John W. Henry and the Glazer family, who own Manchester United.

In North America, the four major leagues consist of privately owned teams who are permanent members of a single competition, with athletes recognised as league partners through strong collective bargaining arrangements.

In 2019, the National Football League (NFL) evenly split a record US$9.5 billion in national revenue among its 32 teams, while the NBA's US$8.3 billion revenue of 2019-20 was a 49-51 split between teams and players.

All teams pool their eligible revenue together to redistribute it from teams with higher revenues to those with lower. Each team then receive revenue equal to the salary cap for that year.

The Super League did not want to impose an identical US-style salary cap but the members reportedly agreed to limit spending on salaries and transfers to just 55 per cent of their revenues - some Premier League clubs spend up to 80 per cent of revenues on wages.

In contrast, the European model is an "open" pyramid model with promotion and relegation, with an existing relationship between grassroots and professional clubs and professional athletes viewed as employees.

One of the main triggers for the outrage was that the Super League split with the history and authenticity of European football.

The closed-door competition was seen as a cash cow for billionaire owners that would devalue domestic competitions by rendering the current fight to make Europe obsolete, and diverting more funds to a group already worth US$37.2 billion (S$49.5 billion).

The pandemic has meant clubs across Europe have suffered steep revenue shortfalls, raising concerns over the sustainability of their business models and complicating any plans for new signings.

At the end of the 2019-20 season, Real Madrid's net debt stood at €355 million, while Barcelona's net debt was at €488 million.

The drop in viewing figures is exacerbating the financial situation, especially as clubs have not had match-day revenue for over a year and are solely reliant on TV revenue and sponsorship.

According to Football London, the global live viewing figures for the group stage of the 2019-20 Champions League were lower than both of the last two seasons.

The number of people watching Europe's premier competition dropped from an average of two billion in the previous three years, in 2018-19, The Sun reported.

As closed-door games are set to be the norm for another year, clubs are desperate to find new sources of revenue.

The financial upside for the Super League owners in adopting the US sports model is so enticing that they are likely to go down the same route again in the future, albeit this time with greater consultation and with a less closed-off concept.

FINANCIAL TIMES, NYTIMES