Can Ronaldo save Juventus F.C?
Cristiano Ronaldo dos Santos Aveiro is one of the greatest player in the history of football.He started his career in 2002 as sixteen year old in Sporting F.C. and then getting a transfer fee of ￡12.24 million to Manchester United F.C. in 2003.He is currently one of the most valuable player in the world and already considered a legend in the game.
In 2009, Real Madrid F.C. initiated world record transfer of the Portuguese winger at ￡80 million. His net income in season 2017/18 was amounted to be about EUR 92 million.He is sponsored by Nike,Electronic Arts(EA) and Herbalife and also has a brand of his own i.e CR7 which revolves around his sports performance and image.
On 10,July 2018 Juventus F.C. announced the signing of the 33 year old from Los Blancos. The real question for the Turin club is that can they finance such an investment and how positive ROI can be generated?
In the last 10 years ,ratio between the world record transfer and the operating revenues of the club has been averaged to be around 22% and the Ronaldo's transfer to Juventus F.C is closer to the global average of 28%.
Breakage of Ronaldo's transfer fee of EUR 117 million to Juventus F.C.:
- EUR 100 million to Real Madrid F.C( payable in 2 financial years)
- EUR 5 million as FIFA solidarity payments
- EUR 12 million owed to agent Jorges Mendes
Ronaldo signed a 4 year contract with Juventus F.C. and the annual amortization of the contract reaches around EUR 29.25 million.The Turin club agreed on the wage of EUR 30 million per year.Therefore the total wage cost taken by the club is around EUR 55-56 million.
According to the financial report of Juventus F.C. in financial year 2017/18,Ronaldo wages/year represent 21% of the total clubs staff cost(EUR 262 million).
According to the UEFA FFP rules and regulations, the club has to show a negative balance of EUR 100 million between the buying and selling of players,so Juventus has to sell some players from their team.The following is the table of the possible players Juventus F.C. that can be sold :
THE RONALDO EFFECT-
Revenue Analysis:
In order to justify the buy of the Portuguese star,the club has to increase their operating revenues in the forthcoming seasons.
Match day Revenue:
After the signing of Ronaldo ,Juventus increased the ticket price by 30% than the previous season which includes the both the seasonal and match day tickets.
In Seria A,Juventus F.C. is aiming to generate EUR 33-34 million in the season through the season ticket revenues and EUR 15-18 million through match day tickets.Juventus F.C. also enjoys champions league and have four different possibilities of income:
- EUR 5-8 million if they get eliminated in the group stage.
- EUR 8-11 million if they reach the quarterfinals.
- EUR 11-13 million if they enter semi-finals
- EUR 13-15 million if they enter finals
Juventus F.C. earned EUR 12 million when they reached the champions league final in 2016/17 in Cardiff.
The total match day revenue estimated by the club in 2018/19 is about EUR 55-70 million.
Broadcasting Revenue:
If Juventus F.C. wins the Seria A title for the eighth consecutive year ,they would earn around EUR 110 million,lesser than the previous year where they earned EUR 122.5 million.This fall is due to the new distribution system form the upcoming season.
Champions League broadcasting rights are as follows :
- EUR 70 million, if they are eliminated in group stage
- EUR 85-95 million ,if they get eliminated in round of 16
- EUR 95-105 million , if eliminated in quarter finals
- EUR 105-115 million, if eliminated in semi-final
- EUR 115-125 million,if they get eliminated in finals,which is EUR 20 million more than the 2017/18 Cardiff final.
Juventus F.C. is estimating a massive growth in broadcasting revenues after the incoming of Ronaldo at about EUR 170-255 million in 2018/2019.
Commercial Revenue:
The arrival of Cristiano Ronaldo has given Juventus F.C. media and marketing team an opportunity to increase the commercial revenue by selling his jersey and other players, and increase international market penetration.
The selling of merchandise will add EUR 20-22 million to the revenue. Ronaldo being in the team sheet ,has given a stronger bargaining position to Juventus F.C. for getting main sponsor.They also get the global opportunity of signing licensing agreements and get more global sponsor.They are creating a brand presence keeping Ronaldo in the center of it.
Share price trend:
After the signing of Cristiano Ronaldo ,the share price of Juventus F.C increased by approximately 32%.The had a increase in market capitalization from EUR 650-700 million to EUR 900 million.within a week.
The Seria A Perspective:
Seria A has lost the title sponsor(TIM) in the previous season 2017/18 and the presence of Ronaldo can act as leverage to attract a sponsor and a favorable deal.They also get an additional bonus of EUR 150 million from the broadcaster Sky and Perform.The presence of Ronaldo is surely uplifting for the Italian football scenario.
Rolando's perspective:
Ronaldo moving to Italy might give him substantial tax advantage. According to the Italian tax law:"individuals moving their fiscal residence to Italy, once accepted by the Tax Authority, may benefit of a forfeit tax of EUR 100,000 for each tax year on income generated from foreign sources".
This gives advantage to him as his most earning are from outside sources.
In conclusion , buying Ronaldo is a good investment as it might provide the sporting ,media ,branding and economic benefits to the club and will also recover the incurred cost. Juventus F.C has done a good buy by not only getting a match winning player ,but also getting a valuable asset.
