A spectacular failure in the football business, lessons to learn

Last week the European Football business was upside down for 48h. Football magnates and prime ministers had two days of agitated calls. What we know is that the Super League operation failed. Something went horribly wrong and as for all decision-making processes we can learn a valuable lesson from it.

What happened? Nothing less than twelve European clubs deciding to launch a new football competition in Europe. The motivations behind it were mainly economical. The revenues of the Top 20 clubs have doubled over the last decade, but this is still not enough to cover for the booming salaries of the new global football superstars. European clubs typically spend 70 to 80 percent of their income on footballers’ costs (wages and transfers), which makes it now a loss-making business.

With COVID revenues plummeted, losses spiraled and debts continued to pile up on the balance sheets of the clubs. The economic stretch brought magnates and oligarchs together (10 out of 12 clubs are privately held companies, the only exceptions being FC Barcelona and Madrid which are owned by their socios. They wanted to revive an old plan: building their own European League to boost the revenues and profits from their investments.

The idea was to create a Super League designed to supersede the Champions League, where 32 teams shared €2bn over the last season. The founding members of this new league would have received a “golden hello pack” worth €200 M-€300 M each and a share of the €4 billion in projected revenues from broadcasting and sponsorship rights in the next few years. This sudden windfall would have stabilized the situation of the highly indebted clubs which had for years heavily invested on players in the pursuit of titles and glory.

The 15 “founding clubs” of the Super League would have shared 32.5% of the commercial revenues. A further 32.5% would have been distributed between all 20 participating teams, including five external clubs invited to play in the competition each year. Twenty percent of the revenues would have been allocated based on “merit” or performance in the competition. The remaining 15% would have been shared based on broadcast revenues. On top of that the clubs would have been allowed to also retain all revenues from gate receipts and club sponsorship deals.

The Super League clubs had committed to using only 55 per cent of their revenues on “sport spending”, such as player salaries, transfer costs, etc. In the agreement they included a “tax equalization” clause so that income tax on salaries would be normalized and calculated at a rate of 45 percent, allowing the comparison of normalized costs across Europe where tax rates are different from one country to another.

Competition would have been closed, as the founding members automatically secured their place for each season regardless of their performance, ensuring thus reliable revenues and steady profits for their owners. 

Such a design is similar to “closed” US sports leagues such as the National Football League or National Basketball Association than to what we currently have in place for European football.

The clubs were trying to protect their scheme: “This is not a league for the rich, it’s a league to save football.” But people did not buy it. Indeed, the Super League structure represents a fundamental break with how European football has been governed for years, where any team, through on-pitch success, can reach for the top prizes.

Football Clubs have been built by and around local communities before becoming global. Local communities have supported these clubs with a lot of passion for many years and are at the origin of their success. The failure to engage with their local supporters, governments and clubs that were left aside would spark the project’s spectacular collapse in the space within just 48 hours. Clubs have hundred years of history and fans who have supported them with all their heart. Fan groups, players, coaches, and rival clubs were all united in their criticism. By no surprise, the governments aligned with the local people and officially condemned the project.

What failed? The owners had such a strong focus on money that they forgot the principles of the game in Europe and also their supporters. They did not take the time to explain the economic problems to drive the opinion towards a more balanced European competition.

Who knows, maybe they had a hidden agenda and in reality these clubs wanted to put pressure on Uefa, as it was due to agree this week on a radical new format for the Champions League for 2024 and beyond. Time will tell, but this time David seems to have beaten Goliath.

The interesting story behind the scenes is to see how people take decisions, how they interpret their environment and how they communicate about it. I can hardly imagine a worse performance than the one we saw. Food for thought for all of us, executives, boards, entrepreneurs and businessmen!