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The soccer financial system is coming into a brand new period

The idea that football is the “mirror” of society is often presented in living rooms and turns out to be quite correct from the point of view of its economy. Branko Milanovic, a well-known inequality specialist and excellent round ball analyst, observes well: “Football has been a mirror of society, where inequalities have grown exponentially over the last three decades,” he explains in the magazine’s columns. Forbes.

At a time of a World condemned for its organizational social and environmental conditions, 21st century footballe century does not escape even the big current economic debates, especially that of growth and inequalities. In our opinion, all these questions are symptoms of a historical and economic transformation of this sport.

According to the English sociologist Richard Giulianotti, football has had four periods in its history. The traditional period extends from the establishment of rules at the end of the 19th centurye century to the First World War; early modernity corresponds to the interwar period when racing was invented; late modernity, which sees the building of professionalization, ends in the late 1980s; as the postmodern period begins, that of media coverage, labor market liberalization and growth.

The thesis that we defend in our latest work is that we are today at the dawn of a new era that we define as hypermodern.

Stars, bands, revenue and audiences

Four characteristics allow us to define this hypermodernity. The first is about economic inequalities which have expanded significantly in previous decades. They are observed on the one hand between clubs of the same league, on the other hand between different championships and have as a consequence sports, competitions, national and international, dominated by some teams much richer than others. They also concern the distribution of footballers’ salaries, with an increasingly strong segmentation of the labor market in relation to stars, even superstars.

Manchester City’s 2008 buyer, UAE deputy prime minister since 2009, Mansour bin Zayed Al Nahyan entrusted the management of the club to businessman Khaldoon Al Mubarak, here in full conversation with Nicolas Sarkozy during a European Cup match.
Frank Fife/AFP

The second characteristic is related to the arrival of young women investor profiles, namely public and private investment funds, often American for the latter and already owners of collective sports franchises across the Atlantic. Compared to the previous period, this change in “ownership” may have at least two consequences: football will now have to be financially profitable either at the club or league level; Moreover, “galaxies” of clubs are formed around the same owner. The wealthy Emirates buyers of Manchester City, for example, have gradually brought eleven more clubs into their “City football group” since 2008, including New York FC, Palermo and Troyes.

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The third is about strategy globalization clubs and major leagues that provide them with ever-increasing commercial income and international broadcasting rights. Finally, the last feature is related to football request The right one. It is the result of the arrival of new broadcasters such as Amazon Prime in France, the proliferation of streaming platforms and new ways of consuming football, especially among younger generations.

Piketty on the penalty spot

The economics of football has thus become an interesting field to apply the analytical network inspired by the worldwide success of economist Thomas Piketty’s book The capital in the 21st century, the first edition of which dates back to 2013. The author showed that the topic of wealth distribution and inequality are at the center of society today. Football does not seem to escape the rule.

Since the 1990s, the world of football has experienced a very strong growth in the main European countries. Excluding transfers, the club’s income comes from four main sources: broadcast rights, tickets, sponsors and derivative products (shirt sales, for example). All have grown significantly since the 1970s, but to varying degrees: ticketing, dominant fifty years ago, has seen its share gradually decline in favor of television rights and sponsorship at major European clubs.

This economic boom has been accompanied by an increase in disparities between clubs, at the national and European level. As in society in general, this increase in inequality is mainly about the peaks of the distribution. The share of the income of the most exclusive clubs has increased in the turnover of the leagues, which in terms of sports has brought about an increased concentration of titles. In the German first division, for example, nine different clubs won the first division in the 1960s, five in the 1990s and only two since 2010.

Despite the increase in revenue, the football economy is still a “smaller economy” than people think. After all, until recently, it generated little or no profit for its shareholders. The fact is that many owners, billionaires or sovereign wealth funds often buy teams for reasons other than the simple financial benefit of their investments: “soft power”, the name of the nation or even philanthropy are the key words.

Deserving stars?

When football and inequality are linked, the issue of player wages also comes to mind. The idea that they would be “overpaid”, on an individual level or on the club’s payroll, permeates the political field. The right formulates social criticism, the left questions the liberalism that feeds them: in any case there is a consensus to see in the remuneration of footballers one of the sources of the supposed evils of the football economy today.

Note already that only a very small fraction of players make millions while most have extremely short careers, averaging about four years in the elite. Furthermore, less than one transfer in three is the subject of a monetary transaction in the five major leagues (England, Spain, Italy, Germany and France) and around one in seven worldwide.

The fact remains that there are strong inequalities among football players and that these have also increased. Cutting the salaries of superstars, however, comes up against a “moral” impasse. These players have a much higher than average talent, whose cost to the clubs is very convex: big teams are ready to pay dearly for the “genius” of these exceptional players, a unique talent that cannot be “replaced with that”. of some “average” players.

By extending his contract with Paris Saint-Germain until 2025, Kylian Mbappé has given himself a salary of around €100 million gross per year.
Frank Fife/AFP

Moreover, seeing the latter play is what a supporter pays for their seat in the stadium, even if it hurts the chances of seeing their favorite team win. From this perspective, if we adopt the philosophical principles of John Rawls, superstar footballers “deserve” their reward: the expression of their talent contributes to the well-being of the “community”, especially those from disadvantaged backgrounds. Daniel Cohen, director of the Department of Economics at the Ecole Normale Supérieure (ENS) in rue d’Ulm, puts it this way in a column written for New Obs :

“Football is the only case where young people, most often from the working class, extort billionaires with their consent. »

As suggested by the extension of Kylian Mbappé’s contract with Paris Saint-Germain, the trend is towards very high wages that could modify the functioning of the labor market for footballers. We’ve probably gone from a two-segment system, superstars and others, to a three-segment system: fewer superstar players, more superstars and others.

empty stands

Does this observation on inequalities support the idea of ​​football in crisis, in a post-pandemic context? Contrary to everything that the wooden prophets warn, what the coronavirus has changed in football, apart from the financial difficulties that the whole economy has suffered, is nothing or not much and we are not living, definitely not the apocalypse!

Florentino Perez, the president of Real Madrid, is not desperate to give birth to his Super League project.
Frank Fife/AFP

The most obvious “crisis” was that of supporters due to the closed general session from March 2020 and throughout the 2020-2021 season. Beyond the financial aspects, the absence of the public was felt on two levels. From a sporting point of view, without this “twelfth man”, we wondered if it would become less of an advantage to play at home than usual. Taking advantage of this “natural experience”, economists have reached nuanced conclusions about the outcome of matches, but not about arbitration. The men in black were softer on the visiting team in empty stadiums, revealing a role of “social pressure” from fans.

Above all, it gave television broadcasts without the flavor of the atmosphere. The lesson to be drawn from this is that this dimension of “spectacle” to which supporters are no strangers must therefore be taken into account when measuring the importance of television rights to club budgets. Maradona said that “Playing behind closed doors is like playing in a cemetery.”

The fans have recently been irritated by the proposal of some presidents of big clubs for “separation” through the (aborted) project of a more or less closed Super League. This repeated and restarted project in the last weeks of a European championship illustrates, in our opinion, an economic need to reform competitions, a development that is undoubtedly one of the main current issues in professional football. The creation of the Super League, the culmination of all the elements that characterize the hypermodernity of football, would then constitute its “apotheosis”.

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