Time for football’s belt-tightening

Slovakia does not need to fear the financial crisis in Europe, our players are not expensive

Football faces serious problems. There is less and less money in the game. Signing new contracts is harder, TV rights are more difficult to sell, wages are falling, transfer fees for top players are dropping, clubs are fighting for bare survival, and the most indebted ones are going bankrupt. Even the Italian league started two weeks later than planned.

Ronaldo in sixth place 
Ronaldo – the central figure of Brazil’s World Cup-winning team, top scorer in Korea and Japan. All summer, agents fed the media with speculation about whether he would leave Inter Milan, and if so, where he would go. At the last minute, he signed with Real Madrid. There is hardly a bigger star in world football today. And yet, the total transfer fee for Ronaldo reached “only” $46.3 million, placing him sixth in the all-time rankings. If transfer fees had been climbing steadily until recently, only two transfers this year appear in the top ten – besides Ronaldo, England’s Rio Ferdinand. At $47 million, he is just one place higher. Last year marked the peak, with a record $64.4 million for Zinedine Zidane. Interestingly, the two most expensive transfers this year again came from the clubs that have been the most generous spenders in recent years – Manchester United and Real Madrid.

Another star also moved this summer – Rivaldo. FC Barcelona released him for free despite his contract still being valid, partly to save $7.5 million in wages. At AC Milan, he will earn only €4.5 million, according to Italian media. Ronaldo also took a pay cut. Not only does he have to cover Inter Milan’s losses from its Nike deal (€2 million), but at Real he earns €2.6 million less than at Inter. That puts him on the same salary level as Zidane, Raul, and Figo.

Fortunately for the “White Ballet,” Ronaldo is a phenomenon. Having him at the club pays off. He transferred his image rights to Real Madrid, sharing advertising income with the club. Demand for his number 11 shirt exploded worldwide. The first batch sold for €72 each, with the first jersey sold just ten seconds after his unveiling. “We even had to give fans numbered tickets,” said marketing chief David Tello. Although Ronaldo was only in the stands for Real’s match against Espanyol, more than 3,000 jerseys were sold afterward.

Leeds survived, Fiorentina did not
While Inter Milan immediately replaced Ronaldo with Crespo, Leeds – which sold Rio Ferdinand to Manchester United – barely avoided collapse. The $47 million transfer fee kept the club afloat. English clubs spent £150 million on transfers this summer, £100 million less than last year. Reality hit home – Chelsea once spent £30 million in a summer, but now brought in just one free player, De Lucas.

Fiorentina was not so lucky. The club went bankrupt. Just three years ago, it was playing in the Champions League. After selling its stars Batistuta, Toldo, and Rui Costa, the decline continued. For months, it failed to pay player wages. Last season, it was relegated, and debts of €22 million crushed it. Fiorentina was denied even a second-division license. “Professional football in Florence can only continue if a new club is created,” confirmed league president Adrian Galliani. Eventually, a new club – Fiorentina 1926 – was formed, starting from the fourth division.

Other major Italian clubs, Lazio and AS Roma, also struggled with licensing but managed to submit financial guarantees at the last minute. Altogether, Italian clubs in the top three divisions owe around €1.039 billion. Insolvency has also hit Austria’s Tirol Innsbruck and Switzerland’s Lausanne, Sion, and Lugano.

TV money drying up
One major reason for football’s crisis is shrinking TV revenue. The collapse of Germany’s Kirch Group wasn’t the only case – ITV Digital also went bankrupt. But in England, it is nearly unthinkable for football to vanish from TV. The 20 Premier League clubs signed a new three-year deal worth £1.65 billion with satellite broadcaster BSkyB.

Italy, however, faced greater difficulties. The Serie A season started two weeks late. Eight clubs threatened to boycott the league over the lack of TV rights deals, supported even by AS Roma. Clubs turned to the Italian government for tax breaks and economic aid. With Prime Minister Silvio Berlusconi also owning AC Milan, their demands were not hopeless.

Negotiations dragged on with private broadcasters Tele+ and Stream, while public broadcaster RAI refused to keep paying €90 million for its football shows, offering just €50 million instead. “We are not here to rescue clubs drowning in debt,” said RAI director Agostino Sacca. A compromise of €62 million was eventually agreed on September 4, and the richer clubs chipped in to help the rest, preventing further delays.

Even at the cost of debt
Licensed football agent Jozef Tokos has a clear view: “Football is a business and acts according to market forces. Wages and transfers spiraled upwards and peaked in the last five years. As long as there was money to pay, it was fine. Compared to other sports, football still moves the most money. As long as demand existed, prices rose – even if clubs had to go into debt.”

In the past, matchday revenue made up a big part of club budgets – except in Spain, still a rare case today. In the 1990s, TV money took over. “When Kirch collapsed, the problems started, the bubble burst. Clubs came under pressure. On one side, revenues dried up, but on the other, fans demanded star signings year after year. Real Madrid went to the extreme, buying the most expensive players,” said Tokos.

Clubs spent on stars but neglected revenue. If advertising or marketing faltered and the club missed the Champions League, problems followed. “But football itself cannot collapse,” stressed Tokos. “The state will not help. Municipalities might, since they own and maintain stadiums. But the most important thing is public interest. That exists and will continue – football is mass entertainment.”

What’s the solution? “A balance must be found,” explained Tokos. “Fiorentina and others are a warning sign: don’t take on risky expenses you can’t sustain long-term. Poorly managed clubs will face serious trouble. If Fiorentina can fall, anyone can. Investments in players will become more realistic. Zidane’s transfer last year was shocking, but Ronaldo’s now set a much lower benchmark. Clubs will carefully consider salaries, and players have already realized that – at least temporarily – they must accept lower wages.”

The Slovak problem – quality
The European crisis does not directly affect Slovak football. For a Slovak club, qualifying for the Champions League would be salvation. Revenue from advertising and marketing is minimal, gate receipts cover little more than referees’ fees, and selling TV rights is difficult. Clubs must act according to market logic, securing players with contracts and selling them – that is the best way to fill coffers.

Selling Slovak players abroad is not about money, according to Tokos: “Slovak players are cheap. Only in rare cases do we talk about one or two million euros; usually it’s just hundreds of thousands, which are not a problem for European clubs. The real issue is quality,” he said. He reflected on how few Slovaks moved from the domestic league to top competitions, aside from neighboring countries, Greece, or Turkey. “The real problem is not that European clubs can’t afford our players, but that Slovak clubs often fail to judge the right market value or the right time to sell.”

That is why arguably the best current Slovak league player, Robert Vittek, is still playing at home. Slovan Bratislava could not agree on a fee with Belgian Genk or German Borussia Monchengladbach. The last real exception was Szilard Nemeth, who attracted half of Europe before joining Middlesbrough in England.

How do Slovak clubs feel the global crisis? Karol Belanik, general manager of champions MSK Zilina, said they have not had to cut wages: “We believe contractual commitments must be honored. In terms of pay, we stick to a certain strategy and have not pushed player salaries to extremes.” Belanik realizes that only top, financially strong clubs are still investing heavily in players: “They count on returns. In smaller clubs, the crisis is visible.”

In Zilina, trading has become more difficult: “Our transfers are limited by our budget. And selling? That is even harder. The market is oversaturated, and the days of huge transfer sums – even by Slovak standards – are gone.”