Money and Soccer: A Soccernomics Guide: Why Chievo Verona, Unterhaching, and Scunthorpe United Will Never Win the Champions League, Why Manchester City, ... and Manchester United Cannot Be Stopped by Stefan Szymanski

Author:Stefan Szymanski [Szymanski, Stefan]
Language: eng
Format: epub, mobi
ISBN: 9781568584775
Publisher: Nation Books
Published: 2015-06-02T04:30:00+00:00

BOX 6.3: WHAT DOES IT MEAN WHEN WE SAY THAT A CLUB “LOSES MONEY”?

Essentially it means that expenditures exceeded revenues—which is not always such a bad thing. For example, a growing business might “lose money” if it is investing in creating future revenues. Generally though, investors disapprove of losses. They want to see profits, so that they can see a return on their investment and maybe even be paid out some of the profit in the form of a dividend.

All well and good, but should fans really care? Reading newspaper headlines, one could sometimes be forgiven for thinking that making money for the investors is the only purpose of a soccer club. Yet in reality many investors are prepared to accept accounting losses if these are compensated for by trophies. Fans should only care about losses to the extent that they might have longer-term consequences for the business (e.g., leading to insolvency or to investors withdrawing their support from the business). This happens often enough, but nowhere near as often as clubs declaring an accounting loss.

Between 1974 and 2010, English soccer clubs declared a profit in only 36 percent of cases where we have the accounting data. In reality the figure is probably closer to 25 percent, since in most of the cases where the data is missing it is because the club was in financial difficulties. Failing to make a profit is the norm in soccer. Losses are to soccer as methane is to dairy farming, a natural by-product.

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