Wednesday, 8 May 2013

Football Isn't Just A Sport...

A lot of criticism gets thrown about these days regarding the sheer sum of money involved in football. In all honesty, it's true. There's a heck of a lot of money in football. I feel these critics are looking at the game all wrong - football isn't just a sport anymore, it is a business and it should be viewed as one. When football is viewed as a business nothing seems out of place - we have a bunch of firms aiming to maximise profit by producing the best quality goods.

Everything you'd expect to see in a market for a 'normal' good can be witnessed in the 'football market'. We have a bunch of firms competing against each other to maximise their profits - these firms are the football teams. At the top of these firms are owners, CEOs, etc all with the intention of making a lot of money. They'll say the aim of the football club is to win football matches and to win tournaments, and this is true. But, they only want to win because that is what earns the dollar. Greed is very much apparent in football as it is in other businesses - the greed to make as much money as possible. A firm cannot operate without its employees, just like a football team cannot operate without its players. The players are the football teams employees. The football team wants the best employees, to win the most matches and therefore earn the most money - therefore a lot of money is flashed around to encourage the most talented players to join the club. I could go on, I think we are getting the idea - a football team is also a business.

If you're bored and lonely on a night then get yourself stuck into the reports and financial statements that each football club releases on a yearly basis. I'm afraid to admit that I'm a Liverpool fan in fear of losing a large proportion of my audience - but hey ho! The report for Liverpool can be found here. It gives a very detailed breakdown of where the money has come from and where it is going - a very interesting read.

The first thing that can be noticed is that Liverpool F.C made a loss in the 2011-2012 financial year, although not quite as large as the loss from the 2010-2011 financial year. An explanation for this is that Liverpool F.C's accounts for 2011-2012 only cater for 10 months because of a change in financial year dates to align with the football season. July 2011-May 2012 is accounted for. But, it still stands that the last two years a loss has been made - totaling over £85 million (£89,960 million for the exact-ists). So, a business making massive losses for a prolonged period of time.. one question springs to mind - why are they still operating? It's a tough question - it could be through expectation, the want for stability, profits being made elsewhere. One thing we can confirm is making losses isn't such a bad thing in football.

A reason for this could be the constant investment flows in the modern game. Not only are the players employees of the firm, but for the duration of their contract they are also an asset. Clubs are constantly investing in new assets and selling on owned assets it's very hard to get a static look at the profitability of the club. Owners will expect losses if they are constantly pumping money into the club in the form of investment. Another reason the loss is essentially overlooked by those that matter is because they may be picking up the gains elsewhere. The owning of the football club gains a unique entry into English markets with access to a large pool of potential custom. Companies could see profits rise in other sectors due to the owning of the club.

This was just a quick ramble in an attempt to be as productive as possible during my procrastination. I'll be writing a full length, in depth post on the economics of football during the Summer - so stay tuned for that. Feel free to throw your thoughts at me.. do you think there is too much money in the game? Is the game suffering as a consequence? Cheers for reading guys.


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