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Abstract

European football market is continuously increasing in terms of revenues and number of consumers
(followers), it is necessary to assess the value of its core assets, which are clubs and leagues. An
important value driver is revenue, as greater incomes, generally, translate in higher expenses and,
consequently, better sportive results because of higher winning probabilities, which satisfy existing
fans and are able to get new consumers, laying the foundation to further increase revenues. It is a
virtuous circle. With the help of SPSS statistics well try to predict clubs revenues and values,
laying on variables mostly related on actual and potential consumers, past and recent sportive
results.














S

Inuex

Intiouuction ___________________________________________________________________________________________ 4
CBAPTER 1: Football maiket ________________________________________________________________________ 6
1.1 Euiopean football maiket oveiview ___________________________________________________________ 6
1.2 Revenue stieams _______________________________________________________________________________ 11
1.S Attenuance _____________________________________________________________________________________ 1S
1.4 Beteiminants of value _________________________________________________________________________ 17
1.4.1 0EFA ianking ______________________________________________________________________________ 19
1.4.2 Bianu value ________________________________________________________________________________ 2S
CBAPTER 2: Football clubs values _________________________________________________________________ 28
2.1 Fiims economic value _________________________________________________________________________ 28
2.2 Naiket capitalization __________________________________________________________________________ S1
2.S Biscounteu cash flows mouels ________________________________________________________________ S4
2.4 Specific methouologies to value football clubs ______________________________________________ S7
2.4.1 Foibes valuation __________________________________________________________________________ S8
2.4.2 Nultivaiiate mouel ________________________________________________________________________ 4S
2.4.S Revenue multiples appioach. ____________________________________________________________ S2
2.4.4 Fans Nethou _______________________________________________________________________________ S4
CBAPTER S: SPSS Statistics anu factoiial mouels ________________________________________________ 6S
S.1 Top Euiopean leagues coiielations __________________________________________________________ 6S
S.2 Coiielations anu factoi analysis in Italian leagues __________________________________________ 72
S.S Nultiple iegiessions ___________________________________________________________________________ 82
S.S.1 Seiie A ______________________________________________________________________________________ 82
S.S.2 Italian lowei categoiies factoi analysis _________________________________________________ 86
S.S.S Top Euiopean clubs _______________________________________________________________________ 88
S.4 Factoiial Fans mouel __________________________________________________________________________ 96
S.S Factoiial Italian mouel _______________________________________________________________________ 1uu
Conclusions _________________________________________________________________________________________ 1u8


4
Intiouuction

The work would like to assess the value of football industry, in particular European and Italian
professional football, deepening the nature of its core assets value, which are the football
companies and related leagues. In this work well not refer to national teams and competitions, only
club teams and related market.
Clubs and leagues are strongly related, as a club builds a product in order to gain an higher market
share with respect to its leagues competitors, thus gaining new consumers/fans, increase profit and
achieving better sportive results, but it contributes also to build another bigger product, which is the
whole league, as clubs revenues depend on leagues revenues, so it is allied with all the other clubs
participating to that championship in order to build a better league and, in a lesser extent, with the
club participating to the lower categories in order to build a better product and to retain new
consumers/followers, reaching new profits and improving sportive results.
If a league will increase its market share, then each club could get a bigger slice of revenues, getting
more visibility and reaching new consumers, thus increase investments in talent favouring sportive
results and, consequently, consumers satisfaction.
As main competitions per clubs, which guarantee the richest awards and visibility, are divided on
countries and, for top clubs, on continents (with few exceptions of worldwide matches), we can
suppose even a competition among continental confederations, in which leagues collaborate in
order to build a better competitions (e.g. Europa League, Champions League, Copa Libertadores)
and, on the opposite, a worldwide collaboration between continental confederations in order to
promote the whole product football.
The biggest clubs and leagues in the world are in Europe, getting fans from all over the world. In
this work Ive concentrated on the old continent with a focus on Italy.
In this work well not deepen the relationship between continents, because from a European club
perspective the main concerns are its value inside the league and the value of its league with respect
to others European leagues, because they have to share most of football industry resources.
In the first part Ive identified the context in which a football club operates, focusing on revenues of
top European Leagues and revenues streams, with a special attention on attendance at the stadium, a
factor able to drive not only matchday direct incomes, but rather is a very important slice of
consumers (for many clubs the most important part), which could affect positively or negatively the
whole show with their enthusiasm, changing the image on media and also affect the other
consumers through direct chats, photos, opinions, thus influencing the value of the club.
S
By continuing, I asked myself what determines the value of a football club and starting from
Szymanski & Kesenne (2004) and Barajas (2005), Ive introduced the relationship between profits
and sportive results, talking about an important indicator of sportive results, able to drive directly
revenues, UEFA ranking, and introducing an intangible asset that affect directly clubs values,
which is their brand.
In second part, starting from Modigliani & Miller (1958) and the definition of firms economic
value, Ive introduced the evaluation methods, trying to apply Market capitalization and Discounted
cash flow methods to football clubs, and then applying more specific methods like Multivariate
Model, Forbes evaluations, Multiplier methods. In all the cases there isnt and absolute and
indisputable value, neither the better methodology to value a football firm, but Ive identified some
strengths and weaknesses of these methodologies, when referring to football market, thanks to
comparison with evidence and real transaction prices. Ive also made an attempt to find a
methodology, called Fans method, that starting from real revenues and having ad idea of actual
values, because of the knowledge of market share and sportive results, would like to catch which
are the more stable factors determining clubs value, we can call the sum of them intrinsic value,
and try to find differences among clubs in order to build an ordinal value rank.
In this way, factors weights are estimated starting from real revenues, market share etc., hence
knowing some results and trying to be consistent with them; in order to estimate real weights, one
way could be factor analysis and in the third part Ive searched correlations and component weights
with the support of SPSS statistic software, in order to propose final evaluations starting from those
findings, as we will see in Factorial fans and Factorial italian models.








6
!"#$%&' ) - !""#$%&& (%)*+#
1.1 Euiopean football maiket oveiview

A football club is an entertainment company, with the aim of give a show, get sportive results and
satisfy the fans and the community; reaching high levels, this translates in make economic results,
otherwise the aims are unreachable. Moreover, given the large number of consumers (followers), it
arises the opportunity to make profits.
Each club competes to excel in its market, which is the league where it plays, but it is also allied
with all the other clubs of the same league in trying to build the best product possible, to improve
their product quality with respect to other championships in order to improve the total league
market share, and then each team will compete for a most valiant slice of that with its rivals/allies.
Limiting ourselves to professional football, the context in which a football firm operates is large,
our first objective is to identify it in order to have an idea of the market value.
To determine size and potentiality of a football company, whether it is a single club or a league,
incomes are very significant, since a greater availability of money translates in grater probability to
provide better services to the customers/fans and to hire better talents, there is a correlation along
with cost of the team and results. In the next paragraphs, well try to calculate how strong is it.
Moreover, new regulations of Financial fair play guarantee that a club should be in equilibrium
between what it gains and what it spends (with a tolerance range in these first years from
application), compliance with this law would mean no more exceptional investments in human
resources from willing owners, so even more focus on how to improve incomes; thats why we are
starting talking about revenues which will remain a core indicator to value a club.
Lets start with a general overview of the European football industry.
According to Deloitte researches results, football market is continuously increasing all around the
world. In this work well consider only European clubs and leagues, because they are stronger
correlated to Italian leagues and clubs as they have to share incomes from the same competitions
and satisfy similar target of customers/supporters, moreover they include the biggest clubs and
leagues in the world, in terms of revenues and market share (in terms of number of customers/fans
served).
Just to know, the first non-European league in terms of aggregate revenues is the Brazilian one,
with approximately 800M! of turnover in 2012, globally it was the 6
th
league in terms of incomes
after five Europeans.
7
This doesnt mean that the rest of the world will be out, because whenever we talk about consumers
or fans of a European club, they may come from all over the world.
We see now some initial numbers:
Aggregates revenues of European Leagues divisions, in 2012, were 19,4 Billions of !, since 2006
they have increased from 12,6 Billions, with an impressive growth of +54% in few years.
In the same period, Italian Serie A has grown more slowly, +25%. Also costs have increased,
resulting in net losses for many clubs, here we limit to first divisions:

Figure 1

9'-*$+ :; <--$+-).+ =$#5'.%
Source: Report Calcio FIGC 2013.

Figure 1 refers to aggregate European first divisions net profits, which is actually, on average, a
loss. Blue histograms are losses in billions of euros, percentages on the black line indicates the ratio
between net losses and revenues. Taxes are included in costs, in 2011 Italian professional football
have paid 1034 millions of euros in contribution, which is more than 35% of the whole incomes.

In Figure 2 we can see the improving revenues (on the vertical axis) of the Top 5 Leagues
(England, Spain, Italy, Germany, France) since 2002, whose are the five larger football market in
the world in terms of market share and incomes (Deloitte, 2013). Notice that whenever we talk
about revenues, they exclude player transfer fees, VAT and other sales related taxes. Because we
need a stable comparison among clubs, and incomes from players transfer are inhomogeneous and
discontinuous.
Looking at the graph, English Premier League is stable at the first place, German Bundesliga is the
second one, despite its the only one with 18 teams instead of 20. Spanish La Liga is that one which
has improved more in the last ten years, +132%, reaching the third place. It follows Italian Serie A
and French Ligue 1.

8

Figure 2

9'-*$+ >; ?#= @ /+)-*+% -$#A.B
Source: personal elaboration from Deloitte data

Football market has grown faster than European economy, even during the crisis periods. In Figure
3 its emphasized the difference between economic growths in Italy, France, Germany, Spain and
England, on average, and the correspondent growth of their top football teams, here in particular are
considered the top 20 clubs in terms of revenues, that all belonged to these leagues in 2012:














9
Figure 3



9'-*$+ C; "#*0.$'+% +3#0#1'+%
Source: Deloitte analysis, Eurostat.

Therefore, were talking about an expanding market, whose growth does not depend only on
available money, but rather there could be even a huge surge of interest from the followers
regardless of the economy. Do I add, reasonably and according to the theory, that in general poorer
consumers will spend less, so in terms of direct gain of money there is a correlation between
incomes and economic situation in that context. From Figure 3 we can guess that many other factors
affect consumers/fans in football, not only their economic situation.
A further consideration is that Figure 3 is related to the economy of the top 5 Leagues countries
and only them, while their clubs have followers from all over the world, so by considering only this
slice of fans, even if its the core market, result could be misleading.

Staying in the European football, the weight of the Top 5 first divisions inside the whole market
is stable or a bit dropped in the last 7 years; by summing up their incomes, in 2006 they generated
around 52% of the total aggregate revenues of all European leagues (12,6 Billions!, estimated by
Deloitte), while in 2012 nearly 49% (out of 19,4 Billions!, Deloitte), which is still a huge share;
moreover, by considering the lower categories of English, Italian, Spanish, French and German
Leagues, which are included in the aggregate total, we dont know their exact weight but the share
of the top five federations is widely over 50% of the total made from 54 UEFA federations, because
this share is reached by including only English second division, which earned 590M! in 2012
(Statista.com).
1u
Anyway, looking at Report Calcio FIGC 2014, there are other first division championships to be
considered in order to have a better idea of this market, like Russian (896 Million! in 2012 with 16
clubs), Turkish (551M! with 18 clubs, 2012), Dutch (439M!, 18 clubs, 2012); meaningful
especially the Russian growth: from 2009 to 2012, earnings have gone from 368M! (Deloitte 2011
review) to 896M!, increasing by 143%. An impressive growth, even if the origin of these incomes
is not always known, Russian league is widely the first league when considering only the stream
other incomes getting 42% of the total (Report Calcio FIGC 2014).

Until now we have reasoned in terms of leagues aggregate revenues, which are the sum of each
football team revenues; single clubs are one of the core assets of a league, probably the most
important. As there isnt a standard, a fixed number of clubs forming a league, there exist different
formats and aggregate revenues could be distorted, even if in Top 5 only German league has 18
clubs while all the other components have 20 football team in their first divisions.
Anyway, to not depend on the number of teams, in Table 1 there are the average incomes (again,
net of player transfers gains) per club of top 10 European Leagues, which are related to the season
2010-11 and 2011-12, and average net profit per club of season 2011-12 (Report Calcio FIGC
2014).

Table 1

League (first divisions) Revenues per club (M!) 2011 Revenues per club (M!) 2012 Net profit per club (M!) 2012
England 134,0 139,0 -11,3
Germany 100,5 106,0 +1,8
Spain 84,5 93,0 +0,2
Italy 81,5 85,7 -10,0
France 56,5 58,4 -4,3
Russia 39,5 56,0 -5,4
Turkey 24,5 30,6 -6,9
Holland 24,0 24,4 +1,2
Portugal 18,5 17,8 -7,1
Scotland 16,0 10,4 -1,2
?)6/+ :; <4+$)-+ =+$ 3/*6 $+4+0*+%

I add a little corollary: only some clubs have the right to play in European competitions, this
generates visibility, possibility to reach new customers/fans and earn new revenues.
A proper consideration should be done for top teams in terms of revenues earned per league, the
ones with greater probabilities to access at European competitions, because they have a different
11
weight for the whole league entries, also due to their higher visibility that translates in higher
league visibility and new customers achievement.
For example, by considering only top 4 clubs in terms of revenues, Spanish clubs are near to
English ones, on average 310M! with respect to 332M! per club in 2013, by detaching all the other
leagues; Spanish La Liga it the second one in this special rank even by considering only top 7 clubs.
This is an imbalance indicator but it also able to explain the great sportive results of Spanish clubs
in European competitions, despite the whole league revenues were relatively low in the past decade.
In the second and, especially, third part of the thesis, we will see how these sportive results could
affect positively incomes of participating clubs but also of the whole league.

1.2 Revenue stieams

To understand the structure of revenues, let us review some core products of each single club.
A football company sells a show, the match, which can be seen either live at the stadium, paying
tickets, or through the media; this generates media rights, sponsorship and advertising. Moreover,
there are a lot of clubs products, like official clothing, gadgets or museums. In synthesis, we can
decompose revenues of football teams (at least professional clubs) in 3 macro factors: matchday,
related to stadium direct entrances, broadcasting, mostly related to TV rights but also other media
rights, and commercial side, comprehensive of gadgets, naming rights, sponsorship and advertising.
In Figure 4 and Figure 5, the slice other, consisting on all the incomes that do not come directly
from stadium and media, are mostly related to the commercial side.












12
Figure 4




9'-*$+ D; ?#= @ $+4+0*+ %.$+)1%
Source: KPMG, European stadium insight (2011)

Figure 5


9'-*$+ @; 2*$#=+ $+4+0*+ %.$+)1%
Source: UEFA, KPMG analysis.

1S
Figure 4 is related to revenue streams of Top 5 European Leagues in the season 2009/10: Italian and
French clubs take most of their revenues from broadcasting, while Germans get a huge amount
from commercial side. English and Spanish clubs are more balanced getting comparable incomes
from each stream.
Figure 5 gives a picture of nearly all the European market, ranked by matchday as percentage of
revenues; Serie A is rather backward, while its the first one in term of TV share percentage. About
broadcasting incomes, Premier League is at the top and it has huge rooms of improvement, because
it sells live in GB only 154 matches out of 380, while all the other top leagues are selling 100%
matches live, but gaining less (Teatino e Uva, 2012). Moreover, Serie A revenues in the last few
years have increased only from the commercial part, while we are the only league with a negative
trend in matchday in the last 10 years (Report Calcio FIGC 2012 and 2013).
One of the causes of this relatively very low and falling Serie A matchday is a negative trend in
attendance at the stadium, I think this problem deserves to be highlighted.

1.S Attenuance

Following the data available on website Stadiapostcards (Their sources are all the Italian sportive
newspapers, FIGC and LegaserieA.it), the decline has been started in the 80s and is still
continuing, even if in the last few years it appears less marked, but we have to invert these numbers
not just keep them unchanged; not only for direct incomes from matchday, but also for
positive/negative externalities which could affect consumers from all over the world, able to change
significantly, in the long term, also commercial and broadcasting side, by changing the number of
followers/consumers; thats why I think this is a critical point, worthy of investigations, able to pull
up or down highly significantly revenues in the long run. Only recently Italian clubs have started to
take into account this problem:








14
Figure 6


9'-*$+ E; ?#= @ )..+0&)03+%
Source: statista.com

German championship has double attendance than Italian and French. Despite the difference with
England and Spain, Premier League (610M!) and La Liga (460M!) still gain more than Bundesliga
(385M!) from matchday, due to 2 more clubs but also to higher ticket prices (Teatino e Uva, 2012).
Serie A and Ligue 1 are far away (180M! and 135M!), anyway the negative trend in our country
its not due to higher prices, there should be other relevant factors:

Figure 7


9'-*$+ F; ?'3G+. =$'3+%
Source: Report Calcio FIGC 2012

1S
This index calculates the weight of average ticket prices of first divisions with respect to average
daily salaries; Italy is in the middle, behind England, Spain and Germany, despite the huge
difference in attendance.
The negative trend for our championships is even more marked in lower divisions; clubs belonging
to a lower division are not a core asset for Serie A clubs, anyway they are able to influence
significantly upper categories, directly because of promotions and relegations, indirectly by
influencing the image and the quality of the whole product Italian football and especially Italian
professional football, which is the same whole product build from Serie A teams. So finally, even
if they are not core assets of Serie A teams, there exists a relevant correlation.
In figure 8,9 and 10 we see the average attendance per match of 2
nd
, 3
rd
and 4
th
Italian divisions,
respectively; of course there are fluctuations, mostly due to changes in the catchment area, very
changeable at these levels because of promotions and relegations; however, the negative trend is
evident, average per game attendance on the vertical axis and related season on the horizontal one:


Serie B: Figure 8


9'-*$+ H; <..+0&)03+ I+$'+ J

Lega Pro (3
rd
division on the left, 4
th
on the right):

Figure 9 Figure 10

9'-*$+ K; <..+0&)03+ (+-) L$# M 9'-*$+ :N; <..+0&)03+ (+-) L$# MM
16
Source: personal elaboration from Stadiapostcards.com data.

Another worrying indicator for our League is the percentage of stadiums filled, in Figure 11 I have
considered Top 5 first divisions season 2010-2011:

Figure 11


9'-*$+ ::; L+$3+0.)-+ #5 %.)&'*1 5'//'0-

The gap is accentuated by considering lower categories like Serie B and Lega Pro and especially the
national cup; our Coppa Italia, with the actual format, presents empty stadiums until the last
rounds (in 2011/12 only 20% of stadiums have been filled, despite the first round, with the lowest
attendance, it is not taken into account, (Report Calcio FIGC, 2013).
This, in addition to the lack of economic returns and waste of resources, is able to deteriorate the
show both for who attends directly (and then makes public what she has seen) and who watches the
match on a media, it could foster a loss of enthusiasm so finally it contributes to a decline in value.
In the next paragraphs well deepen the relation with value.
Anyway, it is evident that the ambiance of a full stadium is different than seeing the show in a
desert cathedral, moreover the image on media it is different; to confirm these considerations,
Ive asked to a sample of 72 football fans whether it is important if there is much public and the
stadium is filled. It is not a very significant number for a statistic, but the answer was given almost
by unanimity: 90% said yes, the remaining 10% declares herself disinterested, with only 1 person
which was contrary and prefers empty stadiums. I point out that the sample was not uniform (95%
men, on average 26 years old, 40% Emilians), anyway this accordance is very marked on this point.
17

In order to point out the value of a football company, it is reductive to consider only economic
factors like revenues and respective components, we have mentioned some intangible factors like
consumers/fans enthusiasm and related externalities.
In the next paragraph Ill try to figure out what determines the value of a football club and,
consequently, of a football league, talking about UEFA ranking and brand value, so that we can
complete this introductory part in which we are defining the context of European football market
and the position of Italian leagues, and begin with practical clubs value calculation methods.

1.4 Beteiminants of value

A club playing in a football market builds a product which depends on the results with respect to
the other teams in the league, which are able to influence the value and increase or decrease revenue
streams; but a club also plays for a bigger product, which is the whole league, because if a league is
able to increase its value and its revenues, then each participant club will benefit from it. We can try
to find some numbers to better investigate this trade-off between inside competition and
collaboration.
Lets start from Szymanski and Kesenne 2004 work on Competitive balance and revenue sharing;
they begin with the assumptions that the probability of winning the league championship depends
on the investment in playing talent and if all contestants invested the same amount of resources in
trying to win the contest, then each contestant would have an equal probability of winning.
[1]

2O*).'#0 :; P'00'0- =$#6)6'/'.+%

Where w is the probability of success and t the investment in playing talent. Then, in a two team
model where each club is a profit maximizing, and profit consists on gate revenues minus cost of
talent investment, this is the profit function they found for each team:




18
[2]

2O*).'#0 >; L$#5'. 5*03.'#0


By assuming that talent can be hired in the market at a constant marginal cost c, and " is a fraction
(>50%) of income R generated from home matches. By differentiating with respect to t, the result
is that, in equilibrium, the marginal revenue from the hiring of talent is equalised across teams (this
is not the same as saying the marginal revenue of a win is equalised).
Following these assumptions, they finally derived the winning percentage ratios (w1/w2) with
respect to the fraction of sharing ", and they found that gate revenue sharing will not only reduce
total investment in talent by teams in a league but also diminishes the degree of competitive
balance, so there must be regulations in order to sustain competition and equilibrium.
In Owner objectives and competition (Fort and Quirk, 2004), authors differentiate between 2
clubs objectives, profit and sportive results: they distinguish between owner profit maximizing and
owner winning percentage maximizing; of course, having different aims changes the market
approach and owner investments priorities.
Despite some evidence (for example, English Premier League has been more inclined to profit
objectives than Italian Serie A in the last decade), its difficult to translate into numbers those
attitudes, also because comparing currently existing leagues cannot distinguish owner objectives if
the existing leagues serve different markets with different revenue possibilities. However, they
demonstrate the initial insights that winning percentage teams are willing to bid higher prices in
talent and that if, in a market, the number of profit maximizing teams increase, then talent price
should fall.
Anyway, I think we cannot strictly separate between profit and winning objectives, as they are
related affecting each other.
Revenues are related to larger expenses and greater winning probability, on the opposite, sportive
results are able to influence significantly clubs value, because of direct incomes, rewords and also
the capture of new fans. Barajas and Crolley (2005) have found that there is a non-linear
relationship, with an explanation degree of 55.12%, between budget (expected income) of Spanish
football clubs and sports performance. This outcome is consistent with the findings of Szymanski
and Kuypers (1999), they state that the proportion of the change in income during the 1996/97
season is explained by 82% (R2=0.82) by the English league position in that season. They use the
19
logarithm of the revenues of each club divided by the yearly mean of the revenues of the all clubs as
a whole. The result raises to an R2 of 0.89 when they work with a longer period (1978-97).
So, sportive results are related to future incomes, and we know that actual incomes are related to
actual expenses (especially in talent) and, consequently, results.
For these reasons I introduce a rank, made by UEFA, which summarize clubs results in the
European competitions during the last 5 years.

1.4.1 0EFA ianking

Every year UEFA updates ranks in order to define participants to its competitions, and different
zones within them, which influence paths inside the game board. A country ranking is used for
invitations, while a team ranking defines groups and part of the route inside the competitions
(UEFA.com). For our aim, which is to identify clubs and Leagues values, they are both
meaningful. Anyway they are strongly related, as country ranking is build by adding teams ranking
coefficients as we are going to see in a while, and the same methodology is used to build these
ranks, a method which relies on UEFA coefficients.
UEFA country ranking is an indicator of the technical value of a League, as it reflects all the
sportive results in European competitions of the last five years of all the participants clubs. It is able
to influence leagues revenues by deciding the number of teams invited to European competitions
(UEFA Champions League and UEFA Europa League) every season.
UEFA coefficient is determined by the results of the clubs of the associations in the UEFA
Champions League and the UEFA Europa League games over the past five seasons. Technically, it
is build as follows:
Two points are awarded for each win by a club, and one for a draw (points are halved in the
qualifying and playoff rounds). Results determined by extra time do count in determining the
allocation of points, but results determined by penalty-shootouts do not affect the allocation of
points, other than for bonus points given for qualification into the latter rounds of the Champions
League or the Europa League (UEFA.com);
To determine a country or club coefficient for a particular season, the coefficients for the last five
seasons are added. Bonus points are added to the number of points scored in a season, they are
allocated in this way:


2u
Table 2

?)6/+ >; Q29< $)0G'0- 6#0*%
Source UEFA.

For team ranking, the total score is calculated by adding at the points scored by each team a fixed
coefficient, equal to 20% of the national coefficient on the current season. For example, 11.375
points of the Italian coefficient (country ranking), for the 2008/09 season, they secured additional
2.275 points per each Italian club.
About leagues, the number of points awarded each season by the team of that country is divided by
the number of teams that participated for that association in that season, for example in 2013/14 the
sum of points gained by Italian clubs is divided by six. This number is then rounded down to three
decimal places (ex. 2.# would be rounded to 2.666, source UEFA.com).
Here is the country ranking 2013, which decides the number of clubs per country participating at
UEFA competitions in 2014/15.












21
Table 3


?)6/+ C; Q29< 3#*0.$7 $)0G'0-
Source: UEFA.

Briefly, the ranking is the sum of points gained in the last 5 years, hence for the next rank season
2008/09 will be completely deleted, and so on.
In the right column, teams refers to number of clubs participating at European competitions in the
current season, and this depends only on the rank 2012. There are few exceptions, for example a
fair play award, which guarantees one more club in Europa League for three countries, for
example in 2012/13 season, Nederland has won the premium having 7 teams instead of 6.

Finally UEFA rank is a good indicator of clubs (and consequently leagues) results in the European
competitions during the last five seasons.
Below the performances of top Italian teams since 1999 (actually SSC Napoli is 32
nd
in the 2014
projection, but it wasnt in the rank until 2008), we have the UEFA team rank position on the y
axis and the related year on the x axis.





22
Figure 12


9'-*$+ :>; ?#= M.)/')0 .+)1% Q29< $)0G'0-
Source UEFA.

Figure 12 well illustrates Serie A situation and related country ranking, as it is made mostly by
these teams, the ones which have been more present in European competitions during the last 15
years; if at the end of the nineties we had 6 teams in the top 30 and 3 tightly in the top 10, in the
following years our clubs have lost positions with few exceptions, but in actual 2012 and 2013 rank,
and 2014 projections, the gap has been reduced and we have recovered indeed 6 clubs in the top 50
(including SSC Napoli), anyway in 2013 only one Italian club is present in the top 10. I have put
this graph as an indicator of Top Italian teams sportive results, which is related to technical values
on the pitch but there exists also a correlation with economic results, as we will verify in the
following sections.
Economically speaking, its important not only the number of clubs per country, but in which
competition, because Champions League generates 75% of the whole pie despite is divided for a
lower number of clubs; nevertheless, relatively speaking, Europa League is acquiring more
importance within an expanding market, data in Millions of euros:





2S
Figure 13


9'-*$+ :C; Q29< &'%.$'6*.'#0%
Source UEFA.


Moreover, if these direct incomes are very significant, and UEFA rankings provide the possibility
to access at these competitions and is able to change the path inside it, there are also intangible
factors which contribute in increasing the value of a club (and consequently of its league); consider
for example the image value which comes from team participation and performance, able to build
consumers (fans) loyalty, influence future incomes and, consequently, results.
For all these reasons I deem UEFA ranking a relevant factor for clubs and leagues value creation.

1.4.2 Bianu value

Football clubs are made up of a mixture of fixed tangible assets (stadium, training ground) and
disclosed intangible assets (purchased players), internally developed players and goodwill, making
up the difference to provide the combined clubs value (Brandfinance.com).
An indicator of leagues value is Brand, as it considers actual awareness and attractiveness, but also
potentiality of future growth. In synthesis, it is the trademark and associated intellectual property
(Brandfinance, 2013).
Below, in Figure 14, Ive put the brand rank of European leagues:
Here, after the richest English Premier League, it is emphasized the solid position of German
Bundesliga, which can rely on a strong economy (with respect to Spain and Italy), modern facilities,
and a huge catchment area (80 Million inhabitants), which have contributed to the impressive
24
increase in attendance during the last 10 years. Fans are important not only for direct incomes they
can assure through tickets, merchandising and media rights, but also for network externalities they
generate, that are able to get or lose other consumers.
Following those results of Brandfinance, England and Germany get 70% value of top 5 leagues in
2012, so by considering only this factor it would be expected that in the coming years they will
widen the gap with Spain, Italy and France in terms of revenues and, consequently, improve their
sportive results because of higher winning probabilities, assuming that higher revenues translates in
higher expenses in most talented players; indeed, the probability of winning the league
championship depends on the investment in playing talent and if all contestants invested the same
amount of resources in trying to win the contest, then each contestant would have an equal
probability of winning. (Szymanski & Kesenne, 2004)
Surely there are other factors to be considered before to try predicting future market, by remaining
on brand values, we should consider the weight of the top clubs of each league, the ones that
participate to European competitions, they can tow the whole leagues revenues, as its happening
in Spain. On the other hand, a balanced and richer league, should provide benefits to all underlying
clubs in the long run, including towing top clubs, as it is happening in England.
Below the rank:

















2S
Figure 14


9'-*$+ :D; (+)-*+% 6$)0& 4)/*+%
Source: Brandfinance.

These values have been calculated through royalty relief method, which determines the value of
the brand in relation to the royalty rate that would be payable for its use were it owned by a third
party. The rate is supported by a profit margin analysis of comparable companies. The methodology
uses discounted cash flow techniques to discount estimated future royalties at an appropriate rate to
arrive at a net present value, which is held to constitute the brand value (Brandfinance.com).
Calculations are not public, its reliability depends on the accuracy of rates calculation, which is
surely a complex process with many chances of errors, especially for an unpredictable company as
a football league.
In the right column there is the Brand rating, which benchmarks the strength, risk and future
potential of a brand relative to its competitors on a scale ranging from AAA+ to D, like a credit
rating.
26
According to the rating, Premier League is confirmed as very strong and it assures extensive
guarantees to investors, while Serbian and Romanian Leagues, despite a quite good value mostly
due to their popularity in these countries, are near to default, not being able to cover all their debts.
Italian Serie A, despite 1630M! of debts in 2012 net of credits (Report Calcio FIGC, 2013), the
decline in attendance and the paucity of modern facilities with respect to top 10 leagues, it is quite
solidly the fourth rated league with Brandrating A and 1122M! of value, evidence that with some
targeted investment (e.g. stadiums), the recovery of fans enthusiasm and some positive results in
European competitions, we could, in few years, cover or reduce the gap with top three leagues. The
same goal could be reached by other leagues, for example Ligue 1 that with the organization of
2016 European championships and the arrival of rich owners (PSG, AS Monaco, RCD Lens) is
catching up Serie A. On our side, if we would like to underline a strength in a leagues SWAT
analysis, there is a hundred of rooted and unique football history, which have brought top
attendances until the 90s, indeed during the 80s Italian leagues where the most-watched live, with
the pick of 38.872 average spectators per match during 1985 Serie A (European-football-
statistics.com), numbers exceeded only recently from Bundesliga and approached by Premier
League and no one else (Ligue 1 pick is 23120, dating 2000/01, European-football-statistics.com).
Thats why Ive spoken about recovery of fans enthusiasm, together with new facilities.

To complete the introduction at values calculation and closing this overview about the context of
the European football market, related size and Italian league position, I add this little corollary
about lower divisions, because as mentioned in the previous paragraphs, there is a strong correlation
among teams belonging to the same league, as they play for the same product in the same market,
and they have to share revenues of this whole product.
Moreover, it is shallow to consider strictly separated the values of different divisions belonging to
the same federation, not only because there are promotions and relegations, able to affect catchment
area and incomes, but also because of followers and supporters, which are able to influence the
image of the whole product changing the value; so the value of a first division depends also on the
value of the lower categories.
Hence, to define the value of a league its important the whole production of a federation, certainly
with a higher weight for upper categories. We have seen an overview of the European football
market mostly focusing on top first division in terms of revenues, followers and ranking, here I
show a simplified economic picture of Top 5 second divisions, where the strong position of
England and Germany is confirmed, its emphasized the Spanish imbalance in terms of revenues
27
and its stressed the lack of public in Italy, despite the high capacity of our stadiums, e.g. Serie B
average stadiums utilization was 32% in season 2011/12 (Report Calcio FIGC, 2013):

Figure 15


9'-*$+ :@; ?#= @ %+3#0& &'4'%'#0% +3#0#17
Source: Sportingintelligence, Rohlmann, 2013.

We see that even economically there are lower divisions with a relative high importance, for
example in terms of revenues, English second division earns more than many other first divisions
League (590M! in 2012), considering all the leagues, so also the first divisions, it is the 7
th
League
in Europe in terms of incomes.
Beyond this coarse comparison between second divisions, many other factors should be considered
to have an idea of the value of a whole federation, (just think that in Italy there were 14450 football
clubs in 2012, playing in FIGC championships in all its categories), but this is beyond our aims,
which are to estimate the value of clubs and leagues, focusing on professional clubs, because at
higher levels the optical of a firm, resumable as selling a successful service reaching sportive
results to satisfy new consumers and make new profits, it is more evident.
I have tried to point out size and relevance of the football market.
At this point a question arises, by considering all the relevant factors of this market, how we can
determine the value of football clubs and leagues?


28
!"#$%&' ! - !""#$%&& (&)$* +%&),

2.1 Fiims economic value

Economic value is a measure of the benefit that an economic actor can gain from either a good or
service, comparable to the amount of money a specific actor is able to pay for that good or service
(Keen, 2001). By definition, it is a subjective value, because it cannot exist an absolute and
indisputable evaluation, indeed the only indisputable evaluation is the market price, but if a
customer is willing to buy a good, assuming a rational world, she places on it a value higher than
market price.
Anyway, it may exist a best way to estimate the economic value in each business, context and
situation, the difficulty is to identify it.
Despite a wide literature, I havent found an optimal or universally used way to value a football
club, and neither the same attention, in terms of attempts, data and methodologies, findable in other
sectors with similar size, which provides many estimation approaches.
Anyway, we are talking about an industry which generates 20 Billions of ! in Europe, without
considering externalities in other sport sectors or related products (small tournaments, videogames,
balloons sold etc.). Hence I think its imperative to know the value of the clubs, as accurate as
possible, which are the core assets of the football business; both for those directly involved and for
investors.
Starting from these needs, I would like to go in deep with this subject.
In the next paragraphs, we will see some techniques used to value a firm, first some general
methods and then some specialized for football companies.

Before to start, we resume Modigliani and Miller (1958); they affirmed that managers cannot
change the value of a firm by repackaging the firms securities. In synthesis, a firms capital
structure is irrelevant.
The basic Modigliani and Miller proposition is based on the following key assumptions:
No taxes.
No transaction costs.
No bankruptcy costs
Equivalence in borrowing costs for both companies and investors.
29
Symmetry of market information, meaning companies and investors have the same information.
No effect of debt on a company's earnings before interest and taxes.
In a following paper, Miller (1977) demonstrated that in presence of corporate taxes, firm value is
positively related to its debts. Anyway, a too high level of debt increases financial distress. Debt
provides tax benefits to the firm but it puts pressure because obligations have to be serviced. So its
a trade-off, as we can see from Figure 16:

Figure 16

9'-*$+ :E; P)33

rWACC is the rate that a company is expected to pay on average to all its security holders to finance its
assets (Miles, James A., Ezzell, John R., 1980), it falls initially because of the tax advantage to debt.
Beyond the optimal level of debt it rises because of financial distress costs.
In this work the assumption is that there is no difference in values with respect to capital structure,
in other words, the way a football club finances its assets, through some combination of equity,
debt, or hybrid securities, doesnt affect its worth.

After Modigliani and Miller, there have been many attempts to value firms and, in particular, its
equity; in general, we can decompose evaluation approaches in:

1) Profitability methodologies: With these methods, firm value is only a function of future profits;
it actualizes future economics results and cash flows, to determine a present value. Strengths
Su
are that this methodology is future looking, moreover profit is usually considered as one of the
most important companies performance indicators. Weaknesses are that by considering future
perspectives, it is introduced subjectivity, and assets and liabilities are not directly considered
in value calculation.
2) Capital (patrimonial) methodologies: It is an evaluative criterion closely anchored to a
patrimonial conception of the company, simple or complex, depending on whether or not you
take into account intangibles, often not emerging from the accounting records and the financial
statements, such as, for example, know-how, brand, goodwill, palatability of the product. It
consists on the analytical assessment of the assets and liabilities of the firm, items that are
valued at their current value, not the functioning value used for the preparation of the financial
statements. Strengths are the objectivity and analyticity of the process, evaluating separately
each element on the statement. Weaknesses are that it is completely backward looking, without
considering future flows, it is difficult to assign the right weight to the intangible assets and it
assigns a value to each balance item active or passive, irrespective of his belonging to the
complex, unitary and functional, business.
3) Mixed patrimonial and profitability methods: In order to combine the advantages of the first
two methods, some hybrids approaches were born; they take into account the objectivity of the
patrimonial size and future potentiality, by considering the concept of goodwill, identifiable as
the difference between firm value and capital structure value. Strengths and weaknesses of
these methods are the same of capital and profitability methodologies, combined.
4) Financial methodologies: they start from the assumption that a firm is comparable to any other
financial investment and hence its value depends on actualized future cash flows generated by
the firm to potential investors. Strengths are that these methods are rational, universally
applicable and future looking by considering financial cash flows; weaknesses are the
subjectivity of the process and the omission of firms assets and related profitability.
5) Multiples methods: they try to express the market value of an (or more) asset relative to a key
statistic that is assumed to relate to that value (e.g. Earnings). Advantages are usefulness and
relevance (they focus on key statistics), simplicity can be both advantage or disadvantage,
because their very simplicity and ease of calculation makes multiples an appealing and user-
friendly method of assessing value, on the other hand by combining many value drivers into a
point estimate, multiples may make it difficult to disaggregate the effect of different drivers,
such as growth, on value. Staticity, dependence on correctly valued peers and short term view
are generally disadvantages, also comparing relative values could be difficult.
S1
6) Market capitalization (a particular market price methodology): Market capitalization is the
total value of the issued shares of a publicly traded company; it is equal to the share price times
the number of shares outstanding (Investopedia Market capitalization definition, 2013).
Strengths are the objectivity and theoretical precision of the value, which should reflect the cost
of buying all companys shares, which is equity value, and knowing debts we should have a
good estimation of market value; weaknesses are that it is usable only for quoted public
companies and to provide a fair evaluation, in practice, it needs a completely liquid market with
perfect symmetric information, which are ideal conditions. It is meaningful only under some
circumstances. Another weakness is that the market value is given for minority shares, i.e. it
does not incorporate the value of control.

There isnt an unquestionably better approach, the choice of the appropriate methodology depends
on the business and related relevant factors.
By referring to football industry, in the literature I have found some attempts mostly related to
financial methodologies rather than patrimonial approaches, variations of profitability
methodologies focusing on revenues and some hybrid of all the methods.
Market capitalization is a separate chapter that I would like to deepen in the next paragraph together
with another traditional financial evaluation method, Discounted cash flow, before to get into
methodologies more specific for football companies.

2.2 Naiket capitalization

One specific way in which firms can make use of financial markets is to list the firm on a public
exchange, allowing many types of investors the opportunity to purchase a share of the ownership of
the firm, and permitting the firm to source capital at the lowest available cost for investment in
productive projects. Firms undertake this change in ownership from a private, entrepreneur-driven
entity to a public firm via an Initial Public Offering (IPO). (Baur, Dirk G. and Conor McKeating,
2011).
An IPO is a public offering of company stocks, available for the first time on a securities exchange.
To find IPO, the issuers intermediating investment bank expends efforts and resources to discover
the price at which the firms shares can be sold (Qfinance.com). The market price will be a
weighted average of the many resulting value estimates; for the issuing company, its important to
know a range of the projected price, with an appropriate confidence interval, before to decide
S2
whether to place or not into financial market.
An example of this is Manchester United IPO; in 2012, the IPO, led by New York City-based
investment bank Jefferies, predicted the 16.7 million shares available at an expected price of
between $16 and $20, raising approximately $300 million, and driving the club's total valuation to
$3 Billions, as the ownership of the club, Glazer family, decided to sell 10% of shares (Jolly, 2012).
Market capitalization is the total value of the issued shares of a publicly traded company; the
formula is trivial:
Value = Pstock * Nshares.
Market capitalization is equal to the share price times the number of shares outstanding.
As outstanding stock is bought and sold in public markets, capitalization could be used as a proxy
for the public opinion of a company's net worth and is a determining factor in some forms of stock
valuation (Griffin & Ebert, 2012).
Hence, only a company floated on an exchange where equities regularly change hands can be
valued reliably using market capitalization.
Modigliani and Miller (1958) said that companies with liquid shares in efficient market tend to be
valued appropriately as quoted share prices are realisable for investors. This is not the case of
football clubs, where shares have tended to be stagnant and illiquid resulting in share prices that do
not reflect the true value of clubs being quoted, like the cases above, and market sentiment
influences share volatility (Markham, 2013). Shareholder structure within publicly quoted
companies may impact a potential acquisition and valuation (Damodaran, 2012); in some instances
in football clubs, majority shareholders will have no interest in selling, but usually investors
looking to gain control of a company are likely to have to pay a significant premium on top of a
shares current value in order entice shareholders to sell (La Porta et al., 2002).
This lack of liquidity around football clubs stocks is also due to the fact that most of them work
zero profit (also negative), and returns are mostly spent in player transfer fees and wages, so
investors are losing interest, shares are rather stagnant and owned by a dominant owner or
individual fans who had no interest in selling. Hence, many shares are illiquid, market capitalization
does not reflect the clubs worth and it is not significant to make comparisons. So we can conclude
that market capitalization is applicable to few football companies and in general it does not
represent the whole firm value, it only refers to equity and in particular it reports the value of little
part of stock exchanges made by minority shareholders, it is useful in that sense and by definition it
should be misleading when referring to a football club value.
To verify those considerations, we can look at those football clubs whose are actually quoted in the
financial market. In European football, including all the teams belonging to the UEFA associations,
SS
there are only 25 clubs actually listed in stock exchange, because adherence to stringent stock
exchange rules and annual reporting requirements is a costly process (Brealey and Myers, 2002),
also problems around strategic objectives could arise because for example a listed club would have
to declare to the stock exchange if negotiations to sign a star new player were taking place whilst a
non-listed club would not; these constraints, for the majority of football clubs, dominate
advantages, like to have more liquidity. Hence, we cannot use this method as a standard to value
football companies. However, lets have a look to a part of this minority, data taken from
Bloomberg, Dec 27
th
2013:

Table 4

MARKET
CAPITALIZATION
(M!)

FORBES 2013(M!)
Manchester United England 1815 2449
Arsenal England 1136 1034
Fenerbahce Turkey 229 /
Juventus Italy 223 541
Borussia Dortmund Germany 221 340
Ajax AFC Nederland 154 /
AS Roma Italy 154 265 (2012)
Besiktas Turkey 137 /
Galatasaray Turkey 97 /
SS Lazio Italy 33 /
O. Lyonnais France 27 287
Porto FC Portugal 5 /
?)6/+ D; ,)$G+. 3)=

From this table, we can see the comparison between market capitalization (third column) and
Forbes magazine value (fourth) for those available. Forbes it can be consider as a benchmark, well
deepen it in the next pages. Despite the poverty of data, its evident the inconsistency between
market capitalization and Forbes values, with the impressive difference between 287 and 27
Millions ! of Olympique Lyonnais. Forbes methodology is not available but we may suppose they
include also assets in their evaluation, making the comparison with market capitalization
misguided.
S4
They aim is to find the whole enterprise value (Equity plus Debt). Moreover, problems could arise
because control premium is not quantifiable on the market, well deepen this aspect later.
Looking at the data, from this table it seems that Forbes gives significantly higher values with
respect to Market capitalization, and we could imagine the difference as debts, because Forbes
should consider equity plus debts while market capitalization reflects only equity value, but we
cant affirm this not only for the paucity of data: for example, Fenerbahce is worth, following
Market cap, 229M!, while the yellow and blue Turkish are not present in the Forbes rank, it means
they are back to the 20
th
position of Newcastle United, valuing less than 210M!, and they where
never present in the rank even in past editions. Arsenal FC is valued less by Forbes. So there are at
least 2 cases out of 12 in which we cant affirm strictly that. Surprising 5M! of FC Porto, the
company has a ratio between total debts and annual revenues of 1,2 (Bloomberg), bad but not so
worrying for a football team of that size, it means they are indebted by around 110M!, but they own
a 52000 attendance modern stadium (Do Dragao), built with an estimated cost of 98M! in 2003,
which is more than annual Porto turnover, near to 90M! (Deloitte); moreover, they have got 85M!
of players value net of their annual salaries (Transfermarkt.com, 2014). It would be interesting to
deep where the evaluation comes out, because at first sight it seems a blatant underestimation, as
the case of Olympique Lyonnaise.
In any case, we conclude that comparing football clubs value through Market capitalization could
be useless as this method is appropriate to value only equitys minority stocks exchange, anyway it
can be used as an indicator to compare the size of two quoted clubs in similar context, provided that
market is sufficiently liquid.


2.S Biscounteu cash flows mouels

Discounted cash flow is defined as a valuation method used to estimate the attractiveness of an
investment opportunity. Discounted cash flow analysis uses future free cash flow projections and
discounts them (most often using the weighted average cost of capital) to arrive at a present value,
which is used to evaluate the potential for investment (Miles, James A.; Ezzell, John R., 1980). The
more general formula is this one, in which the discount factor is the rate that a company is expected
to pay on average to all its security holders to finance its assets, here r (WACC):

SS
|Sj
2O*).'#0 C; R'%3#*0. $).+

Using this technique, the value of an asset is calculated by obtaining the present value of the
expected future cash flows. These cash flows are discounted back to the present day using a
discount rate aligned with the perceived risk of the investment (Pratt, 2008).
This method is recognised as the most credible means to value assets or companies by both
academics and practitioners alike (Demirakos et al., 2004).
Discounted cash flow can be applied to any profitable firms, but its effectiveness depends on the
stability of future cash flows: it can value any company that has predominantly positive and
predictable flows going forward (Markham, 2013).
This is not the case of football clubs, many of them are perpetually loss making entities and
therefore do not have any positive cash flows to discount back to todays value, but we should
consider also positive cash flows regardless from profits.
Notice that by concentrating only in profits and their present values sum, we are considering only
equity thus we need debts value in order to identify companys value.
In an expanding market like football, some club is able to plan future profits and this could explain
great positive values for loss making entities, not detectable in a present value based on old balance
sheets. Moreover, usually investors bought them for other aims, whose values (e.g. politics reasons,
huge control premium value, visibility etc.) is difficult to quantify but it would be necessary when
applying correctly Discounted cash flow method, because otherwise we omit relevant flows
present value, which are benefits related to clubs holders that compose clubs value.
The traditional way to calculate the discount rate comes from a fusion between Modigliani & Miller
and Capital Asset Pricing Model:

[4]
2O*).'#0 D; P)33 &$'4+$%

Where V is the sum of net worth plus net debts, Re and Rd are respectively cost of equity and cost
of debt, Tc is the tax rate; Capital Asset Pricing Model is used to determine the fair rate of return of
an asset compared to a market systematic risk and a risk free rate; here it could be used to estimate
Re.
S6
Let us focus on this term which could be misleading for a football firm: we know from the theory
that the cost of equity is the return a firm theoretically pays to its equity investors, i.e., shareholders,
to compensate for the risk they undertake by investing their capital. Hence it presupposes to plain
some positive return. Moreover, as the risk free rate is theoretically available for all the investors,
which is an assumption of the Capital Asset Pricing Model, it should be greater than this amount.
In the richest English Premier League, only 8 clubs out of 20 made a profit in 2011 (Jones et al.,
2012), and few of them stably during years, it seems meaningless trying to apply the traditional
Discounted cash flow method.
The methodology should provide perfect evaluation when knowing future cash flow, but how can
we estimate them? Many owners have bought football clubs because of political aims, image,
personal benefits useful for other aims as, in same cases, industries. It seems utopian to find a fair
estimation of those values.
Anyway, there are different variations of this approach, like using a risk adjusted rate, with or
without considering debts, by estimating differently future entries.
A problem is that for a football club is hard to determine the correct rate of risk due to the instable
conditions in which most of the teams play, depending, among other factors, on own and
competitors sportive results and fans future enthusiasm, which are very changeable or difficult to
quantify, and highly unpredictable over time.
For these reasons, actualizing future cash flow, even for profit maker clubs, presents high
unpredictability and may cause inconsistency with the actual value of the company.
Take for example the case of Arsenal FC, which is a solid firm that typically generates profits every
year, playing in one of the best context for a football company, the Premier League, which
guarantees a relatively low dependence on results. This is shown in the table 5:

Table 5

Arsenal DCF (Markham, 2013)
M!
Forbes M! Revenues (Deloitte)
M!
2012 791 806 290
2011 1022 802 251
2010 1044 718 274
2009 847 603 263
2008 730 598 264
?)6/+ @; R'%3#*0.+& 3)%B 5/#A
S7

Despite fluctuations in results, Gunners revenues are quite stable with a positive trend, and great
future expectations due to the increasing market of Premier League and their solid position in terms
of market share inside it (Arsenal have been estimated as the third English club per number of
supporters after Manchester Utd and Chelsea FC in 2014, with 113 millions of fans worldwide,
(Teens Digest), and third even when considering only its core consumers, English fans, not far
from Manchester Utd and Liverpool).
We can discuss about Forbes values, anyway they respect the positive trend, while Discounted cash
flow method presents up and downs (DCF values are taken from Markham, 2013, calculations are
not available, anyway they are calculated taken into account the average cost of borrowing in
Premier League, actual free cash flow and an estimated grow rate, as is summarized on the paper).
Because of the high unpredictability of clubs profit and expected growth, we can conclude that
these values are not enough reliable even for a virtuous model like Arsenal, which makes profits
since 2003, so its an ideal case for a football club and this confirms the inconsistency in applying
DCF model, so structured, for the totality of football companies, most of which works in loss or
without making stable profits. DCF would provide theoretically a perfect evaluation by knowing
control premium value and future cash flows, most of them not related to clubs profit and loss but
to propertys benefits, but we dont have the data to apply the method suitably.
Limiting ourselves to the companies able to plan future profits, it is still possible trying to find an
appropriate discount rate, taking into account the relevant factors and knowing the high
unpredictability of sportive results, able to affect significantly the rate.
I havent found any other attempt in this direction in the literature, except some single calculations
of discounted future cash flow, without claiming to be a football club evaluation methodology.
However, Ive found some other approaches that I would like to deepen in the next paragraphs.

2.4 Specific methouologies to value football clubs

In addition to traditional techniques, in the literature there are other methods actually used to try to
assess football clubs value. Three of them are Forbes valuation, Multivariate model and Revenue
multiples approach. Lets see how they work by discussing methodologies, looking for strengths
and weaknesses by exploiting the theory and the wide literature about firm evaluation methods, and
then comparing with the evidence and the real prices at which clubs were sold.

S8
2.4.1 Foibes valuation

Forbes is an US magazine that ranks top 20 (or 25 in some cases) football teams since 2004.
Valuation methodology is not public, to do this the magazine throws available financial data, its
own research, and some expert opinions into a black box shakes it around and out come values
for clubs (Footyfinance.com).
We began our valuations with the Football Money League report, published by the Sports Business
Group at Deloitte, which compiles vital figures for the 20 soccer teams with the most revenue. We
then use our own research, which includes reviewing financial documents and speaking to sports
bankers, to derive operating income, debt and values for each team. (Forbes, 2012).
If a club was scheduled to move into a new stadium that will potentially increase its annual
revenue, this is factored into the valuation estimate (Forbes, 2003).
We deduce that some factors taken into account are assets, debts, transaction prices and multiples of
revenues, but its difficult to know how the included variables are used. We will try to understand
more by analyzing the data.
Here two other more illustrious deductions: The 2012 valuations are based on an even vaguer model
that starts with Deloittes Football Money League figures from which Forbes engages in its own
research, which includes reviewing financial documents and speaking to sports bankers, to derive
operating income, debt and values for each team (Ozanian, 2012). Forbes looked at the revenue
generated and each teams earnings before interest and taxes, depreciation and amortization and
player trading. However, the evaluation completely overlooks player trading expenses, player
salaries and other expenses (Karan Popli, 2013), this is a strong assumption for a football team,
because player values in many cases is greater than incomes, consequently spending huge amounts
of money in player trading could affect significantly a club value.
Anyway, following those considerations, The Forbes model, starting from Deloitte, is heavily
biased toward revenues. To verify this assumption and better understand how Forbes evaluate, I
post here the Forbes rank compared with annual revenues (Deloitte 2013) and in the pictures below
(Figures 6, 7 and 8) is tabled the ratio between value (here indicated as market value or price) and
annual revenues:




S9
Table 6 Table 7


?)6/+ E; 9#$6+% >N:C ?)6/+ F; 9#$6+% 4)/*+S$+4+0*+ $).'# >N:C

Table 8


?)6/+ H; 9#$6+% 4)/*+S$+4+0*+ $).'# TB'%.#$'3)/U

4u
The club valuations are highly correlated with revenues, increases in revenues translate quite
directly into increases in valuation. Also, a clubs individual multiple stays roughly the same
throughout its history. A higher coefficient means a more aggressive valuation, where Forbes
considers other factors heavier with respect to incomes.
Looking at revenues alone is pretty meaningless, we try to include relevant costs by taking the
relation between values and EBITDA, a factor which is included in Forbes calculation (Forbes,
2012):

Table 9


?)6/+ K; 9#$6+% 4)/*+S2JM?R<

The same correlation and consistency we see in Value/Revenues is not found when looking at
Value/EBITDA, in most cases it fluctuates wildly from year to year which suggests it does not
factor heavily in the valuation calculation. Taking into account operating costs, it remains unclear
why some clubs have stably an high ratio between value and revenues (e.g. Manchester Utd) and
the opposite for others (e.g. Manchester City); by considering revenues and operating costs we are
omitting important factors like assets (also intangibles that have an high influence in value
especially for big clubs), and debts, factors which should be included in Forbes calculation, we
dont know how.
41
Anyway values reflect revenues rank and potentiality of greater investments, indeed the ratio
between values and incomes (Table 7) do not change substantially the list, with some exception like
SC Corinthians, which has a high ratio (3,0) relatively to its revenues (119M$).
This is reasonable in an expanding market like football, the more you earn, the greater possibility to
further expand your market share you have.
The high values of Real Madrid, Manchester Utd and Barcelona are justified from their strong
position in their championships (in the case of Manchester Utd it is more the strong position of its
league, the Premier League, and its strong and wide share inside that market), new rich deals like
Adidas and Yamaha (Real Madrid), General Motors (Manchester Utd), Qatar Airways (Barcelona)
and increased market share worldwide; we have a rough approximation of that share by ranking the
number of fans on Facebook, that actually is the bigger social media, top 15 clubs per fans number,
2
nd
Jan 2014 :

Table 10














?)6/+ :N; V*16+$ #5 5)0%

It is clear that those numbers are a superficial estimation of the real number of supporters rank,
which is of course an important indicator of clubs value, which should be included by Forbes; in
Table 10 we see the comparison between Facebook fans at the beginning of 2014 and a more
accurate research made from Sport + Markt (2010), with many top clubs which on Facebook have a
Club Number of fans
(millions) Facebook
(Jan 2014)
Real number of fans
estimation in millions
(Sport + markt 2010)
Barcelona 50,0 57,8
Real Madrid 46,7 31,3
Manchester Utd 38,5 30,6
Chelsea 21,0 21,4
Milan AC 18,9 18,4
Arsenal 18,0 20,3
Liverpool 14,2 16.4
Bayern M 11,1 20,7
Galatasaray 9,2 6,8
Juventus FC 9,0 13,1
Manchester C 7,9 /
Fenerbahce 7,0 /
Borussia D 6,3 /
PSG 6,1 /
Corinthians 5,0 /
42
similar Sport + Markt rank, after four years. Only after 10
th
position on actual Facebook rank we
find clubs that were not present in top 20 ranking of 2010 (Sport + Markt).
Social media have increased from 430 millions of users (2007) up to 1,2 Billions in 2012, (Teatino
& Uva, 2012), and the growing is still continuing, we will see how football clubs will exploit those
fans or sympathizers.
Anyway, we note a correlation between Forbes values rank and number of fans on Facebook (top
10 Forbes clubs are all included in top 15 Facebook number of fans rank), with the proper
considerations, for example the popularity of this social media in each country could influence
significantly the list, as we can see from the high position of Turkish teams (also Besiktas is above
4 Millions of fans), indeed Turkey was the 6
th
country per number of registered in 2011
(Wikipedia), and the first in Europe.
By considering these correlations, number of supporters seems a factor considered by Forbes in its
evaluation, even if we dont know how the research have been done to estimate fans catchment
area.
Lets discuss about Forbes values reliability.
Looking at real market values, discrepancies between transaction effective prices and Forbes values
were found by comparing Forbes North American sports franchises valuations, from 1998 to 2003,
and their actual transaction price during the same period. The result was that Forbes tend to
underestimate, indeed on average the transaction price of the franchises was 27% higher (Vine,
2004). To verify those assumptions, let have a look at this table:
Table 11

Date Club Transaction price (M) Forbes (M)
2005 Manchester Utd 800 690
2006 Aston Villa 75 76
2007 Manchester City 82 124
2007 Newcastle Utd 131 141
2008 Manchester City 233 103
2010 Liverpool 300 508
2013 Inter FC 350 M! 313 M!

?)6/+ ::; 9#$6+% 3#1=)$'%#0
Sources: Markham, 2013; Tifosobilanciato.it; XE convertor.
4S

We have few data to draw an indisputable conclusion, and an inhomogeneous sample formed 6/7 by
English teams; this is due to the lack of official transaction data (moreover only a minority of
football club has been sold in the last years), and the main problem of Forbes is that it has valued
only top 20 or 25 football companies; anyway, looking at these data, we can see a correlation
between actual transaction costs and Forbes one, with some discrepancies, both positives and
negatives.
We must consider that actual transaction prices do not necessarily reflect the real value of the clubs,
they are only the maximum amount investors are able to pay at that moment.
Moreover, sellers could be influenced by their passion and by fans, admitting new investors at
lower prices hoping in brighter future perspectives; on the opposite control premium encourages a
higher offer. Well deepen it in the next pages.
However, in general, we know that seller and buyer seek the maximum possible gain, and the
equilibrium point between supply and demand should be the club fair price.
Forbes estimates deviate from +69% (Liverpool 2010) to -126% (Manchester City 2008), in this
small sample results are worst than the ones on American franchisees. Looking specifically at
Manchester City which changed hands in 2007 and 2008, Forbes valued the club 52% higher than
the price in 2007 and -126% in 2008; this huge difference may be attributed to the large expenditure
in players during that year, that changed significantly the club value, thats why I think that 2008
Forbes value is meaningless.
Im reminded at Karan Popli affirmation about Forbes exclusion of player trading expenses, player
salaries and other expenses (Karan Popli, 2013).
Anyway, only 2 clubs out of 7 were valued by Forbes within 10% of the actual transaction price,
which brings us some doubts about the reliability of the method, even if in many cases it could be
considered as a valid benchmark.
At the end, we can affirm that Forbes list could be considered a good benchmark of football clubs
worth, but not enough reliable to be used as an universal accepted method, neither for the few clubs
it considers; indeed, not only there is a relatively high standard deviation between transaction prices
and Forbes estimation, but it seems to be a lagging indicator:
I begin with some considerations to justify this assumption, before to start I would like to highlight
that as we dont know how Forbes actually includes basic and relevant economic factors like debts,
assets and equity, neither the real values of that indicators for some clubs, our estimation could
change significantly.
44
Anyway, there are some cases in which discrepancies between Forbes and actual economic and
sportive situation seem too big to justify any combination of these factors, this is the assumption we
have made.
Take for example the case of Manchester City, where the shopping spree effects, which
immediately increase a club value, enhancing winning probability and bringing more revenues,
seem to be considered in late:
In 2008, when the club was bought, it was worth by Forbes 191M$, 258M$ in 2010 when the
ambitious plans were already well known and implemented bringing the club back to European
competitions, and only now, 2013, the very higher estimate of 689M$, which takes into account big
potentiality compared with greater volatility of the club, with respect for example to Manchester
Utd rivals, which have a comparable winning probability in the next few years, but a very higher
value (3165M$) due to their indelible history and solid position.
The same is happening for Paris Saint Germain, which is out of 20
th
position of the rank, we are
talking about a club with total player values of 320M! (Transfermarkt.com), with 220M! of
turnover in 2012, a good history in the last 20 years of French football and a relevant catchment
area, it plays in a quite good league, the 5
th
in the world per incomes and it has ambitious plans for
the next years; Le Parisien published a paper about PSG business plans (2013), writing that they
aim to reach 500M! of revenues within 2015, and the growth has already begun.
Despite the relatively high volatility of the property and few data mentioned, I think that the club
actually should be included in the top 15 values list, and the first club of its league.
With these personal considerations and following the previous case of Manchester City, in the next
Forbes ranks PSG will overtake home rivals Olympique Lyonnais and Olympique Marseille, which
have few possibility of winning and collect more than PSG in the next few years, and a market
share drop is predictable for them, as consumers, generally, would like to win. We can extend these
considerations to other companies, like German clubs position seems lower than their bright future
perspectives. For example, I expect that in the next few years the very broad gap between top
Spanish clubs and Bayern will be reduced, based only on the actual situation.
Again, how is it possible that Juventus FC dropped by 37M! from 2011 to 2012, in a season in
which they inaugurated the new stadium, returned to win the championship after 9 years and they
increased annual revenues by 40M!, growth carried out despite it suffered the momentary absence
from European competitions? Moreover, during the same period, others Italian clubs present in the
rank (Inter FC, AS Roma, AC Milan) had improved their value, testifying that Juventus FC fall was
not due to a league crash.
4S
From these results, by accepting the assumptions we have made with available data, the reasonable
conclusion is that Forbes methodology has a too limited viewing, and unless past trends can be
reasonably expected to continue into the future, they are useless for a valuation that is inherently
forward looking with great importance to last seasons.
Anyway, as we actually dont know how important factors like assets and debts are included in the
calculation, we cannot state that in an absolute manner, we would need to see the used
methodology. Forbes evaluations remain the most credible values I have found, thats why they are
a meter of comparison and a benchmark for clubs available. It remains some doubts when talking
about actual rank, which appears as one or two years old updated, and the same happened in the
previous ranks, as I have tried to report in the case of Juventus FC, Manchester City, PSG and top
German clubs.

2.4.2 Nultivaiiate mouel

This model, (inspired from Markham, 2013) has been thought to find a reliable valuation for
English Premier League clubs. Multivariate model appears as a multiplier method where the
fundamental variable is revenue multiplied by some factors. It is a variation of Revenues multiple
approach well deepen in the next pages.
The logical foundation of this method can be traced in many American researches; sports
franchises ability to make money in the future determines its valuation. Following Philips and
Krasner (2010), the most important factors in the US market are:
1) League, with its revenues streams and player salary cap.
2) Stadium and related capacity, corporate boxes, sponsorship and advertising.
3) Market, including corporate presence and demographic catchment area.
Multivariate model follows these assumptions, with the exception that in Premier League (but also
in European football in general) many issues related to revenue sharing policy and salary cap are
not applicable. As this approach aims to operate in the English reality, other important assumptions
are Premier League regulations and context, as the relevant number of owned stadiums and the
broadcasting revenues sharing policy, which guarantees 50% of the most important revenue stream
(Broadcasting was the 52% of the whole Premier League incomes, excluding player trading, in
2012) divided in equal parts, wage expenses that where 1,9 Billions of ! in Premier League in 2013
(Ilsole24ore.com, 2013), getting 66% of revenues, and incentives to follow UEFAs Financial Fair
Play rules which encourage clubs to ultimately operate within the revenue they generate and have
been followed up by the Premier League adopting similar financial controls.
46
Finally, following Markham (2013, p. 16), If a club is profitable or at least breaking even, it shows
they are prudent and controlling costs. Moreover, The main assets of a club, typically a stadium,
training ground and player registrations, need to be weighted up versus the liabilities (normally
trade creditors and debt). Trying to answer to these questions, net profit and clubs net assets have
been included in this method.

The model reduces to this formula:

Club value = (Revenue + Net Assets) * [(Net Profit + Revenue) / Revenue] * (% stadium filled) /
(%wage ratio) [5]
2O*).'#0 @; ,)$GB)1 5#$1*/)

Lets analyse this equation: it can be divided into three factors, multiplied for one another.
The first one is (Revenue + Net Assets), it takes into account actual potentiality but also future
perspectives, since a clubs ability to generate future revenues and consequently increase its value is
related to assets actually available.
This factor is multiplied by the clubs net profit (or loss) figure added to revenue and divided by
revenue [(Net Profit + Revenue) / Revenue]. Hence, the second factor examines a clubs
profitability in comparison to its revenue. So it could be either greater or lower than 1, depending if
the club is profitable, able to enhance or reduce the final valuation.
The third factor is the ratio between stadium utilization and clubs wage to revenue ratio (%
stadium filled) / (% wage ratio), the average stadium utilisation percentage illustrates how
effectively the club is using its core differentiating asset, divided by the clubs ability to control its
major expenditure. So, even this third factor could be either greater or lower than 1, the higher
player wages, the lower the whole ratio, the higher the percentage of stadium filled, the higher the
ratio. In this model revenues are taken net of gains on players selling, too.
Multivariate model gives a lot of importance to revenues in determining a football clubs value, but
it takes into account also costs (factor 2) and indicators of management accuracy and effectiveness.
As we can see, this model is very simplistic and there are possible incongruities, for example when
summing up revenues and net assets, it makes sense to add flows together with something related to
stocks, [!/year] + [!]? We still accept the equation in order to try to apply the methodology, but
well resume this perplexity.
Basically, Multivariate model is applicable with these assumptions:
47
1) Revenues are the most important factor in determining football clubs value, in other words,
by doing a multifactor analysis, incomes should capture most of the variance.
2) Wage ratio and percentage of stadium filled are able, together, to affect one third of an
English club value.
3) Wage ratio and stadium utilization are the most relevant indicator for, respectively,
management ability to control costs and exploit assets.

They are very strong assumptions.
Another weakness of this method is precisely this difficulty to include all the relevant determinants
of value in these three indicators with their fair weight. Factors like debts, intangible assets as brand
and human resources are indirectly included with disputable weights.
On the other hand many importance is given to percentage of stadium filled and wage ratio, they are
able to influence one third of a club value.
To verify the model in practice, trying to prove its reliability, lets see some results of this method,
related to English Premier League. Data taken from Markham, 2013:

Table 12

Transaction date Club Transaction cost (M) Multiv. Method (M) Variation on actual %
23
rd
Dec 2003 Bolton Wanderers 54 51 -4,7
28
th
Jun 2005 Manchester Utd 800 801 0,1
19
th
Jul 2006 Portsmouth 64 43 -32,8
14
th
Aug 2006 Aston Villa 75 82 8,6
21
st
Nov 2006 West Ham Utd 108 112 3,4
6
th
Feb 2007 Liverpool 219 260 18,6
6
th
Jul 2007 Manchester City 82 75 -8,6
18
th
Jul 2007 Newcastle Utd 131 133 1,8
28
th
Jan 2008 Derby County 20 21 4,4
23
rd
Sep 2008 Manchester City 233 241 3,4
28
th
May 2009 Sunderland 20 20 0,6
20
th
Aug 2009 Birmingham City 96 83 -14,4
19
th
Nov 2010 Blackburn Rovers 44 70 59,2
15
th
Oct 2010 Liverpool 300 333 10,9
18
th
Aug 2011 Queens Park Rangers 68 62 -9,0
AVERAGE +2,8
STANDARD DEVIATION 19,7
?)6/+ :>; ,*/.'4)$').+ 1#&+/

48
In all these cases, Multivariate results are close to transaction prices, some variation is congenital as
transaction prices not necessarily reflect market value, moreover there could be also unintended
discrepancies, for example Moores family who sold Liverpool in 2007 acknowledged that they sold
at a lower price as they felt they were selling to new custodians who would propel the club forward.
We know from the theory that whenever we are comparing a firm value calculation with effective
transaction prices we should take into account control premium, which is an amount that a buyer is
usually willing to pay over the current market price of a publicly traded company.
Control provides different benefits depending on sector, context and size of the firm. In public
companies the effect is evident because of direct gain of control through a higher shares percentage
or voting rights acquired from specific shares, but even in private firms there could be a huge value
of control. Lets start with public companies, considering that in football market and sport sector in
general value of control is relevant because of the great visibility and decision power.
Many English clubs have been traded on the stock exchange from 2000 on, by alternating periods of
listing and de-listed (by remaining in the table above, 9 teams were present at least for one year).
Moreover, we should consider a control premium even for private firms, as in general when valuing
a firm, the value of control is often a key factor in determining value, even if in private companies,
with respect to public, there is often a discount attached to buying minority stakes in companies
because of the absence of control (Damodaran, 2005).
We have distinguished between public and private because control value is more evident for the
first ones, in which you pay directly the premium over the quoted shares, depending also on the
type of share you are going to buy. Moreover, in some sector the value is negligible for private
firms. This is not the case of professional football in which control assures great visibility and
influences, at least in the local area of the club, even if the club is not quoted.
In order to guarantee the applicability of Markhams model, two assumptions are made:

1) There is no difference from public and private firms in terms of control premium value.
2) Control premium value enhances transaction price but adhesion to the club reduce it, as we
have seen in the Liverpool case. Here the assumption is that these two values cancel out
each other.
3) The probability of changing management and control in the future doesnt affect the price.

With these strong remarks, looking only at the results on the table, this method seems to be the
optimal one to value a football club, at least in English Premier League, but we need more data to
verify the strong assumptions of the method.
49
Moreover, we have some doubts about the good results of the table, is it because of the great
reliability of the method in English Premier League or there have been some tricks, in the sense that
starting from the real transaction prices, some economic indicator has been taken in order to throw
out the best result possible? We have mentioned perplexities about summing revenues and net
assets, thus summing up an income statement flow with a patrimonial asset.
Even by admitting the possibility of doing so (which should be misleading as we are summing up
[!/year] and [!]), I would like to point out some consideration about the factors used in the method:
Net assets calculation is not visible in Markham paper, they could be taken directly from the
balance sheet for those available, looking at total assets and liabilities, but the problem is that they
not reduce to that, they include also all the intangible assets, as supporters and actual players value,
which are significant factors in determining club worth, difficult to evaluate on a balance sheet.
Moreover, with this method, problem could arises when considering a club with great attendance
and stadium not completely filled, because attendance it is not directly taken into account, also
wages and profit/loss could be a problem because they are highly variable, as well as players value.
Furthermore, using net profit in the evaluation could be misleading, in particular in the football
market: if a club makes a lot of investments in talent, by increasing wages and operating expenses
thus obtaining negative profits, this doesnt mean necessarily a decrease in value, on the contrary it
can raise significantly. It depends on the accuracy of the investments.
Lets verify these considerations in a particular situation taking the case of Chelsea FC.

Year 2011:
Revenues = 250M!; Wages/turnover = 0,84; net loss = -83M!; %stadium filled = 98%;
net assets =260M!* ! club value = 340M!; (Forbes value =498M!).
2012:
Revenues = 323M!; Wages/turnover = 0,67; net profit = 2M!; %stadium filled = 98%;
net assets = 260M!* ! club value = 858M! (+153% of growth); (Forbes value = 570M!, +14% of
growth).
2013:
Revenues = 307M!; Wages/turnover = 0,7; net profit = -59M!; %stadium filled = 98%;
net assets = 260M!* ! club value = 581M! (-32% decline); (Forbes value =703M!, +23%
growth).

Su
Here net assets are estimated considering data (current assets and liabilities) available on balance
sheet 2012 and adding players value from transfermarkt.com, this is our approximation, with the
aim to enable the comparison between years.
Its a mere approximation but our aim is to emphasize the differences of the whole club value from
one year to another, and this is independent from net asset value since we have assumed it constant
over three years.
We keep it constant since by using our estimation the value is pretty stable during that period.
Probably because the club has not build new stadiums neither changed significantly the value of its
human resources from one year to another, anyway looking at the balance sheet I havent found
meaningful changes in financial structure, a part from an increase of 81M! in credits, from 2011 to
2012, at the entry amount falling due after one year, which would further push up the evaluation
from 2011 to 2012, which has already had a very big jump (+153%) and with an increase in net
asset, following the equation, it would be further extended.
What I want to point out in the example is that this model goes out of sight when clubs face instable
condition; we dont have all the data to draw an absolute conclusion on Chelsea value, but big
jumps seem not justified in a stable market like Premier League, knowing revenues and relevant
costs, without changing ownership and in a period in which the club faced stable results, reaching
top positions in the championship and thus qualifying stably for the richest Champions League
competition.
Looking at economic results above, when Chelsea profit from 2011 to 2012 has increased by 85M!
(Also due to great sportive results, they won Champions League which alone guaranteed 60M!,
UEFA.com), revenues rose by 73M! too (keeping wages, the higher cost of the club, almost
unchanged), so following the equation of this model, and assuming net assets stable, the club value
has increased by 518M!, +153% in one year: an incredible jump, which is not seen for example
from Forbes, neither in the following years.
Probably because also the first value devaluated the company, while the 2012 overestimates it.
The confirmation comes from 2013 balance sheet, where there is another big drop of 277M! in
clubs value, following Multivariate method, while in the same period the value has even grown in
Forbes rank by 23%.
To remedy at this weakness of the method it could be deleted, for the must unstable clubs, the factor
referred to net profit, thus finding a more reliable estimation, even if less accurate.
Despite these defects, looking only at results, this technique seems to be the more credible to value
a football club at least in English Premier League, the only market they pretend to evaluate.
S1
Multivariate model has the peculiarity that is applicable to different club sizes, with some cases in
which it provides clearly busted results, but they can be easily detected.
Anyway, it remains our doubts about the multiplier factors, as the meaning of summing up revenues
and net assets and the weight given to profit, percentage of stadium filled and wages.
The fact that a simplistic model so structured provides very good values in Premier League bring us
some suspects about the results: are they thrown out by the model or, on the opposite, the model
was built knowing the transaction prices in order to fall in a limited range around them? This
second hypothesis seems more credible, this doesnt mean that a model building in this way is
useless, we can get some relevant information and comparing clubs value, but it seems a magic
formula able to provide great results in a particular context, well known and with many data
available on firms value, built starting from those data (ex. Transaction prices) by shaking around
the proper economic indicators, with the aim to reach a result near to the real values. This
consideration is supported by the fact that Multivariate model is not applicable outside English
Premier League.
Outside English championship problems could arise because of the assumptions of the method.
Stadium utilization it is considered as one fundamental indicator of ability to exploit assets, but in
Italian context and many others leagues most of the stadiums are not owned by the clubs; anyway,
the percentage of stadium filled remains an important performance indicator but in this model
problem could arise because of the higher weight given to this factor which is pretty low and
instable outside English reality, so able to change significantly the value. In Italian Serie A only
58% of stadiums have been filled in 2011, with some of the big clubs (for example A.S. Roma,
Inter FC, A.C. Milan and S.S. Lazio) with a filling percentage near to 50% but an average
attendance per match which is widely over the Serie A average of 23.000 per match, each of these
clubs have brought, on average, more than 30.000 spectators per match in 2011/2012 season. This is
due to bigger stadiums that with this method penalize significantly the evaluation, because a sold
out in 80.000 capacity stadium is considered exactly as a sold out in a 20.000 capacity one. This
lack could be solved by including an attendance indicator, it remains unsolved the problem of the
weight of this stadium factor. Other defects, outside English Premier League, are the instability of
net profit and wage ratio that we have, for example, in Italian leagues. We have seen what could
happen in the case of Chelsea FC, the same problem there should be for many Italian clubs,
precisely busted values due to variable net profits and wage ratios, whose decline and increase,
respectively, doesnt mean necessarily a decrease or increase in club value.
S2
In conclusion we deserve many doubts on this method that however could be used as a tool to
compare clubs value, but only in Premier League or similar contexts and without claim an absolute
evaluation.
From Multivariate model we keep the idea of revenue multiplier, now we are going to analyse the
more general and simplest method available, before to deepen the multiplier factors: Revenue
multiples approach.

2.4.S Revenue multiples appioach.

It measures a companys value relative to its turnover. This valuation is calculated by multiplying
the organisations annual revenues by the appropriate multiplier, merely like this:
Value = Annual revenues * .
Typically, this technique is used to value troubled or younger businesses, which cannot be valued
by more technical traditional means (Markham, 2013). This method is also suited to industries with
volatile earnings (Damodaran, 2012), so it seems appealing for football club valuation, even if very
simple, but this is not necessarily a weakness, ease of application is surely a strength.
We know from the theory that the value of a firm is defined to be the sum of the value of the firms
debt and the firms equity or, on the opposite, the value of its assets. Until now we have seen two
equity based method (Discounted cash flows and Market capitalization), whose have proven to be
difficult to apply in the football industry, and some assets method (or hybrid) as Forbes, for which
we dont know the calculations but for sure they take into account assets value, as well as
Multivariate model.
Revenue multiples approach fully relies on revenues to valuing a firm, by implication they should
be able to catch the whole assets value. So here the assumptions are:

1) The value of a football company is directly proportional to its revenues.
2) It follows that incomes multiplied by an appropriate number reflect the sum of the value of
firms debts and equity.
3) We are able to estimate that number.
4) Similar firms have same multiplicative factors.
5) A multiple represents a snapshot of where a firm is at a point in time, but fails to capture the
dynamic and ever-evolving nature of business and competition. So we implicitly assume a
pretty stable value.

SS
If we would like to be more flexible getting some future perspectives, maybe this is not the best
methodology to be applied, or a possible solution could be to use a variable multiplier, able to catch
trend and probability of revenues jumps.
Anyway, before to discuss other possibilities of improvement, lets try to verify the method in
practice, starting from its basic formulation, which provide football firm value in function of
revenues multiplied by a constant. I would like to point out also that simplicity could bring both
disadvantages and advantages, because by combining many value drivers into a point estimate,
multiples may make it difficult to disaggregate the effect of different drivers, such as growth, on
value. On the other hand simplicity and ease of calculation makes multiples appealing and user-
friendly method of assessing value. Multiples can help the user avoid the potentially misleading
precision of other, more accurate approaches. (Suozzo & Cooper; Deng & Sutherland, 2001).
In order to apply this approach, the main problem is to find the fairest multiplier.
In the 2008 edition of its Annual Review of Football Finance, Deloitte reported that English
Premier League clubs have typically priced the equivalent of between 1.5 and 2.0 times annual
revenue (Many foreign investors bought English clubs in that period).
According to those numbers, it seems that this quick calculation may be effective, it would be
enough to find the appropriate multiplier. Lets try with a fixed multiplier of 1,7 following Deloitte
considerations

Table 13

Transaction date Club Price (M!) Forbes (M!) Revenue
multiplier (M!)
2005 Manchester Utd 1192 1028 418
2007 Liverpool 304 342 343
2007 Newcastle Utd 183 197 219
2011 Queens Park
Rangers
82 / 34
2013 FC Internazionale 350 313 284
2013 Real Madrid / 2574 886
2013 AC Milan / 737 467
?)6/+ :C; 8+4+0*+ 5'W+& 1*/.'=/'+$
Sources: Deloitte; Markham, 2013. XE.com for money conversion.

S4
The approximation of Revenue multiples approach gives comparable results only in few cases;
referring to top clubs with elevated incomes, it seems to underestimate heavily the actual value (like
Manchester Utd and Real Madrid cases), but the same happened for Queens Park Rangers (QPR),
which was sold for 82M! while the multiplier estimation was only 34M!; because that revenues
was referred to a second division championship, but the coming property aimed to promoting and
increase incomes significantly because of that.
This approach does not consider future perspectives, as it is only a mere approximation based on
actual revenues; however, for some clubs, it is close to the real value stated.
The problem is, in synthesis, the lack of perspective view of accounting indicators.
A season with a drop in revenues doesnt means, necessarily, a decrease in club value; causes may
be for example worst sportive results, but if the club has signed new deals, has captured new fans or
has built new facilities, its value may be increased in the same season. Anyway as revenues are a
good indicator of a football club future potentiality, at least in the near future, this approach with
some modification could be theoretically applicable with significant results. Some additional factors
are needed, able to capture probabilities of a big shock in revenues, for example probabilities of
promotion and relegation in other divisions or to expand market share. In the next pages, after doing
factor analysis, well see a possible implementation of the method, using variable coefficients
depending on other factors (e.g. Sportive results, market share).

2.4.4 Fans Nethou

It remains the unresolved question, which is to find an effective methodology to value our leagues
clubs, especially Serie A, and then seeing if it works even in other contexts.
Here the aim is not to find the exact amount of money that corresponds to clubs values, but to
provide a methodology able to give reliable comparisons among clubs value, and then seeing if the
results are consistent. To do this well try to compare the value of some relevant assets, many of
which are intangibles (sportive results value, supporters value). With respect to Revenues multiple
approach, here revenues are not directly included inside calculation because they should be implied
in the factors used. Fans Method is a factor model in which components are assets multiplied by a
weight. Hence, it is an asset based value model, focusing on intangible assets, as we assume that
some of them, as history, fans, local context and the other intangible assets hardly replicable in a
short time, are part of an intrinsic value, and this is a very important factor to value a football clubs,
able to drive revenues and accordingly sportive results; in the next paragraph well try to verify
these considerations and in particular how revenues, results and consumers are correlated.
SS
I try to synthesize in the following general equation the personal initial assumptions:

! = $(S, R) + (s, r) + e. [6]
2O*).'#0 E; X+0+$)/ 4)/*+ 5#$1*/)

We can summarize the value of a club with this sum, $ is a variable that considers league value and
is related to the value of our club inside the league. $ depends on league followers all around the
world (S) and results of every leagues team over the world (R).
depends on the results of the team inside its championship and abroad (r) and on local supporters
(s). Where s < S, r < R, because local fans and single clubs results are also included in global fans
and whole leagues clubs results; both $ and increase with S, s, R, r.
Externalities (e) can be positive or negative. Externalities originate from a fact (e.g. empty
stadium). They are difficult to evaluate, as externalities we refer to all the social factors able to
influence supporters attitudes and enthusiasm, thereby encouraging fans to invest in tickets, official
products, watching matches on media (positive externalities) or, at the opposite, in something else
not related to football or just moving to club or leagues competitors (negative externalities).
Comments, information, ratings, experiences, which thanks to globalization flow quickly.
Externalities can be both virtual or direct daily chats between fans, in any case they have a value for
clubs, even if it is difficult to quantify.
We assume all these factors affecting each other (well search correlations using SPSS statistics)
and determinants of value.
Our problem now is to find the weight of each component of the equation. Before make use of
factor analysis, Ive made an attempt to get a comparison among Serie A clubs value by placing
this table, where some factor attributable to what we have called intrinsic value is blended with
some more volatile intangible asset, now we are going to see each data and we are trying to evaluate
each factor. In this model, factors values have been thought starting from known revenues (and
related streams weight) in trying to build meaningful comparisons among values in Italian Serie A,
and not to provide a methodology universally applicable. With this method emphasis is on factor
used, then we could discuss about factors weights in order to build a general value method.

Club value = [bv + (pv ps) + nf * fai + ca * cai + er] * t [7]
2O*).'#0 F; 9)0% 1+.B#& 5#$1*/)



S6
Table 14

Serie A
2012/13
clubs

Brand
value
bv
(M!)
Players
value
01/01/2013
pv (M!)
Players
salaries
ps (M!)
N fans
(Millions)
nf
Fans
average
tv
incomes
fai (M!)
Catchment
area
ca
Catchment
Area
average
incomes
cai (M!)
European
Results
Premium
er
(M!)
League
trend
t
Fans
Method
(M!)
Fans
Method
without
players
(M!)
Atalanta 5 66,9 23,7 0,127 16,65 1,24 9,30 3,00 0,944 61,2 18,0
Bologna 11 57,6 28,4 0,331 16,65 1,83 9,30 7,50 0,944 66,3 37,1
Cagliari 4 63,5 15,9 0,446 16,65 0,86 9,30 3,00 0,944 66,0 18,5
Catania 2 54,6 18,0 0,229 16,65 1,67 9,30 0,00 0,944 54,7 18,1
Chievo 1 42,1 15,9 0,127 16,65 1,10 9,30 1,00 0,944 38,2 12,0
Fiorentina 39 124,6 38,8 0,719 16,65 1,79 9,30 28,15 0,944 171,3 85,6
Genoa 6 86,2 28,9 0,178 16,65 1,12 9,30 3,51 0,944 75,7 18,4
Inter 113 223,2 100,0 4,232 16,65 2,99 9,30 115,35 0,944 424,6 301,4
Juventus 135 307,7 115,0 7,087 16,65 2,11 9,30 126,54 0,944 558,8 366,0
Lazio 39 127,0 66,2 0,816 16,65 5,13 9,30 33,14 0,944 183,3 122,5
Milan 195 232,2 120,0 4,130 16,65 2,99 9,30 159,82 0,944 532,0 419,8
Napoli 75 187,6 53,2 2,345 16,65 5,07 9,30 34,03 0,944 311,2 176,9
Palermo 3 58,7 23,4 0,319 16,65 2,74 9,30 4,04 0,944 69,0 33,8
Parma 8 63,1 21,2 0,102 16,65 0,82 9,30 16,50 0,944 71,4 29,6
Pescara 1 38,9 10,8 0,076 16,65 0,59 9,30 0,00 0,944 33,9 5,7
Roma 63 145,7 95,0 1,526 16,65 5,13 9,30 44,76 0,944 218,7 167,9
Sampdoria 11 61,8 29,8 0,229 16,65 1,12 9,30 13,18 0,944 66,5 34,5
Siena 1 31,5 18,9 0,025 16,65 0,36 9,30 0,00 0,944 16,4 3,8
Torino 13 56,5 22,0 0,421 16,65 2,11 9,30 9,50 0,944 79,0 44,5
Udinese 15(2012) 96,4 21,2 0,217 16,65 0,72 9,30 13,73 0,944 107,8 32,6
?)6/+ :D; 9)0% 1+.B#&

All factors are in Million of !. I remark that annual revenues are not present, because Ive assumed
incomes determinants already present inside the formula. Anyway, incomes of the whole market
are considered in the League trend t factor, as they are able to influence the total worth.
Let us examine all the factors of this methodology, in order to understand strengths and weaknesses.
Data and factors:

Bv is the Brand value, which takes into account actual awareness and attractiveness, but also
potentiality of future growth of the club, I have summed up Brand value because it is a direct
intangible contribute to firm value, able to getting or losing customers (fans). A problem of this
factor could be the reliability of the value and especially the paucity of clubs evaluated. Calculation
of Brandfinance is not an official balance data, it is an estimation that seeks to be as accurate as
possible, it has been calculated as follows (methodology from Brandfinance.com):

S7
Calculate brand strength on a scale of 0 to 100 based using a balanced scorecard of a
number of relevant attributes such as emotional connection, financial performance and
sustainability, among others. This score is known as the Brand Strength Index.
Determine the royalty rate range for the respective brand sectors. This is done by reviewing
comparable licensing agreements sourced from Brand Finances extensive database of
license agreements and other online databases.
Calculate royalty rate. The brand strength score is applied to the royalty rate range to arrive
at a royalty rate. For example, if the royalty rates range in a brands sector is 1-5% and a
brand has a brand strength score of 82 out of 100, then an appropriate royalty rate for the use
of this brand in the given sector will be 4.1%.
Determine brand specific revenues estimating a proportion of parent company revenues
attributable to each specific brand and industry sector.
Determine forecast brand specific revenues using a function of historic revenues, equity
analyst forecasts and economic growth rates.
Apply the royalty rate to the forecast revenues to derive the implied royalty charge for use
of the brand.
The forecast royalties are discounted post tax to a net present value which represents current value
of the future income attributable to the brand asset. (Brandfinance.com).
We notice that this methodology mostly rely on revenues and there are subjective components, like
emotional connection which are difficult to evaluate, they are related to externalities e in our
equation [7].
This causes instability in club values, for example a very positive year in terms of sportive results
which affects positively incomes and emotional connections, could change significantly the
whole brand value, before declining the following years if results are not repeated (Inter FC
dropped from 263M$ in 2011 to 161M$ in 2013, Brandfinance.com). On the other hand, it is
necessary to consider sportive results and related emotions because they affect fans enthusiasm,
loyalty and the achievement of new consumers.
The main problem of bv is that it is not present for many Italian clubs, so I have recourse to a
rough estimation for those one, as explained below, anyway we are talking about a relatively little
slice of value for provincial clubs. Brand values are taken from Brandfinance (2013); they are
available only for 7 Italian clubs, which are the only present in the Top 50 rank, hence following the
S8
model the remaining Italian clubs have a lower Brand worth, below 39M! in 2013 (and below
15M! in 2012, in which Udinese was included in the rank and we have taken this value). So for the
other clubs Ive made an estimation as follows, to propose a final comparison: 1M! per each 10
Serie A seasons participation, rounded at the nearest ten. Adding 1M! per each quarter final
achievement in a European competition. Because of sportive results importance in affecting number
of consumers, image, awareness and attractiveness of a club. Of course recent results have a higher
weight as we will see in er factor.

Players salaries are related to season 2012/13 (tifosobilanciato.it).
Players values have estimated by Transfermarkt.com, related to season 2012/13, updating on 1
st

January 2013. This amount should take into account players ages, by subtracting these two values
we obtain a sort of value added given by players; problems could arise when contracts are near to
expire: for the owner club there could be a loss but here values seem not discounted, probably
because a contract can be renewed anytime. It is a common problem for every football club, but in
some cases there could be a huge difference in value, this happen when a top player is going to
expire and the owner club doesnt gain anything from him (e.g. Lewandowski for Borussia
Dortmund). Another weakness is that this factor is pretty volatile as players value could change
significantly in short time, for example because of a promotion or relegation. There is another
problem, as we are summing player value with a periodic flow like wages [! - !/year], so we must
multiply the second factor times years, and as we are considering yearly salaries, we multiply times
one year in order to allow the comparison.
We dont know the methodology used, anyway in general transfer fee paid is counted as an asset for
the buying club. The value of the player is normally amortized by the straight line method and
home grown players are activated up to the formation costs supported by the club. (Pujol, Barrio
2008).
Ive added Players value pv, because this is a direct contribution to clubs actual value,
discounted by their direct expenses, Player salaries ps; about this factor, beyond how it has been
built, a weakness is the reliability of values, which are taken from Transfermarkt.com, so it depends
to their effectiveness as for Brandfinance; moreover it is not a stable value, it could change rapidly
in time so it is not part of the intrinsic value which is our aim.
Transfermarkt.com uses a kind of market value method, not available to the public, there could be
others more accurate evaluation methods, there isnt an official and indisputable value for a player.
An interesting attempt has been made by Pujol and Barrio, 2008, through Media value,
built as follows:
S9
Figure 17










9'-*$+ :F; L/)7+$% 1+&') 4)/*+
Source: Pujol & Barrio, 2008

Their aim was to explain players value through: media value, buying team media value, selling
team media value, media value rank of the player in his precedent team, age, position in the pitch,
nationality (Pujol, Barrio 2008). They found interesting results, like that an increase in media value
of 1% determines an increase of 0.5% in market value.
Anyway, whatever methodology to value a player we use, it remains an important weakness; these
two factors, Players and Brand values, are highly variable from one year to another, and this affects
the stability of the final valuation, they can be included for a comparison among clubs but not to
find what we have called intrinsic value of a football club. Indeed, in table 14 Ive included both
values with and without this players value factor.

Afterwards, I have summed up two factors more related to customers. They are number of fans
times average tv fans incomes (nf*fai) and catchment area times catchment area average incomes
(ca*cai), these factors should consider the impact that number of real and potential consumers have
on clubs worth. The first one it is more related on actual incomes. Here, to consider also foreign
supporters value (variable S in equation [7]), the assumption is that proportionally, the number of
fans for Serie A teams in Italy is the same than abroad; there are many studies rather contradictory
each other, but at least the rank of top 7 in Italy (Juventus FC, AC Milan, Inter FC, AS Roma, SSC
Napoli, SS Lazio, AC Fiorentina) is generally respected, with AC Milan ahead Juventus FC in some
case when considering global supporters; when considering only Italian fans, Inter FC is very close
6u
to AC Milan and SSC Napoli in the last years have exceeded AS Roma. Regarding catchment area,
this addend takes into account future potentiality of build fans loyalty.
The greater weakness of these two factors is the estimation of euros value, which is disputable,
indeed Ive chosen an average of tv revenues depending on fans and matchday incomes, but the
strength is that whatever is the actual worth, differences between clubs are respected, so we can
compare them, and this is the aim of the method. Ive included these contributions because I deem
number of consumers-followers and their worth as a fundamental value for a football club, the only
problem is to find the monetary contribution of these differences.
Number of fans is taken from the statistic made by Lega Calcio (Tifosobilanciato, 2013) on
people older than 14 years old, and it calculates the number of Italian supporters which has chosen
that club answering the question Which is your favourite team, total estimated fans were 25,493
millions, in the table there is the slice of each club, the total is lower than 25,493 millions because
of lower categories and neutral followers.
Fans average tv incomes, is the sum of two contributions; the average money per club received
from the slice of TV rights which depends on fans number, which is, with the actual laws, 25% of
the whole pie, totalling 216M! (10,8M per club, tifosobilanciato.it 2013), and the average value per
club of abroad Serie A tv rights, which is 117M! (Media partners and Silva limited, 2013), so
5,85M! per club. Hence, by adding these two contributions, we obtain the factor value of 16,65M!.
Even for this factor there are the same strengths (comparison among clubs) and weaknesses (Actual
monetary value is an estimation).
Catchment Area: the coefficient is calculated as follows:
(City citizens/ Average 20 bigger municipalities) + (Province citizens / Average 20 bigger
provinces), the assumption is that fans are more concentrated in local cities and, to a lesser extent,
in local provinces; hence, in this sum, city inhabitants are included two times.
Notice that, both number of citizens and average factors, they are divided by two whenever I have
considered a city or province with two Serie A or Serie B teams. The average is on twenty because
this is actually the Serie A format: a team residing in a bigger Area should have greater possibility
of getting fans, gains and results, thus will receive a coefficient greater than one. The opposite for
small towns teams, most probably candidate to relegate losing money.
Example, number of inhabitants taken from Wikipedia:
Average top 20 Italian municipalities = 390121 Milan citizens = 1305479
Average top 20 Italian provinces = 1168194 Milan province = 3075083
Inter FC catchment area coefficient = (1305479 / 2 / 390121) + (3075083 / 2 / 1168194) = 2,99.
61
Catchment Area average incomes is the average per club annual matchday revenues, which was
9,3M! in 2012 (Report Calcio FIGC 2013). So this value comes from the total Serie A matchday
incomes (186M!), divided by the number of participants (20), it has the same strengths and
weaknesses of the previous factor.

The last addend is the European results premium er contribution, which has the same strengths
and weaknesses, too.
Here the assumption is that last years results have a more significant impact on clubs value, with an
higher weight for the nearest years, thats why I have included this addend, by summing up an
historical value build on past European results and trophies, which have created also new followers
all around the world, moreover in this way also past domestic results are included, as they
determine European cups qualification. This factor comprehends an estimation of both r and R
of equation [7].
European results premium it is the more complicated addend, it has been calculated taking UEFA
team ranking and summing up the coefficient of each year, by weighting each season in order to
give more importance to the nearest one, 2008/09 coefficients were divided by 5, 2009/10
coefficient by 4, 2010/11 by 3, 2011/12 by 2, until the 2012/13 points which remain unchanged. In
addition, due to the higher visibility and incomes generated by Champions League, each Europa
League result has been divided by 2 (this is added to the little discounts already considered by
UEFA ranking). Below the values, as an example:
Inter coefficient = 16,88/2 + 20,27/2 +21.31/3 + 34,09/4 + 13,27/5 = 36,85

Table 15

UEFA team
rank
2008/09 2009/10 2010/11 2011/12 2012/13 Coefficient
Inter 13,27 34,09 21,31 20,27 16,88 36,85
Milan 14,27 19,09 18,31 22,27 19,88 43,32
Juventus 16,28 18,09 8,31 0,00 25,88 35,04
Roma 16,28 12,09 18,31 3,77 0,00 12,76
Napoli 4,27 0,00 9,31 21,27 8,83 17,03
Udinese 17,27 0,00 0,00 14,27 5,88 8,23
Fiorentina 11,28 24,09 0,00 0,00 0,00 7,15
Lazio 0,00 7,09 0,00 9,27 20,88 13,64
Sampdoria 11,28 0,00 6,31 0,00 0,00 2,18
Palermo 0,00 0,00 7,31 3,27 0,00 2,04
Genoa 0,00 8,09 0,00 0,00 0,00 2,01
?)6/+ :@; 9'$%. +*$# =$+1'*1
62

Then, in order to consider also past results and build an historical value, other points have been
added, with a simple semi quantitative criteria that tries to be consistent with cups worth and UEFA
ranking; historical data taken from UEFA.com and legaseriea.it:
For each Champions League: qualification, 1 point; quarter final achievement 2 points, winning 8
points.
For each other European official Cup: qualification, 0,5 point; quarter final achievement 1 point,
winning 2 points.
Finally the two coefficients found have been added in the third column building The European
results premium indicator.

Table 16

Club 1
st

Coefficient
2
nd

Coefficient
Euro results
premium
Atalanta / 3,00 3,00
Bologna / 7,50 7,50
Cagliari / 3,00 3,00
Catania / / 0,00
Chievo / 1,00 1,00
Fiorentina 7,15 21,00 28,15
Genoa 2,01 1,50 3,51
Inter 36,85 78,50 115,35
Juventus 35,04 91,50 126,54
Lazio 13,64 19,50 33,14
Milan 43,32 116,5 159,82
Napoli 17,03 17,00 34,03
Palermo 2,04 2,00 4,04
Parma / 16,50 16,50
Pescara / / 0,00
Roma 12,76 32,00 44,76
Sampdoria 2,18 11,00 13,18
Siena / / 0,00
Torino / 9,50 9,50
Udinese 8,23 5,50 13,73
?)6/+ :E; 2*$# $+%*/.% =$+1'*1

These numbers are dimensionless but for our aim they are simply multiplied by 1M!, this is an
estimation of their value, which is of course questionable. I recall that here the aim is the
comparison among clubs.
6S
All these addends are then multiplied times League trend, which is the revenue annual Serie A
growth rate, calculated as the average of last 5 years percentage growth (or decline), as follows:

Table 17

Revenues
(M!)
2008 2009 2010 2011 2012 Annual rate
Serie A 1421 1494 1530 1553 1639 +2,9%
European
football
14600 15700 16300 16900 19400 +5,9%
?)6/+ :F; I+$'+ < -$#A.B $).+
Data taken from Deloitte and Statista.com.

So in this case, the whole valuation of each Serie A club, will be multiplied by (1+0,029) /
(1+0,059) ! League trend = 0,944: our championship is growing slower than the total European
football, this means that globally we are losing market share, and this affects the value of each club
belonging to the championship, as they are selling together the product Serie A.

The two last column of Table 14 are the application of the equation above to find club values,
penultimate considering all these factors and the last one without pv and ps. For the first club:

Atalanta 2013 value (M!) = (5 + 43,2 + 2,1 + 11,4 + 3) * 0,944 = 61,1 M!

As the aim is to find a comparison among clubs value, this model would rank the club with respect
to their value. Then, Ive tried to be as realistic as possible in monetary terms, to be consistent with
actual values, knowing real revenues and related streams. Compared to all the other methodologies
above, Fans method would not to find the exact value of each club if today it would be sell,
neither the exacts monetary differences among clubs, but to point out the determinants of football
clubs value, most of them are intangible assets, in order to compare clubs in a more stable way and
provide an ordinal ranking.
This because we assume there is an intrinsic value made of environment and context, catchment
area, fans, historical results that doesnt change quickly in time, so this is a core asset for a football
club, and we would like to identify and, possibly, quantify it. The weights of each factor have been
built knowing actual revenues and hypothesizing a related value, anyway we would like to have a
reasonable estimation of weights and for this purpose we are going to deal with correlations,
64
regressions and factor analysis. With respect to Fans method player values and salaries will not be
included, they are not part of the intrinsic value we want to determine, because of their high
changeability and because talent expense should reflect money availability, and we would like to
identify those factors able to drive revenues and, as a consequence, increase talent. We notice that
player values affect revenues, too, because talent determines results and consequently revenues and
consumers satisfaction, moreover, at the highest levels, Star players are able to drive some
revenues streams because of their popularity which affect both direct incomes, through
merchandising, and number of clubs and related leagues followers.


































6S
!"#$%&' ! !"!! !$%$&'$&(' !"# %!&'()*!+
!"#$%&

S.1 Top Euiopean leagues coiielations

I have attempted to find the relationship between revenues and sportive results, to verify the
assumption that revenues positively affect sportive results and vice versa.
In the first table, the aim was to find if there is a linear relation between global leagues revenues
and sportive results of top clubs in the following year. To do this, Ive taken Top 5 leagues annual
revenues from 2002 to 2012 (Variable Leagerev) and UEFA country ranking from 2003 to 2013
(Variable ucrank).
Below the results:

Table 18
Correlations

ucrank Leaguerev
ucrank Pearsons correlation 1 ,511
**

Sign. (two tails)
,000
N 55 55
Leaguerev Pearsons correlation ,511
**
1
Sign. (two tails)
,000
N 55 55
**. Level of correlation significance = 0,01 (two tails).
?)6/+ :H; L+)$%#0 Q"8Y(+)-*+ $+4+0*+%

Pearson coefficient r is 0.511, and it was calculated with 2 tailed significance p=0.01.
N is the number of observations (55, indeed we are considering 5 Leagues and 11 seasons). We
know from the theory that Pearson coefficient is defined as the covariance of the two variables
divided by the product of their standard deviations, so it varies between -1 (completely negative
correlation) and +1 (completely positive correlation), so lower than one in absolute value (Cauchy,
Schwarz inequality); if two variables are independent their r=0, but the opposite it is not true
because r is only able to capture linear relationships.
66
In this case r is pretty large, so it exists a positive correlation as we expected, with this estimated
value of 0.511.
Here we are sure that effectively a dependence exists, because significance= .000.
A consideration is needed: in this way we are considering global revenues per league, by summing
up all clubs incomes, but UEFA country ranking reflects only European competitions results, this
means that only 6 or 7 clubs per League are involved each year, so only their incomes should be
included in order to understand the linear relation between revenues and results. By considering
only participating clubs we would expect a higher value of correlation, because those incomes are
effectively the only revenues earned by the clubs participating. To estimate these numbers, I
proceeded as follows:

1) I have identified all the Top 5 leagues club participating at Champions League or Europa
League from season 2009/10 to season 2012/13, and the Top 5 leagues UEFA country
ranking for the same period, made from the results of those clubs.
2) Ive summed up the revenues of the previous year (so from season 2008/09 to 2011/12) of
each participating club of the following year, because we want to verify whether exists a
correlation between incomes and sportive results of the following year.
3) Ive divided these aggregate incomes for the number of participating clubs, building an
average of clubs incomes, because in that period each league has had different numbers of
clubs invited (actually the number varied only from 6 to 7 in these leagues). This is our first
variable, called AverageRev, to be compared with UefaCrank.

Take for example England UEFA country ranking 2012/13. In that season they have totalized
16.428 points, thanks to seven participating clubs (Manchester Utd, Chelsea FC, Liverpool FC,
Tottenham, Arsenal FC, Newcastle Utd, Manchester City). The aggregate revenues of these clubs,
related to previous season 2011/12, were 1821M! (Deloitte). Then Ive divided this amount for
seven, by obtaining AverageRev= 260.1 (M!), to be compared with UefaCrank = of 16.428. By
doing the same for 4 seasons and 5 leagues, thanks to SPSS statistics, Ive obtained the following
results:





67
Table 19

Average Std deviation N
AverageRev 153,6900 46,07709 20
UefaCrank 15,5192 2,99234 20
?)6/+ :K; <4+$)-+ Q"8 )0& .#= 3/*6% $+4+0*+%

Average incomes of European participating clubs during the period, by considering only Top 5
leagues, was 153.69M! with a standard deviation of 46.08 M!. The average UEFA Country
Ranking of these leagues was 15.519 points per year, with 2.99 points of standard deviation.

Table 20


AverageRev UefaCrank
AverageRev Pearsons correlation 1 ,656
**

Sign. (two tails)

,002
N 20 20
UefaCrank Pearsons correlation ,656
**
1
Sign. (two tails) ,002

N 20 20
**. Level of correlation significance = 0,01 (two tails).
?)6/+ >N; Q"8 Y L+)$%#0 =)$.'3'=).'0- 3/*6% $+4+0*+%

The result confirms our expectations, by considering only UEFA Country Ranking participating
clubs, Pearson coefficient is higher (0.656, meaningful at 0.01, two tailed); we are almost sure
(0.002 significance) that revenues and sportive results are correlated, precisely there is a linear
relation between incomes and results in European competitions in the following year, revenues
positively affects results and correlation value is 0.656.
Questions could arise because of the sample number, N=20 could be a failing sample, but in support
of the result we have seen how these 20 variables values have been build: actually they include 132
annual clubs revenues as well as UEFA country ranking includes all the results of each single clubs
match in European competition, more than 2000 matches results during the reference period.
Lets see the inverse correlation, precisely if sportive results affect revenues of the following year
and if there is a linear relationship among them.
68
In doing so, Ive used the same variables of the opposite case, AverageRev and UefaCrank, but
for different periods, precisely Ive compared UEFA country ranking from season 2008/09 to
2011/12 with revenues of the following year, from 2009/10 to 2012/13.
Below the results by SPSS:

Table 21

Average Std deviation N
UefaCrank 14,7763 3,10303 20
AverageRev 162,6950 46,22225 20
?)6/+ >:; <4+$)-+ Q"8 )0& /+)-*+% $+4+0*+% >

Table 22

UefaCrank AverageRev
UefaCrank Pearsons correlation 1 ,578
**

Sign. (two tails)

,008
N 20 20
AverageRev Pearsons correlation ,578
**
1
Sign. (two tails) ,008

N 20 20
**. Level of correlation significance = 0,01 (two tails).
?)6/+ >>; L+)$%#0 Q"8 )0& /+)-*+ $+4+0*+% >

Even here the correlation exists, significance is a bit higher (0.008) than the inverse case (0.002),
anyway it is closeness to zero assuring that there is a relation. Pearson coefficient is similar than
before, a bit lower (0.578 vs 0.656) but still with a meaningful value which tells us that good results
in European competition positively affect revenues of the following year (of course they affect
positively even incomes of the current year because of results awards, but here we are referring only
to the following year).
In this way we have found a linear relation, in both directions, between UEFA country ranking and
leagues revenues. Through this method we cant catch any kind of correlation that is not linear,
moreover UEFA country ranking and revenues are only two possible indicators of sportive and
economic results, different value of relation there could be by considering, together with revenues,
top championships results or lower categories results, anyway even by including only these
indicators we can suppose that incomes and sportive results are strongly related growing together,
69
this is an important assumption in determining clubs value. To further verify the assumption we
should consider the rates of change, but this could be misleading because we dont know how the
causal link is split, positive or negative effects of revenues and sportive results are not reduced to
the following year but they could affect, with different weights, the future. So, why we assume they
grow up together affecting each other?
Because there are more customers/fans, in other words market share increases.
In general, on equal debts situation, when a club earned more incomes it has greater expense
possibility, so it can hire more talent and this translate in better sportive results.
In synthesis, Results translate in more visibility, better rankings for top divisions clubs (both
UEFA ranks and national, e.g. in TV rights systems or national cup participation), consumers
satisfaction and new followers, so new future revenues, together with direct incomes from awards.
More revenues translate in greater possibility of better structures, initiatives and especially talent
expenses, increasing winning probabilities and thus, for the reasons above, probability of further
increasing revenues.
In conclusion, we assume there is a correlation between results and number of fans, so there is also
a correlation between supporters and revenues, both directly and indirectly, and all of this increases
club, and consequently league, value. Its a virtuous circle:

!revenues !! sports results !! followers !!revenues
" # # $
club value.

To verify the assumption that what supports the positive correlation among revenues and results are
customers, a possible indicator of fans involvement and enthusiasm is attendance at the stadium.










7u
Figure 18


9'-*$+ :H; <..+0&)03+ )0& $+4+0*+% 3#$$+/).'#0

We notice a meaningful relation between revenues Rev and attendance Attend. The sample was
made by 35 different teams belonging to top 5 leagues, in particular 7 selected teams per each
league and related revenues and attendance of the last three seasons, globally N=105. For some
aspects, not surprising that there exists a meaningful relation between attendance and incomes. Big
clubs with higher revenues have also the highest attendence because most of them own big and
modern stadiums and stars players, able to attract new fans, moreover, in general, the biggest clubs
in the world are based in big cities with a greater possibility to reach more consumers.
In figure 18, points far away from the central line are special cases, below we find, among the
others, clubs owned by sheiks, like PSG and Manchester City, which in few years have quickly
increased revenues and the attendance has not undergone the same increment, also because of
stadiums capacities, resulting in a small attendance for clubs of that size (PSG in 2013 earned
399M! bringing only 43.239 people, on average, per each home match). On the opposite, above the
line, Borussia Dortmund case stands out, they are represented by the three circles (seasons 2010/11,
2011/12, 2012/13) above the line with a stable attendance, near to 80.000 per match, and increasing
revenues, ranging approximately from 100! to 300M!, not so much for a club with that attendance.
In the Case of Borussia Dortmund is evident the positive effect on fans and, especially, sportive
results on revenues, that are quickly improving together with great attendance, stable also because
the stadium is generally sold out. In would be interesting to understand the underlying reasons of
the great attendance of Dortmund. In terms of past results and catchment area is surely good,
moreover they have relatively low ticket prices, but a difference between other clubs with similar
71
size and results I think should be sought in fans enthusiasm, that manifests itself with beautiful
coreographies, colors and fans involvement. I recall here what Ive called positive externality.

Ive also embedded brand value, to verify its strong correlation with revenues, the higher coefficient
confirms us that Brandfinances values are strongly dependent on current revenues, which is a
driver indicator for the calculation.
Regression analysis made on the same 105 clubs (35 clubs taken from top 5 leagues, from season
2010/2011 to 2012/2013), with revenues as dependent variable and attendance, brand and UEFA
team ranking as predictors, confirms our results:

Table 23


Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,921
a
,849 ,844 47,87258
a. Predictors: (constant), Attend, UteamR, Brand
?)6/+ >C; L$+&'3.'#0% A'.B Q?8Z 6$)0&Z )..+0&)03+

Table 24

Coefficients
Model
Unstandardized coefficients
Standardized
coefficients
t Sign. T Std error Beta
1 (constant) 24,478 17,448

1,403 ,164
Brand ,383 ,038 ,667 10,045 ,000
UteamR 2,780 ,634 ,237 4,387 ,000
Attend ,001 ,000 ,114 1,839 ,069
a. Dependent variable: Rev
?)6/+ >D; 8+-$+%%'#0 Y :%. $+4+0*+% =$+&'3.'#0

Based on the fact that revenues, sportive results and consumers/fans are positively correlated, we
would like to estimate the weight that each of these factors has on clubs value, measured by a
multifactor model as a weighted sum of determinants variables, like results and number of
consumers, and related drivers (attendance, UEFA ranking, etc.), or, as alternative, by a Revenues
multiple approach in which some determinants of value affect a variable revenues multiplier. We
well see both, anyway in doing so factor analysis could help us.
72
S.2 Coiielations anu factoi analysis in Italian leagues

I have started by taking 16 variables, each of them refers to a Serie A team of 2012/13 season. As
we have 20 clubs in the league, the whole database consists on 320 data.

Table 25

Communalities
Inizial Extraction
ItaFans 1,000 ,942
Attendance 1,000 ,945
StadFilling 1,000 ,941
UteamR 1,000 ,882
Pticamp 1,000 ,666
Rev 1,000 ,975
Cityab 1,000 ,895
Provab 1,000 ,859
FBfans 1,000 ,861
PlayerWages 1,000 ,961
PartA 1,000 ,741
TitIta 1,000 ,906
TitEuro 1,000 ,955
CLfinals 1,000 ,986
PartEuro 1,000 ,923
PartCL 1,000 ,993
?)6/+ >@; M.)/')0 4)$')6/+% 3#11*0)/'.'+%

By applying factor analysis, communalities (percentage of variable variance explained by common
factors) are high, meaning there is a large verisimilitude among variables. I recall that variables
with high communalities could imply a hidden factor (Rossi G., 2009).
There are variables that refer to historical results, participation and winning titles in Italy and
Europe, (number of Serie A participation PartA and official Italian titles TitIta, European cups
participations and titles PartEuro and TitEuro, Champions League participation Part CL,
Champions League quarter finals achievement plus winning CLfinals), variables that refer to last
results (UEFA team ranking UteamR and points gained during 2012/13 Serie A Pticamp),
variables related to consumers, both actual (Number of Italian fans (Tifosobilanciato, 2013)
ItaFans, attendance at the stadium Attendance and percentage of stadium filled Stadfilling)
7S
and potential (Number of fans on Facebook FBfans, club citys and provinces inhabitants
Cityab and Provab), variables related to incomes Rev and costs PlayerWages.
Sample was found adequate:

Table 26
KMO and Bartlett test
Kaiser-Meyer-Olkin measurement of sample adequacy ,764
Bartletts sphericity test Chi-squared approx 537,207
gl 120
Sign. ,000
?)6/+ >E; J)$./+.. .+%. :
Through principal component analysis, setting eigenvalues greater that 0.9, SPSS has chosen three
components that together explain 90% of the variance:

Table 27
Total variance explained
Initial eigenvalues Uploads extractions sum of squared Uploads rotations sum of squared
Total % of variance % cumulative Total % of variance % cumulative Total % of variance % cumulative
11,385 71,157 71,157 11,385 71,157 71,157 8,205 51,284 51,284
2,057 12,856 84,013 2,057 12,856 84,013 4,439 27,741 79,025
,989 6,182 90,195 ,989 6,182 90,195 1,787 11,170 90,195
,472 2,952 93,147
,415 2,594 95,742
,250 1,560 97,302
,172 1,077 98,379
,108 ,674 99,054
,062 ,387 99,441
,033 ,207 99,647
,025 ,158 99,805
,015 ,091 99,897
,010 ,060 99,957
,005 ,031 99,988
,001 ,007 99,995
,001 ,005 100,000

?)6/+ >F; 9)3.#$ )0)/7%'% : I+$'+ <

74
One eigenvalue, alone, explains more than 70% of the whole variance, lets see how we can identify
that component looking at the rotated matrix:

Table 28

Rotated components matrix

Component
1 2 3
ItaFans ,793 ,317 ,462
Attendance ,605 ,747 ,145
StadFilling ,220 ,003 ,945
UteamR ,799 ,488 ,072
Pticamp ,439 ,558 ,403
Rev ,863 ,385 ,285
Cityab ,115 ,929 -,137
Provab ,088 ,920 ,070
FBfans ,910 ,145 ,104
PlayerWages ,789 ,556 ,172
PartA ,414 ,721 ,223
TitIta ,802 ,340 ,382
TitEuro ,967 ,115 ,081
CLfinals ,974 ,140 ,131
PartEuro ,737 ,559 ,258
PartCL ,933 ,247 ,249
?)6/+ >H; 8#.).+& 1).$'W : I+$'+ <

First component is more related to economics and sportive results, but with meaningful correlations
also with number of fans, it incorporates many determinants of values with different weights so it is
difficult to isolate as a single factor. Second component is more related to Italian football catchment
area and third one is mostly related to percentage of stadium filled, with some correlation with
number of fans and Serie A results. In general, we notice a huge interdependence among variables
that makes difficult the decomposition in Principal components, in this case we could call the first
component Sports title, with the highest weight, the second component Catchment area and the
third one Assets effectiveness, but the strong interdependence among all the factors make the
distinction enforced.
I have made another attempt using the same variables without considering the economics indicators
(revenues and wages), because they should include most of the other factors.
Adequacy of the sample:

7S
Table 29

KMO and Bartlett test
Kaiser-Meyer-Olkin measurement of sample adequacy ,735
Bartletts sphericity test Chi-squared approx. 418,439
gl 91
Sign. ,000
?)6/+ >K; J)$./+.. .+%. >

Variance explained:

Table 30

Component
Initial eigenvalues
Uploads extractions sum of
squared Uploads rotations sum of squared
Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative
1 9,486 67,755 67,755 9,486 67,755 67,755 6,764 48,311 48,311
2 2,035 14,533 82,287 2,035 14,533 82,287 4,040 28,855 77,167
3 ,983 7,021 89,309 ,983 7,021 89,309 1,700 12,142 89,309
4
,461 3,291 92,600
5
,404 2,889 95,489
6
,248 1,768 97,257
7
,159 1,134 98,390
8
,098 ,700 99,090
9
,055 ,395 99,485
10
,032 ,228 99,713
11
,025 ,178 99,891
12
,009 ,062 99,953
13
,005 ,038 99,991
14
,001 ,009 100,000
?)6/+ CN; 9)3.#$ )0)/7%'% > I+$'+ <

Setting eigenvalues greater than 0.9, three components have been extracted reaching 89% of
variance explained, a bit less than the previous iteration with revenues and wages. Lets see the
correlation with the extracted components in the rotated matrix:

76
Table 31

Component
1 2 3
Attendanc ,598 ,751 ,150
StadFilling ,211 ,005 ,948
Cityab ,100 ,927 -,134
Provab ,079 ,924 ,067
PartEuro ,735 ,566 ,263
PartCL ,928 ,255 ,255
CLfinals ,972 ,149 ,137
TitEuro ,966 ,125 ,086
TitIta ,796 ,346 ,389
PartA ,413 ,725 ,224
FBfans ,905 ,154 ,108
Pticamp ,435 ,566 ,399
UteamR ,798 ,495 ,077
ItaFans ,785 ,324 ,466
?)6/+ C:; 8#.).+& 1).$'W > I+$'+ <

First component is strongly related to clubs results all around the world: Participations and
especially winning in European competitions have the highest correlation coefficient as well as
number of fans on Facebook, which should depend on clubs history and results. Also recent results
are strongly related with the component (UEFA team ranking has 0,798 of positive correlation).
Italian fans, history and results are in general less considered but with a meaningful value of
correlation when referring to Italian titles and number of Italian fans. At the end, first component
gets most of the whole variance and is strongly related to past and recent sportive results all around
the world and, probably as a consequence, on number of consumers. We can call this first factor
worldwide value. The second component has huge correlations with catchment area and a bit less
with attendance at the stadium. It is reasonable that a club residing in a big city comprehensive of a
large province has, generally, a greater aggregate attendance. We notice a meaningful positive
correlation also with Serie A participation, we can suppose that catchment area strongly affect
club size e potentiality, indeed, in general, Serie A clubs belong to the biggest Italian cities and
provinces, with few exceptions every year. We can call the second factor catchment area and we
observe that both first and second component are positively related with all the variables, this could
be a signal of positive interdependence among them which positively affect each other growing
together. The third component gets only 7% of the whole variance and it is mostly related with
percentage stadium filling, positively related (even if with small values) with all the variables,
77
especially number of Italian fans, except for City inhabitants; this could be explained by the
fact that many Serie A teams belonging to the biggest cities (e.g. Milan and Rome) play into very
big stadiums with a relatively high attendance and a relatively low percentage of stadium filling,
with respect, for example, to Catania, Siena and Pescara, which have had small attendance in that
season but with >60% of stadium filled. We could call the third component Stadium usage
Finally, lets see the weight assigned to each component by SPSS:

Table 32

components weights matrix

Component
1 2 3
Attendance ,015 ,185 -,042
StadFilling -,184 -,063 ,816
Cityab -,093 ,347 -,178
Provab -,152 ,344 ,013
PartEuro ,059 ,086 ,032
PartCL ,173 -,068 -,016
CLfinals ,236 -,113 -,133
TitEuro ,252 -,120 -,177
TitIta ,083 -,014 ,139
PartA -,057 ,204 ,076
FBfans ,222 -,099 -,142
Pticamp -,068 ,133 ,236
UteamR ,139 ,053 -,153
ItaFans ,063 -,023 ,213

Extraction method: Principal component analysis
Rotation method: Varimax with Kaiser normalization.
?)6/+ C>; "#1=#0+0. A+'-B.% : I+$'+ <

In the first column there isnt any coefficient greater than 0.3, anyway as we are talking about a
factor getting 70% of the variance, if we multiply the values times the variance explained, many of
them are relatively meaningful. The contribution of catchment area variables is almost negligible,
except for city and province inhabitants that weights, respectively, 0.347 and 0.344. Stadium
usage provides a significant contribution only with variable Stadium filling, 0.816, which is the
greatest coefficient in the matrix but if we multiply times the variance explained, only 7% for this
component, we get a not surprising contribution. Moreover it has a negative weight when referring
to the first, heaviest, component.
78
Until now I have included variables with very high communalities, able to imply a single o more
factors. I would like to introduce another attempt, with fewer variables, embedding the previous
ones. The variables used are:
1) CatchA calculated as follows, for each Serie A 2012/13 club:
(City citizens/ Average 20 bigger municipalities) * (Province citizens / Average 20 bigger
provinces). Hence, city inhabitants are included both in city and province. In this way we
want to emphasize the positive effect of big cities and provinces and the negative effect of
small towns in small provinces, but penalizing big cities in small provinces (e.g. Genova) or
small cities in big provinces (e.g. Bergamo), with respect, for example, to medium cities
residing in medium size provinces (e.g. Catania). An alternative could be adding the two
contributions, as we did in Fans Method, building in this way a linear indicator. In the
following calculations, I have used both.
2) Fans is the sum of number of fans of each Serie A clubs (Tifosobilanciato, 2013) divided
by the club with the highest number of fans (Juventus FC, 7.1 Millions), plus the number of
Facebook fans divided by the highest number of Facebook fans updated April 2014 (AC
Milan, 21Millions).
3) Stadium is the product between average attendance per match of the club multiplied times
percentage of stadium filling, divided by the average attendance (per match) of the
championship in that season.
4) HistPart is, for each club, the sum the number of participations to, respectively, Serie A,
European competitions and Champions League, each of them divided by the highest number
of participations (primacy belongs to, respectively, Inter FC (82), Juventus FC (50), AC
Milan and Juventus FC (28)).
5) Titles is calculated as HistPart, considering the weighted sum of three variables: Italian
winnings, European winnings and Champions League quarter finals participations plus
winnings.
6) LastRes is the weighted sum of UEFA team ranking 2013 and Serie A points gained
during the season, calculated as HistPart and Titles.






79
Table 33 Table 34

!
?)6/+ CC; I+$'+ < 4)$')6/+% : ?)6/+ CD; I+$'+ < 4)$')6/+% >

Notice that all of these variables are dimensionless and with different weights, because of diverse
calculation methods and number of components variations. We need to standardize.
Therefore, I have divided the values obtained for each club by the sum of the values of that column,
thus obtaining values between 0 and 1 for each data, and an amount of 1 per each variable when
summing the values of all the clubs considered. Finally, just to have a clearer vision and to avoid
that SPSS could go out of sight with many values very close to zero, Ive multiplied all the values
times one hundred:

Table 35 Table 36
!
?)6/+ C@; I+$'+ < 4)$')6/+% C ?)6/+ CE; I+$'+ < 4)$')6/+% D


As we can see database consists on 120 data, barely sufficient to apply a factor analysis. Sample has
resulted adequate:




8u
Table 37
KMO and Bartlett test
Kaiser-Meyer-Olkin measurement of sample adequacy ,754
Bartletts sphericity test Chi-squared approx. 144,947
gl 15
Sign. ,000
?)6/+ CF; J)$./+.. .+%. C

Table 38

Communality

Inizial Extraction
CatchA 1,000 ,975
Fans 1,000 ,941
Stadium 1,000 ,905
HistPart 1,000 ,937
Titles 1,000 ,962
LastRes 1,000 ,891
Extraction method: principal
components analysis
?)6/+ CH; I+$'+ < 3#11*0)/'.'+% >

Communalities are still very high, greater than previous cases, we can suppose that they imply a
unique common factor.

Table 39
Total variance explained
Component
Initial eigenvalues
Uploads extractions sum of
squared Uploads rotations sum of squared
Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative
1 4,668 77,802 77,802 4,668 77,802 77,802 4,167 69,452 69,452
2 ,943 15,721 93,523 ,943 15,721 93,523 1,444 24,071 93,523
3
,158 2,638 96,161
4
,127 2,120 98,281
5
,086 1,441 99,722
6
,017 ,278 100,000
Extraction method: principal components analysis
?)6/+ CK; [)$')03+ +W=/)'0+& I+$'+ <
81

Setting eigenvalues greater than 0.9, the software has isolated 2 components explaining more than
93% of the whole variance.

Table 40

Rotated components matrix

Component
1 2
CatchA ,147 ,976
Fans ,965 ,091
Stadium ,835 ,455
HistPart ,908 ,336
Titles ,981 ,010
LastRes ,854 ,402

Rotation method: Varimax with
Kaiser normalization.
3 iterations to converge
?)6/+ DN; 8#.).+& 1).$'W C I+$'+ <

By using as catchment area indicator the sum of the contributions (City citizens/ Average 20
bigger municipalities) + (Province citizens / Average 20 bigger provinces), we obtain similar
results, with the difference that to find two components we should set eigenvalues greater than 0,8:

Table 41
Total variance explained
Component
Initial eigenvalues
Uploads extractions sum of
squared
Uploads rotations sum of
squared
Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative
1 4,760 79,325 79,325 4,760 79,325 79,325 4,004 66,732 66,732
2 ,845 14,090 93,415 ,845 14,090 93,415 1,601 26,683 93,415
3 ,163 2,712 96,127

4 ,129 2,144 98,270

5 ,087 1,448 99,718

6 ,017 ,282 100,000

Extraction method: principal components analysis
?)6/+ D:; [)$')03+ +W=/)'0+& > I+$'+ <
82

Table 42
Components weights matrix

Component
1 2
CatchA -,300 ,895
Fans ,326 -,222
Stadium ,125 ,196
HistPart ,189 ,078
LastRes ,157 ,129
Titles ,355 -,288

Rotation method: Varimax with
Kaiser normalization.
?)6/+ D>; "#1=#0+0.% A+'-B.% > I+$'+ <

In any case, there isnt a separation between variables related to results and consumers, they are
both included in the first component with high correlation, indeed they explain most of the variance.
The second component in Table 40 is positively correlated with all the variables but it is strictly
related only to Catchment area, anyway separation appears enforced.

S.S Nultiple iegiessions

S.S.1 Seiie A

We have not been able to distinguish between variables related to results and variables related to
consumers/fans; they seem highly related and interconnected.
We know they are positively related with revenues, to further understand these links I have applied
a multiple linear regression using the same variables of the last factor analysis as independent
(CatchmA, Titles, LastRes, Stadium, HistPart, Fans) and revenues as dependent variable:





8S
Table 43

Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,995
a
,991 ,986 8,13689
a. Predictors: (constant), CatchmA, Titles, LastRes, Stadium, HistPart, Fans
?)6/+ DC; I+$'+ < $+-$+%%'#0 :

Results seem great as these factors fully explain revenues, with R^2 proxy to one. Problems could
arise when considering coefficients in trying to linearly approximate revenues:

Table 44
Coefficients
Model
Unstandardized coefficients
Standardized
coefficients
t Sign. T Std error Beta
1 (Constant) 28,377 6,549

4,333 ,001
LastRes 2,301 2,085 ,077 1,103 ,290
Titles 1,002 1,221 ,119 ,820 ,427
HistPart ,997 1,989 ,057 ,501 ,625
Stadium ,378 1,713 ,017 ,220 ,829
Fans 5,565 1,006 ,705 5,529 ,000
CatchmA 2,013 ,821 ,103 2,451 ,029
a. dependent variable: Rev
?)6/+ DD; I+$'+ < $+-$+%%'#0 3#+55'3'+0.% :

Rev = 28,4 + 2,3LastRes + Titles + HistPart + 5,6 Fans + 2,0CatchA [8]
2O*).'#0 H; I+$'+ < 3/*6 8+4+0*+% :

Significance of many factors is pretty high, among variables only Fans and CatchmA present
sure values, and some variables appear proxy to zero. It seems that knowing actual number of fans
from Lega Calcio research (Tifosobilanciato, 2013) we can mostly predict revenues, unfortunately
we cannot verify it in other context using real numbers because I havent found any research on
number of fans of football teams (except for top 20), neither for Italian lower divisions, so we have
to resort to approximations of real numbers, e.g. number of fans in social networks. Anyway with
those factors we are able to predict revenues with a very good approximation, well recall Table 44
in the next pages.
84
In order to find more reliable coefficients I have tried to assemble all these variables in two
independent ones. The first related to consumers, precisely the sum of CatchA, Fans and
Stadium, each of them with the same weight (w=1), lets call this variable Share. The second
related to Results Res, is the sum of HistPart, Titles and LastRes, weights (w=1).
Dependent variable is annual revenues.

Table 45

Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,982
a
,964 ,960 14,00778
a. Predictors (constant), Res, Share
b. Dependent variable: Rev
?)6/+ D@; I+$'+ < $+-$+%%'#0 >

Table 46
Coefficients
Model
Unstandardized coefficients
Standardized
coefficients
t Sign.
B confidence interval: 95,0%
T Std error Beta Lower limit Upper limit
1 (Costante) 15,969 4,666

3,422 ,003 6,124 25,814
Share 1,407 ,425 ,308 3,313 ,004 ,511 2,303
Res 3,505 ,464 ,702 7,548 ,000 2,525 4,485
a. Dependent variable: Rev
?)6/+ DE; I+$'+ < $+-$+%%'#0 3#+55'3'+0.% >

Revenues are mostly explained by these two variables and even coefficients appear more reliable.
Precisely the equation:

Rev =15,969 +1,407Share + 3,505Res [9]
2O*).'#0 K; I+$'+ < 3/*6 $+4+0*+% >

Provides a good approximation for Serie A teams. With this model, Revenues for a new team with
no history and no fans (Res = 0; Share = 0) would be 16M!. This is not so bad if we think that this
ideal and hypothetic case of a new team starting from Serie A would have had, by default, the slice
of 17.31M! from TV rights divided in equal parts (Tifosobilanciato.it).

8S
Figure 19


9'-*$+ :K; 8+4+0*+% =$+&'3.'#0Z +W=+3.+& )0& #6%+$4+& =$#6)/'.7


Table 47

Correlations
Res Share Rev
Res Pearsons correlation 1 ,869
**
,970
**

Sign. (two tails)

,000 ,000
N 20 20 20
Share Pearsons correlation ,869
**
1 ,918
**

Sign. (two tails) ,000

,000
N 20 20 20
Rev Pearsons correlation ,970
**
,918
**
1
Sign. (two tails) ,000 ,000

N 20 20 20
**. Level of correlation significance = 0,01 (two tails).
?)6/+ DF; 8+4+0*+% /'0+)$ 3#$$+/).'#0%

We notice a very strong linear relation between revenues and the variable comprehensive sportive
results, a bit lower, but still very high, Pearsons coefficient between revenues and variable
including market share. Moreover, Share and Res have 0.918 of Pearsons coefficient among
them; as we expected, the three variables are strongly interconnected, as results create new
86
consumers, this could explain while in Table 44 revenues are mostly explained by number of fans
(which are included in Share) while in [9] Res variable have got most of the variance.

S.S.2 Italian lowei categoiies factoi analysis

In order to enlarge the Italian analysis, in Tables 48, 49 and 50, Ive included 7 variables
(attendance, percentage of stadium filling, city inhabitants, Serie A and Serie B participations,
number of Facebook fans, points gained in the last championship) related to Serie B and Lega Pro
2012/13 season (except for Facebook fans which are related to April 2014), precisely all the Serie B
and Lega Pro I (third division) clubs and fifteen clubs of Lega Pro II (fourth division), so globally
70 clubs and 490 data:

Table 48
Commonality
Initial Extraction
Attend 1,000 ,844
Filling 1,000 ,713
Cityab 1,000 ,783
Pticamp 1,000 ,445
PartA 1,000 ,793
PartB 1,000 ,834
Fb 1,000 ,676
?)6/+ DH; I+$'+ J )0& (+-) L$# 3#11*0)/'.'+%
Number of points gained during the season is the less connected variable, one cause is that we are
comparing different categories and there is a huge difference in gaining 60 points in fourth division
than in second one, and the same difference is not present among the other variables. By applying
factor analysis two factors have been extracted thus explaining 73% of the variance:









87
Table 49

Total variance explained
Component
Initial eigenvalues
Uploads extraction sum of
squared Uploads rotation sum of squared
Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative Total
% of
variance
%
cumulative
1 3,863 55,192 55,192 3,863 55,192 55,192 2,933 41,893 41,893
2 1,225 17,505 72,697 1,225 17,505 72,697 2,156 30,804 72,697
3 ,750 10,711 83,408

4 ,467 6,674 90,083

5 ,323 4,616 94,699

6 ,201 2,865 97,564

7 ,171 2,436 100,000

Extraction method: Principal components analysis
?)6/+ DK; I+$'+ J )0& (+-) L$# 4)$')03+ +W=/)'0+&

Table 50
Components weights matrix

Component
1 2
attend ,063 ,299
filling -,294 ,556
cityab ,382 -,188
pticamp -,005 ,272
partA ,287 -,013
PartB ,369 -,144
fb ,028 ,300
Rotation method: Varimax with
Kaisers normalization

?)6/+ @N; I+$'+ J )0& (+-) L$# 3#1=#0+0.% A+'-B.%

Looking at coefficients, we see a first component mostly related with history and catchment area,
while the second one presents the higher coefficients with variables related to supporters. The
presence of different divisions increase variability and variance, anyway results seem not so
different than the previous factor analysis made with Serie A data, in which variables were strongly
interdependent, making it hard to assign separated weights to each variables.


88
S.S.S Top Euiopean clubs

Before to introduce the last model, in which well try to estimate football clubs value starting from
these SPSS results, I have made another calculation by considering 35 selected clubs coming from
top 5 leagues, among which are present top clubs in the world, in terms of incomes and market
share. Because of the huge interdependence that makes difficult a clear weights distinction by
factor analysis, I propose a multiple linear regression, using the following variables:

1) Foreign: this variable includes UEFA team ranking and foreign consumers; as UEFA team
ranking, it has been made a weighted sum of the last five seasons for each club, the current season
rank is weighted 1, the fifth it is worth 1/5, the fourth is weighted 1/4 and so long, because
consumers are more satisfied by the recent results and coefficients are an estimation of that. As an
example, in the case of Manchester Utd the variable related to UEFA team ranking is 304.58:

Table 51

2009/10 2010/11 2011/12 2012/13 2013/14 Weighted sum
28.586 [1/5] 36.674 [1/4] 16.050 [1/3] 21.287 [1/2] 26.357 304.580
?)6/+ @:; ,)0 Q.& Q?8 4)$')6/+

Number of foreign consumers has been estimated according to Facebook; this social network has
already reached an almost homogeneous penetration, in terms of registered, in the top five leagues
countries, and a wide penetration all around the world (1.28 billions monthly active, Facebook
report, January 2014), thats why I deem number of fans on Facebook a good indicator of fans
number, in the absence of a specific research, moreover it is available for most of the professional
football clubs. This estimation is going to be more accurate with the increase of registered and the
negligibility of difference in time among clubs (for example official pages born in different periods
have had different catch possibilities, but the difference is reduced along time). It is also possible to
see from which countries fans come from, in this variable Ive included only foreign fans.
Foreign variable is the weighted sum of UEFA team ranking and number of foreign consumers on
Facebook, taking for each club the related value of UTR divided by the higher UTR coefficient, and
summing up the related number of foreign fans divided by the higher number. So finally 0 <
Foreign <= 2. (Notice that FC Barcelona has got the highest values of both UTR and foreign fans,
thus obtaining an evaluation of 2). It has been included these two contributions because they are
89
strictly related, in the sense that results in European competitions affect fans from all over the
world, because they assure visibility, important gains and talent.

2) Local: on the line of Foreign variable, Local is the weighted sum of number of local fans
according to Facebook and local league results, because championship results especially affect local
consumers, even if of course there could be followers from all over the world. To estimate local
league results, I have made an average of last five championships placements, then the number
obtained has been subtracted to twenty, thus favouring first places in the ranks. Notice that in our
sample two clubs have been relegated one year in second division during the analysis period, for
that clubs (Villareal CF and Newcastle Utd) a 21
st
placement has been considered in that season. To
standardize Facebook local fans and championship coefficient, each single value has been divided
by the highest of that column, thus obtaining the range 0 < Local <= 2.

3) CatchA takes into account city inhabitants, attendance at the stadium and percentage of
stadium filling; we have seen the importance of the city population, even if it appears less important
for big clubs able to get fans from the rest of the country or even the rest of the world, it remains the
core of the catchment area. City values have been standardized in the usual way, taking single clubs
values and dividing by the highest, which in our table is Paris with approximately 2.3 millions
inhabitants. Notice that for cities with more residing clubs in the top divisions, during 2013/14
season, the number of citizens has been divided by that number of clubs; this is a strong
approximation in some case, as fans are not uniformly distributed in the local city, for example
London citizens have been divided by six, ignoring clubs participating to lower categories and
assuming, for example, Arsenal and Crystal Palace have the same catchment area possibilities
inside the city, as we dont know actual fans distribution. Anyway, city inhabitants affect 1/3 of
CatchA variable. The others components are attendance at the stadium, for which I have taken an
average of the last five seasons attendance, in order to have a clearer vision of attendance
potentiality and to avoid the selection of single picks. The value obtained, affecting 1/3 of the
variable, has been standardized dividing by the highest (Borussia Dortmund, 79.547); actually
attendance directly affect a bigger slice of the variable, as the last contribution is given by the
standardization of the same average attendance multiplied by the percentage of stadium filling, in
this component I would like to include the ability to exploit a core asset as its stadium and also a
better context to create enthusiasm, more than the possibility of future fillings. Before the
standardization, percentage of stadium filling is multiplied by the attendance to remark the
importance of the effective number of consumers actually present every week. The whole CatchA
9u
variable evaluation is composed by the sum of these three contributions, thus ranging between 0 <
CatchA <= 3.
Below the database with 105 values, actually coming from 735 variables components, as we have
seen.

Table 52


?)6/+ @>; ?#= 3/*6% 4)$')6/+%\ 4)/*+

First, using these variables, Ive tried to predict Brand value, as Brand Ive taken an average of last
3 years values (Brandfinance 2012, 2013, 2014), in order to avoid annual picks:

Table 53

Model
Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,897
a
,805 ,786 79,31947
a. Predictors: (constant), Foreign, CatchA, Local
?)6/+ @C; ?#= 3/*6 $+-$+%%'#0 :

Brand value is well predicted from our variables that get 80% of its variability.




91
Table 54
Coefficients
Model
Unstandardized coefficients
Standardized
coefficients
t Sign. T Std error Beta
1 (Constant)
-157,116 44,119

-3,561 ,001
CatchA 89,974 33,504 ,290 2,685 ,012
Local 66,747 48,494 ,162 1,376 ,179
Foreign 205,267 46,401 ,550 4,424 ,000
a. Dependent variable: Brand
?)6/+ @D; ?#= 3/*6% 6$)0& =$+&'3.'#0


Precisely the equation

Brand = -157 +89,97CatchA + 66,75Local + 205,27Foreign. [10]
2O*).'#0 :N; 6$)0& =$+&'3.'#0 /'0+)$ 5#$1*/)

It is a good approximation. Significance is relatively high only for Local (.179), which is the value
nearest to zero taking standardized coefficients. I recall that prediction is based on Brandfinance
values, so we rely on them. Lets try to predict revenues which are real values; as for brand, I have
taken the average of last three years in order to avoid seasonal picks:

Table 55

Model
Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,952
a
,907 ,898 40,42842
a. Predictors: (constant), Foreign, CatchA, Local
?)6/+ @@; ?#= 3/*6% $+4+0*+% $+-$+%%'#0

Approximation is very good, getting most of the variance. Moreover, an unappreciated part is
congenital as we are not able to include all the relevant factors in our variables, for example
different owners attitudes (think about PSG and Manchester City sheiks, clubs present in our
sample), are only indirectly and thus, partially, included in our variables.





92
Table 56
Coefficients
Model
Unstandardized coefficients
Standardized
coefficients
t Sign. T Errore std Beta
1 (Constant) -80,428 22,487

-3,577 ,001
CatchA 57,949 17,077 ,254 3,393 ,002
Local 80,313 24,717 ,264 3,249 ,003
Foreign 151,135 23,650 ,549 6,391 ,000
a. Dependent variable: Rev
?)6/+ @E; ?#= 3/*6% $+4+0*+% =$+&'3.'#0

Coefficients are almost surely different from zero, presenting very low significance values. Looking
at standardized coefficients, our variables explain respectively 26% (Local), 25% (CatchA) and
55% (Foreign) of the whole variance. The sum is a bit higher than 100% due to approximations.
The equation:

Rev = -80,43 + 57,95CatchA + 80,31Local + 151,14Foreign. [11]
2O*).'#0 ::; 8+4+0*+% =$+&'3.'#0 /'0+)$ 5#$1*/)

Provides a good annual revenues estimation. We notice that the equation [11] is similar to [10], not
surprising as brand values taken from Brandfinance are strongly related with annual revenues. Both
for revenues and brands, constant coefficient is widely negative, so it seems we could have negative
values, and this is not possible as brand and revenues should have zero as lower bound. A first
consideration is that our independent variables are strictly greater than zero, as there is no existing
club with zero fans or catchment area, neither zero in UEFA rankings as the national coefficients
are the yearly lower bound for each club. Secondly, in this sample values are significantly higher
than zero as we are taking 35 important clubs, residing in big cities, participating to top 5 leagues
and having a history behind. To generalize the equation to all professional football clubs or at least
to top divisions clubs, we should take an homogeneous sample, made of hundreds of teams with
different sizes and contexts, but we dont have the data as for example revenues and brand values
are available only for few clubs. Anyway, with respect to [9], [10] and [11] could theoretically
provide negative values when applied to small clubs, so with available data we cant generalize.
To verify our results I propose a comparison between real revenues and equations [9] and [11] for
top Italian clubs and between [11] and revenues for some other top European clubs.

9S
Table 57

Club Country Revenues
2011 M!
Revenues
2012 M!
Revenues
2013 M!
Revenues with
regression [9]
Revenues with
regression [11]
Juventus FC Italy 154 195 272 242 214
AC Milan Italy 235 257 264 252 259
Inter FC Italy 211 186 169 197 199
AS Roma Italy 144 123 124 135 148
SS Lazio Italy 75 81 106 111 86
SSC Napoli Italy 115 148 116 127 143
ACF Fiorentina Italy 79* 75* 73* 91 68
Manchester Utd England 367 396 424 / 414
Arsenal FC England 252 290 284 / 311
Liverpool FC England 203 233 241 / 219
Chelsea FC England 250 323 303 / 315
Tottenham England 181 178 172 / 162
Manchester City England 170 286 316 / 174
Newcastle Utd England 98 115 112 / 67
Bayern Munich Germany 321 368 431 / 374
Bayer Leverkusen Germany 90* 96* 94* / 100
Borussia Dortmund Germany 139 189 256 / 245
Schalke 04 Germany 202 176 198 / 182
Hamburger SV Germany 129 121 135 / 143
Stuttgart VFB Germany 96 103 117 / 103
Werder Bremen Germany 100 86* 87* / 102
Barcelona FC Spain 451 483 483 / 485
Real Madrid Spain 480 513 519 / 482
Atletico Madrid Spain 100 109 120 / 208
Valencia CF Spain 117 111 116 / 155
Villareal CF Spain 62* 70* 43** / 41
Sevilla FC Spain 86* 75* 69* / 108
Athletic Bilbao Spain 60* 68* 59* / 76
Paris SG France 100 221 399 / 237
Ol. Marseille France 150 136 104 / 197
Ol. Lyonnaise France 133 132 100* / 167
Bordeaux France 70 * 66* 68* / 79
Lille LOSC France 55* 80* 99* / 81
AS S. Etienne France 59* 52* 54* / 34
Toulouse FC France 48* 49* 47* / 16
?)6/+ @F; ?#= 3/*6% $+4+0*+% 3#1=)$'%#0
*Data taken from local press or official clubs websites
**Second division incomes
For the remaining clubs revenues source is Deloitte.
94

Lets analyse Table 57 results: In general, they appear near to actual revenues values, so our
regressions seem a good approximation. Even for real values we see some relevant variation among
years, which could be caused, for example, to intermittent participations at top European
competitions or global league revenues changes (e.g., new deal for leagues TV rights). There are
very few large variations, we are going more in details in searching some partial explanation for the
apparently more wrong values.
With regard to Italian Serie A and German Bundesliga, regressions provide good revenues
estimations proxy to actual values of the club considered, with little variations, for which we can try
to identify partial causes; Hamburger SV and AS Roma, following [11], present higher values than
real incomes of last seasons, the two club never participated to UEFA Champions League and have
had only few matches in European competitions in the past 4 seasons, hence their real revenues
could have underestimated the actual potentiality of two clubs of that size and catchment area.
Borussia Dortmund presents a very high estimation with respect to 2011 and 2012 revenues, but the
value follow the growth of the club, thanks to last years great results, a similar reasoning can be
done for Spanish Atletico Madrid and, in a lesser extent, to Sevilla CF, that thanks to last European
performances that have improved their ranking and achieved new fans, laying the foundations to
improve their revenues in the next few years. Anyway, in general, medium/large Spanish clubs have
got from [11] an higher evaluation, if one explanation could be the great results of some clubs
which will push up all the league revenues, another factor is that La Liga is the only Top 5 league
which has got individual TV rights, thus assigning huge amounts of money to their top clubs,
having an high unbalanced distribution. This is not directly factored in our regression, indeed top
clubs Barcelona FC and Real Madrid havent exploit this advantage in the evaluation, and the other
clubs havent exploit their disadvantage with respect to other leagues clubs of similar size, but
this could be a strength of our regression in terms of previsions, as from 2015 La Liga will pass to a
collective distribution, thus favouring most of the Spanish clubs to push up their revenues. By
remaining in Spain, we have some doubts about Villareal CF value, which is lower than their actual
revenues during the momentary appearance in Segunda Division (2012/13). Its a club residing in a
small town (little over 50.000 citizens) but able to reach great results during the last decade, which
are positively affecting clubs revenues still now, but they need some confirmations in the coming
years to maintain an important slice of consumers and thus revenues, as they havent a huge
catchment area neither several decades of great history, they strongly depend on results which are
never granted. This could explain a lower value. The recent appearance in second division has
surely affected our calculation, which should be good if the club will have some (relevant)
9S
probability to relegate in the next years. Even if probability of relegation is not directly factored in
our regression, by considering each team catchment area, worldwide fans and past recent results it
is, in a lesser extent, indirectly included in the evaluation. More doubts arise for some English and
French revenues values: Manchester City is growing faster in the last years and our prevision seems
to not sufficiently considering the effects, probably because the presence of very reach owners is
not directly included in our calculation, a similar reasoning could be done for PSG: our estimation
could be good if the sheiks would sell the two clubs in the next few years to new normal owners,
we should verify the event probability, which in absence of private information, appear us
unknown. Also O. Marseille and O. Lyonnaise revenues are related to PSG future perspectives,
because with actual situation, a drop in share and results is predictable, making our regressions
predictions too optimistic, also because in the same league there are other two teams owned by rich
foreign owners (AS Monaco and RC Lens) which have already undergone huge investments in
talent despite the relatively low revenues. It emerges a lack in our regression, which is the
importance of ownership that should be factored, in particular their disposability in spending huge
amounts of money in talent in the coming years. Even if Financial Fair Play UEFA should mitigate
losses over incomes, with some commercial deals bounds can be bypassed (PSG earned 64% of
their revenues from commercial part in 2013, widely the greater slice of all the top clubs from this
stream, Deloitte), well see UEFA applications of the regulations. The low values of AS S. Etienne
and, especially, Toulouse FC, can be explained by some more probability of relegation in the long
run, which is a risk as it would cut significantly revenues. The remaining English and French clubs
have got an evaluation in line with actual revenues, with the exception of Newcastle Utd, for which
the estimation is pretty lower than the actual incomes, one explanation could be that most of their
strength comes from the participation to the richest English Premier League, which provides great
revenues with respect to other leagues even if a club has not recently undergone great European
results (Each club participating have earned a minimum of 55M (approximately 70M!) of TV
rights by default, because divided in equal parts, from 2013/14 season, according to the new,
pharaonic, deal). Moreover, Newcastle Utd played in second division just in 2009, so the their
constant stay in the top League is not so granted as for top English clubs, while revenues from 2011
are only referred to a first division championship.
In conclusion, revenue prevision with linear regression provides good results, similar to actual
values, with the peculiarity that the formula is individually changeable when new results and new
consumers will be included. Anyway we have seen some case in which it provides busted results,
due the lack of relevant factors included, or partially included because related to results and number
of fans, as the generosity and the stability of the ownership, the league growth tendency and its
96
weight on football market (knowing actual growth and already concluded deals) and the league
internal regulations (as different TV rights rules, which could provides different incomes
distribution).

S.4 Factoiial Fans mouel

We have seen the relation between some revenues drivers, finding an estimation of incomes using
indicators related to number of fans and sportive results. To find clubs and leagues values, we can
start from revenues that as we have seen are a relevant indicator of value, especially in football
market. Factorial Fans model tries to evaluate assets value, starting from revenues, in this sense it is
an evolution of Revenues multiples approach, using Forbes values as benchmark. As incomes, I
have taken an average of 2012 and 2013, in order to avoid or reduce single picks and to consider
only recent incomes as the market is quickly changing. According to Forbes (Table 7), top clubs
have a ratio between value and revenues, on average, slightly higher than 2.5, and clubs with higher
incomes present, on average, the highest multiplier (with the pick of Manchester Utd that have got
6.3). Moreover, looking at Table 7 and previous Forbes ranks, ratios are, on average, very similar to
hundredths of revenues and proportional to them. Following those numbers, Ive set a multiplier
proportional to revenues, merely m = (incomes/100). Because clubs with higher incomes have
further probabilities to exploit their revenues in an expanding market like football. Then, multiplier
has been little corrected including clubs and leagues average growth, thus adding to one the product
between league market share (MS) and annual growth of European first divisions (EG, average of
last five years), to consider the league contribution, and adding to one the annual club growth or
decline (CG, average of last five years) to include each single club trend. The period of 5 years has
been chosen according to UEFA ranks, as it is a sufficiently long time to amortize extraordinary
seasons defining a trend and sufficiently short to avoid or reduce the effects of past, negligible,
events. The final value of m is (we call it ):

= (Average last 2ys Rev) /100 * (1 + MS*EG) * (1 + CG) [12].
2O*).'#0 :>; ?#= 3/*6% 1*/.'=/'+$ :

E.g. Man Utd = ((396 + 424) /2) /100 * (1 + 0,209 * 0,060) * (1 + 0,040) = 4,100 * 1,013 * 1,040
= 4,32.

97
From table 55, revenues have been estimated by [11] with approximately 52% Foreign (a variable
including UEFA ranking and foreign fans), 24,5% Local (including local fans and clubs results
in the league) and 23,5% CatchA (Comprehensive of attendance at the stadium and citizens).
Following those numbers, also potentiality of further exploit revenues can be decomposed by these
three variables, hence Ive added to the multiplier 52% of and subtracted to it, respectively, 24,5%
and 23,5%, thus obtaining three different multiplier that refer to different parts of revenues, and
for which is a weighted average.

Foreign mult. (%) = + 0,520. Local mult. (&) = 0,245. CatchA mult. (') = 0,235. [13]
2O*).'#0 :C; ?#= 3/*6% 1*/.'=/'+$ >
E.g. Man Utd ! % = 6,56. & = 3,30. ' = 3,26. ( = 4,32).

As the three multipliers %, & and ' refer to revenues variance decomposition from [11], Ive taken
the whole incomes estimations by [11], then dividing the value in three parts: 52% to Foreign
part, 24,5% to Local and 23,5% to CatchA. Then each slice has been multiplied by the related
multiplier, thus obtaining our estimation of value.
E.g. Man Utd revenues from [11] = 414,3M!. Foreign value = 215,4. Local value = 101,5. CatchA
value = 97,4. ! Value = 215,4% + 101,5& + 97,4' = 2067M!.
We can synthesize the whole value formula as:

0,520Rev% + 0,245Rev& + 0,235Rev' [14].
2O*).'#0 :D; ?#= 3/*6% 4)/*+ 5#$1*/)

Where Rev comes from [11] and multipliers from [12] and [13]. Notice that in equation [12] starts
from actual revenues, inspired by Forbes, searching a fair, approximated multiplier of the average
of last 2 years revenues, while the factorization of [13] and revenues in the formula [14] follow
estimations of regression [11], because the decomposition of incomes with these proportions is
related to [11]. We have seen the consistency of [11] with actual revenues, at least for top clubs. I
resume in Table 58 the whole database:





98
Table 58


?)6/+ @H; ?#= 3/*6% 3)/3*/).'#0 4)$')6/+%

To analyse the results I propose a comparison with Forbes values, as our multipliers are initially
inspired from Forbes values and as both methods focus on top clubs, indeed our methodology could
provide busted results (or at least the reliability will change) when applied to medium/small size
clubs, lets say for clubs that earn less than 60-70 millions of euro per year, because it was set
starting from SPSS, using only medium/large clubs. Below the top 20 rank following our model:










99
Table 59

Club Forbes 2013 M!
0.78 $ ! ! conversion
Forbes 2014 M!
0.78 $ ! ! conversion
Factorial model 2014
M!
Real Madrid 2574 (1
st
) 2683 (1
st
) 3048 (1
st
)
Barcelona 2028 (3
rd
) 2496 (2
nd
) 2889 (2
nd
)
Manchester Utd 2449 (2
nd
) 2192 (3
rd
) 2067 (3
rd
)
Bayern M 1021(5
th
) 1443 (4
th
) 1831 (4
th
)
Chelsea FC 703 (7
th
) 677 (6
th
) 1229 (5
th
)
Paris SG <205 (>21
st
) 324 (15
th
) 1069 (6
th
)
Arsenal FC 1034 (4
th
) 1037 (4
th
) 1067 (7
th
)
AC Milan 737 (6
th
) 669 (8
th
) 832 (8
th
)
Manchester C 537 (9
th
) 673 (7
th
) 773 (9
th
)
Borussia D 340 (13
th
) 468 (11
th
) 724 (10
th
)
Liverpool 508 (10
th
) 539 (10
th
) 619 (11
th
)
Juventus FC 541 (8
th
) 663 (9
th
) 586 (12
th
)
Schalke 04 388 (12
th
) 453 (12
th
) 432 (13
th
)
Inter FC 313 (14
th
) 377 (14
th
) 409 (14
th
)
Tottenham 406 (11
th
) 401 (13
th
) 354 (15
th
)
Atletico Madrid <205 (>21
st
) 256 (17
th
) 280 (16
th
)
O. Marseille 222 (19
th
) <231 (>21
st
) 277 (17
th
)
SSC Napoli 257 (17
th
) 231 (20
th
) 246 (18
th
)
O. Lyonnaise 287 (15
th
) <231 (>21
st
) 223 (19
th
)
Valencia CF <205 (>21
st
) <231 (>21
st
) 219 (20
th
)
?)6/+ @K; ?#= 3/*6% 4)/*+% 3#1=)$'%#0

I recall that in our sample clubs outside top 5 leagues have not been included, neither top 5 leagues
clubs not present in Table 58. Anyway, with respect to Forbes ranks, only 2 clubs are not present in
our database, SC Corinthians (16
th
in 2013 Forbes rank) and Galatasaray (16
th
in 2014 Forbes rank).
The remaining 4 empty Forbes places are of Hamburger SV (18
th
in 2013 and 2014 rank and 21
st

with Factorial model), AS Roma (19
th
in 2014 Forbes rank and 22
nd
with Factorial) and Newcastle
Utd (20
th
in 2013 Forbes rank and 24
th
with Factorial). If in terms of clubs ranked the
methodologies provide similar results, with respect to values emerge some relevant differences.
Without considering single cases, for which results are generated by different methodologies
(Forbes one is not available), the sum of Top 20 Factorial rank (2014) is 19.174M! with respect to
16.344M! of 2014 Forbes rank, and this difference is mostly due to top teams, indeed in Top 10
1uu
Factorial rank, 9 clubs present an higher values than Forbes (only Manchester Utd has a lower
evaluation), it seems that with Factorial model potentiality of further expand market share, with
respect to Forbes, is even expanded.
S.S Factoiial Italian mouel

If the Euro model provides top clubs values estimation, most of the Italian professional clubs are
not included; according to factorial analysis (focusing on Tables 41, 43, 44, 46 and 49), even
limiting to Italian leagues, revenues and consequently values, are almost explained by actual and
potential number of consumers and sportive results of each team, and variables related to consumers
and results are strictly related, making difficult the decomposition in single factors, we have to
consider that whenever we take one (ex. Attendance), we are already getting part of the variance of
another (e.g. UEFA ranking). From [9], we have got a relation which estimates revenues of Serie A
teams knowing attendance, catchment area, number of fans, past results (divided in recent and
historical). The equation [9] have a constant value of 15,969M!, which is approximately the amount
that each club participating to Serie A has received in the last seasons (2012/13) by default from TV
rights, because coming from equal parts distribution. Since, for lower divisions, results comparable
to Serie A factor analysis (Table 48 and 49) have been obtained, we can take the equation [9]
diminished by the constant part as a benchmark, but we cannot keep it unchanged because some
factor is not available. In that equation variable related to results get most of the variance (around
70%) while variable related to market share get 30%. Previously, in [8] we had well predicted Serie
A clubs revenues with number of fans and catchment area getting, together, almost 80% of the
variance, an opposite percentage of variance with respect to [9], which tells us how much share and
results predictors are interconnected. In [9] and [8] were included variables like revenues, actual
number of fans (2013) or UEFA team ranking, not available or useless (UTR) when including lower
categories. Hence, we need to predict Serie A revenues with variables available even for lower
categories, and then try to extend revenues prediction to lower categories clubs.
As we dont know lower categories actual fans number, a possible indicator could be the number of
Facebook fans, weve seen the correlation between Facebook fans and actual number of consumers,
which allow us the approximation, because the great majority of professional football clubs has got
an official page and for those who havent, we can take the number of fans of the wider unofficial
page. Moreover, attendance at the stadium and city inhabitants are available, as well as historical
results (participation to championships and leagues and winning titles).
1u1
Following [9] Ive made a first attempt building a share variable and a result variable, as we
have different variables with respect to [9], Ive tried setting different weights, 50% per each
variable. In Share Ive included, per each club, Facebook local fans (May 2014), Facebook
foreign fans (May 2014), city inhabitants and attendance (average of last 5 years). Each of these
variables has been standardized. In result Ive included the standardization of number of
European cup, Serie A and B participation (Serie B have got half weight), Italian and European
winning titles; then Ive summed 50% of share with 50% result, obtaining Part variable, which
we are going to analyse with SPSS:

Table 60
Model
Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,959
a
,920 ,916 20,4962145
a. Predictors: (costante), Part
?)6/+ EN; M.)/')0 1#&+/ $+-$+%%'#0 :

Table 61

Coefficients
Model
Unstandardized coefficients Standardized coefficients
t Sign.
B confidence interval 95,0%
T Error std Beta Lower limit Upper limit
1 (Constant) -18,246 8,690

-2,100 ,050 -36,502 ,010
Part 74,757 5,185 ,959 14,418 ,000 63,864 85,650
a. Dependent variable: Rev
?)6/+ E:; M.)/')0 1#&+/ 3#+55'3'+0.% $+-$+%%'#0 :

Serie A 2013 revenues are mostly explained, but the widely negative constant coefficient could
provide some problem when valuing lower division clubs, because it can cause negative revenues.

Another attempt could be done using one more variable, following [11]. Ive built three variables:
1- Res, including Italian and European winning titles (only official completion without
considering lower divisions titles), both standardized compared to the club with the highest
value.
2- Share, including both Facebook local and foreign fans (May 2014), Participation to Serie
A, B and European cup. The whole sum has been standardized to the highest values, in order
1u2
to allow the comparison. Notice that when summing up participations, each Serie B
presence has been halved.
3- Loc, including average attendance at the stadium and city inhabitants, standardized.

Table 62

Model
Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,991
a
,982 ,979 10,24139
a. Predictors: (constants), Res, Loc, Share
?)6/+ E>; M.)/')0 1#&+/ $+-$+%%'#0 >

Table 63

ANOVA
a

Model Sum of squared gl
Quadratic
average F Sign.
1 Regression 91066,374 3 30355,458 289,414 ,000
b

Residual 1678,176 16 104,886

Total 92744,550 19

a. Dependent variable: Rev
b. Predictors: (constant), Res, Loc, Share
?)6/+ EC; M.)/')0 1#&+/ <V][<

Table 64

Coefficients
Modello
Unstandardized coefficients
Standardized
coefficients
t Sign. T Std error Beta
1 (Constant) 23,136 4,281

4,549 ,000
Share 99,443 8,316 ,715 11,957 ,000
Loc 13,218 6,278 ,101 2,106 ,051
Res 28,529 8,302 ,244 3,437 ,003
a. Dependent variable: Rev
?)6/+ ED; M.)/')0 1#&+/ $+-$+%%'#0 3#+55'3'+0.% >
The approximation appears even better and the equation for Serie A clubs revenues is:

1uS
Rev = 23,14 + 99,44Share + 13,22Loc + 28,53Res [15]
2O*).'#0 :@; I+$'+ < 3/*6% $+4+0*+% C

The slightly positive constant is of course suitable only for Serie A clubs, but we keep the
proportion of independent variables for lower divisions club. The amount is a bit higher than the
slice divided in equal part, but if we consider that the lower gain from tv rights in 2013, obtained by
Pescara Calcio, was 21,38M! (tifosobilanciato.it), we can assume that amount as a Serie A
premium, keeping the same formula without the constant coefficient (or with proportional splits,
depending on category) for lower divisions.
Ive made a third attempt, again using Share and Res variables, but without considering
weights provided by [9] and [8]. In Share Ive included average attendance, average attendance
multiplied by percentage of stadium filling, Facebook local (Italian) fans and Facebook total fans
(May 2014), city inhabitants. Hence, 5 standardized variables, in which Facebook local fans and
average (5 years) attendance have been included two times. Res includes 5 variables, too. They
are the standardization of the sum of Serie A participations, Serie B participations (with halved
weight), European cup participations, Italian and European winning titles. Problem could arise
because here recent results have not directly rewarded, anyway they are included, with disputable
weight, in Share, when considering attendance and Facebook fans. Let see the results:

Table 65

Model R R-squared
R-squared
adapted
Estimation
standard error
1 ,964
a
,929 ,921 19,63800
a. Predictors: (constant), Res, Share
?)6/+ E@; M.)/')0 1#&+/ $+-$+%%'#0 C
Table 66

ANOVA
Model Sum of squared gl
Quadratic
average F Sign.
1 Regression 86188,480 2 43094,240 111,744 ,000
b

Residual 6556,070 17 385,651

Total 92744,550 19

a. Dependent variable: Rev
b. Predictors: (constant), Res, Share
?)6/+ EE; M.)/')0 1#&+/ <V][< >
1u4
Table 67


Coefficients
Model
Unstandardized coefficients Standardized coefficients
t Sign.
B confidence interval 95,0%
T Error std Beta Lower limit Upper limit
1 (Constant) -1,191 7,613

-,156 ,878 -17,253 14,871
Share 27,603 8,725 ,459 3,164 ,006 9,195 46,012
Res 35,924 9,818 ,531 3,659 ,002 15,209 56,638
a. Dependent variable: Rev
?)6/+ EF; M.)/')0 1#&+/ $+-$+%%'#0 3#+55'3'+0.% C

The equation:

Rev= -1,20 + 27,60Share + 35,92Res [16]
2O*).'#0 :E; I+$'+ < $+4+0*+% D

Despite is related only to Serie A clubs (the only ones with known incomes), it seems suitable even
for lower categories clubs, as we can use the same variables for lower categories in trying to
generalize the estimation, and constant coefficient is proxy to zero, actually we are absolutely not
sure it is different, indeed Significance is very high (.878), so it could be a negligible contribution in
the approximation.
At this point we should verify the results, comparing with actual revenues for Serie A clubs, and
then applying the same formulas for the remaining, to verify if a generalization is possible. We have
some doubts because driver factors should have different impacts depending on club sizes, but we
would like to provide a grouping formula to have at least a value approximation.
As it is difficult to homogenise revenues and consequently values of Serie A and Lega Pro (third
division) clubs in a single formula, Ive applied different revenues approximations, following [9],
[15] and [16], and then well see an average of the results. Equation [9] has been changed,
neglecting the constant coefficient and weighting 50% both the independent variables, Share and
Res; [16] is unchanged, but without considering the constant coefficient (-1.2), [15] is unchanged
except for the constant coefficient: for Serie A clubs it has remained 23.14 (I recall that the lower
gain from TV rights was 21.38M! in that season), for Serie B clubs 5.14 and for Lega Pro clubs it is
negligible, as an attempt to exploit Serie A and, in a lesser extent, Serie B commercial and
especially TV rights advantages. In all these equations but especially following [9] and [16], as we
are predicting Serie A revenues trying to generalize to lower divisions clubs, what we are finding
1uS
are not the exact incomes but different revenues values, ranked by the drivers factors we have
mentioned, so for example a club currently militating in third division with a good catchment area,
great history and high attendance, for the current season would get a relatively low slice of incomes
with respect to its potentiality, because that division assures lower incomes from all the revenues
streams, but with ours equations it will get an higher shares, as we assume it will have greater
probability to promote in the next years increasing its revenues. To find clubs values, following
multiples models, we have taken revenues values divided by 100 to find a multiplier , then we
have multiplied those revenues by to get a value estimation. Ive analysed all the 2012/13 Serie A,
Serie B and Lega Pro I clubs, plus top 15 seasonal attendance Lega Pro II clubs. In Table 68 I have
posted top 60 clubs rank (from that sample) in terms of values (millions of euros):

Table 68

Club

Category
(2012/13)
Revenues
[9]
Values
[9]
Revenues
[15]
Values
[15]
Revenues
[16]

Values
[16]
Average
revenues
value
Multiplier

Average
values
Milan Serie A 223,0 497,3 297,1 882,7 230,0 529,0 250,0 2,500 625,2
Juventus Serie A 223,2 498,2 281,2 790,7 222,4 494,6 242,3 2,423 586,9
Inter Serie A 176,0 309,8 177,4 315,0 186,9 349,3 180,1 1,801 324,4
Roma Serie A 149,1 223,9 140,0 196,2 157,3 247,4 148,8 1,488 221,4
Napoli Serie A 134,9 183,5 135,0 182,2 142,7 203,4 137,5 1,375 189,2
Lazio Serie A 107,4 115,4 89,2 79,6 119,3 142,3 105,3 1,053 110,9
Fiorentina Serie A 88,1 77,6 79,0 62,3 96,9 93,9 88,0 0,880 77,4
Torino Serie A 73,2 53,6 67,9 46,6 78,9 62,0 73,3 0,733 53,8
Bologna Serie A 69,5 48,3 65,5 42,9 75,9 57,7 70,3 0,703 49,4
Genoa Serie A 65,9 43,5 65,8 43,4 72,7 52,8 68,1 0,681 46,4
Sampdoria Serie A 61,5 37,8 59,5 34,1 64,8 42,0 61,9 0,619 38,4
Palermo Serie A 59,7 35,7 59,2 35,1 64,8 42,0 61,2 0,612 37,5
Parma Serie A 51,8 26,8 54,1 29,2 56,9 32,4 54,3 0,543 29,4
Verona Serie B 53,3 28,4 44,4 19,6 58,5 34,2 52,1 0,521 27,1
Atalanta Serie A 47,6 22,6 51,9 26,8 53,2 28,3 50,9 0,509 25,9
Udinese Serie A 47,0 22,1 49,5 24,5 54,4 27,4 50,3 0,503 25,3
Bari Serie B 47,9 22,9 38,8 15,1 53,5 28,6 46,7 0,467 21,8
Cagliari Serie A 41,1 16,9 49,2 24,2 45,3 20,5 45,2 0,452 20,4
Catania Serie A 36,3 13,2 44,1 19,5 40,3 16,2 40,2 0,402 16,2
Brescia Serie B 34,0 11,5 30,8 9,4 36,3 13,2 33,7 0,337 11,4
Vicenza Serie B 31,7 10,1 28,7 8,2 34,6 11,9 31,7 0,317 10,0
Modena Serie B 29,4 8,7 26,1 6,8 31,1 9,7 28,9 0,289 8,3
Pescara Serie A 23,4 5,5 35,5 12,6 26,0 6,7 28,3 0,283 8,0
Padova Serie B 28,3 8,0 26,1 6,8 30,3 9,2 28,2 0,282 8,0
Venezia Lega Pro II 27,5 7,6 21,2 4,5 29,4 8,7 26,0 0,260 6,8
Cesena Serie B 25,2 6,4 25,9 6,7 26,3 6,9 25,8 0,258 6,7
Chievo Serie A 19,3 3,8 31,1 9,6 25,1 6,4 25,2 0,252 6,3
Livorno Serie B 23,9 5,7 21,9 4,8 26,3 6,9 24,0 0,240 5,8
1u6
Perugia Lega Pro I 23,0 5,3 18,7 3,5 26,2 7,0 22,6 0,226 5,1
Salernitana Lega Pro II 22,4 5,0 17,5 3,0 26,5 7,1 22,1 0,221 4,9
Novara Serie B 21,7 4,7 21,1 4,5 21,5 4,6 21,4 0,214 4,6
Siena Serie A 15,3 2,4 28,3 8,0 16,4 2,7 20,0 0,200 4,0
Lecce Lega Pro I 20,2 4,1 16,1 2,6 22,5 5,1 19,6 0,196 3,8
Pisa Lega Pro I 20,0 4,0 15,9 2,5 22,5 5,1 19,5 0,195 3,8
Reggina Serie B 18,5 3,4 18,9 3,6 19,2 3,7 18,9 0,189 3,6
Pro Vercelli Serie B 18,0 3,3 18,9 3,6 19,4 3,7 18,8 0,188 3,5
Como Lega Pro I 18,7 3,5 14,4 2,1 20,2 4,1 17,8 0,178 3,2
Reggiana Lega Pro I 19,5 3,7 14,3 2,1 17,4 3,0 17,1 0,171 2,9
Ascoli Serie B 16,1 2,6 16,7 2,8 17,9 3,2 16,9 0,169 2,9
Spezia Serie B 15,4 2,4 17,7 3,1 17,0 2,9 16,7 0,167 2,8
Ternana Serie B 15,1 2,3 16,5 2,7 17,4 3,0 16,3 0,163 2,7
Cremonese Lega Pro I 16,0 2,6 14,1 2,0 17,5 3,0 15,9 0,159 2,5
Varese Serie B 15,1 2,3 15,8 2,5 15,6 2,4 15,5 0,155 2,4
Catanzaro Lega Pro I 16,0 2,6 11,8 1,4 17,6 3,1 15,1 0,151 2,3
Monza Lega Pro II 15,9 2,5 12,1 1,5 16,6 2,8 14,9 0,149 2,2
Alessandria Lega Pro II 15,8 2,5 11,7 1,4 16,7 2,8 14,7 0,147 2,2
Avellino Lega Pro I 15,1 2,3 11,0 1,2 17,3 3,0 14,5 0,145 2,1
Empoli Serie B 13,2 1,8 14,5 2,1 14,6 2,1 14,1 0,141 2,0
Mantova Lega Pro II 12,4 1,6 10,9 1,2 13,9 1,9 12,4 0,124 1,5
Pro Patria Lega Pro II 12,5 1,6 9,2 0,9 13,3 1,8 11,7 0,117 1,4
Sassuolo Serie B 9,4 0,9 12,9 1,7 10,8 1,2 11,0 0,110 1,2
Crotone Serie B 9,3 0,9 11,6 1,4 9,9 1,0 10,3 0,103 1,1
Latina Lega Pro I 8,8 0,8 8,1 0,7 11,1 1,2 9,3 0,093 1,1
Trapani Lega Pro I 7,5 0,6 7,7 0,6 10,5 1,1 8,6 0,086 0,7
Prato Lega Pro I 9,3 0,9 6,0 0,4 9,7 0,9 8,3 0,083 0,7
Treviso Lega Pro I 8,5 0,7 6,2 0,4 9,1 0,8 7,9 0,079 0,6
Frosinone Lega Pro I 7,6 0,6 5,6 0,3 8,2 0,7 7,1 0,071 0,5
Rimini Lega Pro II 7,2 0,5 6,1 0,4 7,9 0,6 7,1 0,071 0,5
Forl Lega Pro II 7,4 0,6 5,4 0,3 7,6 0,6 6,8 0,068 0,5
Cittadella Serie B 4,8 0,2 9,0 0,8 5,2 0,3 6,3 0,063 0,4
Serie A 1702,3 2234,2 1860,5 2865,2 1830,2 2457,0 1801,3 / 2496,4
Serie B 439,8 126,0 433,9 105,7 481,2 150,9 457,5 / 127,5
Lega Pro I 251,6 34,1 174,4 17,2 275,6 41,0 225,0 / 30,8
Aggregate* 2543,9 2416,7 2565,9 2999,5 2736,7 2678,9 2651,2 / 2698,4
*It includes also top 15 Lega Pro II clubs, Serie B and Lega Pro I aggregates include all the participating clubs, not only the ones
ranked in the table
?)6/+ EH; M.)/')0 /+)-*+% 4)/*+%

Equations [9] and [16] provide close results, indeed they are very similar. [15] exploits advantages
to be, currently, in a higher division. A lack is the absence of recent results direct premiums,
anyway this weakness is partially covered by the inclusion of actual number of fans and last 5 years
attendance, which are mostly related to recent results. A factor not included in the calculation is the
economic power and ability of the ownership, which could change significantly a club value, for
example US Sassuolo has been promoted in Serie A despite its relatively low catchment area and
1u7
poor history, thanks mostly to a solid, capable and generous property, and if the club would be
currently sold it would probably be valued more than the fifty first position of our rank (with a
value of 1,2M!), that considers only a part of these positive ownership effects when including
results, number of fans and attendance. Anyway, this could be a strength of Italian model in the
long run in trying to predict as accurately as possible clubs values, as the continuity of a rich
ownership is never assured, while intangible assets like catchment area and historical results are
pretty stable factors. With respect to Table 58 it is more difficult to set a comparison with actual
values, because only 5 Italian clubs are present in Forbes ranks and a little minority of Italian clubs
has been sold in recent years.













1u8
Conclusions

We have investigated European football market with emphasis on clubs and, consequently, leagues
revenues. As clubs are the main assets of this increasing market we have tried to value them.
Economic value is not an absolute and indisputable evaluation but our aim has been to find some
reasonable estimations. We have seen that values are strictly related to annual revenues, and as
clubs (and consequently leagues) with higher incomes will have more ways to further increase their
market share, we have concentrated on multiples approaches with variables multipliers, depending
on clubs and leagues shares, results and trends. We have verified the high dependence of revenues
on number of consumers and sportive results: Consumers/fans are able to push up revenues and
consequently values, assuring greater investments possibilities and thus enhancing winning
probabilities, improving sportive results. In general, there are fans concentrating in local catchment
area and attending directly at the stadium, others consuming only media products from local or
foreign countries depending on club size, anyway they have different degrees of loyalty; it could
be influenced by sportive results, which in general are positively related to number of fans, indeed
they satisfy the existing ones and they are able to reach new consumers, thanks to positive
externalities and direct visibility, so finally they are positively related to clubs (and leagues)
revenues not only for direct monetary premiums coming from wins, but also thanks to an increased
market share which will further push up incomes and consequently results. Its a virtuous circle.
Based on these considerations, using SPSS statistics we have found some relations between
variables related to market shares and number of consumers and variables related to results, thus
verifying thy are positively related and strongly interconnected, moreover they are able to predict
with a good approximation clubs revenues. In the last paragraphs, starting from those outcomes, we
have seen an attempt to estimate top European clubs values and Italian leagues values, finding
consistent results in the first case (using Forbes values, despite some our perplexities weve seen in
the related paragraph, as a proxy to estimate the multiplier thus favouring a final comparison), more
subjective the judge for Italian values as we have very few data to allow a comparison, moreover it
is more difficult to compare clubs participating to different categories having very different sizes,
and weve had to resort to more variables approximations as we hadnt actual values of many
relevant variables, each reader may judge the results looking at the last paragraph. In all of these
cases, the aim was to rank clubs and, consequently, leagues value, in the more stable way,
concentrating on those intangible assets that constitute an intrinsic value, difficultly changeable in
the short run. Anyway, a stable valuation is certainly impossible as each formula should be
continuously updated inserting new variables values, changing because of new situations (e.g. last
1u9
sportive results), each of them with different probabilities to occur and able to continuously affect
economic values.























11u
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Vine, D. (2004). The value of sports franchises. Wharton Business School.
Watson, Farley and Williams LLP (2013). Sport briefing. Online edition obtained from wfw.com.
Xe.com (2014). Money conversion. The World's Favorite Currency Site.














114
Tables index

Table 1: Average per club revenues _________________________________________________ 10
Table 2: UEFA ranking bonus _____________________________________________________ 20
Table 3: UEFA country ranking ____________________________________________________ 21
Table 4: Market cap _____________________________________________________________ 33
Table 5: Discounted cash flow _____________________________________________________ 36
Table 6: Forbes 2013; Table 7: Forbes value/revenue ratio 2013 __________________________ 39
Table 8: Forbes value/revenue ratio (historical) _______________________________________ 39
Table 9: Forbes value/EBITDA ____________________________________________________ 40
Table 10: Number of fans ________________________________________________________ 41
Table 11: Forbes comparison ______________________________________________________ 42
Table 12: Multivariate model ______________________________________________________ 47
Table 13: Revenue fixed multiplier _________________________________________________ 53
Table 14: Fans method ___________________________________________________________ 56
Table 15: First euro premium ______________________________________________________ 61
Table 16: Euro results premium ____________________________________________________ 62
Table 17: Serie A growth rate _____________________________________________________ 63
Table 18: Pearson UCR-League revenues ____________________________________________ 65
Table 19: Average UCR and top clubs revenues _______________________________________ 67
Table 20: UCR - Pearson participating clubs revenues __________________________________ 67
Table 21: Average UCR and leagues revenues 2 _______________________________________ 68
Table 22: Pearson UCR and league revenues 2 ________________________________________ 68
Table 23: Predictions with UTR, brand, attendance ____________________________________ 71
Table 24: Regression - 1st revenues prediction ________________________________________ 71
Table 25: Italian variables communalities ____________________________________________ 72
Table 26: Bartlett test 1 __________________________________________________________ 73
Table 27: Factor analysis 1 Serie A _________________________________________________ 73
Table 28: Rotated matrix 1 Serie A _________________________________________________ 74
Table 29: Bartlett test 2 __________________________________________________________ 75
Table 30: Factor analysis 2 Serie A _________________________________________________ 75
Table 31: Rotated matrix 2 Serie A _________________________________________________ 76
Table 32: Component weights 1 Serie A ____________________________________________ 77
Table 33: Serie A variables 1; Table 34: Serie A variables 2 _____________________________ 79
11S
Table 35: Serie A variables 3; Table 36: Serie A variables 4 _____________________________ 79
Table 37: Bartlett test 3 __________________________________________________________ 80
Table 38: Serie A communalities 2 _________________________________________________ 80
Table 39: Variance explained Serie A _______________________________________________ 80
Table 40: Rotated matrix 3 Serie A _________________________________________________ 81
Table 41: Variance explained 2 Serie A _____________________________________________ 81
Table 42: Components weights 2 Serie A ____________________________________________ 82
Table 43: Serie A regression 1 _____________________________________________________ 83
Table 44: Serie A regression coefficients 1 ___________________________________________ 83
Table 45: Serie A regression 2 _____________________________________________________ 84
Table 46: Serie A regression coefficients 2 ___________________________________________ 84
Table 47: Revenues linear correlations ______________________________________________ 85
Table 48: Serie B and Lega Pro communalities ________________________________________ 86
Table 49: Serie B and Lega Pro variance explained ____________________________________ 87
Table 50: Serie B and Lega Pro components weights ___________________________________ 87
Table 51: Man Utd UTR variable __________________________________________________ 88
Table 52: Top clubs variables' value ________________________________________________ 90
Table 53: Top club regression 1 ____________________________________________________ 90
Table 54: Top clubs brand prediction _______________________________________________ 91
Table 55: Top clubs revenues regression _____________________________________________ 91
Table 56: Top clubs revenues prediction _____________________________________________ 92
Table 57: Top clubs revenues comparison ____________________________________________ 93
Table 58: Top clubs calculation variables ____________________________________________ 98
Table 59: Top clubs values comparison ______________________________________________ 99
Table 60: Italian model regression 1 _______________________________________________ 101
Table 61: Italian model coefficients regression 1 _____________________________________ 101
Table 62: Italian model regression 2 _______________________________________________ 102
Table 63: Italian model ANOVA __________________________________________________ 102
Table 64: Italian model regression coefficients 2 _____________________________________ 102
Table 65: Italian model regression 3 _______________________________________________ 103
Table 66: Italian model ANOVA 2 ________________________________________________ 103
Table 67: Italian model regression coefficients 3 _____________________________________ 104
Table 68: Italian leagues values ___________________________________________________ 106

116
Figures index

Figure 1: Aggregate profits ________________________________________________________ 7
Figure 2: Top 5 leagues growth _____________________________________________________ 8
Figure 3: Countries economies _____________________________________________________ 9
Figure 4: Top 5 revenue streams ___________________________________________________ 12
Figure 5: Europe revenue streams __________________________________________________ 12
Figure 6: Top 5 attendances _______________________________________________________ 14
Figure 7: Ticket prices ___________________________________________________________ 14
Figure 8: Attendance Serie B ______________________________________________________ 15
Figure 9: Attendance Lega Pro I; Figure 10: Attendance Lega Pro II ______________________ 15
Figure 11: Percentage of stadium filling _____________________________________________ 16
Figure 12: Top Italian teams UEFA ranking __________________________________________ 22
Figure 13: UEFA distributions _____________________________________________________ 23
Figure 14: Leagues brand values ___________________________________________________ 25
Figure 15: Top 5 second divisions economy __________________________________________ 27
Figure 16: Wacc ________________________________________________________________ 29
Figure 17: Players media value ____________________________________________________ 59
Figure 18: Attendance and revenues correlation _______________________________________ 70
Figure 19: Revenues prediction, expected and observed probality _________________________ 85

Equations index

Equation 1: Winning probabilites __________________________________________________ 17
Equation 2: Profit function ________________________________________________________ 18
Equation 3: Discount rate _________________________________________________________ 35
Equation 4: Wacc drivers _________________________________________________________ 35
Equation 5: Markham formula _____________________________________________________ 46
Equation 6: General value formula _________________________________________________ 55
Equation 7: Fans method formula __________________________________________________ 55
Equation 8: Serie A club Revenues 1 ________________________________________________ 83
Equation 9: Serie A club revenues 2 ________________________________________________ 84
Equation 10: brand prediction linear formula _________________________________________ 91
Equation 11: Revenues prediction linear formula ______________________________________ 92
117
Equation 12: Top clubs multiplier 1 ________________________________________________ 96
Equation 13: Top clubs multiplier 2 ________________________________________________ 97
Equation 14: Top clubs value formula _______________________________________________ 97
Equation 15: Serie A clubs revenues 3 _____________________________________________ 103
Equation 16: Serie A revenues 4 __________________________________________________ 104