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Tuesday, April 16, 2024

Football clubs’ staggering losses

The financial crisis engulfing Norwegian top-flight football clubs has continued to worsen, with clubs losing NOK 460 million (USD 74.3 million) over the last six years. Failed sponsorship deals, expensive player contracts, declining public interest, board decisions based on emotion and a reliance on bail-outs have all been blamed for the financial woes.

Many Norwegian football clubs including Oslo's biggest, Vålerenga, have had little to celebrate in recent years. Serious financial mismanagement has left the top two divisions in a state of economic crisis. PHOTO: Vålerenga Fotball
Many Norwegian football clubs including Oslo’s biggest, Vålerenga, have had little to celebrate in recent years. Serious financial mismanagement has left the top two divisions in a state of economic crisis. PHOTO: Vålerenga Fotball

Figures from the Norwegian Football Association (Norges Fotballforbund, NFF) showed the clubs in the top two divisions had a combined deficit of NOK 462 million over the past six years, reported newspaper Aftenposten on Tuesday. If sales of players and property were taken out of the picture, the deficit would top NOK 1.2 billion.

Year after year of losses, pay cuts and financial lifelines, such as the most recent bail-out of Oslo’s biggest club Vålerenga last week, have created a totally unsustainable culture in football management. reported Aftenposten. Despite slashing its budget, Vålerenga admitted it needed at least NOK 16 million to survive through 2014. The long-standing Hamar football club Hamarkameratene (known as HamKam) came within hours of withdrawing last week, while electricity supplier Hafslund recently threatened to cut off the power at Lillestrøm sports club after utility bills went unpaid.

“In the top leagues of Norwegian football the leadership has been absent, there has been a total lack of realism,” said Rosenborg FC’s chairman, Ivar Koteng. The property investor and billionaire has helmed Norway’s biggest club for just over two years, and argued clubs have long been overly optimistic about their sponsorship income and sporting success. “There has been more emotion than brain, we at Rosenborg have also had some of this. There is only room for one team at the top.” Rosenborg is also facing a deficit this year, but expected to be back in the black by 2015.

Bleeding money since glory days
In 2005, TV2 paid NOK 1 billion for the television rights to broadcast Norwegian football at the peak of the league’s glory days. Three years later the clubs were already bleeding money. In 2008 the teams in the top two divisions spent NOK 2.1 billion between them, and recorded a combined loss of NOK 223 million.

Between 2005 and 2010 personnel costs doubled across the premier league clubs, from NOK 400 to 800 million annually. The money primarily went to player and support staff wages.

Vålerenga management admitted it was naive to think football would continue to grow. “You saw no limitations beyond how many people you could get into the stands,” said Stig-Ove Sandnes. “In retrospect, you must be able to take a critical self-evaluation of how you were thinking through this time. You can not take out all the gains at once.” On Tuesday afternoon, Vålerenga’s board offered to collectively resign.

Other factors that contributed to the slump included TV2 losing the broadcast rights to pay channel C More, a weak Norwegian national team that failed to enthuse fans, and increased availability across multiple platforms of top-flight international football.

‘Rich uncles’ increased appetites
Professor and football finance expert Harry Arne Solberg from Trondheim Business School (Handelshøyskolen i Trondheim) argued most clubs only have a small safety margin, and usually budget just to break even. He said rich investors swooping in to cover clubs’ losses had done more long-term harm than good, making teams more lax about risks and consequences.

“They therefore become very vulnerable if something goes wrong,” Solberg explained. “Football clubs don’t have profit as the most important objective like ordinary businesses have, it is sporting success which has the highest priority. The problem is that the sum of the objectives does not go to the hop. There is only one team that can win the league and only three which can be among the three best. That also means that some must fail.”

Tried to keep fans happy
When that sporting success is not delivered on the pitch, fans cry for new star players. “The club leadership can as such be pushed in different was than other business leaders,” Solberg told Aftenposten. “There is a lot of emotion in football.”

“Even though the clubs have not had money, they have bid on players,” said Rosenborg’s Koteng. “They have wanted to solve sporting challenges by buying new players and paying well. The players don’t get better from that, but the clubs become poorer.”

The Vålerenga fans’ spokesman Christian Kjellsen agreed supporters played a role in influencing a club’s finances. “We are actually the worst,” he said. “We want long term stability, but based on good results in the short term.”

As audience numbers dropped and sponsorship revenue fell away, clubs were left with expensive player contracts they could not afford. NFF figures showed Norwegian clubs are on average more dependent on revenue from sponsors, commercial arrangements and ticket sales than other European football leagues. Many clubs struggled to attract lucrative deals in the wake of the global financial crisis.

“What we have experienced these last two seasons is that the revenues have fallen much faster than we have managed to cut costs,” said Sandnes. “But we cannot give up players because we get less income from sponsors. It has become much tougher to get partners in recent years.”

Improvement, but more to be done
Despite the fact many clubs were still in dire financial straits, NFF said there had been a lot of improvement in terms of responsible financial operations. Some clubs were starting to return more sustainable results. Administrative costs were slashed, wages were cut back and the era of long-term player contracts worth millions each year was definitely over.

Many have now advocated for a reduction in the number of premier league teams to drum up renewed interest in football. “We must drop to 12 teams as soon as possible to get a tighter and more dramatic league,” said Vålerenga’s coach Kjetil Rekdal. “Things no longer boil the same way around Norwegian football. The whole concept of the premier league must be reviewed.”

“Now real life has come to Norwegian football, there has been a completely different attitude just in the last year,” said Koteng. “Football has enormous revenues compared to other sports, so it should be possible to do this in a better way.” Woodgate



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