UEFA game plan

European football’s governing body UEFA must give up a cup competition and two long-standing principles if it is to remain a major player in the world game.

A European football superleague, creaming off the Continent’s best 32 clubs, is coming. But the question is whether the superleague will be run by a new entity involving sundry business tycoons or whether UEFA can survive, with its own revamped version of its competitions.

To come out on top, UEFA will probably have to drop one of its three Cup competitions, the most likely being the Cup Winners Cup. It will also have to drop its two guiding principles – a commitment to distributing proceeds from the cups in an equitable way across clubs, and its insistence that games are shown free on television.

Plans to run a superleague to rival UEFA have been drawn up by Milan marketing consultancy Media Partners International (MPI), which is also understood to have 2bn backing from investment banker JP Morgan for the first three years of the league’s existence. The earliest hoped-for date is August 2000.

The superleague would comprise Europe’s top 32 teams playing each other in a division without promotion or relegation. There is also talk of a second knock-out tournament involving up to 50 teams.

The rationale for these plans is spelled out in a leaked letter from MPI’s Dutch lawyer, KPMG Meijburg & Co, which reads: “The European Football market is governed by a monopolistic competition organiser, UEFA, [whose] exploitation of European club games could be seen as sub-optimal. This results in a deficient and unpredictable revenue stream for the clubs from these competitions.”

In other words, MPI believes it can generate more money from European club football nights. And the clubs believe this too, because despite earlier denials, Manchester United, Arsenal, Liverpool, Ajax and Real Madrid have held meetings with MPI to discuss the proposals.

Others are trying to help football come to a solution. MPI is owned by Rodolfo Hecht. He was formerly the chairman of Fininvest, the holding company of the vast media interests of media mogul and former Italian President Silvio Berlusconi.

Berlusconi, Hecht, Rupert Murdoch, German media magnate Leo Kirch and Saudi Arabian investor Prince Al Waleed, are all understood to be in consultation with each other over how they might use their respective TV operations or financial clout to make a deal work.

Last week, UEFA rushed out a statement from general secretary Gerhard Aigner, which was designed to calm the waters. In it he promised to arrange meetings with the Continent’s top clubs and added: “I would like to stress to the clubs that it is not the moment for nerves and haste. They should not be afraid of missing the boat. Our route to the future is based on consultation and cooperation. So there is no need for any club to be pushed into signing an agreement which it might regret afterwards.”

Conventional wisdom says a European superleague is inevitable and that UEFA is on the defensive. This is only partially true.

Throughout the Nineties, top clubs have exerted increasing pressure on a revamp of the European competitions. UEFA runs three competitions – the Champions League, the UEFA Cup and the Cup Winners Cup. A good run in its most prestigious and lucrative competition, the Champions League, can add 10m to a club’s annual bank balance. UEFA has partly responded to this pressure. During the Nineties, the European Cup – now known as the Champions League – a knockout tournament of 16 teams, has expanded to a part-league/part-knockout competition of 32 teams. However, the top clubs feel this is only the start of the process.

As Richard Baldwin, a partner at management consultant Deloitte & Touche says: “It is no longer about football on a Saturday afternoon. It’s about selling a brand and building value on the back of that brand. “

The obvious way to generate more money is to look for more revenue from pan-European TV deals. Most European clubs are locked into national TV agreements for some years to come, and most clubs who are able to do so have already expanded their grounds to ensure more gate money. This leaves merchandising, sponsorship and European-wide TV as ways to increase revenues. A European superleague would add revenue in each area. One fertile issue for investigation is whether World Cup sponsors would be interested in transferring their copious resources into sponsorship of a yearly European superleague.

However, the reason Europe’s top clubs have not taken their ball away and set up a new league long ago is precisely because UEFA holds the trump cards – its major competitions. As M&C Saatchi Sponsorship chief executive Matthew Patten says: “UEFA does organise meaningful competitions. It has years of her-itage behind it and it matters to people if their club wins one of them. The challenge for UEFA will be to recognise the business imperatives of its members.”

As one City analyst says, clubs realise the value of playing in games that matter to the general public.

“These club boards do not want to miss out on having an attendance of, say, 55,000 for Manchester United against Liverpool for only 35,000 for Manchester United against Lazio. They know that big domestic games against local rivals are the bread and butter of the game,” he says.

Tim Jenkins, who until recently was director of international football at sponsorship agent International Management Group, says: “In a league without promotion or relegation, people would lose interest in two years. It would have a certain degree of novelty value and then it would be dead in the water.”

The UEFA cup competition facing the axe will be the Cup Winners Cup. This will avoid the clutter in European cup programmes that is in evidence now. Ditching this Cup will also raise the status of the UEFA’s remaining two cups.

One source close to the European game says: “The Cup Winners Cup is easily the weakest of the competitions. It will have to go to leave room for an expanded Champions League and UEFA Cup. These games have heritage and this is the option many clubs have wanted all along.”

But there are two other demands UEFA will have to meet to maintain its iron grip as the game’s European governing body. Clubs want UEFA to drop its commitment to show these games first on free-to-air TV. Or rather they want to see these games put up for sale to the highest bidder. And as the British TV market has shown, properties like these will be irresistible to the cable and satellite operations owned by Murdoch and Berlusconi. Cable and satellite TV will outbid any amount paid by terrestrial TV and will make profits by showing these games on a pay-per-view basis.

For years UEFA has argued that showing these games on terrestrial TV keeps the game alive in hundreds of millions of homes all over the Continent. Clubs and sports agents argue football is a case apart from every other sport on the Continent. Its popularity is such that it does not need exposure to remain healthy, in the same way that cricket and rugby do.

Clubs and agents argue that the transfer of the English Premier League to BSkyB has not prevented it from becoming the most profitable and fastest growing League in the world. According to Deloitte & Touche, the Premier League made operating profits of 86m on a turnover of 463m last season.

Clubs are also pushing UEFA to adopt a less equitable distribution of the monies made from these competitions. UEFA’s belief is that money made from these cups should cascade down to the grass roots of the game, while big clubs can find other sources of revenue to augment their high overheads.

It’s a principle set against the tide of the times. Players’ wages continue to escalate and with grounds already at capacity, big clubs are looking for a greater return from the competitions that their names undoubtedly enliven.

There is a widening gap between rich and poor. At the top is Manchester United, one of the biggest clubs in the world, which made a profit of 26m on a turnover of 87m.

Last season, the Premier League had about 20 perimeter board advertisers and took about 4m in revenues from them. This season the Premiership will have only seven sponsors and will make 14m.

Premier League commercial director Stephen Pearson says: “This league has been undervalued in the past. I am sitting on a jewel of a property.”

By contrast, the 72 clubs in the Football League have lost 118m over the past five years. And even in the Premiership, only six clubs made pre-tax profits last year.

M&C Saatchi Sponsorship’s Patten comments: “What goes on at the top of the sport weakens the secondary level of the game. It makes what goes on in Division One even more irrelevant. For sponsors, there is still such clutter at the top levels of the game, that unless you are among the very biggest companies, you should question whether you want to be there.”

Deloitte & Touche football analyst Gerry Boon says in the past two years, 15 Football League clubs have had to go to their banks to refinance their operations.

“But fewer people are coming to save it because football is so much more expensive now,” says Boon.

Observers believe that all the talk of setting up a breakaway Superleague is nothing more than a way for the clubs to leverage UEFA into giving more power to the clubs and making a pact with the likes of Berlusconi and Murdoch – and signing up for Pay TV.

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