This post is a guest post by Ennio Longo, an investment adviser and lifelong Juventino. As happens every mercato, the debate of the actions and intentions of management has collided with the economic reality that Juventus exists in, Ennio is here to clear some concepts up. You can follow him on Twitter: @JuveEnnio
In 2008 a friend of mine lost $750,000 in a Ponzi scheme, an irony which is not lost on me as I am an investment advisor. When he asked me what guarantees I could offer his portfolio I told him that I could not because I cannot guarantee something which I nor anyone else could control. However, the other “guy” offered him a 12% rate of return on his money, guaranteed. So I didn’t get to manage his account and now he is $750,000 poorer. He also didn’t tell me he was the victim of a scam artist, I just read about it in the local paper and so did millions of others. When I was discussing it with another of our friends, he said, “Well he has enough money to make these mistakes.” In football, there are a few teams which can afford to error financially and they are as follows; Real Madrid, Manchester United, Barcelona, Bayern Munich, Arsenal, Chelsea, and Liverpool. To a certain extent we shall include PSG and Manchester City in there but as recent events have shown, they are not immune to the rulings of financial fair play. I was reminded of this story when reading comments about Juventus. “Agnelli doesn’t care”. “Elkann doesn’t care”. “Why don’t they use FIAT money?” “Marotta doesn’t know what he is doing etc.”
So much of this has been brought to the forefront by a few events, Conte leaving, Iturbe being purchased by Roma and Roma spending more money than Juventus. So let’s address all these issues and more.
First off my personal opinion, you can admire what Sabatini is doing at Roma but calling Marotta incompetent is not justified, he only assembled a team which has won three consecutive titles. Sure Conte was the manager, but I doubt he could have accomplished what he had with Secco’s teams. I don’t think anyone should ever apologize for being successful.
First off let’s address what a team can spend. It’s only what they take in, Elkann and FIAT cannot give money to Juventus like Gianni used to in the old days. Also, if I am a FIAT shareholder, I want growth in my shares and a dividend in my pocket, do you think I care about a football team? Why do you think the Qataris set up the Qatari tourism board to try and funnel 200 million Euros a year to PSG only to then be leveled with Financial Fair Play sanctions? So forget about dipping into your own pockets anymore, Roman can’t do that with Chelsea either. So now we can leave John Elkann and FIAT and EXOR for that matter out of this.
What about the issue of Juventus “not wanting to spend money”. Frankly that’s absurd. You are welcome to go on their website and examine their latest audited annual financial statements from June of 2013. You will find that Net Income (net income is what you keep after your expenses) has been in the loss column for the past few fiscal years. They had losses of 48.7 million Euros in 2011/2012 and losses of 15.9 million Euros in 2012/2013. So, there is not as much money in the team as people tend to think. You cannot look at revenues alone, you must also examine expenses.
The next argument is that Roma is outspending Juventus and they don’t have a shirt sponsor and they don’t have a technical sponsor and Juventus earned more than they did. All that is 100% true. The main sources of revenue are TV, domestic and Champions’ League, marketing, gate revenue and player sales. So this is why Roma has more funds to spend. First off, Roma has sold more than Juventus has in the past few years especially last year with Borini, Lamela and Osavldo. Therefore they have cash from that source. Second, Juve has more legacy costs than Roma does, that means when the current management assumed control of the team they had to deal with huge money spent on failed transfers and large player salaries which were still on the books, still an expense to them yet they were not getting anything from these players. Thirdly, if you purchase a player you also have to pay that player.
You don’t win championships just spending big on transfers, you win championships paying the players who play for you. Seeing as Roma brought in 3 or 4 excellent players last year in Benatia, Pjanic, Gervinho and this year Iturbe, they are still on low wages, however, if Roma wins, then the players will want salary increases. As it is they probably do want them now. Building a team is one thing, keeping that team together is another thing. Essentially Roma’s revenues were lower than Juve’s but their expenses were also significantly lower. You must examine BOTH sides of the income statement and BOTH sides of the balance sheet as well when looking into those items. In essence, Roma had more net income.
I am very sensitive to managing risk as it is part of my job to do so. One of the biggest dangers is not being able to meet salary demands. Here is where looking at non-Champions’ League revenue is vital. You cannot build a sustainable model and include variable revenue because if you don’t have the variable revenue one year, the model falls apart. Then you are forced to liquidate your players much in the same way the club did during Calciopoli. Overall it’s a similar economic impact. The Adidas sponsorship, the new shirt sponsor and La Continassa project will all assist with these. If you examine Manchester United’s revenue they were able to spend large this transfer window because they have hundreds of millions in non-CL revenue. They can afford to make these errors, Juventus cannot.
So the next criticism levied by fans is “Why isn’t Juventus earning these same revenues as United?” Why is Adidas paying Juventus 30 million and United 100 million? Is that a management failure? That is square upon the league itself. Any Serie A team has a marketing ceiling as long as the league is run the way it is. Let me illustrate. I live in Toronto, a city of about 5 million people. Our Canadian Football Team is the Toronto Argonauts. In the United States there is a team in the National Football League called the Green Bay Packers from Green Bay Wisconsin with a population of just over 100,000. Now the city of Toronto has more people, more money, more revenue, more income, however, The Green Bay Packers probably have a market value in and around $1 billion but the Argos have a value of $20 million. Why? It’s the league. The NFL is the richest sports league in the world, largest TV contract, huge marketing exposure. A team can only do so much before it hits the glass ceiling imposed on it by its league. If you built a mansion in a middle class neighbourhood would it have the same value as if would if you built it in the richest part of town?
I can appreciate the frustration, I really can. But just because I and others see it differently doesn’t mean that I accept “mediocrity” or that I “don’t care for the team” or that I “don’t want to win” or that people like me are “responsible for the downfall of the team” (this last one being my personal favorite). Success is not necessarily immediate. You can’t just hit the refresh button and everything will be as it was. Long term sustainable success has to be built over time. This is not Juventus in 1994 nor is it Juventus in 2004 because this is not the Serie A of 10 or 20 years ago. There are certain realities which must be accepted and addressed regardless of how hardcore of a fan you are. You might really want a Ferrari but cannot afford one, does that make you less of a Ferrari fan? Perhaps you have taken steps to one day afford it.
I see team building as a multi-year process. This doesn’t mean that I or that management doesn’t want to win Champions’ League, they just realize that it cannot be done in Italy the same way it was done 10 or 20 years ago. In order, you must consider Constraints, Fact and then Objectives. Looking at Objectives without examining what the Constraints and Facts are just makes it a wish. If that is what you expect then it’s not so much help from FIAT that is required but from Doc Brown’s Delorean.
First, you can’t blame everyone who don’t understand, some fans are just still teenager and some just don’t wanna understand. Then, since I have also same background, so my eyes were opened already. From the Juventus Stadium, signed free players, etc. I knew Agnelli family want Juventus to be financially independent, they don’t want end up like Lazio or AC Milan. As for Marotta, it was clear AC Milan followed Marotta’s way to sign free players and cheap players but they fail miserably. Hence, actually he and Paratici (although there are some flops) have done great job. If there is one thing I still don’t satisfied from the management are from the commercial aspect. ManU, R.Madrid, Barcelona and even PSG are actually doing better than us, their popularity just immense. I think popularity are important for any sports team since they mean bigger sponsors contract and more jersey sales, in the other word more revenue. More revenue means bigger transfer budget and higher salary cap, and so on. Juventus board must do something about it, Asia-Australia tours is another good step after J-Stadium, but they simply can’t stop after that.
Exactly!.. they need to understand how a corporation works. CLubs like PSG and Chelsea and Man City are funded by oil money or if you can imagine a rich brat being funded by their father. Clubs like Manchester United, Liverpool, Arsenal, Real Madrid and Barca gets their money from strategic marketing and planning. imagine a rich kid who just graduated from college asking from their parents money to help them build a business. Clubs like Juve, Ac Milan, Valencia, are like children of rich family who has gone broke or children of rich families who wants their children to grow independent.
Thank you for that article.
with all that said, do you or anyone else have an idea as to whether how much Juve are able to spend? I understand that we arent able to compete against the major spending clubs, but we cant be in such bad shape to which we cant purchase one big name player in the 4-5 years Marotta has been here.
Juve can spend next season once new sponsors comes in, like adidas.
Financial restraints are not a problem when you have a talented scout network. I see the scouting staff a problem at Juve. You can’t compare Ceravolo and Sivori to what they have now.
it’s not just who you bring in. it’s how you use them. the primavera system and serie b system is a terrible way of developing youth. so many promising youngsters have been wasted because of it. just look at masi. he was playing great in preseason against good teams. now he’s been ruined in serie b
truly!
Whilst the majority of Juventus fans understand the financial aspect of the club, it’s not money that’s the problem, it’s how it’s being spent. I think a lot of fans would prefer the club to go and buy one or players in the top bracket (or close to it) than buying (or slightly overpaying for) 3-4 in the average/mediocre bracket. I understand that spending the money on one or two players could also be risky (see Melo and Diego) but if successful it also has a knock-on effect with regards to selling tickets, jersey sales and, quite possibly, progression in the Champions League, where, as we all know, the big money lies.
Again, it’s not about how much money the club has but rather how the money is being spent.
yup.. ask Secco. Marotta, I still have faith in him.
While I agree on what is being said here about the financial stuff, I still think that Juventus shouldn’t be run as a business but rather as a football club. Yes, we’ve been quite successful with less means, but that isn’t for Juventus. I do understand the fact that Agnelli wants Juventus to be independant, which is good, but here we forget that football isn’t an accurate business field and I can refer to the amounts we spent on average players during the last 3 years (Isla alone did cost 16 M€). I say that pretty often, Dortmund and Atlético reached the Champions League final with less means that we have, so that itself is an argument that risks do often pay especially with the right management (ie : Conte).
Also concerning Marotta, the guy isn’t the genius which so many fans are picturing, he did failed major signings as in Alexis and Iturbe and that itself isn’t justified. How come we overpay for an unproven Morata and we can’t secure Iturbe for 2M€ more ?
Well said good sir
Roma spent 30m on Iturbe because 8m went to his agent so it would be an extra 10m for him. I guess they thought it would be better to get Morata + Pereyra instead of just Iturbe
i don’t think anyone is asking us to go and buy james rodriguez and falcao and stuff. it’s just that we’d rather it be spent on one good player like shaqiri or griezmann or sanchez rather than get like 3 pereyra level players.
“It’s only what they take in, Elkann and FIAT cannot give money to Juventus like Gianni used to in the old days.”
If thats true then theres a double standard going on and the question is why and by whom? or does this rule apply only to serie A and Italy only? If I’m not mistaken, PSG hasn’t produced any talent nor sold anyone to create revenue, they have won nothing but LFP and they keep pumping Russian natural gas money into the team. Now if there is any difference in that rule between us and PSG then theres politics going on which is one of the main reasons why Italian teams and Serie A has been made to become weak in the past decade, most effectively with farsopoli which they created when Juve was on top and practically taking over Europe.
Ok most real fans already know this. Still doesn’t explain why we didn’t bought Sanchez before the word cup for 30 mill, or Griezmann like Atletico did. The latter is overtaking us whith a debt of 100 million+. Those were the perfect options for the wing, but we can spend 20 million on a Morata. Sorry but this article doesn’t explain the multiple blunders of our board at all.
Your question can only be answered by Juve management. All we and the author can offer are theoretical answers. Good transfers needs to be planned and budgeted. Arsenal and Athletico Madrid has a ready WAR CHEST available anytime. While in Juve, buying a player may require several approval and budgeting.
Atlético Madrid does not have a ready war chest. They were in deep debt. The sales this year probably eased most of that.
I meant REAL Madrid.. sorry 🙂
Exactly my thoughts, I still don’t understand why did we pay 20M€ for a backup striker and we didn’t do so for our priorities which are left back and wings.
And now we just got Evra -_-“
Dear Author,
I hope Juve fans will be cleared on how difficult Marotta’s job is. Thank you and keep it up.
I still see Marotta as an incompetent tight ass
not really.. as Moggi described earlier. He has a provincial character and attitude
Provincial character and attitude? Are we a provincial club? No. Hes an incompetent tight ass idiot.
If I handed you 50m to go and buy some players, youre telling me you would have trouble spending the money and finding players? Marotta is an idiot, and Juve have more money to spend than they let on. We could spend 50m+, just like we did with Secco in charge, Marotta just doesnt want to. You hand me 50m and we have Sanchez and Coentrao/Rodriguez. Problems solved.
That duo would’ve been perfect. I’d take Rojo and Shaqiri right know but I think we already blew our budget, unless Vidal leaves ofcourse. In that case I’d take Verratti too as PSG is desperate to sell some player to reel in Di Maria.
Under Secco, we have a different president. Now, Agnelli is in control. At the moment, only management knows what is happening to the budget.
Hope Tevez’ dad is doing well.. His dad got kidnapped. Tevez out for preseason. Also read that Tevez paid $400,000 for the release of his dad.
I read that the family paid 36k, but i´m just glad for Tevez that he´s OK.
Its a good article, but I dont really think it says anything new.. We know we don’t have the financial strength to go buy Bale or Messi or whatever that goes 50mill+Our main problem is that we dont spend our money right in these economic hard times.
First thing, we spend way too much on too many average players. Why spend 10-20mill on players who dont really add quality to the team? Pereyra, Romulo, Padoin, the list goes on and on. We don’t need these players, you could say its good for depth (and it is) but we dont need this whole pack of midfielders when its defence and wingers we lack.
Instead of spending more on 1 or two TOP players, which would result in the same expenses, we waste money on these players.
Second, when it’s hard to buy top players, you make them yourself. But we don’t do that either, so much of our youth goes wasted on deals for those very average players. Immobile is gone for peanuts, while he would have been a great addition. We dont give faith to others promising youngsters either, like Bouy, Beltrame, Masi and so on. The whole Morata deal sounds so weird in this light, do we not have a promising attacker of our own? We do, Beltrame, Zaza, Gabbiadini, Berardi and so on, they aren’t hyped up as Morata but surely we could have spend that money on a better player? Instead we’re selling of our youngsters or including them in deals for the likes of Pereyra.
That is the main problem for us Juvefans. Not the lack of financial power, but the incorrect use of the funds we do have.
Marotta did get some good buys and free agents, but he sorely lacks the guts to get a proven top class player and to sell a player for at least his true value. The players we do sell all leave for practically free. Quags 3mill, Vucinic 6mill, Immobile only 8mill, Melo also for almost nothing. We all know these guys aren’t worth 25mill, but it’s almost a blessing if we can sell someone for as much as 10mill
Agree, unless Pereyra and Morata completely explode we’re fucked again for a couple of years.
A very informative article. It helps younger fans like me (who are 17+) understand the finances a lot better. But shouldn’t Juve spend a lot of money and buy 2 or 3 good players? Thanks for the article!