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ANALYSIS | Ligue 1 breaks €2 billion mark while Marseille flounder: a deep dive into the financial findings of the DNCG

Though the football season in France, and around the world, remains frozen in time and shrouded in uncertainty, away from the pitch the administrative cogs continue to whir. Indeed, March 11th saw one of the most significant events in the national football calendar take place as usual: the publication of the DNCG’s financial report for the 2018-19 season.

The release from French football’s financial authority contains a detailed breakdown of league-wide finances, along with a peek into individual club accounts. As is the case every year, there are several key talking points: record commercial revenue for French professional football, a sizeable increase in expenses (notably in terms of wages), and Marseille staring down the barrel of the proverbial gun with over €90 million in debt. These, along with some intriguing statistics and surprises. And, of course, a healthy dose of controversy.

The DNCG: A brief overview

French football’s financial watchdog is responsible for monitoring and supervising the accounts of the country’s professional football teams. This includes, and is not limited to, helping develop clubs’ resources and applying sanctions to those who do not observe regulations.

After the DNCG reviews the clubs’ accounts, their findings for the previous season are released in March. Teams then typically have until June 30th to get their books in order and present them to the authority.

Clubs found to have breached the rules can face a number of possible sanctions including budget restrictions, transfer embargoes and even relegation. In June 2017, Corsican side SC Bastia, having just been relegated to Ligue 2, were demoted by the DNCG to the Championnat National 1 and then again to National 3 (France’s fifth tier) due to financial difficulties. Similarly, Lille faced a partial winter transfer ban and narrowly escaped relegation in 2018. 

France breaks €2 billion

In terms of the DNCG’s league-wide findings, perhaps the most notable takeaway is the overall turnover for Ligue 1 clubs. Earnings from transfer fees are down from €840 million to €635 million, though the previous season’s year’s figure was significantly aided by Monaco’s sale of Kylian Mbappé to PSG.

However, disregarding player sales, clubs in France have generated over €2 billion for the first time in history, with Ligue 1’s commercial earnings notching in at €1.902 billion (€2.537 billion including transfers). This constitutes a 12% increase from the previous season.

A big factor for this growth is a 21% increase in sponsorship and advertising income (up to €414.8 million), along with a €110 million increase in broadcasting rights, largely due to the performances of French clubs’ in European competitions (and the start of a new UEFA broadcasting rights cycle).

In fact, the DNCG’s report shows just how lucrative participation on the European stage can be, especially in the Champions’ League, with international matches constituting 49% of the total broadcasting revenue earned by the six Ligue 1 sides competing in Europe over the course of last season. For instance, 59% of PSG’s income from broadcasting came from the Champions’ League, compared to just 38% from Ligue 1.

Top-heavy tilt

One of the most fascinating elements of the DNCG’s report is the clear, insightful comparison made between clubs in terms of income and expenditure, in various areas. For instance, we can often see a strong concentration in both of these departments among just a small number of clubs.

For total non-transfer earnings, PSG alone account for 34.8% of the league, while also including Lyon and Marseille sees that total reach 53%, a proportion which would be just 15% if all 20 Ligue 1 clubs enjoyed equal earnings.

A similar story follows for the distribution of the league’s broadcasting rights, with the top five clubs (the aforementioned trio, plus Monaco and Rennes) accounting for just over half. In comparison, Amiens and Dijon sit bottom with just 2.4% of the share each. Gate receipts are even more concentrated, with PSG and Lyon accounting for 45.8% of the league’s total (compared to Montpellier and Dijon’s measly 1.2% each). Sponsorship, advertising and merchandising, however, see the greatest imbalance, with Les Parisiens taking home a whopping yet somewhat predictable 56.4% of the league’s total. For Nîmes, that figure sits at just 0.4%.

As above, so below

In terms of expenditure, there are several interesting observations to be made. Looking at the budget ranking of the league last season, Nîmes were by far and away the biggest overachievers, finishing in 9th despite having the lowest budget in the division. This makes Les Crocos’ success all the more remarkable, and perhaps explains their struggles this campaign.

Other clubs to outperform their means were Reims and Montpellier, while Monaco’s 17th place finish, while boasting the fourth-biggest budget in the league, looks even more abject.

The talking points do not stop there. The report outlines that no team with a payroll exceeding €30 million has ever been relegated from Ligue 1. That being said, Toulouse are listed in the report as being in the group of clubs with “a payroll between €30 million and €70 million.” This would mean that, should the season conclude rather than be written off, Les Violets would become the wealthiest club ever to be relegated from the top flight, emphasising just how woefully run le Téfécé truly are.

Big spending

With the league’s record turnover come record expenses. Despite less spending overall on players (with no Neymar-sized surprises), operating expenses were up 11% in the league. This is largely down to an increase in agents fees’ paid, but most significantly down to ever-increasing wage budgets. The total paid to players is up 9%, while payments to professional and coaching staff was up a huge 32% from the previous season. The report puts this primarily down to “[…] the termination payments paid over the course of the season.” A lucrative season to bite the bullet, it seems.

Wages, the report outlines, represent 54% of the operating expenses of all clubs combined, while PSG’s wage bill represents over a quarter of the entire league’s total, over 20 times larger than that of Amiens. If that disparity wasn’t enough, the top 10% best-paid players in the league combined are paid more than the entire rest of the division combined, taking home 54% of the total wages.

In spite of Ligue 1’s record commercial income, the financial watchdog reports an overall loss of €126 million. Though smaller than in the 2017/18 campaign, overall expenses are up 11%, with payroll and player investment “[…] in the run-up to the new cycle of domestic broadcasting rights” cited as the main reason for this. With clubs benefitting from an improved domestic broadcasting rights deal as of next season (a gross increase of €400 million for the league), there should be no great cause for concern.

What is concerning, and indeed surprising, is some of the information released about individual clubs.

Club breakdown: the good, the bad and the downright unexpected

As was the case for the previous season, 15 Ligue 1 clubs have a profitable net income.

Unsurprisingly, PSG are the biggest earners, with a net profit of €27.627 million. In second, however, are Toulouse, bringing in €10.275 million. Despite declining attendances and a toxic atmosphere, les Violets prove that, while on the pitch results have been abysmal in recent years, purely in a business sense, their model is a successful one.

Lyon and Nice clock in at €7.278 million and €6.724 million in net profit respectively, followed by Strasbourg, Montpellier, Amiens, Nîmes, Dijon, Caen, Saint-Etienne, Nantes, Guingamp and Reims, all raking in between €0 million and €5 million. Monaco are the club with the smallest profit margin: just €3,000.

Moving on to the five clubs making a net loss, Rennes were just over a million euros short of breaking even, while Angers found themselves making a relatively hefty €11 million loss. Given the club’s successful model, this is unlikely to be of particular concern, and certainly a manageable amount ahead of their meeting with the DNCG.

Bordeaux are the first of the three clubs to be in the red zone, recording a loss of €25.7 million. The club registered a loss of €21 million the previous season, and sought to rectify this through selling prized assets Jules Koundé and Aurélien Tchouaméni for more than €40 million, while spending relatively sensibly in the summer. Clearly though, the clubs ideal model of buying and selling young talent to make a profit is not working as well as hoped.

A worrying situation, then, and one which had already been addressed by Club President Frédéric Longuépée in January, who spoke of the club’s financial situation to RMC Sport, “[…] we are thinking about the best way to develop the club while also being aware of the whole economic dimension. We make sure, as we agreed to before the DNCG, to demonstrate a financial situation that is as healthy as possible. We try not to spend more than we earn, and in the end we have to create a model that is self-sufficient.”

Confident words, but there is little doubt that owners King Street will need to absorb the debt, lest the club risk strict sanctions. The sustainability of the club’s model may also be due a rethink.

Following les Girondins are Lille, who remain in debt with losses of €66.587 million. After a calamitous couple of years, including their near miss with automatic relegation, the situation has somewhat stabilised. There are also some important factors to consider. Lille’s debt has been decreasing by roughly half year-on-year, with €250 million in June 2018 dropping to €128.5 million a year later. Moreover, the DNCG were overseeing Lille’s wage bill and transfer allowances for the 2018/19 season, restrictions that were lifted at the end of May, proving that the DNCG were satisfied with the club’s progress.

Though posting a loss of €66 million, the club made a net profit of €127,000 following the sales of Thiago Mendes and Youssouf Koné to Lyon and Rafael Leão to AC Milan by July 31st 2019. With possible impressive income from another high league finish, Champions’ League participation and potential player sales, les Dogues are unlikely to be under serious threat of sanction.  

Champions Project flounders

However, by far and away the biggest cause for concern is Marseille, posting a loss of €91.4 million, an extremely worrying figure that explains a recent increase in surveillance from UEFA due to possible breaches of Financial Fair Play Regulations.

The club’s dismal run in the Europa League, and continued inability to qualify for the Champions’ League have proved costly. So too has their model of valuing experience over youth, and thus paying far higher salaries than their direct European competitors.

The club were already fined by UEFA last summer, though the club refused to honour this commitment. Faced with possible sanctions both domestically and internationally, and with their potential second place finish this season seriously under question given the current coronavirus crisis, Frank McCourt’s Champions Project may have run aground.

Off-field Olympics

Though the stadia of Ligue 1 remain empty, fans haven’t been short of off-the-pitch entertainment. Outspoken as ever, Lyon President Jean-Michel Aulas has been busy stirring the pot, at first by suggesting that the current season be cancelled due to the current COVID-19 situation. This would therefore mean that his Lyon side, currently seventh and 10 points off the podium, would qualify for next season’s Champions’ League (having finished third in 2018-19), while Marseille, second with a six point cushion, would not.

Since then, Aulas has accused the club of receiving favourable treatment, telling La Dauphiné Libéré that OM operate “completely outside the limits of financial fair play, with the blessing of the DNCG”; serious, and somewhat ludicrous claims, which have prompted a prolonged spat with Marseille President Jacques-Henri Eyraud, a regular sparring partner.

While Aulas’ comments are nonsense, he is perhaps alluding to the fact that, unlike UEFA, the DNCG do not oppose club owners injecting their own personal funds in order to balance the books. Regardless of this, Marseille should face sanctions, and the DNCG’s ruling may be all the more severe should the season be voided, and Marseille find themselves without Champions’ League money.

The DNCG and COVID-19

There is no doubt that the current situation globally will have a financial impact on football clubs, and this is no different in France. Speaking on the day of the release of their findings, DNCG President Mickeler told L’Équipe, “There are no short-term risks on the sustainability of L1 and L2 clubs.”

Key figures in French football, including the LFP Executive Director General Didier Quillot, and French Football Federation President Noël Le Graët, have both advocated finishing the league in July, and postponing the DNCG’s annual hearings to the end of that month, rather than the end of June, as scheduled.

That being said, this is a situation which is changing every day, and the rest of the campaign remains steeped in uncertainty. The decisions made surrounding the outcome of the campaign will have serious ramifications for many clubs, and perhaps most significantly for OM.

L’Équipe report that UEFA and the DNCG will be accommodating to the situation, although the potential €400 million that the league stands to lose if the season isn’t finished, according to KPMG (via Ouest-France) could have ramifications for all involved.

Conclusions

All in all, the situation is a tense one, especially for Marseille, who await their appointment with the DNCG, and the decision surrounding the end of the season with baited breath. Lille and Bordeaux have some housekeeping to attend to, while Toulouse might become the first club ever to be relegated on a goldmine.

More generally speaking, the league remains in a very healthy position, and new broadcasting rights should see clubs strengthen further both on and off the pitch. Though PSG still enjoy by far the largest slice of the pie in many ways, time will tell whether this new TV money will level the playing field. And Jean-Michel Aulas probably needs a holiday.

J.Sm.

A piece assessing Marseille’s situation in greater detail follows tomorrow.

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