Solidarity – “We Care About Football”

In line with its democratic structure, UEFA has in place a solidarity programme which has been expanded by the growth in the TV rights of its competitions. Though rising pressures from clubs have seen the amounts reassigned, UEFA still tries to maintain distribution of funds from its top competitions, the UEFA Champions League and the Euro. This principle of solidarity allows for revenues generated by the premier level competitions to be redistributed benefiting football as a whole and not just a selected few. In this way, UEFA can help fund footballing activities which on their own could not at the current time, generate significant commercial income to break even, such as youth competitions, women’s, amateur football, futsal, coaching educational programmes, the less-developed professional leagues in smaller European countries and even refereeing.⁷⁹

Beyond Solidarity

UEFA aims to embody the initial objectives back from its foundation while becoming a “proactive, dynamic organisation with service-orientated leadership”.⁸⁰ It attempts to maintain a corporate-like efficiency required by a large international organisation, while still serving the greater family of football through solidarity and charitable activities. Aside from the hours of elite football competitions organised by the Competitions Division, the Assistance and Development Department (ADD) of UEFA

76 UEFA statutes, article 2.

77 Interview with Peter GILLIÉRON - Gilliéron added that goals are easier to align f or a federation like the Swiss one where there is much less pressure coming from the biggest clubs on the continent.

78 Interview with Lars-Christer OLSSON

79 UEFA Brochure- UEFA Champions League: A Solidarity System for European Football

creates many activities with more socially oriented aims.⁸¹ These include the EEAB (Eastern European Assistance Bureau), the Meridian Project, the UEFA Charity Portfolio (Special Olympics, Open Fun Football Schools in Denmark, FARE, ICRC) and the Kiosk Project. ⁸²

Solidarity and the different stakeholders of European football

Undoubtedly UEFA conducts many programs intended to redistribute revenues to the whole pyramid.

Yet, although decisions made at UEFA regarding the employment of funds are justified on the grounds of solidarity within the football family, the validity of such decisions remains controversial for some of the stakeholders of European football. For Thomas Kurth, General Manager of G-14, UEFA should better justify and communicate their decisions about revenue distribution:

‘The clubs believe that it is not fair that UEFA distributes the money from club competitions as if it had been UEFA’s own merit. In fact, it has been to a large extent the merit of the clubs. And when UEFA appears paying money to charitable projects, for instance, most of this money actually comes from the clubs. And it should be more clearly stated that this is money which has been raised by club football. The clubs are just the ones that are always excluded when it is about giving merits, when it is about giving recognition.’⁸³

Kurth is not alone in criticizing the way UEFA organises solidarity. Some of the experts interviewed for this paper also question the effectiveness and efficiency with which this money is being invested at the bottom of the pyramid.

UEFA’^{S FINANCES84}

Most Governing Bodies rely on the organisation of elite competitions to structure and finance their activities, and UEFA is no different. UEFA’s revenues come basically from two main sources: the organisation of the UEFA Champions League (UCL), and the Euro – the competition of European national teams. Lars-Christer Olsson⁸⁵ estimates that for the next season (2003/04) the Governing Body’s revenues will be split on a 50/50 basis between the UCL and the Euro 2004, each one contributing with roughly CHF 1.1 billion.⁸⁶ Considering that the Euro is organised every four years, in ballpark figures the split between the contribution of the UCL and the Euro on an annual basis would be around 80/20 respectively.

A closer look in the way UEFA treats its finances shows that the vast majority of those revenues never make it to the governing body’s accounts. They are actually paid beforehand to a number of beneficiaries directly or indirectly involved in those competitions (namely clubs, leagues, national associations and organisers). Thus, while the revenues produced by UEFA competitions can reach the ranks of billions of Swiss Francs from TV rights and sponsorship, UEFA’s actual revenues are closer

80 UEFA website. Administration section.

81 UEFA’s assistance programmes “Giving back to football” version 2, November 2002.

82 UEFA website. Assistance and Development section. A detailed description of these different programs can be found in appendix b.

83 Interview with Thomas KURTH, General Manager of G-14

84 All numbers presented in this section are in Swiss Francs (CHF), the official currency used at UEFA’s financial reports. The parity of the CHF against the Euro has been kept relatively stable along the last years at around €1,00 : CHF1.50

85 Interview with Lars-Christer OLSSON

86 The other football competitions organised by UEFA are not in a commercial level sufficient to generate significant revenues.

to one-tenth of that, precisely CHF122 million (~ € 80m) in the season 2001/02. It is with those revenues that UEFA covers the cost of its administration and makes direct investments in the development of European football.

Figure 2.4 portrays UEFA’s financial reality for the 4-year cycle from 98/99 to 01/02 seasons. The chart shows the accumulated revenues produced by UEFA’s championships, including Euro 2000, the amounts paid beforehand to competing teams, and the share kept by UEFA to run its activities.

As depicted in Figure 2.4, 83% of the consolidated income was derived from the UEFA Champions League, representing CHF 3.3 billion. Thereof, CHF 2.7 billion were paid beforehand. It is clear from the chart that the clubs received the largest share of those payments (91%).

Euro 2000 accounted for 9% of the total income, representing CHF 345 million. Thereof CHF 284 million were shared by the 16 participating national teams (~40%), the organisers⁸⁷ (~30%), and the Euro Pool (~30%) to be distributed lately to all member associations of UEFA. The organisation costs of competitions represented CHF 393 million, roughly 10% of the competitions’ revenues. Finally, CHF 92 million were paid as bonus to participant teams and organisers of other UEFA competitions.⁸⁸

Figure 2.4 – UEFA Consolidated Income Statement 1998/1999 – 2001/2002 – CHF m

3 960 3 450

510 238

272

Total Income Paid

beforehand

UEFA retained

Income

UEFA expenses

Assignment to provisions

and profit 83%

9%

8%

2 427

92 393

6%

7%

To Clubs (91%) UCL

3 287

Euro 345 Other 328

To Leagues and Member Associations

(9%) 254

Organization Costs

Source: UEFA Financial Reports From

UCL 2 681

Other Competitions

284

13%

From Euro

To teams (~40%) To organizers (~30%) To Euro Pool (~30%)

Playing a key role in the European Football Industry, UEFA is no different from the other actors with regards to its growth pace. As shown in Figure 2.5 the consolidated income of the competitions under UEFA’s control have grown at an impressive 29% per annum since 1992.

87 The Euro 2000 was organised conjointly by the Belgian and Dutch National Associations

88 Namely UEFA Cup Finals, UEFA Intertoto Cup, Final round of the U-21 competition. Approximately 85% of this amount was paid as bonus to football clubs taking part at the UEFA Cup Finals and the UEFA Intertoto Cup.

Figure 2.5 – Evolution of UEFA’s Revenues – CHF m

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400

1990 1991

1992/7Mte 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02

Consolidated income

Paid beforehand

UCL

Paid beforehand

Euro

UEFA’s retained income³

Other competitions UCL

expanded to 16 clubs

Euro ‘96 UCL

expanded to 24 clubs UCL expanded to 32 clubs + Euro 2000

Euro ‘92

Creation of the UCL CHF m

Note: 1) Compounded Annual Growth Rate – 92/93 - 01/02, 2)Annualized growth rate between Euro’92 and Euro 2000, 3) Notice that the growth of UEFA’s retained income is close to zero from 95/96 to 01/02

Source: UEFA – CEO Annual Report 2002

29%¹

34%¹

31%²

12%¹

It is interesting to note that while the income generated by UEFA’s two main competitions has grown rapidly during the period, UEFA’s retained income has remained relatively stable since 1996, being kept at levels around CHF 120 million annually. This actually means that the incremental revenue generated by the competitions during that period is being directed basically to the clubs participating in those competitions in the form of beforehand payments.⁸⁹ This makes us wonder if UEFA is not actually gradually softening its direct grip on the game.

But even though UEFA’s retained income has been kept relatively stable during the last years, the same behaviour is not observed in its expenses, as shown in Figure 2.6.

Although UEFA’s expenses seem dwarfed by the total level of income generated by its competitions, we would like to stress that the funds available for solidarity and development of European Football are the difference between UEFA’s retained income and its expenses.⁹⁰ The conclusion is logical: if UEFA’s retained income is being kept constant while expenses are growing, then the funds for solidarity and development ought to be declining. In fact, a closer look at UEFA financial reports show that those funds have gone from CHF 83 million in 1999/00 to CHF 67 million in 2000/01, ending up at CHF 49 million in 2001/02. A reduction of 23% per annum in the last three seasons. Even if we combine those numbers with the payments made beforehand from the UCL to the Leagues and

89 According to UEFA Financial Reports, the clubs are the main beneficiaries of the increment in the beforehand payments.

National Associations, which can be seen as solidarity, we verify a decline in the total amount that was supposed to be destined to Football development during the last three seasons.

Figure 2.6 – Evolution of UEFA’s Expenses – CHF m

0 10 20 30 40 50 60 70 80

97/98 98/99 99/00 00/01 01/02

Others⁴ Football Expenses²

Staff / Admin costs³ Committees / Events CHF m

PR /

Communications 43

49

56

61

72

14%

34%

6%

36%

10% 10%

7%

31%

41%

11%

11%

7%

33%

40%

10%

7%

8%

42%

37%

6%

10%

8%

38%

34%

CAGR¹ 9%

14%

Note: 1) CAGR – Compounded Annual Growth Rate, 2) Youth Football, Referees, Delegates, and others 3)Includes costs of UEFA building – Nyon 4) Acquisitions and project amortizations, non-football expenses, extraordinary expenditure

Source: UEFA Financial Reports

If the trend of decrease in the use of club football money for solidarity and development continues and if Olsson’s estimation about the growth in the values for the Euro 2004 are confirmed, UEFA might no longer need the revenues from the UCL to fund its activities. A larger share of the quadrennial competition of national teams would do it.

2.1.6. UEFA’SL^ATEST DEVELOPMENTS

UEFA underwent many changes in the last few years, facing growing pressures from clubs, the deregulation of the transfer market and the explosion of TV revenues. UEFA had to adapt its structure to the new challenges posed to a continental federation and its many stakeholders. We have already addressed earlier in this section the wide-ranging restructuring programme - Project FORCE - that changed completely UEFA’s organisational model. According to an article published at the uefa.com News, one of the Governing Body’s official communication vehicles, one key element that emerged from the FORCE Programme was the recognition that the clubs and professional leagues should be given greater representation within UEFA’s activities. The article continues stating that UEFA is pursuing an intensification of dialogue with the top clubs and leagues, while maintaining its long-standing bond with the national associations.⁹¹

90 Although it is clear that the revenue distributed beforehand to National Associations and Leagues might also be used for the local development of the game, UEFA has no direct control on the way that money will be used.

91 2000-2002 : Project FORCE, Sunday, 4 August 2002, uefa.com News

We will now take a look at some latest developments of UEFA’s activities that appeared as a result of the changes initiated by that project, with the aim of enhancing the relationship with leagues and clubs.

UEFA Professional Football Committee (UPFC)

The UPFC was created with the objective of promoting friendly cooperation between the national leagues and UEFA within the framework of UEFA’s statutes. It meets two to three times a year and by being one of the eleven Committees of UEFA, like all other committees, it is composed by eleven members, being one chairman, two vice-chairmen and eight members.⁹² From the eleven members, one vice-chairman and four other members are appointed by the European professional football leagues. The UPFC is administrated jointly by two professionals from UEFA’s staff: The Director of Professional Football and Marketing and the Senior Manager of Professional Football and League Services.

The Committee, as explained before, has an advisory function to the CEO informing him of the viewpoints and experiences of the leagues represented. Thus, the members of the UPFC in their capacity of representing their leagues and clubs, are responsible for presenting solutions and proposals for the CEO in areas such as contractual relationships between clubs and players, principles for compensation for training / education of players, impact of new formats of European club competitions for domestic competitions, club licensing system, release of players for national teams, solidarity system among others.

UEFA Statutes (art. 37 par. 3), allow the CEO to delegate some of his duties to Committees, thereby transferring decision-making powers. By delegation of the CEO, the UPFC has the power to decide on the principles to be observed by the leagues in making use of the UCL revenues allocated to them for the training of young players, according to the competition regulations.

The UEFA Club Competitions Committee (UCCC)

The UCCC was created with the main objective of exchanging views on current UEFA club competitions and their formats, and coordination with national team, FIFA and IOC events. The Committee meets four times a year. Following the pattern of the other Committees, the UCCC has eleven members, thereof, seven are appointed by UEFA, and four are representatives of clubs, coming from the European Club Forum.

92 The UPFC has an additional co-opted member, besides the regular 11 members.

European Club Forum

In February of 2002 UEFA hosted a workshop for clubs dealing with issues such as marketing rights and competition structure.⁹³ On July 9^th 2002, UEFA introduced the European Club Forum (ECF).⁹⁴ This body is designed to strengthen the links between UEFA and top clubs in Europe. Within UEFA statutes, the ECF is an Expert Panel that supports the Club Competitions Committee in all its tasks.

The ECF has met at UEFA’s headquarters addressing issues such as the UEFA Champions League’s commercial rights, national team issues, team-jersey sponsoring and artificial turf.⁹⁵

The ECF is composed by representatives of 102 clubs from throughout the continent. The membership structure has been defined by making use of UEFA’s ranking of National Associations.

Thus, as an example, Spain, Italy and England have the right to appoint five members, Germany, France and Holland can appoint four, and so forth.

The 102 clubs are represented themselves by the ECF Board consisting of eleven clubs. The current members of the board are Real Madrid (Spain), Lazio (Italy), Manchester United (England), Bayern München (Germany), Olympique Lyonnais (France), Galatasaray (Turkey), FC Porto (Portugal), Dynamo Kyiv (Ukraine), Glasgow Rangers (Scotland), Dinamo Zagreb (Croatia) and Litex Lovech (Bulgaria).

Figure 2.7 depicts the structure of the European Club Forum and its relationship with the Club Competitions Committee.

Figure 2.7 – Structure of the European Club Forum

UCL Holder

4 members

3 members

2 members

1 member

Vice-Chairman

Vice-Chairman

1 Member

1 Member

1 Member

1 Member

7 members (nominated

by UEFA) Club Forum

Board

Club Competition Committee (CCC) Chairman

The Board elects the chairman and three vice-chairmen

Vice-Chairman

Associations ranked 27 to 52:

26 clubs Associations

ranked 1 to 6:

27 clubs

Associations ranked 7 to 15:

27 clubs

Associations ranked 16 to 26:

22 clubs

Source: www.UEFA.com

European Club Forum Members

(102)

The chairman and the vice-chairmen sit

on the Club Competitions

Commission

93 UEFA Press Release No. 13 - 2002

94 UEFA Press Release No. 102 - 2002

It is worthwhile mentioning that all members of G-14⁹⁶ with the exception of Paris Saint-Germain and Olympique de Marseille are current members of the ECF, and among them, five G-14 clubs are members of the ECF Board. However, being an Experts Panel, the body has no direct link with the Executive Committee of UEFA, and it is only an advisory body with no decision making power.

UEFA Licensing system

Acknowledging that European clubs have gone through a great deal of changes lately, undergoing financial challenges arising from dramatic cost pressures and that the wealth has become much more concentrated in a few markets, UEFA developed recently a concept of club licensing to meet its duty to shape a framework for the future of the game. Started in 1999, the process to create this framework has become a reality and should be in place for the 2004/05 season.

Officially, the aims of this licensing program for clubs are:⁹⁷

§ promoting and improving sporting standards in European football;

§ increasing the focus on the training and care of young players in each club;

§ strengthening the economic and financial health of clubs, increasing their transparency and credibility, and placing the necessary importance on the protection of creditors;

§ adapting sporting infrastructures to future requirements so that spectators and the media can visit well-appointed, well-equipped and safe stadia;

§ improving the quality of the administration in club football; and providing the necessary help, support and education to the national associations, leagues and clubs operating the licensing system.

To reach those goals UEFA drew a set of criteria that will determine if a club is qualified to be granted a licence to participate in official competitions. Those criteria fall into five categories: Sporting, Infrastructure, Personnel & administrative, Legal and Financial. For each of those categories there will be different types of criteria: some must be fulfilled as defined, some can be fulfilled with possible alternatives and some are “nice to have” best practices recommendations. The licensors will be the national associations who may delegate this power to an affiliated league although remaining fully responsible vis-à-vis UEFA for the licensing project as such.

This grand reform of European football raised some concerns among the clubs and also at the European commission. Is this licensing system a means to slowly close access to elite competition with many clubs unable to meet the criteria imposed by the system? For Arnaud Rouger, the legal adviser of the French professional league, one cannot exclude this possibility:

‘I am concerned that this could lead to higher criteria which fewer clubs could satisfy and then you approach a closed league of sorts. From the Club system to a closed league, there is a long way to go however.’⁹⁸

95 UEFA Press Release No. 014 - 2003

96 The members of G-14 are presented in section 2.4 of this paper.

Aware of this concern among certain stakeholders, UEFA has asserted that ‘there is no desire to exclude clubs from European competitions but rather to create a framework to encourage and facilitate better financial planning, greater transparency, improved infrastructure and a real commitment to youth development. The UEFA club licensing system itself will be improved on a continuous basis in collaboration with the national associations, leagues and clubs.’⁹⁹

In practice, UEFA is assuming the role of a regulator, typical in natural monopoly industries that have undergone a process of privatisation, like utilities such as electricity distribution, gas, and water for instance. In such industries, the regulator has to make sure that the concessionary will perform a wide range of services to the entire population covered by the concession area, and it does so by establishing a set of performance measures for service level. Without such measures the concessionary, being a profit maximiser, will focus on the profitable areas, and if possible, drop the service in areas that offer less potential for financial returns. By implementing the Club Licensing System, UEFA intends to make sure that all clubs will observe a set of practices that it considers crucial for the long term survival of the sport, such as investment in youth development programmes, maintenance and security of stadiums, a sound financial situation, among others, even if those practices might mean the forfeiting of short term profits.

Dialogue with the European Union

In the spring of 2003, Jonathan Hill, the new UEFA delegate to the European Union began working in Brussels. The discrete opening of an office in the Belgian capital by the European sports governing body shows how UEFA has come to change its attitude toward the European Union in recent years.

Not prepared for the revolution created by the Bosman judgement and again not fully aware of the risks to submit its monopolistic selling process of broadcasting rights to the European Commission, UEFA has learned its lesson and considers now the European Union as a major partner in the future shaping of European football, as confirmed by Jonathan Hill:

‘In the past UEFA has been at times arrogant, but as the opening of the new Brussels office shows, UEFA is showing a positive agenda. They have a desire to build a relationship with the EU. Though still characterized as “react and respond”, UEFA has realised that it has to step forward as it faces and copes with the major commercial pressures’.¹⁰⁰

The main efforts of UEFA should now be in collaboration with other sports governing bodies such as FIFA or the IOC to try to obtain the recognition of the specificity of sport by the European Union, a recognition that should avoid the European Commission constantly revising practices of the governing bodies taken for the good of the sport, but from a monopolistic situation.

97 UEFA’s Communication and Public Affairs’ Division, Creating a better future. Club licensing for European football, March 2003, p.2.

98 Interview with Arnaud ROUGER, Legal advisor for French Professional League

99 UEFA’s Communication and Public Affairs’ Division, Creating a better future. Club licensing for European football, March 2003, p. 22.

100 Interview with Jonathan HILL

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