Clubs forced to look at new ways of generating revenue
The day he decides that he’s not into this anymore, the club will collapse
● With the world experiencing an economic crush, clubs around the globe have seen their spending power slashed.
The PSL is no exception. Premier Soccer League (PSL) outfits like AmaZulu FC and Cape Town City and a couple of others in the GladAfrica Championship have been forced to cut players’ salaries.
It’s been worse for Bloemfontein Celtic, who were hamstrung by financial constraints long before Covid-19 wreaked havoc with world economies.
The situation calls for clubs to find new ways of generating revenue. Currently teams in top-flight football draw income from four streams: grants derived from TV rights, sponsorship and gate takings.
The cost of putting on a PSL match versus the revenue from the ticket sales doesn’t look like it makes any profits for teams.
It ranges between R300,000 and R1.2m, depending on the size of the game, and yet the average price of the PSL match ticket is R40.
Both Errol Madlala, director of Pitch Sports Entertainment and Media, and Sgwili Gumede, founder and executive director of sports finance research company Sport Boardroom, agree that without the deep pockets of the owners most PSL clubs would struggle to manage their expenses.
“If it carries on for three seasons it starts putting pressure on the owner to take from the family coffers to fund the club,” Madlala says.
With the economy likely to shrink further, Gumede says PSL clubs have to up their ante in making sure they get everything from all possible sources of revenue, most of which they’re not taking advantage of.
“Smaller clubs are far more reliant on broadcasting income because that’s the only one of the income streams in which they get a big share.
“With PSL clubs that number goes to about 89% and for the bottom teams nearly 90% of their income is just broadcast. So the rest of the income is from match day, small sponsorship here and there and they then rely on the top-ups from the owners and municipalities.”
Madlala says smaller clubs should learn from Kaizer Chiefs and Orlando Pirates, who have ventured outside sponsorship, creating more merchandise outside of what they do with their technical partners.
“You can see Pirates’ strategy of expanding outside their fan base by creating a strong e-sport division, which allows them to get to non-traditional fans that follow different types of sport,” Madlala said.
“They augment their merchandise to appeal to their market, which increases their fan base with much younger urban audiences.”
Gumede urges the PSL to finalise club licensing, which should ensure that every club lives within its means, as is done in European leagues.
“The financial fair play rules [in Europe] were put in place to prevent the situation of clubs that are running but whose financial well-being is based on someone else’s kind gesture. On their own they’re not sustainable,” says Gumede.
“So, for instance, if you have R100m in revenue you can’t then have expenses that are higher than R160m.”
So if the rules, like those in Europe, were in place in the PSL, a Bidvest Wits scenario would not have been allowed, we asked Gumede.
“Absolutely not. So if you start implementing those rules then teams begin to start living within their means. If the revenue is only R50m, then expenses should be the same. Because if you continue running the system where the revenues are much lower than the expenses, you are then piling up your losses and debt, and there will come a time when the debt is too much and the club collapses. And that’s exactly what happens in SA.”
Gumede further makes an example of a club like Mamelodi Sundowns that everyone knows hugely depends on the generosity of their billionaire owner, Patrice Motsepe.
“Yes, this is one club I can tell you that it doesn’t live within their means.
“I don’t know their revenues but from what Patrice has said on a few occasions, they’re not.
“The problem with that system, which is why Uefa put those rules in place, is that the day he decides that he’s not into this anymore, the club will collapse.
“So football leagues therefore have the responsibility of ensuring that that thing doesn’t happen. Imagine if halfway through the season the owner decides he’s sick and tired, or anything happens to him and his family decides he liked this football but we’re not interested anymore. So there’s a far bigger risk that the game faces when you have too many clubs that live beyond their means. They’re simply not sustainable.”