It's all about sports!!

This week the Dutch National Olympic Committee will present  a focus list of 10 sports that could help the Netherlands in realizing its ambition to structurally end in the top 10 of the Olympics medal table. This is one of the requirements for hosting the Olympic Games. Our analysis shows  the 10 sports which will make the focus list and which hence may receive extra funding are likely to be the following ones: skating, aquatics, athletics, rowing, judo, field hockey, cycling, sailing, equestrian and gymnastics.

On 30 august the Dutch National Olympic Committee (NOC NSF) will present its “study top 10”. This study should give insight in the present top sports climate in The Netherlands and its future ambitions. In order to fulfill its objective to host the Olympics in 2028, one of the ambitions of the NOC NSF is to structurally end in the medals top 10 of Olympic Games. The top 10 should be seen in this perspective; it consists of those sports that have a decent chance to realize this ambition. Clearly these sports should qualify for extra financial support.

The Netherlands has only once been in the Olympics medal top 10 table. Let’s first briefly examine how The Netherlands has performed during  the Olympics in the last 7 editions and simultaneously how many gold medals were required to end up in the medal top 10. 

From this table the following conclusions can be drawn:

1. The Netherlands has only once been able to end in the top 10; this was during the tremendously successful  Sydney 2000 Games.
2. The Netherlands usually is ending in the top 20 in the Olympics medal table
3. In order to realize a top 10 position around 7 gold medals are required. Only during the 2000 and 2004 editions this number was exceeded
4. In order to structurally end up in the medals top 10 The Netherlands needs more gold medals.

Choices have to be made. Not surprisingly more money is required to stand a chance to realize this ambition. Besides a better sports infrastructure, better facilitation and better support of top athletes, it is clear that choices have to be made as far as sports are concerned. One would invest in those sports where chances of gold medals are the best.  The 80/20 rule also applies to sports and it is no different from your average company, where just a few clients (20%) make up 80% of the turnover. As we will see, it ain’t that different in sports; a few sports are accounting for the vast majority of medals. It doesn’t require rocket science to determine which sports these are. We have used 3 criteria to pinpoint where The Netherlands would have a decent chance to gain gold medals.

1. How many gold medals per sports discipline are at stake during the Olympics? Clearly this makes a difference; are we going to invest in athletics, where 47 medals are to be gained or say in triathlon with only 2 gold medals to be divided.
2. Do we have sufficient talent available in those sports to support our ambitions? In order to measure this, we have looked at the size (in terms of members)  of each sports federation that could be active on the games
3. In which sports do we have a historic tradition as far as medals are concerned? In several Olympic sports, we have barely won any medals  at all. For example The Netherlands does not have a tradition in wrestling, where it has never gained any medals (also reflected in the number of members at the wrestling union). It should therefore be questionable whether such tradition can be reversed quickly, particularly given the available resources of such sports.

 In the table below we have listed the different Olympic sports in accordance with the criteria mentioned above.

5 out of 26 different sports account for 50% of the medals. There are 302 gold medals to be handed out at the next Olympics in London split over 26 different sports and even more disciplines. Important to realize is that 5 of these sports account for approximately 50% of all the medals, coincidentally wrestling being one of these sports. The 10 sports with the least gold medals to be gained account for only 10% of all the medals. Hence, this explains why focusing is important. Looking at the total members per union, it is clear where the Netherlands has the biggest resources as far as talent, trainers and tradition is concerned and not surprisingly this is also reflected in the column detailing the total number of medals that historically have been gained in a certain sport.

The top 10 focus list. Taking these criteria as a yardstick it is not difficult to arrive at a focus list (or a study top 10 as NOC NSF is defining it). Apart from skating (we have not analyzed the Winter Olympics for obvious reasons –  the vast majority of Dutch gold medals are gained in skating -), we would arrive at the following sports: athletics, aquatics, cycling, judo, rowing, sailing, equestrian and field hockey.  It means there is one sports left. As football and tennis are played on a full-time professional level and not primarily dependent on NOC NSF, we would not expect these sports to be on the list. Given both the number of medals at stake and the number of people participating in the sports, we believe gymnastics would be a prime candidate to end the list.

Recently Vitesse became the first Dutch football club to be acquired by a foreign investor. With this take-over Vitesse appears to be saved from bankruptcy as the club has been in financial difficulties for several seasons. Opportunism is the name of the game, as both supporters and new club owner expect to become national champions within 3 years. This may be a bit overly optimistic and lacking any realism. Clearly Vitesse’s financial situation is to improve but this will not mean the club now can spend zillions of money on buying new players. It’s precisely this what UEFA’s financial fair play plan is designed for; to stop reckless spending by clubs and to stop rich benefactors (or sugar daddies) from injecting large amounts of cash.

Caution required! Supporters and management of Vitesse are over the moon. The club appears to be saved. The Georgian investor Merab Zjordania has bought all the shares of the club and hence the club is no longer in financial troubles. Good news of course! Most of Holland’s football clubs have similar problems and any club saved from potentially going down should be cherished. Nevertheless, the club and supporters should be careful not to get totally carried away. For the first time since the nineties Vitesse is talking again of becoming national champions and entering the champions league. In the nineties this also happened when Karel Aalbers took the reigns. He also had big ambitions with the club, but we know what happened,  it all ended in tears; Vitesse almost went bankrupt and could just be saved by outside parties and the local municipality. We do not say the story will repeat itself as circumstances are different this time. What we do say is that the club should be cautious and manage expectations properly as there are several risks looming around the corner, which we will briefly address. See article Telegraaf

UEFA’s financial fairplay plan limits reckless spending. In Vitesse’s press conference there was mention of the club attracting all kind of new players. It is precisely this that the UEFA will attempt to stop. UEFA’s financial fair play plan (FPP) is designed to stop the reckless spending by clubs and to stop rich benefactors from injecting large amounts of cash as this distorts the transfer market. Supported by the European Club Association, the following main new rules will be set in motion:

1. Clubs will only be allowed to enter European competition if their generated revenues – money from sources such as television rights, gate receipts, competition prize money and sponsorship – is equal to or greater than their expenditures. This rule will run into effect for the reporting season ending 2012 whilst the first season that clubs can be banned from European competition will be 2014-15. What this means is that UEFA is actually looking at the Profit and Loss account of a club. If paid salaries are over the top and not covered by revenues, it means PROBLEMS! So reckless spending on players won’t do the trick as salaries for these players will be too high! Revenues should be increased and this won’t be easy in the current Dutch setting! The creative masterminds  who claim that there are loopholes around this should be careful. Constructions such as benefactors paying excessive amounts for sponsoring or lounges in the stadium won’t work; the UEFA will likely judge at arm’s length! Moreover governance and transparency will become of extreme importance, something which will not always come easy. What does this mean? It means that wages and transfer fees in particular are under surveillance! However there is also good news; sugar daddies can still invest in stadiums, training grounds  and youth development  as these will be kept out of any calculations
2. As of June 1, 2011 clubs will no longer be allowed to owe money to other clubs, players, tax authorities and social service departments.  Hence this concerns particularly the balance sheet. This is where benefactors can help out! In fact sugar daddies are allowed to contribute up to a maximum of 45 million Euros for the 2013-14 and 2014-15 seasons together. This will be reduced to 30 million Euros for the period covering 2015-16, 2016-2018. This obviously is good news for Vitesse as debt can be reduced and structural long-term  investments can be made. As far as investments in players are concerned, yes these investments can be made, but (as said) only if the accompanying expenses are covered by revenues. See recent article financial fair play 

For the non financial wizards amongst us, this may all sound like akakadbra, so let’s simplify it! Under the new circumstances Vitesse cannot  invest without any limits  in new expensive players. What it can do is investing  in the future of the club! In fact the new rules may be regarded as a blessing as they should guarantee the sustainability of the club! So every reason to cheer! With the help of the new investor Vitesse is here to stay and with a solid long term policy (see FC Twente) it might even become champion sometime in the future. However  this is unlikely to take place in the near future as revenues are not sufficient as of yet to allow the investment in expensive players. There is every reason to be happy but it should pay tribute to management if it would be a bit more cautious in managing expectations as far as the championship is concerned!