Last weekend FC Twente was crowned as the new Dutch national football champions. This may have come as a surprise to many, certainly given the club’s history of almost being bankrupt just 7 years ago in the 2002/03 season. Strong leadership, a prudent policy, a strong team with high self esteem and a solid fanbase are the main pillars behind the success. We explain why. 

FC Twente? Foreigners may ask FC Who? However that would do the club injustice. FC Twente has been around in the Dutch League since 1965 and is a household name to the Dutch. The club only relegated once, played many times in Europe and sees itself as the pride of the eastern part of The Netherlands (note that FC Twente is named after a region in the East). In all these years the club never managed to become Dutch national champion albeit that they were very close in 1973/74, when they just lost out to Feyenoord.  In the 2002/03 season the club went almost bankrupt but since then it has risen from its ashes with this year’s championship being the cream on the pie. It has not been the locker room mental pep talk of Al Pacino which has brought the club this success but a mixture of different reasons, which we explain below.

1. The team. More than any other club in the Dutch Eredivisie (Premier League) FC Twente has been an example of a team without any prima donnas. There may have been stronger teams in the league, but none of them showed as much unity and mental toughness as FC Twente. With team discipline and character, the team won a lot of its matches in the last quarter of its games. Bryan Ruiz, Nkufo and Douglas are probably the big names in the team, but mentioning only these guys would fail to recognize the effort of all the other players, without whom Ruiz, Douglas and Nkufo would not have been able to excel. 

2. The coach and staff. The success of FC Twente is also the success of coach Steve McClaren. After having been written off in the UK, McClaren has come back with a vengeance. In just 2 years time, he managed to make the club national champion, after having already finished in the number 2 position last year, so no coincidence here. This should be seen as a formidable achievement, particularly given the number of important players that left the club last year. Few people would have given even a dime for Twente’s chances after the departure of Braafheid, Elia and Arnautovic. However, their replacements Tiendali, Ruiz and Stoch proved them wrong. The merits for this should clearly go to McClaren and his technical staff (including the scouts).

3. The Management. As stated earlier, FC Twente almost went bankrupt just 7 years ago with debt of around EUR 14mln, were it not for Herman Wessels and its current chairman Joop Munsterman, who took charge in 2004. Munsterman, who made his career in the newspaper business, has been the big architect behind the revival of FC Twente. He is known as a tough reorganiser and negotiator. With the help of Enschede, several sponsors and the founders of the stadium, he managed to salvage FC Twente and wrote black figures in 2005 and ever since. Thrift, prudence and hard work have been the main elements of Munsterman’s policy. He managed to grow the budget from just EUR 11mln in 2003 to EUR 33mln in the current season, making Twente the 4th biggest club of The Netherlands as far as turnover is concerned. With the prospects of the Champions League, this budget should grow even further to well above EUR 40mln in the coming year, implying the club will pass Feyenoord. Twente’s new stadium, the “Grolsch veste” has been instrumental behind this growth. In 2008 the club moved into this 24,000 spectator stadium, increasing capacity by 11,000 and hence substantially increasing turnover. This year capacity will be further increased to 32,000. The club managed to obtain the ownership of the stadium through a mortgage loan. However, the incremental operating income (including catering etc) of the stadium more than compensates the financial charges of these loans. Although debt is substantial (> EUR 30mln) and will rise further with the current expansion, this should be no problem. Firstly this debt is largely related to the stadium (serving as collateral). Secondly FC Twente is paying off this debt as the club is generating positive cash flow and also is using part of the proceeds on players. Secondly, players are valued at zero on the balance sheet! Thirdly, player salary costs are relatively low at only 52.4% of sales. Hence, from a financial point of view, FC Twente is one of the healthiest clubs in The Netherlands, which is reflected by the category 3 rating of the Dutch Football Union. All in all one can say that the management team of FC Twente has done a remarkable job! And the end is not in sight. No doubt Munsterman and friend will try to further leverage the function of the stadium; there are plans to make the Grolsch veste a regional centre for science, education, sports and recreation. A hotel, railway station, congress center, offices, skating hall, healthcenter etc should arise. Hence plenty of room to leverage!

4. The region and fanbase. FC Twente’s fanbase has been instrumental for its success. The club has always had a very loyal fanbase. The values of the club are football, atmosphere and solidarity, whilst the club is a symbol for the region. Hence the club has 10 official supporters clubs spread across the region. This hinterland should guarantee that the new extra capacity of the stadium will be filled up. The success of the club should fill the traditional laid back and reserved population with confidence, which should be good for the region. Additionally FC Twente is one of the leading clubs as far as socially responsible policy is concerned being active in many different educational and public health projects in the local district, an example of being good neighbours. This is exactly what Twente binds and connects to the region and vice versa.  

5. The league. Clearly the Dutch Eredivisie is not what is used to be. Quality has clearly detoriated and the height of a budget is by no means a guarantee for winning the league. Ajax, PSV and Feyenoord used to win the league each and every year, but these clubs no longer manage to outpace the competition as FC Twente and AZ last year have clearly proven. The main reason has been that it has become increasingly difficult to retain top talent. Obviously this has resulted in a nore exciting competition but clearly at the expense of quality.

The miracle of the east; FC Twente has proven it can be done! A club can become champion with a solid policy, good financial management and a good technical staff. In contrast with AZ Alkmaar, which entirely depended on a rich maecenas, the FC Twente model looks more sustainable. Nevertheless, the proof will be in the eating of the pudding. Twente will face two major challenges in the coming year; the pressure of being national champions and the departure of several key players (Ruiz, Douglas, Perez?) and possibly Steve McClaren. That won’t be easy and chances of a repeat performance are likely slim. So we said last year…….but then again, maybe it pays off to just put in that dime of last year……….

Slowly the details of the new 2011-12 Volvo Ocean Race are being revealed. Dates, ports, rules and routes have recently been revealed and one by one teams participating in the race are coming forward. 6 candidates seem to be sure with another 20 syndicates currently considering an entry. With the announced format changes and the increase in competitors, the newest edition promises to be a blast with all the potential to exceed the success of the last edition.

It is still early days but slowly the outlines of the revised format of the Volvo Ocean Race are beginning to take shape. And it promises to be even better than the Race’s last edition. Closer racing, an increased number of teams, exciting stopover venues with great in-port races and festivities, great sailors and exciting multimedia coverage should lead to a great experience for everybody involved, be it viewer, gamer, sailor, sponsor or organizer. It’s gonna be fast and furious with loads of excitement. Let’s see where we are now…..

Course and date set! The next Volvo Ocean Race will take place from 29 October to 8 July, taking eight and a half months, similar to the 2008/09 edition. A difference however is that the course is slightly longer, set at 39,270 nautical miles rather than 37,000. This time there will be 10 rather than 11 stopover cities. Similar to 2008/09 we will start with a first leg from Alicante (Spain) to Cape Town (South Africa) again passing Gibraltar as well as Fernando de Noronha off the Brazilian Coast; a traditional leg where the fleet has to deal with the famous doldrums. The second leg will go from Cape Town to Abu Dhabi, rather than to Cochin (in the last edition). As there is a risk of piracy, the fleet will have to sail around an exclusion zone. Nevertheless this will remain a dangerous leg but with a great finish in store. No doubt Abu Dhabi wants to set itself on the yachting map and we know money will not be an issue here. Next we will go to Sanya in China. No doubt the sailors are happy that they don’t have to go all the way north into the winter of China this time, battling storms etc. In contrast Sanya is the only tropical island province of China, so no complaints from the crews I would imagine. Rather than last time’s very long and tiresome leg China-Brazil, there will now be the traditional stop in between; the fleet will make in stopover in sail crazy Auckland, a stop everybody will agree with and look forward to. The Kiwis will participate with Emerald Team New Zealand in this edition and hence it promises to be an enormous spectacle. From Auckland we will go on to Itajai in Brazil, battling the Southern ocean, always one of the most spectacular legs of the race and also the longest one. Itajai marks of course a change from the usual Rio de Janeiro stop, but appears to be at least as much of a treat. Miami marks the surprising North American stop. Although Ken Read on Puma, the North American entry, might have preferred to go up north a bit further, Miami has the glitz and glamour that fit the race. On to Europe, where Lisbon has the honor to be the first stopover port and this is an honor indeed given that 34 European cities bid for hosting the race. Sailing conditions in Lisbon tend to great and of course the city has a great maritime past. From Lisbon it is on to Lorient in France, home of Groupama. This sound like a short one but this is a deceiving one; the fleet first has to head offshore again, rounding the Portuguese archipelago of the Azores before heading back towards France. Can be a clearly interesting one! Given its great yachting tradition France should be in there and Lorient should be no surprise; it has developed itself in a true European sailing center. The biggest surprise is the finish of the race. After having passed the Fastnet rock, another interesting feature, the race will end in the last edition’s succes number Galway. I had the pleasure to be a guest there during the race’s last edition and one cannot deny it, it was an outright success with more than 650,000 spectators, underlining what good marketing can do to sailing. Clearly Galway hence will be an excellent place to finish! Surprising is that Sweden, the home of the main sponsor Volvo, is not hosting a stopover. All in all the race should offer plenty of variety as far as weather conditions and variety of ports is concerned. For sailors it should be a definite improvement, also underlining that the organisation has listened to them. And as far as the stopover ports is concerned; a good mixture of fun, yachting tradition, glitz and glamour and sail crazyness, whilst simultanously with economically sound benefits! 

Changed in-port format should provide lots of excitement. In the new edition of the race, all ports (including the finishing one – Galway) will host an in-port race, which should be great news for the spectators. A final weekend in a stop-over port will now contain both the in-port races as well as the start of the new leg, which provides for a super weekend. Moreover, it will give both the crew and on-shore team more time to prepare, whilst for the syndicates it will result in cost savings; a win-win situation for everybody. The short course of the In-Port races and the proximity to the stopover harbours and beaches will allow the public to watch the racing up close.

Virtual fun should get even better! We are just at the beginning of convergance of real and virtual……..Although details have not been announced as of yet, I am reasonably convinced the official Volvo Ocean Race Game (produced by United Games) will be even better than last time. In the last edition around 220,000 people participated in a game lasting around 9 months. Gamers had to endure many sleepless nights but also actively experienced what a Volvo Ocean Race really is all about. An absolute highlight could be found in the virtual community steering one of the boats during the last few legs; a true example how the virtual and the real world are converging. Moreover Green Dragon  managed to realise its best result when steered by the gamers, proving the phonomenon of “virtual wisdom”. Hopefully, this will be repeated in the new version of the game. Even without it, there should be plenty improvements to look forward to. I would imagine social media will enter the equation, whilst gameplay and communication features (possibly with the real boats) may also be improved. We have to wait, but it surely will be exciting!

No news as of yet of the multimedia front. We have not heard anything yet of the potential innovations as far as multimedia is concerned. In the last edition we had some spectacular footage of the teams on board shot by the different media crew members of the teams. Additionally some live TV of the starts of the different legs, a race viewer tool, pictures and podcasts, whilst in the mean time the Race has also entered Facebook. It will be interesting to see with what the guys will come up with to increase the Volvo Ocean Race experience. No doubt Twitter will enter the equation and for the remainder we have to wait and see what they come up with. Of course the ultimate would still be to be live on board from behind your screen, watch it when it all happens.

And then the teams…..6 participants so far but more to come…Who are they?

  1. Camper/Emirates Team New Zealand. Camper and Emirates Team New Zealand have joined forces, implying a second footwear sponsor (Puma being the other) is entering the race; good news as yet another B2C sponsor feels it can realise sufficient returns. The skipper and head of the syndicate is one of the icons of sailing, Grant Dalton! It is good news for the race that this 6 times veteran and former winner is returning and undoubtedly he will play a major role. Moreover, as Auckland is one of the stopover ports, expect some Kiwi enthusiamn!
  2. Puma Ocean racing: great to seen Ken Read and his team back. The very distinguished cat will be back and undoubtedly will spice up the race botth ashore and on the water! The team ended the 2008/09 race in second place and hence should be considered as a favourite. For sailing it is good news that Puma extends its focus into premium lifestyle sports, apparently acknowledging that the race offers a good B2C marketing platform. The Puma brand attracts a young fashionable crowd, which is good for the marketability of sailing in the long term  
  3. Groupama: France is back and so it should be! Since the 1993/94 edition no French yacht participated in the race. The formidable Franck Cammas (the fastest sailor around the world, recently having broken the record) will lead the charge with the insurer Groupama being the main financial backer. Groupama has been around a long time in sailing and sees the Volvo Ocean Race as instrumental to develop its overseas business. With Juan Kouyoumdjian (ABN Amro 1, Ericsson 4) designing the boat and stopover port Lorient being the homebase of the team, there will be no lack of support from the French!
  4. Italia 70: Italy is back in the race for the first time since 1993/94. Giovani Soldini is the skipper to watch and with him he will bring a fully Italian crew. The environmental friendly team aims to bring together a group of companies, wwhich will be prepared to support Italia 70 throughout its entry in the next two editions of the Volvo Ocean Race. The Azurri have already acquired the Volvo Open 70 Ericsson 3, meaning the team can immediately start training. The plan is to generate a new generation of Italian sailors and build a national offshore team. Although the guys are probably not a favourite to win the race, they are here to stay and no doubt the Race will benefit from a little bit of Italian flash, design and grandeur.     
  5. Team Abu Dhabi: Abu Dhabi has been announced as a stopover city, which, no surprise, had to be followed by a home team and no doubt the emirate will come out with a top notch team.  The crew will be selected by the Abu Dhabo Tourism Authority and these guys are far from short of money. Although it has the ambition to include an UAE national in the crew, one can rest assure that the remaining crew members will be the cream of the crop. The team will construct the boat locally and will construct a new marina. With this proposition Abu Dhabi wants to establish itself as a high quality marine and leisure spot to the world and reestablish its seafaring heritage. Hence a lot is at stake and Abu Dhabi has the financial resources to do it properly. 

A sixth team is yet to be announced whilst there are currently over 20 more syndicates that are actively working on entering a team. This means the Volvo Ocean Race is ahead of the number of teams at the same stage of the last race, which is exceptionally good news given the state of the economy. The new rules (see blog article http://www.jkmconsultancy.nl/2009/10/yachting-new-rules-should-guarantee-future-of-volvo-ocean-race/)  apparently seem to do the job, lowering the costs of a campaign. So we have got the New Zealanders, the Yanks, the Azurri, the French and Abu Dabi, all with some very serious names already aboard. Which sailing nations do we miss? To name a few: the UK, Australia, Brazil, Sweden, Spain, China, Ireland and my own country The Netherlands. Undoubtedly a few of the additional names (possibly another Americas Cup team, how about Team Origin?!) to be announced will come from these countries, also in view of some of them hosting stopovers, which should make it more easy to leverage their investments.  Unfortunately there seems to be no Dutch syndicate in the making as of yet, but let’s hope this will change.

Still a year to go……Experience it, it will be worth it! In any case, there is no doubt in my mind, the new edition of the Volvo Ocean Race will be even better than the last one, more close racing, more viewers, more competitors, more virtual reality fun, better festivals, all at lower costs! For the syndicates, sponsors, viewers and virtual players who haven’t decided yet, join!! It will be worth it!

Recently Delloite published its annual Football Money League for the 2008/09 season, in which it profiles the European football with the highest revenue base. Simultaneously the Dutch National Football Union (KNVB) came out with the financial performances of Dutch football clubs. Not surprisingly the revenue gap of Dutch clubs compared to European clubs is substantial and has further increased. Ajax and PSV are leaders within The Netherlands as far as revenues are concerned. Will these teams ever be able to bridge this revenue gap?

Revenues are a fair indication of a club’s relative size. The Deloitte Football Money League is using revenues from day to say football operations to determine a clubs’ relative size. It believes revenues provides the best publicly available financial comparison, rather than fan-base, attendance, broadcast audience or on-pitch success. We tend to agree; revenues are a reflection of aforementioned elements. Moreover revenues are extremely important to the continuing existence of a football club. As fixed costs such as personnel costs (player salaries!) and stadium rent often take up as much as 90% of  total revenues, revenue maximization guarantees not only the ongoing existence of the club but is also providing a good base to improve the on-pitch success and hence fan-base, attendance etc. In this perspective it is not surprising to see that most of Europe’s top clubs (measured in revenues) have been able to grow faster than the second tier clubs.

The rich clubs growing faster than the poor ones…..When analyzing the current top 20 European football clubs measured by revenues, one can conclude that these clubs as a group have grown by 8% over the last 2 years. As a comparison the Dutch Eredivisie has grown 7.7% over the same period. The problem is not so much to be found in the relative growth as it is compared to absolute growth. The top 20 in Europe saw their turnover grow by EUR 290mln, whereas the 18 clubs in de Eredivisie saw their revenues increase by only EUR 30mln. To put it into perspective, Ajax was able to grow its revenue base by EUR 2.3mln from EUR 64.9mln in 2006/07 to EUR 67.1mln in 2008/09, whereas the number 1 in the league, Real Madrid noticed a EUR 50mln increase from EUR 351mln to EUR 401mln. This implies that Real’s increase in sales almost equals Ajax entire turnover level. We can put it differently; The clubs in the five countries with the highest average club turnover for the 2007/’08 season (England, Germany, Italy, Spain and France) represent 13% of the 732 clubs in the 53 highest divisions in Europe, but generate 69% of the € 11.5 billion total European turnover. No doubt the differences will grow further in the future in case there aren’t any changes. The rich will get richer…… It means the slow emergence of a super league consisting of clubs out of the aforementioned big leagues.

Market size essential for revenue generation. This is logical! Sponsors are attracted to the biggest markets and are willing to pay for this! For media the story is not that different; media companies are willing to pay big bucks for those clubs or in those countries, where there are most viewers. Analyzing the build-up of revenues of the top 20, 26% is derived from matchday revenues, 42% from media revenue and 32% from commercial activities. When comparing the Dutch league (Eredivisie), this compares with 27% from matchday, 12% from media and 51% from commercial activities. No doubt the biggest difference can be found in Media income. The average Dutch Eredivisie club receives EUR 2.9mln (ranging from EUR 1.1mln to EUR 6.7mln) in media income vs EUR 82.4mln (ranging from EUR 22mln to EUR 161mln) for a European top 20 club! Or to put it differently; Real Madrid’s media income of EUR 161mln alone already is 2.4x bigger than the total annual revenues of Ajax.

Gap with top 20 still substantial. Well now, would Ajax be able to bridge the gap with the European top 20? Let’s first look at where the club currently stands. As stated, Ajax generates annual revenue of EUR 67.1mln. This compares with EUR 401mln for the number 1 Real Madrid and with EUR 101mln for the number 20 Newcastle United. This also shows the huge differences within the top 20. In fact the top 11-20 all generate less than EUR 150mln. So in order to enter the top 20 Ajax should generate around EUR 35mln turnover. Clearly the easiest way to victory would be to participate in the Champions League. 13 clubs out of the top 20 played in the Champions League last year generating around EUR 37mln on average in additional revenues. Even PSV Eindhoven generated around EUR 36mln in Champions League income. In comparison Ajax generated only EUR 5.1mln from European football last year. Playing group levels in the  Champions League could hence lead to a top 20 place in Europe or at least very close to it. Nevertheless, it remains the question to what extent such a position would be sustainable. We should not forget that the number 18 Borussia Dortmund (revenues EUR 104mln), number 19 Manchester City (revenues (EUR 102mln) and the number 20 Newcastle United (revenues EUR 101mln) all generate these revenues without having played Champions League either. Hence it should be Ajax’ target to grow towards these levels even without playing Champions League. Can this be realized?      

Ajax Revenues (EUR000) 2004/05 2005/06 2006/07 2007/08 2008/09 % gr 09/05
Ticketing income            
Europe 9344 13304 4385 1111 5055 -46%
Season tickets 8999 8662 9280 9850 10122 12%
Other tickets 3418 5298 6646 6040 4232 24%
Other 1970 1030 1035 2129 786 -60%
Total Matchday 23731 28294 21346 19130 20195 -15%
Total ex Europe 14387 14990 16961 18019 15140 5%
             
Media income 8260 11871 8834 8207 5479 -34%
             
Sponsoring 18868 19328 18759 18781 25280 34%
Skyboxes 9586 9513 9833 10198 10031 5%
Merchandising 6180 5424 6119 5576 6169 0%
Commercial income total 34634 34265 34711 34555 41480 20%
             
Total revenues 66625 74430 64891 61892 67154 1%
Total ex Europe 57281 61126 60506 60781 62099 8%
Total Ex Europe + media 49021 49255 51672 52574 56620 16%

 

Ajax: 5 year revenue growth has been very disappointing.  Let’s first look at Ajax current growth and revenue mix. Revenues in general mainly consist of commercial revenues, media income and revenues generated during matchday. Over the last 5 years Ajax has barely been able to substantially grow its total revenues. In fact since the 2004/05 season, total revenues have grown by just 1% in total from EUR 66.6mln in 04/05 to EUR 67.1mln in 08/09. Revenues peaked in 2005/06 at EUR 74.4mln, but it has to be said that during that year both media revenues and matchday revenues peaked, mainly the result of the club being active in the Champions League. Because these items (media and champions league income) have an exceptional nature, they distort the picture: media income has come down as the Dutch Eredivisie exploits the television rights as an entity and Ajax has not included the income of the exploited channel as of yet, whilst income from European competitions was EUR 8mln higher in 2005/06 when compared with 2008/09. When stripping out these exceptional items, total underlying revenues have increased by 16%, equaling less than 3% growth per annum and particularly helped through a strong increase of 34% in sponsoring revenues in 2008/09. Without this jump in sponsor income, Ajax revenues would not have shown any increase whatsoever. 16% underlying revenue growth over a period of 5 years may look decent but for a club such as Ajax, but this is a very poor performance of course, certainly when compared to most top 20 clubs, of which most have been able to grow their revenues substantially across the line, so not only in media. Particularly the limited increase in matchday revenues, in merchandising and in sponsoring (with the exception of last year) is disappointing.  

What could Ajax do to bridge the gap with the other clubs without being too dependent on media income? I believe the main strategies forward can be summarized as follows:

  1. Ajax has to improve its Customer Relationship Management. The Ajax brand identity is exceptional and known across the world and hence should attract many fans. B2B and B2C relationships can both still be significantly improved and exploited. The national fanbase of both Ajax and Manchester United are pretty much equal with around 4mln fans. However, the international fanbase of United is many times higher than that of Ajax as United has been much more aggressive in marketing the club abroad. Ajax has cautiously entered China now but could be much more aggressive as revenues from commercial income blatantly prove. Ajax still has a great image and brand value; young and very talented players, offering attractive and spectacular football. Cruyff, van Basten and Bergkamp are just a few names which represent the brand. Their fame will be eternal but if Ajax waits too long the association with the club being a producer of talent will fade away. Fan connection and CRM should hence obtain much ore attention. As a result commercial income (both sponsoring and merchandising could grow much faster)
  2. Matchday revenues could be raised. Again when looking at the figures, one can conclude that matchday revenues over the last 5 years have grown by less than 1% per annum. Clearly it is more difficult to grow revenues when you already attract full capacity crowds, but improved yield management could possibly lead to higher revenues.  When analyzing the top 20 clubs in Europe, one can conclude that with the exception of Borussia Dortmund (explained by the fact that it has many cheaper standing places), Ajax generates the lowest income per seat, whereas it is in the top 10 of Europe as far as average attendance is concerned. Better yield management (has price elasticity ever been checked), on site sales and the likely expansion of the stadium should lead to higher matchday revenues.

Lack of media income remains a problem. Nevertheless these strategies are unlikely to compensate the lack of media income which is holding the club back. The lack of media income is and will remain a problem as long as Ajax is playing in a small country like the Netherlands. Clearly the club has been trying to market the right of its games itself but as long as it is a member of the Dutch National League, this will remain a problem. It’s only hope in this perspective would be the formation of a European Superleague or a merger of several national competitions. However, both seem to be far away at this moment.

Youth and consistency should be name of the game! As a conclusion one can state that Ajax is unlikely to enter the top 20 on a sustainable basis without regular Champions League performances and without putting more emphasis on the items discussed above. As the rich get richer and the poor get poorer, strategy should hence be into this direction. As Ajax is unable to generate sufficient income to attract the best players in the world, it should get back to its roots/values and brand identity; young technical players that can excite the crowd and stand for attractive football. As the club has potentially the biggest revenue base in The Netherlands, it should be able to attract the best young players and with this increased focus, it could possibly be active more often in the Champions League than it did during the last few years. Moreover by being a breeding ground of talent this could lead to an extra source of revenue. Only by being consistent going forward, such a scenario is possible. It is this way the club aims to be going. Consistency will hence be the proof of the pudding, let’s wait and see whether the club will be able to execute this.

The yachting calendar counts a multitude of different events. After having witnessed the spectacle of the Americas Cup in February and the Louis Vuitton Trophy in March, focus is now turning to the Carribean and to the announcement of the final routing of the 2011/12 edition of the Volvo Ocean Race. We have attempted to list the top 10 yachting events in the world, taking into account issues like coverage, price money, quality of sailors and the history or future potential of an event. The list includes different formats of racing, such as single handed, around the world, ocean, coastal and fleetracing. Clearly the list and rankings are arbitrary but they should give an indication on which events deliver the best spectacle and value.

10. Olympic Games: the Olympics are the greatest sporting spectacle in the world and hence they should be part of our top 10. The Games have produced great sailing legends of the likes of Ben Ainslee, Ian Percy and Torben Grael to name a few. Hence the Games should be seen as a breeding ground for great sailors. Adding that the Games are also being watched by many millions of spectators around the world, we have got 2 major reasons why they should be on our list. Having said so, for television purposes the races are not as spectacular as some of the other events listed below, so work in progress we would say.

9. The World Match Racing Tour. Matchracing is the future and that’s why this event is in! It’s fun, fast and furious and hence should appeal to the younger crowd, important for the future growth of the sports. The World Match Racing Tour is attracting great talent with some of the best sailors in the world, such as Adam Minoprio, sailing legend Peter Gilmour and aces like Ian Williams and Ben Ainslee. Whereas the sport of sailing/yachting is still primarily dependent on sponsoring (particularly B2B), match racing should be very interesting for television as well as for hospitality purposes, which should give the sports a good platform to expand and to become more popular. Close to shore, short races, technical assistance such as virtual eye, on-board cameras and on-board interviews make the sport a lot more appealing to not only TV but also to different user groups. Although it is still lacking the tradition of some of the other events, the upward potential has made us decide to include it on our list.

8. Antigua Sailing Week. The Antigua Sailing Week is the biggest regatta in the Carribean and over the last two decades, Antigua Sailing Week has developed into one of the biggest events in the World Sailing calendar. It is a week of races where some of the biggest, fastest and most impressive sailing yachts in the world packed with Olympic, America’s Cup and round the world sailors are competing. Adding the variety in races, the big boats and the great party atmosphere and here we have an event that should not be lacking on anyone’s list!

7. Cowes week; the Cowes week is tradition all the way. Since 1826 it is one of the UK’s longest running and most successful sporting events. With 40 daily races for over 1,000 boats, 8,500 competitors (amateurs and professionals) and 100,000 spectators, it is without a doubt the largest sailing regatta of its kind in the world. With these numbers and this longstanding tradition, it belongs without a doubt within our top 10 of sailing race events in the world.

6 . Louis Vuitton Trophy. Maybe the Trophy has not proven its existence yet but following up on the success of the old Louis Vuitton Cup, it could be a blast! Putting together the exciting format of match racing, Americas Cup Class yachts, some of the best monohull sailors in the world (Barker, Cayard, Ainslie, Bruni) and a large crowd, makes for a great event. Adding large TV screens on site and side events in places such as Auckland, La Maddalena in Sardinia, Nice, Dubai and Hong Kong and you have a great experience that you do not want to miss. As stated before match racing has great potential for the future and that’s why we have included the trophy.

5. Fastnet race. Every sailor has heard of the Fastnet Race. It is one of the most famous offshore yachting races counting 608 nautical miles and taking place along the southern coasts of the UK and Ireland. Weather conditions always play a key role here; either big storms or relatively quiet weather determine a fast and furious or a tactical race. Similar to Sydney Hobart the Fastnet has had its share of casualties, underlining the fact the race is not without danger. With many big names participating and a long history, we rank the Fastnet at 5.

4. Sydney Hobart; say Christmas, Bass Strait, Tasmania, new year and spectacular racing and sailing fanatics filled with passion immediately will answer: Sydney-Hobart!! Without a doubt the Race is one of the most well-known iconic brand names in sailing. With the exception of the Volvo Ocean Race and the Americas Cup there is no yachting event attracting such huge media coverage. The “Bluewater Classic” has grown over the last 64 years to become one of the top three offshore yacht races in the world and now attracts maxi yachts from all around the globe. One of the reasons for the popularity of the race are the unpredictable and sometimes grueling conditions with high winds and difficult seas, sadly having also led to tragedies. Finally a top 10 list should not be complte without a race in one of the most crazed sailing nations, Australia.

3. Vendee Globe The Vendée Globe is a round the world single handed yacht race, sailed non-stop and without assistance. The race was founded by in 1989, and since 1992 has taken place every four years. As the only single-handed non-stop round-the-world race, one can say it is probably the most extreme form of ocean racing, being a serious test of individual endurance. Not surprisingly a significant portion of the entrants usually retire, but the one succeeding waits eternal fame and prey. Names as two times winner Desjoyeaux and Ellen Mc Arthur are just some of the wellknown heroes who succeeded in finishing the race, but there are many more……the Vendee (similar to the Volvo Ocean Race) now has leveraged its race to the on-line community with hundred’s of thousands of participants. This convergence no doubt will further add to the popularity of the Vendee!

2. Americas Cup. And then there is the Americas Cup! Of course the Americas Cup should be on the number one spot! However, we chose not to do so after the recent dismantling of the Cup. Although the actual race in Valencia was awesome to watch and a magnificent display of technology, the 33rd Americas Cup sadly will go into the history books as the one mainly battled out in Court. In this perspective Larry Ellison is left with a big responsibility to regain the status that the Americas Cup should have; the world’s most prestigious sailing event. We trust Ellison and Coutts to be able to do this. Sailing is in their hearts and that’s why we believe the 34th version will be a blast! It is likely to be a multichallenger event, more international than ever before and great for spectators; there will be short furious races, cameras and microphones on-board, leading to an on-board experience and likely a new much more affordable to many boat type. It should excite young people and certainly when the Cup will take place in San Franciso, which will receive a huge economic boost as a result of the Cup. If Ellison and co. is able to do this, the Americas Cup will be the flagship event of sailing again that it once used to be. In that case the Cup will regain the number one spot on our list again.

1. Volvo Ocean Race. The Formula One of sailing! For sailors it is one of the ultimate sailing experiences, tough and asking enormous endurance capabilities. Subsequently it attracts together with the Americas Cup the best sailors of the world. Similar to Formula One team budgets have increased tremendously, limiting the number of campaigns. The new rules should improve this situation and make the race more accessible again. For spectators the race offers plenty. The boats are like race horses reaching enormous speeds in wild conditions at sea offering some good pictures and films taken by on-board media guys. Additionally (similar to the Vendee) the Race has converged with the on-line community that even assisted the Green Dragon in the last Volvo Ocean Race. The Race is attracting huge gatherings in the ports where the fleet makes a stop-over. In these ports a variety of side events combined with in-port races guarantee a great experience and a great boost to economic activity. The combination of the best sailors and boats in the world, endurance, round the world, experience, economic and media impact makes the Volvo Ocean Race the best package in our opinion and that is why it is the number one on our list!

No doubt the list offers plenty of room for debate. Feel free to comment, add or delete events and share your opinion!

After the recent bankruptcy of one of Holland oldest football clubs more negative news is hitting the press almost daily. Football club BV Veendam is close to bankruptcy, MVV (Maastricht) is not able to pay salaries to part of its staff, liquidity problems at several other clubs and even Ajax is heading for a loss of EUR 25mln this year. Adding that only 14 clubs out of 38 are profitable, sponsoring proceeds are likely to come down, transfer income is seen to drop dramatically, support from society is coming down and salary costs are still ridiculously high, the conclusion seems clear: Houston, we’ve got a problem.

Recent figures indicate deteriorating financial position of Dutch football. Recently the Dutch National Football Association (KNVB) came out with new figures related to the financial health of Dutch football clubs. I know I have been writing on this subject before, but the new figures reveal that things are rapidly deteriorating. This has already culminated in the first bankruptcy in Dutch football in a long time. The HFC Haarlem, one of Holland’s oldest football clubs, had the questionable honor to be the first victim and went bankrupt in January 2010. It now seems increasingly likely that BV Veendam, a club active in the Dutch Jupiler League, will follow Haarlem’s fate. The club is likely to ask for Chapter 11 today if it cannot obtain sufficient funding (equivalent to some 20% of the annual budget) for the remainder of the season. The other prime candidate seems to be MVV, again a club active in the Jupiler League (Holland’s 2nd major division). Last week it became known that the club has difficulties in paying salaries to its staff. Moreover as it did not pay its premium to the Foundation of contract players in time, the club got a 1 point penalty in the league standings and a fine of EUR 25,000 for not handing in its financial plans in time. All signs of a club in severe difficulties.

Only 14 out of 38 clubs managed to generate profits and sadly there is more bad news on the way. Following is a list of recent news and facts pointing towards financial problems

  • Nov 2009: RBC (budget 2008/09: EUR 4.2mln) requiring EUR 300,000-EUR500,000 of fresh liquidity
  • Dec 2009: Cambuur Leeuwarden (budget 2008/09: EUR 3.7mln) heading for EUR 1mln loss after shortage of EUR 1.8mln in 2008/09. As a consequence the club is looking to sell its stadium
  • Jan 2010: Willem II (budget 2008/09: EUR 10.8mln) seems to have bigger problems than anticipated. The loss in 2008/09 has turned out higher than expected at close to EUR 4mln. Stadium rental payments have been freezed.
  • Feb 2010: AGOVV Apeldoorn (budget 2008/09: EUR 1.9mln) has not been able to adhere to the liquidity standard required by the football union. As a consequence it has received an official warning
  • Feb 2010: FC Zwolle (budget 2008/09 EUR 3.7mln)  saved by EUR 1mln guarantee of municipality, so it can look for new investors
  • Mar 2010: Ajax (budget 2008/09: EUR 67.1mln) heading for a loss of approximately EUR 25mln for the current season

The above list is exemplary for the difficulties which clubs are facing and then we even didn’t include clubs such as Feyenoord, RKC, ADO Den Haag, Omniworld, AZ Alkmaar, Sittard etc etc, which all are known to go through very difficult times. In fact, out of the 38 clubs in professional football only 14 clubs managed to generate profits in 2008/09 and things are likely to deteriorate in the current season. Around 14 clubs are believed to be in the so called category 1 (the watch list of the Dutch Football union), the financial danger zone of Dutch professional football. That is an astonishing number confirming that it is questionable whether Dutch professional football in the current state can sustain much longer.

Facts don’t bode well. Let’s examine!

Eredivisie (EURmln)  07/08 08/09 %chg   Jupiler League (EURmln) 07/08 08/09 %chg
Turnover 421.8 429.0 1.7%   Turnover 63.6 57.4 -9.7%
– of which sponsoring 179.2 197.7 10.3%   – of which sponsoring 32.4 32.0 -1.2%
Sponsoring as % of sales 42% 46%     Sponsoring as % of sales 51% 56%  
Personnel ratio 59% 64%     Personnel ratio 72% 77%  
Personnel costs 248.9 274.6 10.3%   Personnel costs 45.8 44.2 -3.5%
Net profit 64.2 -31.0 -148.3%   Net profit -13.1 -10.2 -22.1%
– As % of sales 15% -7%     – As % of sales -21% -18%  
                 
FTE’s 1850 2088 12.9%   FTE’s 817 761 -6.9%
Wages per FTE 0.1345 0.131 -2.2%   Wages per FTE 0.056 0.058 3.6%
Average FTE’s per club 103 116 12.6%   Average FTE’s per club 41 38 -7.3%
Average # of players 36 39 8.3%   Average # of players 21 20 -4.8%
  • Fact 1: Both the Eredivisie and Jupiler League are generating losses As can be seen in the table above, profitability of the Dutch Eredivisie has taken a severe dent in 2008/09 in spite of the fact that sales actually have increased. The main reason for this can be found in EUR 60mln lower profit made on transfers of players. For the Jupiler League, things are more dramatic. After having suffered a loss of EUR 13mln in 2007/08, the league still generated a loss of EUR 10mln in 2008/09 in spite of several measures been taken.
  • Fact 2: Personnel costs have risen to unacceptably high levels. As can be seen the personnel ratio as a % of sales has risen by 5% from 59% to 64% for the Eredivisie and from 72% to 77% for the Jupiler League. In a football environment salaries are always the biggest expense. A level of 60% is generally regarded as an acceptable level leaving sufficient room for stadium rental costs, general cost, marketing costs and all other costs related to a football organization. As most of these costs have a fixed nature, it is essential to generate sufficient turnover to cover these costs or to cut costs in time. In this perspective and given the economic backdrop, it is somewhat surprising to see that the average Eredivisie club has further grown both its staff and number of contract players, making itself more vulnerable for an economic backdrop. For many it is not too late yet, but it is to hope management is not deaf and hearing the alarm bells. For the Jupiler League things are again much more dramatic. The division as a whole has a personnel ratio that is far too high, mainly the result of lower turnover. The clubs have managed to reduce the salary bill and the number of FTE’s on the payroll (average number of FTE’s down by 7.3%). However, the potential to further reduce the wage bill is limited as the KNVB requires a club to have a minimum of 18 contract players vs the average of 20 now; huge cuts seem to become increasingly difficult. It also implies that in case of a further decline in turnover, losses might increase again. Of course these numbers are averages. To shed some light on individual clubs, there are 19 clubs (10 Juplier League, 9 Eredivisie) that have a salary ratio of higher than 70%! No wonder there are that many clubs generating a loss! The most striking ones in 2008/09: RKC 123%, Fortuna Sittard 100%, AZ 96%, Utrecht 89%, MVV 88%, Cambuur 87%.
  • Fact 3: Dependency on sponsoring has further increased. What the table also implies is that total income has become even more dependent on sponsoring, which tends to be the most volatile item of a profit and loss account. Sponsoring now accounts for 46% of annual turnover in the Dutch Eredivisie and even 56% of that of the Jupiler League. In absolute terms it is a surprise to see that income from sponsoring has actually increased by 10% in the Eredivisie and declined by a marginal 1% in the Jupiler League. Hence sponsoring has been one of the reasons, why turnover levels for the 2008/09 season have held up relatively well. Nevertheless it is very dangerous to extend this trend towards the current season.

Near term future appears to be bleak.The near term future seems to be very uncertain, particularly for the Jupiler League, which in my opinion will not survive in its current format. It seems unavoidable that losses will further deteriorate in the near term for the following reasons:

  • TV income and ticketing income are unlikely to rise significantly
  • Sponsoring income is likely to be significantly down. The impact of the economic crisis on last season’s figures may have been marginal, it is unlikely that this will be the case again in the current season. Sponsor contracts closed before the crisis are unlikely to be renewed, whilst several sponsors are in difficulties themselves (a crisis always has a lagging effect). This means I wouldn’t be surprised when sales levels would come down this year in both the Eredivisie and the Jupiler League, which has a dramatic impact on the bottom-line.
  • Limited transfer activity. During the winterstop there was virtually no transfer activity (Honda being one of the exceptions), implying no bookprofits made on players, further limiting the profit potential. Moreover this also reduces the possibility to reduce the most important cost center, wages!
  • Limited cost reductions possible for the Jupiler League: given that most of the clubs already have reduced their number of contract players to the absolute minimum, these clubs have limited potential to further reduce costs.

All in all I expect losses in the current year to be significantly down from last season and as a consequence several clubs might be facing liquidity problems.    

Structural reasons for the backdrop are plentiful. I believe the main structural reasons behind the difficulties mentioned above can be summarized as follows:

  • Poor management. In many cases Dutch football clubs are not properly managed. Professional football should be run like a business, not like a hobby. In a period of stagnating sales and rising costs, cash flow management is essential. I wonder, apart from the positive exceptions, whether all clubs have even heard of this. It is utterly irresponsible to buy new players, extend the number of staff or increase salaries in a period of an economic downfall, particularly as income of many clubs is largely dependent on discretionary items like sponsoring, TV and ticket sales. In an environment of declining revenues, it is surprising that many clubs are working with flat or even rising budgets or are spending money before receiving it. No wonder that problems arise. This is particularly the case for the first division clubs. If one realizes that clubs in the Jupiler League are largely dependent on sponsoring income, it is plain stupid and irresponsible to keep budgets flat. No wonder, casualties emerge, certainly in a high fixed cost environment such as in football. Football clubs should be run professionally. It means proper revenue management and proper cost management (remember that in many cases salaries and rent of the stadium already account for some 75-90% of sales!). It means creativity and contingency plans and it means accountability! If I still hear management of clubs saying “ I am sure many clubs largely depend on transfer sums” or “ why always look at finance, it is good players which are important and subsequently financing automatically will be all right” or “we have ambitions to go the Eredivisie and hence need extra money (everybody has this ambition I am afraid)”. Brrrrh,  it is exemplary for the limited mindset of some, which tend to be short term. Clearly there will always be friction between the technical and financial aspects of a football club but in the right setting (more long term oriented) they should peacefully co-exist as several clubs such as for example FC Twente, VVV and FC Groningen are proving.                  
  • Limited viability for current number of football clubs. There are several ways to look at this, but the conclusion should be the same. The Netherlands counts 38 professional football clubs, implying one club per 429,000 habitants. However, it gets worse. These clubs are not spread properly over the country. For example Brabant counts 9 football clubs or 24% of total clubs, whereas Brabant only counts 15% of the total Dutch population; it means one football club per 268,000 habitants. No wonder many clubs in Brabant have financial difficulties. Hence mergers could be a solution here. Looking at a more financial angle, it is amazing that some clubs even still exist. Looking at the Jupiler League again, there are 8 clubs with annual turnover below EUR 2.5 mln. With a required minimum of 18 players under contract on say the average salary of EUR 35,000 and with additional staff and management, it means that the salary bill already accounts for some EUR 1.5 mln. Come to think of it! And this is before stadium rental costs, variable costs, depreciation, selling costs, media costs etc. No wonder clubs are having difficulties to survive.
  • Declining community support. Whereas in the past many clubs always counted on community support (hundreds of millions have been invested) coming to the rescue, support for such action is rapidly declining. In the case of Haarlem, the local municipality was not prepared to bail-out the club and this seems increasingly the trend. In some cases there are still municipalities granting loans to clubs (which often is only temporary respite), but subsidies seem to be no longer in vogue, although in view that the European Union does not allow for such action (although there are always ways around). Although one can debate whether this is right or not, in the end a club should be able to survive on its own, also in view of creating a level playing field.
  • Economic crisis. Finally there is the economic crisis, which is leading to lower sponsor and tv income. But this is an easy one to hide behind. It is just proper business sense to build up a proper reserve for more difficult times.  For many clubs the contrary has taken place, which brings us all back to management again I guess. Luckily there are good exceptions such as Heracles, Twente and several others. It is good to see that FC VVV is not immediately spending all the millions received for Honda on all kind of expensive players. The club is saving a large part of the money for its youth academy, the new stadium and possibly some players to be bought in summer.

So what could be the solutions? Clearly the current model is not sustainable and sooner or later more clubs will go down. In order to avoid this there are several alternatives (or rather a combination of them to accomplish this:

  • Bundling/merging of clubs; although not easy to realize (given the example of FC Limburg), mergers should be considered in some parts of the country given that the sheer number of professional football clubs is not sustainable in those areas.
  • Introduction of semi-professionalism in the first division or merger with amateur top-liga. Salary bills are too high, whilst minimum wages are often not a viable option for professional players. The result is that many opt for a semi-professional career at a top-amateur club. With the introduction of semi-professionalism the first division could possibly merge or cooperate with the top amateur leagues.
  • Cross-border competitions. With the rich getting richer and the poor getting poorer, competitive balance seem to have long gone. Combining for example the Belgian and Dutch leagues should lead to a better balance and stronger competition. However, it should be realized this will not be acceptable to many clubs that would not be able to participate in this league as well as to their supporters. Food for thought.
  • Improve quality of management. It seems many clubs are not managed properly, supervisory boards should carry part of the blame. It means that managing for cash has to become more important and that the long term existence of the club should not depend on irregular items such as transfers of players. It also should imply the build-up of reserves for more difficult times
  • Salary adjustments. Wages are by far a club’s biggest fixed cost item. With the recent rise in salary costs this has become a heavy burden to many football clubs. Re-adjustment will take time, partly depending on the duration and mix of the contract portfolio.
  • Creativity and innovation. Many of the current clubs tend to think in the old traditional way rather than out of the box. New business concepts, flexibility of costs, revenue management, a new (longer term oriented) business model are just a few principles where improvements may be made.
  • Emphasize talent development

So it is clear something has to be done! Sales are stagnating, costs are rising! This has to be turned around, one cannot always count on the community (government money) coming to the rescue….Is management in Dutch football capable of doing it? I sincerely hope so. I hope they will find creative ways to grow the top-line, I hope they will be able to reduce costs (recent reports at least suggest that clubs like Ajax and Feyenoord are going to reduce salary costs), I hope they will implement contingency planning procedures. The proof of the pudding will be in cash flow management. I am sure some clubs with good management will be able to do this properly but there are also examples of clubs where I have my severe doubts. This is also the reason why I expect more clubs to go bankrupt.

I do realise that better players will lead to better results and greater recognition, but reality tells us that we just will not be able to match the budgets of European clubs in the bigger leagues, which is a function of scale. Equal competition and a level playing field can only co-exist through rules of the regulators. In the mean time we have to start thinking longer term as in the end players are better off with a solid health of the clubs they are playing for. Holland has always been a producer of talent, our football schools have often been examples to many clubs, although this strength has been neglected as of lately. By re-investing in good football schools we are better off in the future. Financially it is also much more attractive then buying expensive stars from abroad. The youth is relatively cheap and by treasuring and growing talent in the right way and with the right values, the financial outcome will also be more attractive, a win win situation in my opinion if and I emphasize if properly executed!

After having witnessed a couple of mediocre Formula One seasons, in which the sports lost popularity, the 2010 season promises to be a blast. Coming Sunday the new season will start in Bahrain and there is plenty to look forward to. Here are 10 interesting reasons why the 2010 season should become a thriller:

  • The return of Michael Schumacher. You either hate the guy or you love him, but both fans and enemies probably agree on one thing: the return of Schumacher is a blessing for Formula One as the sport was lacking sufficient charismatic personalities. Schumacher is clearly a winner, being often seen as the bad guy given his controversial behavior; but don’t we have enough dull and programmed drivers in F1? Schumacher should bring the umpf factor back into the sports. It remains to be seen how he will do after 3 years having been away from racing, particularly given the changes since he left. But it usually doesn’t take long for true champions to get back to basics.
  • New rules allow for more spectacular racing. A couple of new rules are being introduced, which may lead to more spectacular racing. The main ones are the following: firstly, refueling is no longer allowed. As a result bigger tanks are needed and more emphasis will be put on fuel consumption and tyre wear. As a result pit-stops will last less than 3 seconds, whilst drivers who can adjust the most easily to changing conditions are likely to have an advantage. Strategy (early pit-stop may pay but will it be at the expense of tyre wear-out) might become even more important and no doubt there will be mistakes in the beginning of the season. Those teams that will come quickest to grips with the new rules and strategies, will be winners. Secondly there will be a new points system. Rather than the old 10-8-6-5-4-3-2-1 points system for the first 8 finishers the 2010 (25-18-15-12-10-8-6-4-2-1) points system will reward the top 10 finishers. This clearly is putting more emphasis on victory and hence the fight for the number one spot could be fierce. Finally, the top 10 qualifiers have to start on the tyres on which they set their qualifying time, aiding of course the bunch following the top 10.
  • Tight competition at the front end of the grid. At the final testing day at Catalunya, it became clear that the differences between the top teams are minimal. In contrast to last year, when Brawn and Co. only showed their tail to the competition, it now seems incredibly close. Last year’s front runners Brawn (now Mercedes) and Red Bull are now joined by the ones who you would expect; it’s good to see Ferrari and McLaren back at the front again, it just gives that extra bite! But that’s not all! The second bunch within the field consists of Williams, Force India, Renault, Sauber and Toro Rosso and testing proved they are not far behind!
  • Which driver will cope best with the new rules? The 2010 season will have one of the best line-ups of star drivers in grand prix history. It will be tremendously exciting to see them fight for the championship. Note that there are 4 former world champions in the field: Schumacher, Hamilton, Alonso and Button. Adding Sebastian Vettel and you probably end up with the big favorites for the 2010 title. Alonso has great racing qualities and is probably best in nursing his car in all conditions, which given the rule changes will be very important. Having said so, his Ferrari is said to be high on fuel consumption, which could run against him. No doubt Michael Schumacher could win races again in 2010. Although he is super determined, it remains to be seen whether he will be able to grab the title after having been absent for 3 years. Lewis Hamilton is the big favorite in my opinion. The guy has matured, has shown he is a great and gutsy racing driver and in essence should be better than Jenson Button. And then there is the dark horse Sebastian Vettel. Could he do it? 2010 might still be too early for him, whilst he also might be pre-occupied with Michael Schumacher in the fight for best German racing driver. And what do the bookies say? The latest odds: Alonso 11/4, Hamilton 7/2, Vettel 4/1, Schumacher 4/1 and Button 10/1.
  • Personality clashes and in-team fights. Feuds and personality clashes in F1 have been of all times. 2010 will be no different and there is plenty to look forward to. The in-team fights will be fascinating. No doubt Schumacher will blow away Nico Rosberg. Schumacher will do anything (and we know what that means) to avoid losing against his teammate with the risk of people saying he is over the hill. That will not happen! The fight between Ferrari’s Alonso and Massa will be interesting too; Alonso is desperate to get back into a championship-contending car and is potentially one of the best drivers in the field. However, he is new to Ferrari, whereas Massa is not. Moreover Massa will be eager to prove he has fully recovered from last year’s accident and can get back to old form. Undoubtedly the most interesting team relationship to watch will be that of Lewis Hamilton and Jenson Button. Button has taken up the gauntlet by moving to McLaren. However, trying to prove he is the best British driver won’t be easy There is no doubt about his pace and coolness, but will he be able to deal with adapting to constantly changing conditions? It will be a clash between two driving styles; Hamilton’s bold and aggressive driving vs Button’s conservative style of racing. Let’s see who will win and who will be able to maintain his personality best. And those are just the in-team fights! There is plenty more of touchy issues. The young Vettel fighting old dog Schumacher for German hegonomy, Schumacher fighting his old friends at Ferrari, Schumacher continuing his feud vs McLaren etc etc. One thing is for sure: it’s gonna be fun to watch!
  • Large number of new teams. In contrast to what was expected (we had a financial crisis to deal with and 3 manufacturers withdrew from F1), the grid is counting 4 more cars rather than diminishing by 6. This means we will start this weekend with 24 drivers. It could even have been 26, were it not that US F1 did fail to be ready in time. So which are the new names? First of all Lotus, which seems to have a very reliable car, that has been clocking mile after mile during testing. No doubt racing fans will be happy to see the traditional yellow and green colours back on the roster. Moreover, Lotus has a good line-up with Trulli and Kovalainen. Richard Branson’s Virgin is a second new kid on the block, but later more on this one. Finally Hispania (Campos) is the last name that has made it. It remains to be seen, whether they will still be there during the last race as the team is said to have financial problems. Moreover the team will arrive in Bahrain without any pre-season testing. Hence its race pace remains a mystery. My bet is the tough gets tougher.
  • And then there is Richard Branson with his “Virgins” No doubt the golden guy with the Midas touch will bring some extra glamour to F1, leveraging his Virgin brand now to car racing. If there is one guy who can do it, it is probably him. Branson has the smallest budget (only GBP40m) of the new teams, but no doubt he will get his fair bit of exposure by doing things differently, you have to give the guy the credits for it. His first bold move has been to design a car by Computational Fluid Dynamics, meaning the car is entirely designed by computer simulation rather than using a scale model in wind tunnels. Of course the car has to prove itself, but if it works, it will bring down costs tremendously. No doubt we will hear a lot more from Branson and his “Virgins” (as he calls his cars). He has done the trick before with his other businesses but F1 will be the ultimate test.
  • Many rookies likely to provide for some interesting action. During the last few seasons we have not seen as many rookies as this year, clearly the result of several new teams on the grid. In total the start of the 2010 season will count 5 rookies: Nico Hulkenberg, Vitaly Perov, Lucas di Grassi, Bruno Senna, Karun Chandhok. But to be fair, Jaime Alguersuari and Kamui Kobayashi have barely any F1 experience either. Clearly these drivers can all drive a F1 car but the lack of experience in driving such a car for an entire race and being in competition with some very seasoned veterans might provide for some interesting viewing.
  • Will Korea be ready in time? The F1 calendar is counting 19 Grand Prix and includes one new venue; Yeongam in Korea. The problem is that the track has not been finished yet and although there is still half a year left, it remains to be seen whether the Koreans will be able to win this race against the clock. We are positive they will.
  • Politics, economics and rules….. And then there are always the arguments in the all-important periphery of the F1. No doubt there will be disagreements between teams on the interpretation of the rules, no doubt Berny will pull a few tricks out of his sleeve and no doubt the FOTA (F1 Team Association) and FIA (International Automobile Federation) will have their ongoing disputes. It will be interesting to see how the balance of power will change within the FOTA now that 3 large car manufacturers have disappeared and are replaced by several smaller teams. Finally, economics will play an important role again. Will F1 be able to find its way up again, will it be able to put constraints on budgets, will all teams survive this year? In any case, if races are not interesting, there is plenty of going on outside the racing track!

svenkramerWhereas at the beginning of the Winter Games Sven Kramer of The Netherlands was widely seen to become the athlete winning the most gold medals, he did not manage to indeed become the king of the Games, mainly due to an unintended mistake of his coach. Local marketing buffs claim this mistake could turn out to be extremely expensive, costing him millions of dollars. I doubt whether this will be true; although his claim to international fame has not materialised to the extent he would have hoped, this should be more than compensated by his increased popularity at home, where he found a whole new bunch of supporters admiring him for the way he dealt with this issue.

Sven Kramer’s disqualification at Olympics costing millions of dollars?? It wasn’t meant to be. Dutch speedskater and national hero Sven Kramer did not manage to grab the three gold medals, he was predestined to win. Not because he was not the best…. The skater was well on his way to win his second gold medal when his coach made a big mistake by directing him into the wrong lane. As a result Sven was disqualified. Things turned worse in the team-pursuit, this time as a result of poor communication. Hence the world’s best speedskater did not become king of the Olympic Games. According to sports marketeers like Frank van de Wall Bake, this will have big implications as far as his income is concerned. As Kramer has not become Vancouver’s biggest star, the number of international endorsements (think cover on Sports Illustrated, international brands etc) will be significant less than anticipated, costing him millions of dollars. This is probably true from an international perspective, but these specialists fail to tell the entire story.

From star to icon: Sven Kramer’s unknown hidden values. Sven Kramer has always been known to the public as an extremely talented and ambitious athlete, a bit cocky and a humorous guy. The Dutch always embrace their skating stars and Sven Kramer has not been an exception. However, what the Dutch audience did not know was how Kramer would respond and behave in case of a setback or misfortune. Kramer’s enormous mature reaction after losing two gold medals has uncovered some hidden values that most people were not aware of: respect, dignity, responsibility and sportsmanship. Just after experiencing probably the biggest disappointment of his life, the guy was open to talk to the press, showing no rancour and behaving as a good loser. Moreover, a day later he was in good spirits with his coach and told the press that he and his coach had gone a long way and celebrated a lot of success. Clearly that could not be a reason for breaking-up. The way he dealt with this issue was one which only true big stars show. Sven lost two gold medals but gained an enormous amount of goodwill, well documented on television and on the internet. At once he gained thousands of additional admirers, probably elevating him from a star to an icon and role model.

Commercial exploitation of newly discovered values should compensate for the missed (international) income. These new values should undoubtedly make Sven Kramer more interesting for commercial purposes. Sven Kramer has shown the world he is extremely ambitious (like a sport star should be) but can also behave in a very responsible manner when taking an unexpected blow. He has shown he is authentic. No doubt commercial brands will use these values in their marketing campaigns, certainly in view of his increased and likely sustained popularity. Adding the new values and the popularity of skating in The Netherlands, this should lead to a longer and more sustained steady income flow going forward. I have no doubt that the discounted value of this stream of income will more than compensate for the loss of international endorsements. As speed skating is a very small sport globally, these endorsements will rapidly decline over time anyway.

Market value of Sven Kramer likely to increase further. Sven Kramer has lost two medals but gained tremendous appreciation. The guy is still young and has broken already all the records you can imagine. I would not be surprised when he will come back with a vengeance in Sochi. Rather than from “hero to zero”, I would like to say “claim to fame”. No matter what happens, Sven Kramer will end up in the row of the true big champions in skating like Ard Schenk, Johan Olav Koss and Eric Heiden. Soon Kramer and company will launch a new commercial brand named SvenK. Oakley, Giant and Viking are rumoured to have already closed deals with this brand. I am sure they are to be followed by many more over the coming years.

van_2010_logoWith a large part of the Olympic Winter Games in Vancouver now behind us, it is interesting to notice that the Games continue their unbridled growth both in terms of participating athletes and nations as well as in the number of events. However, this comes at a expense. Whereas since 1980 (Lake Placid) the number of athletes and events have increased by 2.5x and 2.3x respectively, the expenses related to the games have increased by a staggering 13x and when compared to 1984 (Sarajevo) even by 20x! This exponential increase is clearly not sustainable going forward. Since Lake Placid the number of events, athletes and nations has more than doubled.

Vancouver, Canada is the pride host of the XXI Olympic Winter Games. After Calgary, it is the second time Canada is hosting the games. Since then a lot has changed, but what has not changed is that the Winter Games are continuing to witness unbridled growth in terms of events, countries, participating athletes, participating officials, TV coverage and revenues and expenses. So far the end is not in sight, albeit that growth is slowing down. This should not be surprising given the fact that two sources of growth seem to slowly get saturated. The increase in the number of participating countries is slowing down and more importantly the growth in the number of participating athletes and events is coming down. The table below shows that since Lake Placid in 1980 the number of participating countries, the number of athletes and the number of events has more than doubled, implying that compounded growth for each time Winter Games were organized on average exceeds the 10% figure. As can be seen the Torino and Vancouver Games have witnessed significant lower growth.

Year Host City Country Countries % chg Athletes % chg Events %chg
1924 Chamonix France 16 290 16
1928 St Moritz Switzerland 25 56% 360 24% 14 -13%
1932 Lake Placid USA 17 -32% 280 -22% 14 0%
1936 Garmish Germany 28 65% 760 171% 17 21%
1948 St Moritz Switzerland 28 0% 810 7% 22 29%
1952 Oslo Norway 32 14% 730 -10% 22 0%
1956 Cortina d’Ampezzo Italy 32 0% 920 26% 24 9%
1960 Squaw Valley USA 30 -6% 650 -29% 27 13%
1964 Innsbruck Austria 36 20% 930 43% 34 26%
1968 Grenoble France 37 3% 1290 39% 34 0%
1972 Sapporo Japan 35 -5% 1130 -12% 35 3%
1976 Innsbruck Austria 37 6% 1260 12% 37 6%
1980 Lake Placid USA 39 5% 1280 2% 38 3%
1984 Sarajevo Yugoslavia 49 26% 1490 16% 39 3%
1988 Calgary Canada 57 16% 1550 4% 46 18%
1992 Albertville France 64 12% 1800 16% 57 24%
1994 lillehammer Norway 67 5% 1730 -4% 61 7%
1998 Nagano Japan 72 7% 2180 26% 68 11%
2002 Salt Lake City USA 77 7% 2400 10% 78 15%
2006 Torino Italy 80 4% 2500 4% 84 8%
2010 Vancouver Canada 82 2% 2632 5% 87 4%

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The table below gives some more detailed information. Whereas in the past travel to another continent had an impact on the number of participating nations, this seems no longer the case. This is partly due to the fact that the IOC is subsidizing smaller exotic countries that want to participate. These smaller countries are only a small reason behind the enormous growth in the number of athletes. More important growth drivers are the growth in the number of female athletes and the number of events. When looking at the number of women that participate in the Games, we notice that since Lake Placid this number has increased by 355%, whereas the number of participating men only increased by 87%. Also in absolute terms the number of women has grown more rapidly. This is partly due to the increase in the number of events for women, which brings us to another growth driver. Both the number of men’s events and women’s events has more than doubled over this period. New popular events like snowboarding and snow cross have been added, whilst almost all events are now both for women and men. Clearly the new sports will continue to play an important role for the growth in the future. The success of the winter X-games shows the need for action sports and by allowing sports such as boarding and snow cross (which everybody seems to embrace), the IOC is aiming to embrace the younger generations. Ironically, in absolute numbers, the number of team officials has grown the most and now exceeds the number of athletes.

LakePlac. Sarajevo Calgary Albertv. Lilleh. Nagano SaltLake Torino Vancouver
1980 1984 1988 1992 1994 1998 2002 2006 2010
Countries present 39 49 57 64 67 72 77 80 82
% change 26% 16% 12% 5% 7% 7% 4% 2%
Events 38 39 46 57 61 68 78 84 86
% change 3% 18% 24% 7% 11% 15% 8% 2%
Men’s events 24 24 28 32 34 37 42 45 45
% change 0% 17% 14% 6% 9% 14% 7% 0%
Women’s events 12 13 16 23 25 29 34 37 39
% change 8% 23% 44% 9% 16% 17% 9% 5%
Male athletes 839 1000 1110 1312 1215 1389 1513 1548 1572
% change 19% 11% 18% -7% 14% 9% 2% 2%
Female athletes 233 274 313 489 522 788 886 960 1060
% change 18% 14% 56% 7% 51% 12% 8% 10%
Total athletes 1072 1274 1423 1801 1737 2177 2399 2508 2632
% change 19% 12% 27% -4% 25% 10% 5% 5%
Team officials 920 1417 917 1888 1821 1468 2100 2704 2850
% change 54% -35% 106% -4% -19% 43% 29% 5%

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Costs have grown exponentially. It should also be interesting to see how the games have done financially. In the table below the revenues, costs and profits are summarised in USD and at constant 2000 prices using the 2000 price index. Two quick conclusions can be drawn: 1. the figures (which exclude investments related to the venues and infrastructure) clearly indicate that the organising committees of the Olympic Winter Games have realised a deficit in most of the cases; 2. The increase in both revenues and costs have grown far more rapidly than the number of participants in the games. The Vancouver Games (we have used the budget numbers) are likely to be the most expensive; Vancouver 2010 is likely to be almost 13x more expensive in terms of costs than Lake Placid 1980 and even 20x more expensive than Sarajevo 1984. This is an astonishing increase when compared to the increase in the number of athletes (2.5x) and the number of events (2.3x). When allocating total expenses over the number of athletes active in the game, it implies that costs per athlete has risen by 414% from USD 107,612 to USD 553,171 using constant 2000 prices. Of course there are plenty of explanations, but it is clear that this exponential cost increase cannot continue in the future!

Lake Pl. Sarajevo Calgary Albertv. Lilleh Nagano Salt Lake Torino Vancouver
1980 1984 1988 1992 1994 1998 2002 2006 2010
Revenues (USDm) 97.6 277.81 626 800 525 1050 1264 1300 1456
% change 185% 125% 28% -34% 100% 20% 3% 12%
Costs (USDm) 115.36 72.93 590 859 868 1002 1317 1333 1456
% change -37% 709% 46% 1% 15% 31% 1% 9%
Profit or loss -17.76 204.88 36 -59 -343 48 -53 -33 0
Costs per athlete USD 107612 57245 414617 476957 499712 460266 548979 531499 553171

bmworacleLooking back at the 33rd edition of the Americas Cup, the conclusion is one of mixed feelings. In disgust over the countless courtcases, fights, manipulation, postponements and enormous egos of the two owners of both syndicates. In awe of watching the magnificent display of technology and raw power of the BMW Oracle and to a less extent Alinghi. And full of enthusiasm when watching the actual race. That pretty much sums it up. Clearly, awe and enthusiasm have taken the upper hand during the last week. In that perspective it is sad to conclude that the 33rd Americas Cup will likely end up in the history books as one of the most controversial ones, very similar to the Americas Cup of 1988, when Dennis Connor won the cup with his Stars and Stripes. It is to hope that, again similar to what happened after1988, the 34th Americas Cup will regain some of its lost reputation, a big responsibility for the parties involved.

The 33rd edition of the Americas Cup is one to remember, a Cup which will go down as one of the most controversial ones in history. Controversial because of several reasons: 

Astonishing display of technology and yachtsmanship. Looking back at both races the image of a monster trimaran with a 68 meters high mast and a highly innovative 223 foot wing sail (easily exceeding the wing of a Boeing 747 airplane) will always be imprinted in the minds of those who have witnessed it. This wing sail was powering this unique piece of engineering equipment at three times the speed of the wind, sending its windward and middle hulls flying well above the water. These were the fastest, most technologically advanced sailboats built in the 159-year history of the America’s Cup. This giant boat made the crew like little midgets, of course safely guided by Jimmy Spithill at the helm. Talking about giants! Spithill, who at 30 became the youngest skipper to win the America’s Cup, has proven his great sailing abilities and absolute dedication (which even led him to take flying lessons). Russell Coutts is the other hero. The CEO of the racing team has done it again, he won his 4th Americas Cup and hasn’t lost a Cup race in 15 years. Moreover, being a true leader he sacrificed himself for the best of the team by not participating in the first race. So far for the positives…..

Disgust over legal wrestling, manipulation and egos. The flip side of the coin is clearly that this Americas Cup will always carry a dark shadow of distrust, a lack of sportsmanship and enormous egos of both syndicate owners. The countless number of courtcases during the last 2 ½ years (and we haven’t witnessed the last one yet) has severely dented the credibility of the Americas Cup and the sport of sailing. Moreover, rumours have it that the SNG (the organizing yacht club) racing committee members refused to raise the flags and participate in the starting procedure of the last race, possibly following instructions of Alinghi. If true, it would be the ultimate of unsportsmanlike behaviour. Let’s hope this is not the case, but I would not dare to bet against it if I hear Alinghi owner Ernesto Bertarelli commenting: “They got a little help from the legal system in New York. That always makes things difficult for us Europeans to get the same advantages. It’s not the Europeans’ Cup; it’s America’s Cup. It’s very difficult for a European to win.” Such comments are childish and make you wonder how the guy has made his fortune. This brings me to the egos of the two owners, which are as big as their ……….enormous wealth I guess. Both business tycoons have prioritized their own ambition over the sport of sailing. Battle should take place on the water, not in court. Bertarelli seems to have the biggest ego. Rather than handing the wheel to his best helmsman, he wanted to steer the boat himself in the first race, showing his enormous cockiness. Moreover, he blamed Ellison to be not in charge of the BMW Oracle. By not helming the BMW Oracle, Ellison at least showed he is the better manager.

From major to sideline event; disappointing economic impact. In contrast to the last edition, the 33rd Americas Cup has not been a financial and economic success. The buzz, the public interest, the teams and the business that was generated in 2007 have not been realized in this edition, which has not helped the Americas Cup brand. Both owners have spend around USD 200mln each on their campaigns, but it seems doubtful whether either will have a sufficient payback. BMW has already indicated they are not happy with this version of the Americas Cup and are re-assessing whether they will continue their support. From a sponsor part of view, it hasn’t been a success anyway. The mudslinging and the battle over every detail of the contest have driven away both sponsors and fans: the 2007 race attracted more than $200 million in sponsorship money, but the 2010 has pulled in just $11 million, whils the competition has certainly lost much of its charm. Only time will tell if the next competition will be able to attract as much interest as the series did back in 2007. In 2007 the Americas Cup was an enormous event; according to Professor Tom Cannon it even was the third-largest sporting event after the football World Cup and the Olympics in terms of gross economic impact. He emphasised that because of the lack of a challenger series, which last time attracted eleven challengers from nine countries along with major sponsorship opportunities, the overall economic impact was probably about one tenth of the 5bn euros ($7bn; £4.4bn) it was worth last time. The long-weekend event was not a draw for TV Companies or advertisers, with the races being shown on the Internet for the first time and the organising budget reduced from a record 230-million to just eight million euros for last week’s event! Additionally the host city of Valencia wasn’t happy either, in terms of what might have been. The 2007 event was a major attraction for tourists, sponsors, clients, business and the media bringing benefits of over two billion euros to the port and almost four billion euros net economic benefit for the city. This year, coverage on Spanish TV was very limited and with the event now finished, Carnival fiestas from Rio, the Canaries and around Spain totally eclipsed the couple of minutes seen about the America’s Cup. That sums it up and should be taken into consideration when organizing the next edition.

Big responsibility going forward. The Golden Gate Yacht Club announced that a challenge has been accepted from the Club Nautico di Roma, and that the Italian club will be the Challenger of Record for the 34th America’s Cup. The challenging team for CNR is “Mascalzone Latino” owned by world champion sailor Vincenzo Onorato. This leaves both him and the defender with an enormous responsibility towards the future and the sport of sailing. It is to hope both parties will make the right choices that the event needs to get back on track. At least both Russell Coutts and team owner Larry Ellison seem to be aware of the responsibility. Whether the next edition will take place with monohulls or multihulls is less relevant. In my opinion there are three essential elements for making up the lost ground:

  1. The Americas Cup should be a multi-challenger event again
  2. There should be upfront agreement on rules and regulations
  3. It should be easier to enter the event

In this perspective Ellison’s comments are encouraging. He is promising an independent organising committee including an impartial jury and umpires, for the next multi-challenger event, agreeing it is important that there is a level playing field for all competitors to bring sponsors and fans back to sailing’s pinnacle event. If Ellison and Onorato practice what they preach, there is hope for the next edition of the Americas Cup. Still being the oldest sports trophy in the world and one of sailing’s biggest traditions, it is the least they can do!

975e479f-a4d3-4cc2-9fdf-21432c4e0255_Eredivisie169Last week first division club HFC Haarlem filed for bankruptcy, no longer being able to fulfill its financial obligations. This should come as no surprise. Several clubs are in dreadful financial condition, mostly on the back of poor management and unfavorable economic conditions. Hence we expect more casualties along the way. We briefly explain and suggest some solutions.

Dutch footbal clubs facing difficulties. Last week, one of the oldest Dutch football clubs, the HFC Haarlem, filed for bankruptcy and hence this household name will disappear from Dutch professional football. In spite of several attempts, the club could not be saved. We are not surprised, Haarlem has been facing financial difficulties for quite a while and the club was placed on the watchlist (category 1) of the Dutch Football Association (KNVB). The problem is that Haarlem is no exception. Its situation is exemplary for many other clubs in particularly the lesser important first division (Jupiler League). It is believed that some 9 other clubs are on the same watchlist, with several more far from safe. At the moment Veendam seems to be the primary candidate to be next with a liquidity shortage of some EUR 600mln. Besides Veendam other clubs having difficulties seem to be AGOVV, RKC, RBC, Fortuna Sittard, MVV, Eindhoven and Cambuur. However, it is not only the first division which is facing difficulties, there are also problems in the Dutch Premier League (Eredivisie), where losses amounted to EUR 34m last year. Feyenoord, Willem II, Roda JC and Ado Den Haag are just a few names, which face a huge financial burden.   

Is this a surprise? No, not really. In our article Dutch Football: financial difficulties of Dutch clubs no surprise, we explained the problems behind the financial crisis. The main reasons for the financial disarray can be explained as follows: 

1. Poor management. In many cases Dutch football clubs are not properly managed. Professional football should be run like a business, not like a hobby. In a period of stagnating sales and rising costs, cash flow management is essential. I wonder, apart from the positive exceptions, whether all clubs have even heard of this. It is utterly irresponsible to buy new players or increase salaries by 25% in a period of economic crisis, particularly as income of many clubs is largely dependent on discretionary items like sponsoring, TV and ticket sales. In an environment of declining revenues, it is surprising that many clubs are working with flat or rising budgets. No wonder that problems arise. This is particularly the case for the first division clubs. If one realizes that clubs in the Jupiler League are largely dependent on sponsoring income (51% of total revenues), it is plain stupid and irresponsible to keep budgets flat. No wonder, casualties emerge, certainly in a high fixed cost environment such as in football. Football clubs should be run professionally. It means proper revenue management and proper cost management (remember that in many cases salaries and rent of the stadium already account for some 75-90% of sales!). It means creativity and contingency plans and it means accountability! If I still hear management of clubs saying “ I am sure many clubs largely depend on transfer sums” or “ why always look at finance, it is good players which are important and subsequently financing automatically will be allright”. Brrrrh,  it is exemplary for the limited mindset of some, which tend to be short term. Clearly there will always be friction between the technical and financial aspects of a football club but in the right setting (more long term oriented) they should peacefully co-exist.                  

2.  Limited viability for current number of football clubs. There are several ways to look at this, but the conclusion should be the same. The Netherlands is just not big enough to host 38 professional football clubs. Let’s first look at the map of The Netherlands. The Netherlands has a population of 16.3mln, which implies one professional football club per 429,000 habitants, which intuitively already seems not that many. However, it gets worse. These clubs are not spread properly over the country. For example Brabant counts 9 football clubs or 24% of total clubs, whereas Brabant only counts 15% of the total Dutch population; it means one football club per 268,000 habitants. No wonder many clubs in Brabant have financial difficulties. Hence mergers could be a solution here. Looking at a more financial angle, it is amazing that some clubs even still exist. Looking at the Jupiler League again, there are 8 clubs with annual turnover below EUR 2.5 mln. With a required minimum of 18 players under contract on say the average salary of EUR 35,000 and with additional staff and management, it means that the salary bill already accounts for some EUR 1.5-1.6mln.Come to think of it! And this is before stadium rental costs, variable costs, depreciation, selling costs, media costs etc. No wonder clubs are having difficulties to survive.

3. Declining community support. Whereas in the past many clubs always counted on community support (hundreds of millions have been invested) coming to the rescue, support for such action is rapidly declining. In the case of Haarlem, the local municipality was not prepared to bail-out the club and this seems increasingly the trend. In some cases there are still municipalities granting loans to clubs (which often is only temporary respite), but subsidies seem to be no longer in vogue, although in view that the European Union does not allow for such action (although there are always ways around). Although one can argue whether this is right or not, in the end a club should be able to survive on its own, also in view of creating a level playing field.

4. Economic crisis. Finally there is the economic crisis, which is leading to lower sponsor and tv income. But this is an easy one to hide behind. It is just proper business sense to build up a proper reserve for more difficult times. For many clubs the contrary has taken place, which brings us all back to management again I guess. Luckily there are good exceptions such as Heracles, Twente and several others. It is good to see that FC VVV is not immediately spending all the millions received for Honda on all kind of expensive players. The club is saving a large part of the money for its youth academy, the new stadium and possibly some players to be bought in summer.

So what could be the solutions? Clearly the current model is not sustainable and sooner or later more clubs will go down. In order to avoid this there are several alternatives (or rather a combination of them to accomplish this:

1. Bundling/merging of clubs; although not easy to realize (given the example of FC Limburg), mergers should be considered in some parts of the country given that the sheer number of professional football clubs is not sustainable in those areas.

2. Introduction of semi-professionalism in the first division. Salary bills are too high, whilst minimum wages are often not a viable option for professional players. The result is that many opt for a semi-professional career at a top-amateur club. With the introduction of semi-professionalism the first division could possibly merge or cooperate with the top amateur leagues.

3. Cross-border competitions. With the rich getting richer and the poor getting poorer, competitive balance seem to have long gone. Combining for example the Belgian and Dutch leagues should lead to a better balance and stronger competition. However, it should be realized this will not be acceptable to many clubs that would not be able to participate in this league as well as their supporters. Food for thought.

4. Improve quality of management. It seems many clubs are not managed properly, supervisory boards should carry part of the blame.

5. Salary adjustments. Wages are by far a club’s biggest fixed cost item. With the recent rise in salary costs this has become a heavy burden to many football clubs. Re-adjustment will take time, partly depending on the duration and mix of the contract portfolio.

6. Creativity and innovation. Many of the current clubs tend to think in the old traditional way rather than out of the box. New business concepts, flexibility of costs, revenue management, a new (longer term oriented) business model are just a few principles where improvements may be made.

So it is clear something has to be done! Sales are stagnating, costs are rising! This has to be turned around, one cannot always count on the community (government money) coming to the rescue….Is management in Dutch football capable of doing it? I sincerely hope so. I hope they will find creative ways to grow the top-line, I hope they will be able to reduce costs (recent reports at least suggest that clubs like Ajax and Feyenoord are going to reduce salary costs), I hope they will implement contingency planning procedures. The proof of the pudding will be in cash flow management. I am sure some clubs with good management will be able to do this properly but there are also examples of clubs where I have my severe doubts. This is also the reason why I expect more clubs to go bankrupt.

I do realise that better players will lead to better results and greater recognition, but reality tells us that we just will not be able to match the budgets of European clubs in the bigger leagues, which is a function of scale. Equal competition and a level playing field can only co-exist through rules of the regulators. In the mean time we have to start thinking longer term as in the end players are better off with a solid health of the clubs they are playing for. Holland has always been a producer of talent, our football schools are often examples for many clubs, this is a strength we should focus on. Financially it is also much more attractive then buying expensive stars from abroad. The youth is relatively cheap and by treasuring and growing talent in the right way and with the right values, the financial outcome will also be more attractive, a win win situation in my opinion.