This story explains the relationship between football club’s revenue and it’s football stadium.

This includes the example of iconic San Siro being destroyed, home to AC Milan and Inter Milan, and how it is important for a football club to survive, leaving behind the legacy associated with it’s home.

Contents

  • Introduction
  • Why this story about San Siro?
  • What is the story of San Siro getting demolished all about
  • Why is there a need to prioritize financial interests by these top clubs?
  • How is this revival plan shaping up in reality for the Milan clubs ?
    • Ownership
    • Recruitment and Wage structure
    • Focus on Broadcast and Marketing
    • Introducing fashion on top of all the detailed planning
    • Conclusion
  • Statistics taken from Deloitte Football Money League
  • Comparison with other stadiums and their decision to move on to new stadiums
  • Fight of culture, identity by not demolishing the San Siro

Introduction

  • In the build up to the all-Italian Milan derby Semi final of UEFA Champions League (UCL), I noticed something strange going on. Being a digital native, I spend some of my free time scrolling on Instagram. My feed is filled with football related content. Multiple reels, posts started saying that Stadio Giuseppe Meazza (famously known as San Siro), which is the home to both AC Milan and Inter Milan is going to be destroyed. This left me shook.

  • The stadium which is so iconic that people while playing FIFA used to pick this stadium because of its sheer beauty. In the real world also, this stadium is up there with the Anfields, Bernanbeus, Camp Nous, Wembleys of the world.

  • Quick googling suggested that there is a lot to uncover regarding this demolition. The UCL semi-final might not just be the perfect goodbye before this iconic stadium gets taken down.

  • Hence, this is a deep-dive story about the iconic stadium, why it has a special place inside every football fan, how the clubs who share this home had different stories from the very highs to the very lows and slowly returning to where they belong. This is a story about the business of football and the challenges faced by modern football clubs in a world where success is often measured in dollars and cents.

  • Written at the intersection of football romanticism and business, this also involves the strategies and plans taking place behind the scenes of two footballing giants - AC Milan and Inter Milan.

Why this story about San Siro is being thrown at you?

  • First, an all Italian Semi-Final after 2005 (18 years gap!!!) for the first time. 2005 itself is a huge chapter in the book of football. Top it that with the fact that I’m a Liverpool fan, I recall that UCL campaign (2004-05) because of the unbelievable comeback in the final. Let’s discuss that on some other day but you can watch it here and you would be lying if you tell you didn’t get goosebumps. But there is a highly likely chance, you might have come across this iconic picture.

    Materazzi (Inter Milan) and Rui Costa (AC Milan) gazing at the flares thrown by angry supporters at the San Siro, 2005 UCL Semi-final

    Materazzi (Inter Milan) and Rui Costa (AC Milan) gazing at the flares thrown by angry supporters at the San Siro, 2005 UCL Semi-final

  • We have all our memories with FIFA. Mine was playing FIFA 2005-06 with my brother for the first time. Everyone has this habit of either picking their favorite club or picking the star studded team like Real Madrid/PSG these days in FIFA. Earlier, it used to be AC Milan. Partly because it was full of star players, obviously, but also Kaka was everyone’s favorite those days. I got roped into football because of Fernando Torres and everyone of my age also did so in same way. There’s always a starting point into football linked to a player. It might be liking CR7, Messi or Torres as was in my case.

  • Strangely enough Carlo Ancelotti is the common link in helping the teams AC Milan and Real Madrid to win the UCL. There is a possibility of grand finale of Real Madrid and AC Milan again in this ongoing UCL tournament.

  • And for very obvious reasons, we associate Inter Milan’s image with Jose Mourinho and his celebration across Camp Nou in the semi-final of 2010. Inter were on golden run domestically and won 5 league titles in row up till 2010.

    Jose Mourinho, head coach of Inter Milan, after beating Barcelona at Camp Nou in 2010.

    Jose Mourinho, head coach of Inter Milan, after beating Barcelona at Camp Nou in 2010.

  • Above snippets of facts highlight the pedigree the two Italian clubs hold and obviously the San Siro is the home to these trophies.

  • San Siro getting destroyed certainly attracted my interest for multiple reasons and so it should for you.

  • If you want to read more about the San Siro’s history. go do your own research and exploration. There’s Google and Wikipedia for that.

What is the story of San Siro getting demolished all about ?

  • Digging up further told me that this plan of demolishing San Siro was materialized in 2019 with the actual destruction to take place in 2024. Both clubs submitted a feasibility report which discussed the technical and economic scope of renovating/revamping the area where the stadium stands.

  • Majority of Italian clubs get the stadiums from local municipality, hence less flexibility over the revenue routes. All different possibilities of maximizing the top line is now handicapped due to this dependency on external parties.

  • This resulted in a mutual decision of clubs to move to a new stadium. It was for financial expansion. To have full control over every income stream rather than depending on the local municipality.

  • The plan was to either renovate the current stadium or go to different stadiums of their own. The feasibility report was drafted and proposal to construct “The Cathedral” was put forward with the help of Populous group which helped to design the “Narendra Modi Cricket Stadium” also.

  • This drew widespread sparks across government folks, local supporters, groups of city’s heritage preservation which also included former Mayor of the city. Italian Culture Minister further went on to declare that San Siro will most probably not be destroyed in order to preserve the identity of Italy and Milan’s culture which is heavily represented by San Siro.

Why is there a need to prioritize financial interests by these top clubs ?

  • This brings us to an important point that why are football clubs willing to leave behind the rich heritage and focusing on their financial ambitions?

  • These clubs don’t want to leave the stadium (read heritage) behind, instead, they want to earn more money. The Italian top clubs want to compete with the giants like Liverpool, Manchester City, Real Madrid (I’m a Pool fan and I can’t help it for the previous order). Majorly, Seria A clubs get the stadium from the hands of city municipal council on lease and hence can’t do much change. This restricts them to look for customizations which brings in more money apart from the obvious matchday tickets. Tottenham Spurs’ new stadium also built by Populous group hosts events all year round and posted a revenue almost 2x times that of Inter and AC combined.

  • With own stadium → Initial infuse of money → Cutting down on wages both for players and staff → Smart and long term recruitment → Improvement at domestic level → Broadcast revenue taking speed → Balance sheet improving slightly → New players recruited → Title contender → Serial winners on the team to make the team title winners → Title winners ultimately. “Bird’s eye view of how a plan to rebuild a club can be executed”.

    A flywheel model representing the cycle of a successful football club having its own stadium.

    A flywheel model representing the cycle of a successful football club having its own stadium.

How is this plan of revival shaping up in reality for the Milan clubs ?

  • Need for change is clearly defined. Any top club will be in great desperation to make this move happen. AC and Inter are no different. They are ambitious, having tasted absolute zenith in the past, they want to be financially independent and thrive and challenge at the international level.

  • Before we get to know the plans and strategy taken up by the clubs, lets take a look about the ownership.

  • a. Ownership

    • AC Milan is owned by Redbird Capital Partners. Redbird Capital bought the majority stake from Elliott management in a 1.2 billion Euro deal in 2022. Elliott Management Corp saw the stewardship for 4 years after it acted as the financier to the deal in which Rossoneri Sport Investment Lux led by Li Yonghong had borrowed 220 mil Euro debt from Elliott itself to buy from Silvio Berlusconi in 2017 but failed massively and defaulted with huge debt amount. Elliott management ultimately cleared was successful in bringing back the club on the path to recovery and breakeven.

    • Redbird Capital has tie ups with NY Yankees and a stake in FSG (Fenway Sports Group) - deal valued at 673 mil Euro. The losses incurred by the Lux investment group was halved in an year with cutting payrolls of underperforming aged players and replacing with cheaper alternatives (tactic used by FSG which sees them run a profitable business but that story is for another day).

    • Suning, major electronics retailer in China, took over the ownership on 2016 with a buy-in of 68.55% stake. Inter’s owners didn’t face major setback during Covid and infused money and eventually went on to win first league title since 2011. The owners are now committed for a long road ahead.

    • Suning’s ownership of Inter has certainly had its ups and downs, ranging from guiding the team to major trophies that had not been won in over a decade, to financial uncertainty and forced big sales amid mounting debt. More on this can be read here.

  • b. Recruitment and Wage structure

    • AC Milan’s recruitment strategy of bringing in young players headed by director Maldini (club legend), Pioli (coach) helped them to turn this bankruptcy to champions . Simon Kjaer came in on loan but helped to build the defence of team. Kalulu from Lyon playing top-flight football for the first time, Tomori from Chelsea Academy. (everyone knows the quality of Chelsea academy players). Maignan replacing Donnarruma and becoming best GK by a mile was another great storyline. Story of Rafael Leao’s comparison with Thierry Henry and coming from academy of Sporting for a bargain is another feather to the cap. Recruitment of Ibrahimovic to establish experience among group of young players proved crucial in the title run towards the end.

    • The smart approach to recruit at low costs and make profit both over players and by winning the title proved beneficial for the new owners.

    • Inter Milan on the other hand took a different approach in the start. They focused on signing players at big fees, with the experience of winning big at other leagues, at the start of 2016-17 season. This did not help in the initial years of Suning taking charge of the club.

    • Inter’s owners didn’t face major setback during Covid and infused money and eventually went on to win first league title since 2011. This was a contrasting approach wrt AC Milan who focused on solidifying the base first, slashing the payroll first and then bring the glory and maximize the profits. Steven Zhang felt this was in fact the right approach as it was already working with AC Milan and reportedly asked Conte (Inter’s head coach) to cut his wage and also to sell the star players as there were ageing players too on the wage-sheet. This led to the departure of Conte.

    • Both clubs have identified this snowball effect of lowering team’s overall age with right experience and also eventually reducing payrolls and winning titles which means green financials.

  • c. Focus on Broadcast and Content Marketing

  • d. Introducing fashion on top of all this detailed planning

    • Analysts estimate the Milan jersey as being worth €75m (+65% compared to just a year ago) when including the bonuses in deals with sponsors. Emirates pays around €30m per season as the men’s first team sponsor, as does PUMA, while Wefox (back jersey sponsor) and BitMex (sleeve partner) are there too.

    • If you combine entertainment, fashion, music, and sports, you are able to reach another kind of audience and ultimately grow your fanbase in the modern world. With the help of US investments, AC has increased presence in North America. World Cup also is there in the coming years. Massive growth potential. AC milan also revealed deal with Virgil Abloh’s luxury brand Off-white. {Stop it with those drooling faces, no matter how great they look}

    • Inter Milan, not being behind but rather on an unfortunate side, signed a 85 million Euro deal with Digital Bits but did not receive a single penny due to the crash in crypto market. That’s the reason they currently play with no jersey sponsor.

  • e. Conclusion

    • The above discussed steps and plans are taken by the Milan clubs in order to come back to the picture at the international scene. Football clubs, in general, follow the below routes to increase their revenue figures.

    Revenue depends on income from stadium, the club’s wage structure and controlling the media and broadcasting rights.

    Revenue depends on income from stadium, the club’s wage structure and controlling the media and broadcasting rights.

    • If we focus on the aspects which a football stadium can earn money, below image explains well.

    General revenue streams for a football club’s stadium

    General revenue streams for a football club’s stadium

    • A modern stadium has enough capacity to accommodate their ever-increasing fan base. Unlike the case of San Siro where two clubs are sharing the matchday tickets revenue when playing together. Also, the stadium is unable to fill the entire capacity due to the safety measures taken to preserve it. A well maintained stadium is also a place to host stadium tours for fans and concerts and various events when football is not being played. Tottenham Hotspur’s new stadium, also built by The Populous, hosts NFL matches occasionally which further helps to improve the top line and which is justified by the rankings in Deloitte’s Football money league highlighted below.

Statistics taken from Deloitte Football Money League

  • Inter Milan gathered 308.4 mil Euro in overall revenue in 2021/22 season and took the 14th spot in the overall ranking of football clubs based on their revenue figures.

  • AC Milan gathered 264.9 mil Euro in overall revenue in 2021/22 season and came at the 16th spot in the overall ranking.

    Football money league_rankings.png

  • Inter’s revenue saw a decrease of 7% from last season partly due to the COVID but it is not significant as compared to the effects seen on giants like Real Madrid and Barcelona. AC saw an increase of 22% in revenue from previous year because of multiple factors and strategies which clicked in favor for them.

    inter_milan_revenue.png

    ac_milan_revenue.png

  • As stated earlier, Inter believed in hiring players at fat paycheck unlike AC who focused on cutting down the payroll. This trend can be seen in the same report of Deloitte Money league. Inter’s wage rate is an increasing one whereas AC’s is constant and decreasing slightly.

Comparison with other stadiums and their decision to move on to new stadiums

  • Tottenham is known for different reasons in the world of football. Some troll this club for its lack of silverware and competence at top level. But, it is known for doing shrewd business under Daniel Levy since 2001. He is also known for maintaining modest wage structure. He has had history of scouting talent and buying them at cheap and selling at a hefty profit with the likes of Modric, Bale and Berbatov.

  • This was also similarly done by Arsenal moving from Highbury to the Emirates Stadium.

  • WHU won a bid to pay rent for Olympic stadium where they keep the matchday revenue from tickets without having to pay for maintenance and huge cost of buying the iconic stadium. Stadium is valued at 600 million but the rent amount is only 3.6 million euros as reported in 2022.

  • Juventus, on the other hand, signed a 99-year lease agreement on the land of Turin and further decided to build its own stadium and headquarters and also amenities like hotels, football school, shopping center, museum. With the sole motive to bring in more revenue while also not buying the whole land upfront.

  • So, there are few stadiums who are benefitting from the rental model too. Some are seeing gains by getting world-class stadiums at cheaper cost and some are renting the land for a longer tenure and building their own facility. Both approaches are innovative.

  • Every other move to a new stadium is clouded by speculation as fans romanticize the idea of glory associated with the existing stadium. A general feeling that somehow, this might not be the case and luck may not be favorable when moving in to a new stadium.

Fight of culture, identity by not demolishing the San Siro

  • Locals believe demolition will further damage the receding identity of the city of Milan. Also, it’s the locals’ money which has helped the club to remain in history books and owners cannot bring their own will and try to focus on profits.

  • They believe that money can never be victorious over culture and heritage. And it’s football heritage.

    Jose Mourinho: The face when it is about “football heritage”

    Jose Mourinho: The face when it is about “football heritage”

  • Every other city is now looking the same across Europe. San Siro in its full glory is the face of Milan and of Italy to some extent.

  • To add to its complication, San Siro is set to host 2026 Winter Olympics which further nullifies the possibility of destroying the stadium any soon.

  • Fans, even neutrals have always admired this stadium and it has special place in the book of “Streets won’t forget”.

  • From the absolute chaotic and iconic picture of Rui Costa, Materazzi to the current, subdued and friendly atmosphere, San Siro has seen it all.

📝 San Siro needs its pending legendary farewell and what better way to witness an epic all-Italian semi final at a time when Italian football is seeing its resurgence at the global level.