During his recent interview with The Athletic's James Horncastle, former Roma owner James Pallotta cited Serie A's massive growth potential as one the major appeals for investors, and one of the main reasons he invested in Roma to begin with. On the potential of the league, Pallotta voiced equal parts excitement and frustration, saying “Italy always had a great league. It was the best league for a while. You have great cities. Italy should be up in the top couple. That was my frustration because it’s really simple blocking and tackling to go to the next level.”
If you can look past the mixed soccer/football metaphor, Pallotta hardly seems alone in his excitement about Serie A's growth potential. Look no further than the growing tide of foreign investment in the league as proof of this fact. Including Pallotta's successors at Roma, the Friedkin Group, seven Serie A clubs are led by non-Italians, including Joey Saputo, the Canadian owner of Bologna, Rocco Commisso, the Italian/American owner of Fiorentina, and Kyle Krause, an American who recently purchased Parma Calcio.
As Pallotta lamented, Serie A will likely never chase down the Premiership, but the spate of recent foreign investment in the league does speak to the growth potential present on the peninsula. And while they didn't drill the numbers down to Serie A specifically, the folks at Forbes Magazine, when publishing a list of the 20 most valuable clubs in the world, were quick to point out that club values have increased 30% over the past two years alone, which speaks to “the untapped potential in the sport's global appeal.”
An appeal that has only partially been tempered due to the pandemic:
The world’s 20 most valuable soccer teams are worth an average of $2.28 billion apiece, an increase of 30% from two years ago, the last time we published the ranking. The jump comes despite a decline in revenue caused by limited attendance during the pandemic, with buyers focused on what they see as still untapped revenue potential in the sport’s massive global following.
Average revenue for the 20 teams was $441 million for the 2019-20 season, down 9.6% from 2017-18, while average operating income fell by 70% over the period to $23 million. The pain is far from over, with a worsening decline in match-day revenue during the current season as most of the teams in Europe’s top leagues still permit few fans to attend games.
Still, investors continue to pay the kind of rich multiples for top-tier soccer teams that they offer for NFL, NBA and big-market MLB franchises. For RedBird Capital’s recent acquisition of a minority stake in Fenway Sports Group, which owns Liverpool, an appraiser valued the Premier League club at more than $4 billion, roughly 6.4 times revenue—about the same multiple Steve Cohen paid for the New York Mets last year when he bought the MLB franchise for $2.42 billion. The NBA’s Utah Jazz changed hands for $1.66 billion in December, or six times pre-pandemic revenue. Liverpool’s value is up 88% since our last valuation.
These figures are largely based on 2019-2020 figures, so it will be interesting to see how these numbers shake out once the full effect of the pandemic is felt, but, much like Pallotta said during his interview, a big piece of any football club's business puzzle is commercial revenue; an area in which Italian clubs are woefully behind.
With only one club (Juventus) ranking in the top 10 most lucrative shirt sponsorship deals, Italian clubs are falling far behind their competitors in this profitable arena. Real Madrid and their $413 million pact with Emirates stand atop the heap, followed closely by Manchester United, who inked a new kit deal with TeamViewer worth a whopping $325 million. Juve, the only Serie A club on this particular sub-list, will earn $159 million from Jeep when their deal expires after the 2022-2023 season.
Forbes doesn't provide as much nuance or detail as their counterparts at Deloitte, but, despite ranking 17th, Roma's financial health took a hit over the past two seasons. Here are the top 20 clubs, including each team's two-year value change, debt/value, revenue and operating income.
While Roma have generally always been ranked in the top 20 most value clubs, whether its Forbes or Deloitte doing the rankings, there are some troubling signs in Roma's 17th place ranking this year. I'm no financial wizard, but take a look at that list and what stands out?
Roma are, along with AC Milan and West Ham United, the only clubs to suffer a drop in value over the past two years, with the Giallorossi taking a 12% hit. But it gets worse. Among the 20 clubs on this list, Roma ranks dead last in revenue ($156M), operating income (-$108M) and debt/value ratio (56%). Maybe Pallotta was wise to cut bait after all?
Despite those negative values, we should focus on the positive: Roma are once again one of the 20 most valuable clubs in arguably the world's most valuable sport. Pallotta certainly saw the potential in Roma, as both a brand and a club, but was frustrated time and time again by the league's archaic business practices and the country's seeming unwillingness to improve their stadia infrastructure.
The extent to which Dan Friedkin can push Roma even further up this list likely depends on how patient he is: Can he weather the bureaucratic storms of the Eternal City? Can he overcome the inherit competitive disadvantages Italian clubs face compared to their peers in England, Spain or Germany?
James Pallotta made more than a few missteps during his time in charge, but he was absolutely right about one critical thing: Roma are a potential powder keg. If the Friedkins can capitalize on the potential of Roma—both the club and the city—as a globally recognized brand/symbol/icon, then perhaps the Giallorossi can fulfill Pallotta's prophetic words...”because it's fucking Rome!”