European clubs finances are in crisis as television deals falter

The top teams have had to cut their budgets and reduce their spending on transfers as the formerly lavish funding is no longer as readily available, writes David McKechnie

While English Premiership clubs may consider these troubled times financially, their plight is nothing compared to many clubs on the continent, where the square box is causing difficulty for the round ball.

In Europe's biggest leagues in Italy, Spain and Germany, many clubs have been plunged into crisis because television companies have either been unable to live up to their contracts, or else they have offered to renew contracts at a greatly reduced rate.

Just like in England's Football League, which is suffocating after the collapse of ITV Digital, European clubs have already included projected television income in their budgets, only to discover they are no longer getting the money.

This has manifested itself most starkly in the summer's transfer market on the continent.

By mid-July in Spain, clubs had spent just €64 million on 61 transfers, €158 million less than the year before.

Before this year, the world transfer record had been broken for six consecutive years.

Two weeks ago, Fiorentina, twice winners of the Italian championship, were thrown out of the Italian league after going into administration with debts of €23.5 million.

They have re-formed as Fiorentina 1926 Florentia and will begin this season in Italy's fourth division, Serie C2.

Another club, Parma, is reported to be spending 10 per cent more on salaries than its annual turnover.

Wages have doubled in Italy's top division in the last four years. Leading clubs such as Lazio have recently been trying to off-load several of their most highly-paid stars.

The rights to the matches of all 18 of Italy's Serie A (the country's top division) clubs are owned by two companies - Stream and Telepiu - which have signed individual deals with each club (the top clubs earn considerably more).

Neither company managed to sell anything like the number of subscriptions it expected since agreeing the deals in 1999, however.

This was due to a combination of viewer apathy and piracy.

Both companies are heavily in debt and are currently in the process of merging.

If they are successful, competition for football rights will decline and Italian clubs will get considerably less from their next television deal.

In Germany, the situation looked grim earlier this year when KirchMedia announced it would not be able to honour the remaining two years of a four-year deal with 36 clubs in the Bundesliga, leaving them €721 million short.

Traditionally, Germans have been able to watch football on free-to-air TV, so many viewers refused to sign up to Kirch's service.

A new deal was thrashed out this summer with Kirch, worth a hefty 20 per cent less than the previous one.

Clubs in Spain, Europe's top league at present, are in an even worst plight.

In January, the aggregate debt for the top division's 20 clubs was €792 million.

Only the sale of their city centre training ground allowed Real Madrid, Europe's most successful club, to clear debts of €266 million.

While clubs like Madrid and Barcelona will always survive because of their fan base and commercial activities, not everyone is so lucky.

Valencia, the current Spanish champions, are also strapped for cash, with recent estimates putting their debts at €80 million .

Audiovisual Sport, the company with the rights to Spanish league matches, has run up massive losses after an unsuccessful launch of pay-per-view.

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