Citizen clubs making profits

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Citizen clubs making profits

Postby Holyjoe » Wed Jan 21, 2009 6:30 am

Although I'd like to see actual balance sheets to get a bigger idea of what's been happening, Daejeon, Gyeongnam, Daegu and Incheon all reported operating profits from the 2008 season which is extremely good news.

The first graphic shows the revenues generated by the four clubs in ok-won which equates to the following (conversions via xe.com):

Image

Daejeon: 8,300,000,000 won ($6,104,495)
Gyeongnam: 10,000,000,000 won ($7,354,813)
Daegu: 8,200,000,000 won ($6,030,960)
Incheon: 15,000,000,000 won ($11,032,244)

The second graphic indicates net profit or loss for the clubs from the past three years. Incheon have been doing well, mainly through selling on players for a sizeable profit, and Gyeongnam have clearly benefited from selling Cabore and Popo to Japanese clubs otherwise they'd have been looking at another sizeable loss. Daegu's income was boosted by the near-$2m shirt sponsorship revenue from Doosan Construction, and a rather impressive $4.2m in advertising and sponsorship income.

Image

Net profits for 2008
Daejeon: 1,000,000,000 won ($735,426)
Gyeongnam: 1,000,000,000 won ($735,426)
Daegu: 190,000,000 won ($139,739)
Incheon: 1,000,000,000 ~ 1,500,000,000 won ($735,426 ~ $1,103,208)

No economic doom and gloom in the K-League :smt006

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Re: Citizen clubs making profits

Postby Hootsmon » Wed Jan 21, 2009 8:03 am

Very interesting facts. I'm quite proud to support a citizen team and I'm pleased to see Incheon doing well. I'm not surprised there has been an upturn in profit from 2007-2008, despite the lack of many outgoing players at that stage (apart from Dejan) because the club started running much more professionaly...had to buy your shirt and season ticket seperately instead of getting the shirt thrown in free!

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Re: Citizen clubs making profits

Postby Evergreen » Wed Jan 21, 2009 10:06 am

Good news but hardly surprising given the playing staff we had probably didn't break the bank.

Invest in the squad PLEASE!
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Re: Citizen clubs making profits

Postby njs » Wed Jan 21, 2009 12:14 pm

At first I thought how the heck could any of the clubs have made a profit given crowds, ticket prices and merchandising but the selling of players makes sense. The key for those clubs now is what do they do with that money. As Evergreen says, back into the squad? or do they sit on it and try to become a sausage factory churning out fresh meat for export.
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Re: Citizen clubs making profits

Postby Cyclops » Wed Jan 21, 2009 1:02 pm

One of the problems they face is that the link between success and increased revenue is not as fixed as it is in Europe. If you look at Britain for example, very small clubs like Wigan, Reading, Inverness, etc. can invest funds (whether from transfers or a sugar daddy) in infrastructure and the playing squad, gradually make their way up to a higher division, and then benefit from revenue from increased away ticket sales, TV rights, etc. Even if the home support remains small it is still possible to grow as a club and become relatively secure at a higher level than before, and in time it is almost inevitable that the home support will pick up as the new generation in the town have a top division club on their doorstep so don't rush off to Manchester, London, Glasgow, etc. in such large numbers like the previous generation. Of course some clubs only manage to make the step up for a couple of years and soon disappear back to where they came from, but there are many clubs throughout Europe who over the course of a decade or more have been able to establish themselves as regulars in a much higher division than they started in.

But in Korea I'm not so sure this can work for teams like Daejeon or Incheon. Investing in a flashy little all-seater with 7-day-a-week revenue streams and increased matchday revenue potential normally gives you a long term advantage over your rivals with crumbling old grounds that suck up funds just to cover the repairs, but is out of the question in Korea when every team has a huge modern stadium already. They are already in the top division and there are no Old Firm or Liverpools, Man Utds, etc. who are going to bring 10,000 travelling fans a few times a season to pump up the revenue. TV rights are miniscule and it's unlikely that the top clubs are making much more than the bottom clubs anyway. And the Asian Champions League is a bit of a joke and probably attracts less interest than domestic competition.

So where do these clubs go? What is the logical step forward? Answers on a postcard!

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Re: Citizen clubs making profits

Postby Holyjoe » Thu Jan 22, 2009 7:07 am

If anyone's really bored they can sit and work their way through this - it was a nine-month study comissioned by the KFA and conducted by "Global Research Institute" into the broadcasting of Korean football from 2005 to 2008.

Click here for the full study

A few things are of interest, particularly that 2008 saw the least number of games broadcast in the entire study (see first graphic). It would have been interesting to see the month-by-month figures for 2008 as it could well be that the Olympic baseball gold saw that shoot way ahead of the football in broadcastability (is that a word?).

The two middle bar graphs show the percentage of the population that are KFA-registered football players in/from different areas of the country. It seems that Jeju is the football hotbed of the nation with 3.9% of Jejuites playing football, with just 0.47% in the capital region.

The KFA's annual budget size is shown in the green graph near the bottom, with the following figures:

2005: 45,514,671,760 won ($33.5m)
2006: 51,737,758,386 won ($38m)
2007: 46,024,071,645 won ($33.9m)
2008: 70,357,232,124 won ($51.8m)

According to this study, the average operating budget of K-League sides in 2008 was 13,394,000,000 won ($9.8m), down from 14,499,000,000 won ($10m) in 2007 but still rather a lot of cash.

Averages for the three leagues:

2008
K-League: 13,394,000,000 won ($9,800,000)
N-League: 1,696,000,000 won ($1,300,000)
K3 League: 337,000,000 won ($250,000)

2007
K-League: 14,499,000,000 won ($10,000,000)
N-League: 1,206,000,000 won ($890,000)
K3 League: 148,000,000 won ($109,000)

To further complicate matters, they've included the average budget of the top five K-League teams in 2008 (20,397,000,000 won, or $15m) and compared it with the average for the bottom five teams (10,607,000,000 won, or $7.8m) which gives an idea of the amount of corporate backing the big guns get.

Although the operating budget for the bottom sides in the K-League may be comparatively low, it's considerably more than the average for the top five National League sides (2,138,000,000 won, or $1.6m) and the K3 League (496,000,000 won, or $336,000). The bottom five National League sides average out at 1,289,000,000 ($950,000) and the bottom K3 sides at 138,000,000 won ($102,000).

To make that a bit clearer:

K-League top 5 average: $15,000,000
K-League bottom 5 average: $7,800,000
N-League top 5 average: $1,600,000
N-League bottom 5 average: $950,000
K3 League top 5 average: $336,000
K3 League bottom 5 average: $102,000

Makes you wonder why anyone would want to enter the K-League really (topical, as Hallelujah have again stated they aim to enter the K-League as soon as they possibly can) as the amount you'd need to spend to register coupled with the amount to even tread water is stupendously vast. Corporations can just about get away with it but as has been seen the citizen clubs do tend to struggle unless they can unearth a gem or two to sell on and that's not something you can rely on.

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Re: Citizen clubs making profits

Postby njs » Thu Jan 22, 2009 1:25 pm

That would be a classic. Hallelujah vs Seongnam. Expect lightning storms during the match.

That's quite a large gap between the top sides in the K-League and the bottom sides but it would obviously pale into insignificance compared to the amount sides like Chelsea, Man U and Man City (are trying to) spend vs sides like Bolton and Sunderland. Then there's a side like the NY Yankees spending 180 million a year with every other side under 100 million (or at least were relatively recently).

Is a big advantage that the top sides have, actually the number of players in their squad and amount of money going on junior football and recruiting young players? I remember back in the day Suwon, Anyang and Ulsan had massive squads and put a lot of money into development while some other teams seemed to just have a top side and buy and sell players as needed. Anyang had squad photo in 2003 that featured about 45 players, obviously enough for 3 teams + subs. The teams with full football programs are going to perform better all of the time and maybe that's where the poorer sides are falling down because they can't afford all that stuff???

I dunno, maybe some people who know their clubs well can comment on the amount of money being spent on players and development outside the first team.
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Re: Citizen clubs making profits

Postby eujin » Fri Jan 23, 2009 2:43 pm

I'm surprised Incheon is making that much every year. Has anyone got any idea what the net balance is on their player transfers? Can we get a rough idea from known transfer fees?

How much gate money do they make from home games? Season tickets and give-away tickets must account for a sizeable part of each home crowd. Otherwise there'd be queues outside the ticket booths. How much do they pay for the stadium? Just having the lights on can't be cheap.

How much money does each club get from the TV deal? My impression is it isn't worth that much.

A very good effort if they are making that much, but Korean accounting being what it is, I'd want to dig deeper.

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Re: Citizen clubs making profits

Postby Holyjoe » Sat Jan 24, 2009 5:50 am

Incheon have been reasonably open about their finances in the past which is pretty good - the figures in the first post on this thread came from a balance sheet posted on the official website, if my memory serves me correctly. There is some transfer info at the end of the thread which came from a Daum article about their major dealings up to the start of 2007.

There was another thread from the end of 2006 (this one) with some financial info on Daejeon in 2004, with non-league side Anyang Citizen's balance sheet in there for good measure.

Having reviewed the thread, the second page has detailed financial information on the accounts of all four citizen clubs for the 2007 season. Incheon's gate money in 2007 was the lowest out of all four but they're streets ahead in terms of advertising revenue. They've been playing rent-free at the Munhak under a sponsorship deal with the city government which is a bonus, as Daejeon paid more in rent ($190,000 ish) than they actually made in ticket sales ($160,000).

On the other figures above, it's difficult to make direct comparisons between clubs from the bottom end of the K-League and the top of the National League but from having watched more than my fair share of football at both levels I really don't think there's all that much of a gap between teams like Busan, Gwangju, Jeju or Daejeon and some of the better National League teams. In theory the likes of Mipo, Suwon City and Hallelujah should be good enough to compete on the park with their supposedly more illustrious counterparts but the budgets of those lower-end K-League sides are around five times larger. Something's not right there.

And as for ever getting promotion and relegation off the ground... :lol:

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Re: Citizen clubs making profits

Postby eujin » Wed Jan 28, 2009 12:03 pm

OK, $8,000,000+ in Daewoo sponsorship money sounds a lot better. What exactly is the relationship between Daewoo and Incheon United? Are they just good friends? :smt007

Basically they're being bankrolled by a Chaebol just like everyone else. Hopefully this sponsorship money is just transferred to Incheon and no one at Daewoo is worrying about the ROI.

$8.5 million at Incheon or $27 million at Manchester United. I wonder which one gives more global recognition?

http://edition.cnn.com/2009/SPORT/footb ... pstoryview

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Re: Citizen clubs making profits

Postby eujin » Wed Jan 28, 2009 2:26 pm

I was thinking at lunch, nevermind the global recognition, which team has more recognition in Korea? Man United must make a lot more from merchandise sales in Korea than Incheon do and the TV rights to their games must be worth a lot more too. They're certainly on MBC ESPN a whole lot more than Incheon are. Incheon probably make slightly more from gate receipts in Korea, but if you wanted to plug an idea solely in the Korean market, what would make more sense, sponsoring Man U or sponsoring Incheon? What about if it cost three times more to sponsor Man U?

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Re: Citizen clubs making profits

Postby njs » Wed Jan 28, 2009 4:16 pm

Depends how long there's a Korean playing for Man U. But your'e right with the merchandise. About the only football shirts, jackets etc I EVER see in Korea are Man U's gear. Even my Korean students in NZ have Man U jackets that I make take off every day (not because I hate Man U) but because it's incorrect uniform. :roll:

The Korean companies sponsor quite a few sports sides round the world. I think Kia is one of the main sponsors of the Aussie tennis open, LG sponsor one of the Aussie league teams, Samsung sponsor another. I also see their names on shirts around the world. And of course Hyundai sponsor the A-League and even sponsor shows on the sports radio station in NZ.

I guess that because the Korean marketplace is so saturated and dominated by Korean products and companies that many foreign companies don't get much of a look in. I don't know much about economics but I do hear from time to time how Korea is very protectionist. And I suppose so long as attendance is low, few games are shown on TV and there is zero interest and coverage of Korean football abroad (apart from isolated pockets like my house, and HJ's and Mipo's etc) then it's not an attractive proposition for even some diddy potato chip company.
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Re: Citizen clubs making profits

Postby Sampo » Wed Jan 28, 2009 5:32 pm

njs wrote:
...


I guess that because the Korean marketplace is so saturated and dominated by Korean products and companies that many foreign companies don't get much of a look in. I don't know much about economics but I do hear from time to time how Korea is very protectionist. And I suppose so long as attendance is low, few games are shown on TV and there is zero interest and coverage of Korean football abroad (apart from isolated pockets like my house, and HJ's and Mipo's etc) then it's not an attractive proposition for even some diddy potato chip company.


It was surprising to see Lucas Oil (http://www.lucasoil.com/) sponsor Suwon this past season.

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Re: Citizen clubs making profits

Postby eujin » Wed Jan 28, 2009 5:53 pm

I remember that little video they showed at the stadium of the CEO of Lucas Oil encouraging the team. Some American guy, head of an American oil company, addressing the crowd, in English, from America, on the big board, before a football match. I hope he has a rough idea of the rules. What do Suwon fans spend more money on? Hello Kitty stickers or engine oil?

That's definitely right up there in my pantheon of randomness.

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Re: Citizen clubs making profits

Postby Holyjoe » Fri Jan 30, 2009 6:58 am

eujin wrote:OK, $8,000,000+ in Daewoo sponsorship money sounds a lot better. What exactly is the relationship between Daewoo and Incheon United? Are they just good friends? :smt007


Game over with that relationship I think, as Daewoo have decided they've got better things to spend their money on. There was talk of Hanhwa sponsoring Incheon this season but I don't know if that's been confirmed.

Loss of the Daewoo money will be a big blow for Incheon this season unless they can replace them. I suppose they must be reasonably confident financially to have signed Ilija Petkovic to a one-year deal as manager today, but they might need to find an extra player or two to sell on if they're keen on balancing the books again.


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