AC Milan have tumbled out of the Deloitte Football Money League for the first time ever, meaning they are no longer among the top 20 clubs in the world based on revenues.
The seven-time European champions are languishing in 22nd place, with €191.7m in revenue taken in during the 2016-17 season.
Milan had been ever-present on the Deloitte list from its inception in 1997 and were as high as third in the 2004-05, with an income of €234m.
A number of different factors have contributed to the Milan slump. Significant revenue increases in other leagues – namely the English Premier League – have seen a slew of clubs jump ahead of Milan. In fact, all Premier League clubs have seen revenues increase by some 70 per cent since the implementation of the new Sky/BT domestic television deal in 2016-17.
Italian clubs, in that respect, simply can’t keep pace. Serie A is not due another TV deal until 2021 and its current value is less than half that of the Premier League.
It was announced on Tuesday that Lega Serie A will try to negotiate privately with bidders for the next domestic broadcast rights contract because opening offers failed to attract the minimum revenue target of €1.05 billion per season.
“This is a new low,” says Sam Boor, a consultant in Deloitte’s Sports Business Group. “There’s a real lack of a success on the pitch and that means matchday and broadcast revenues are flat and commercial revenues have fallen.
“On-pitch performance has had a knock-on effect; they can’t go out and talk to sponsors to draw value.”
Factor in the fact Milan have no Champions League money to speak off and the scale of the problem becomes apparent.
“If you want to be in the top 20, European competition is vital - particularly if you are not an English club.”
It has been somewhat of a lost decade for Milan, with scant success on the pitch to speak of and an increasingly difficult financial outlook on the horizon.
The club was finally sold by Silvio Berlusconi in April 2017, after two previous attempts to sell it broke down.
A little known Chinese businessman by the name of Li Yonghong fronted a consortium called Rossoneri Sport Investments Luxembourg in order to force through a deal. The total cost of acquiring Milan was in the region of €740m, including a sizeable debt pile of a reported €220m.
Li initially struggled to raise the necessary funds for the deal and, accordingly, the purchase was part-financed by Elliott Management Corporation – a US private equity fund – which provided a loan of around €303m.
Elliott delivered the loan in two parts; the larger part has an interest rate of 11.5 per cent and the smaller amount 7.5%.
Milan have until October of this year to repay the total. Upon default, the club risks falling into Elliott’s ownership and all the uncertainty that brings.
More than €150m was lavished on the transfer market last summer, as Milan gambled on new players in order to catapult them back among Italy’s elite. It has not worked.
Leonardo Bonucci, Hakan Calhanoglu, Ricardo Rodriguez and Andre Silva spearheaded the record assault on the market but it has done little to improve Milan’s fortunes in Serie A.
Having finished sixth last season and, thus missed out on the Champions League – and the prize money and broadcast revenues it brings – they find themselves in seventh place this time round and at a standstill.
Coach Vincenzo Montella was sacked and replaced by ex-midfielder Gennaro Gattuso but it has done little to alleviate the gloom around San Siro.
Even if Milan do manage to re-qualify for the Champions League, it is uncertain whether UEFA would even permit the club to take part.
In December, the Investigatory Chamber of UEFA’s Club Financial Control Body declined to enter into a voluntary agreement with Milan as part of Financial Fair Play (FFP).
“If UEFA imposes sanctions, that can result in removal of the right to play in UEFA competition,” says Boor.
“That removes the right to receive distributions from lucrative UEFA competition, which has a knock-on impact on club revenues and their ability to spend in the transfer market and operate the wider business.
“Any ruling from UEFA on that basis can have quite severe consequences.”
CEO Marco Fossone and Li’s right-hand man David Han Li met with UEFA officials and presented a 160-page document but the European game's governing body remains unconvinced that the new ownership has the capability of lifting Milan out of its losses.
“There are still uncertainties in relation to the refinancing of the loans to be paid back in October 2018 and the financial guarantees provided by the main shareholder,” a UEFA statement read.
It is looking impossible for Milan to meet UEFA's FFP criteria given that they lost some €74.9m in Berlusconi’s last season in charge and the scale of last summer’s spending.
And without UEFA participation fees – and associated broadcast revenues – Milan’s hopes of bringing in significant sums are limited in the extreme.
Their revenues have stagnated and they haven’t earned any Champions League money since 2013-14. Total losses in the last 11 years are estimated at over €400m.
Moreover, an investigation late last year by the New York Times raised significant doubts about Li and his resources. The paper alleged that the phosphate mines thought to form part of Li’s business empire were in fact owned by other people.
Milan are thought to be struggling to get investors or a refinancing of Li’s high-interest loans due, according to the Financial Times, to limited information concerning Li’s wealth.
Despite that, Deloitte is optimistic that Milan can recover even if they are not in Europe next season.
“AC Milan has got its financial challenges but it’s still a very big brand. It’s been damaged slightly in recent years given its on-pitch performance.
“But in 2016-17 they weren’t appearing in UEFA competition and they still generated 190-odd million worth of revenues.
“Could there be financial reorganisations, improvements and rationalisations given the revenues are stagnant and the cost base increasing? Maybe. Could it go as far as Parma and Fiorentina, I don’t think so but it’s hard to predict.
“Well-established brand will always find people out there to help the club if they ever got to that position.”