Ronaldo to Juventus set to provide major boost to club revenues

The much heralded arrival of Cristiano Ronaldo in Turin, having signed a deal with Italian champions Juventus, has been the source of a great deal of debate since its announcement in July 2018. The €113 million price tag may well pay for itself, as the CR7 brand boosts commercial revenue at the club, although Juve may need to be patient to see its full benefits, according to a new study.

When one of world football’s all-time greats decided to call time on his spell at one of history’s most successful clubs, it was heralded by some as the end of an era. However, while Cristiano Ronaldo has since noted that players his age tend to “go to China or Qatar”, when news broke that he would exit Real Madrid for Italian giant Juventus, he described it in more optimistic terms as “the moment to begin a new cycle.” For a player of 33, a rapid decline and retirement plans often spring to mind, but Ronaldo, who has grown to be a legend in his own time, is no ordinary player.

As a result, despite the not-inconsequential financial matter of a €117 million price tag, there are few who regard the deal between the clubs as anything but a boon for Italy’s Old Lady. Indeed, many Italian headline writers even went as far as to hail Juve’s capture of the five-time Ballon d’Or winning Portugal forward as “the deal of the century”. Quite a statement, considering the purchase of Ronaldo will cost the club the equivalent of 28% of its operating revenues, according to analysis from KPMG’s Football Benchmark team.

While the portion of operating revenues put toward Ronaldo’s purchase is still dwarfed by 2017’s borderline absurd deal for Brazil striker Neymar – costing €220 million, or 42% of Paris St Germain’s operating revenues – it ranks well above the average. Over the past decade, the average for the world’s most expensive transfers has been 22%, including the eye-watering fees splashed out by Manchester United for recent World Cup winner Paul Pogba, and Real Madrid for Welsh star Gareth Bale. In fact, the only two other times the magic 22% threshold has been crossed have been for Fernando Torres to join Chelsea, and the purchase by Real Madrid of Ronaldo himself.

In fact, the 2009 deal for Ronaldo points toward the potential benefits of spending big on a player who seemingly delivers every time. Los Blancos spent €94 million to make the then-Manchester United number 7 a Galactico, over 23% of the club’s operating revenues at the time. The evidence shown here is that by the time Bale was signed for €101 million six years later, that was worth 20% of operating revenues. Indeed, it’s a play hardwired into Real Madrid’s business DNA, as exemplified by the Spanish club’s €37 million cheque written to recruit David Beckham in the summer of 2003. While some questioned the logic of the free kick specialist’s arrival, long-suffering club President Florentino Pérez was assured he had obtained a player who would bring far more than that into his club’s coffers, and while it was far from the most successful period of Madrid’s glittering history, the transfer paid for itself in terms of publicity and sales.

A large part of Juve’s own motivation for signing Ronaldo is likely to have been this boost in sales, while bizarrely the on-pitch impact of the CR7 brand may have been secondary. Juventus has hardly been in the wilderness in the past few years, reaching several Champions League finals, and winning the Scuddetto for the past seven years running. However, the club, which rebuilt its reputation following a relegation relating to match-fixing allegations, moved into a new stadium and birthed a new logo in the past decade, is pushing to expand its identity into new lucrative markets, while bringing in new fans across Europe – something Ronaldo’s presence on next season’s team sheet will undoubtedly help with.

It is worth noting that the perceived risk to the club of the huge transfer fee was not directly taken from Juventus’ revenues, however, potentially making the decision easier to make. Workers at a Fiat Chrysler plant in Italy are set to strike after its main investor, the holding company owned by the Agnelli family, which owns both the club and the carmaker, shouldered the €113 million fee. For the USB union, the decision means Fiat is missing out on investment, adding that it was "unacceptable" that while Fiat Chrysler workers were making "huge economic sacrifices", millions of euros were being spent on the purchase of a player.

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As several media organisations reported as the news broke, KPMG’s Football Benchmark team also believes that the real growth opportunity for Juventus is in the commercial space, although this will probably be impossible to achieve in the first season. Indeed, while matchday revenues are limited by stadium capacity (and ticket pricing limits), and media income is generated through agreements set at league/international levels, the Bianconeri need to strongly capitalise on the acquisition of Ronaldo, especially in merchandising and sponsoring.

With Juve still lagging behind the main European superpowers in this area, all eyes will be on the club’s commercial revenues in coming seasons. In 2016/17, English footballing institution Manchester United, Catalan giants Barcelona, Real Madrid and German champions FC Bayern München recorded €320 million, €288 million, €280 million and €344 million, respectively, more than double Juventus FC’s figure of €120 million. This disparity is even clearer when comparing the jersey value figure for the 2017/18 season. In particular, Juventus get €17 million per season from their main shirt sponsor, Jeep, and €23 million per season from kit supplier Adidas, making for a total of approximately €40 million, a huge distance behind Manchester United, Barcelona and Real Madrid, who reported a total jersey value of €156 million, €140 million and €95 million, respectively – meaning all eyes will be on the kit revenues of the Turin club in particular next season.

While the long-term benefits remain to be seen, however, some pluses have already been witnessed by Juventus. In particular, when rumours emerged in early July – following a disappointing World Cup campaign for Ronaldo and Portugal – regarding the possible transfer, they significantly affected the club’s share price. As the rumour mill went into overdrive, it stimulated a steep increase in market capitalisation for the club, rising from €650-700 million to roughly €900 million, within the space of a week. During the period from then up until July 19th 2018, the price of Juventus’ stock rocketed up by approximately 32%.

Commenting on the Ronaldo-factor at Juventus, Andrea Sartori, Global Head of Sports at KPMG, said, “In a world in which major football clubs competing on the international stage are closer and closer to becoming entertainment companies, rather than being sport entities with a limited focus on shareholders’ value creation, our analysis demonstrates that although the acquisition of Cristiano Ronaldo presents some risks, Juventus FC’s investment might prove to be beneficial from the sporting, commercial and financial perspectives if not immediately, then within 2-3 years, when Juve might reach half billion Euros turnover. We believe that Ronaldo can be an accelerator of the visible growth that Juventus FC have already experienced throughout the years of Andrea Agnelli's presidency.”