Is European football eating itself?

[Viper]

Was going to post this in the European football thread, but it occurred to me that what Leander Schaerlaeckens is describing here is basically the antithesis of the profit-driven North American pro sports business model.

So, for those of us who complain about certain team owners not spending money to put a winning product on the field, consider this a cautionary tale, one which, like the "NCAA and amateurism" topic, I thought deserves its own thread.

[dfwabel]

Was going to post this in the European football thread, but it occurred to me that what Leander Schaerlaeckens is describing here is basically the antithesis of the profit-driven North American pro sports business model.

So, for those of us who complain about certain team owners not spending money to put a winning product on the field, consider this a cautionary tale, one which, like the "NCAA and amateurism" topic, I thought deserves its own thread.

The one thing which the writer did not mention is that Valencia had to stop construction of the Nou Mestalla stadium in 2009 since they could not pay the contractors and it just sits there undone with concrete crumbling.

[Waleslax]

The author has no real understanding of the concept of debt. Debt, when you owe $100k on your credit card, is a bad thing. When business have debt, it isn't bad, rather it is often a good thing. The fact that they have so much in debt shows that they are in good enough financial standing to continue to be offered debt. In these examples, the cash flows are monstrous; clearly high enough to pay off the debt load (monthly or annual payments) on the loans. Having that debt outstanding also works in that business write that off against their profits. Tax write-offs are huge in the business world, and what the article does not make clear (because it hurts the author's point) is that everyone is a) getting paid and making lots of money. All of the examples he gave are business' (teams) MAKING A PROFIT (Revenue-spending). Sure, it seems like $8 million in profits off of $78 million in revenues (Blackburn in this example) isn't a lot, but actually it is. Go take a look at the financial statements of almost any large company worldwide. I say large, because most small companies operate at losses (I am talking in the MSN sense of small, not the "mom and pop" sense).

All in all, the author seems misinformed about both finance and the sports world. Go ask 20+ NBA teams what their profits are. I will make the obvious comment here - sale prices of franchises keep going up and up and up. They don't go up because it is an unprofitable business. These "otherwise smart business men" don't suddenly become stupid when a ball is brought into the room.