Wednesday, 27 June 2012

What ails the Serie A? Explaining the downward spiral of Italy's top league

Italian football is going through its lowest point in memorable history, with apparently no end in sight. From being the undisputed number one league in Europe in the 80's and 90's, it now lies below the Bundesliga and far behind both La Liga and the Premiership in the UEFA Ranking. How did it come to this? The politics of Italian football are complex beyond belief. But they mirror the general situation of the country, and understanding the Serie A's downfall gives us some insight into understanding some of the problems that plague the country more generally. I will attempt to briefly outline the main factors that are keeping the Serie A back, and why the situation seems unable to change.

Lack of privately owned stadiums. Juventus is currently the only team in the Serie A that owns and operates their own stadium, which was completed in September 2011. Ever since its construction, the media and experts alike have been quick to praise Juve for taking this "innovative" step. Having a privately owned stadium is destined to give Juve a massive competitive advantage over its rivals for years to come. It means that Juve retains all the profits from their stadium and no longer have to pay rent to the municipality to play there. Furthermore, Juve can reap the profits from the shopping mall in the stadium which is open 7 days a week, thus diversifying their revenue base. Other Italian stadiums are open only on match days, and have no shopping malls or other revenue-generating venues attached. Given all these benefits, why haven't other teams followed the root paved by Juventus?

The answer lies in the many obstacles and interests involved that prevent the construction of new stadiums. The municipalities own and operate the stadiums, and rent them to teams for a relatively large sum. They would stand to lose one of their biggest revenue streams if privately owned stadiums became the norm. As a result, they use their resources to lobby the government to ensure that legislation that would favour the construction of new stadiums is blocked. Such a law has been the subject of debate in the Senate for over 3 years(!), grounded by the many interests and bureaucracy which seek to keep it at bay. Without such a law, building a stadium from scratch to finish is estimated to take around 8-10 years due to the bureaucratic obstacles involved in obtaining permits and licenses. It took Juve around 8 years, from when they first came up with the idea in 2003 to the inauguration ceremony in September 2011.
Such an estimate is only hypothetical since all the teams so far have seen their requests for building permits denied by the very municipalities. The consequence of this is that not only does it prevent new stadiums from being built, but is also makes it so the municipalities have no incentive to renew and modernise the existing ones. By controlling the licensing of permits, they can make it so no new stadiums are built. This forces teams to play in the existing, municipality-owned ones. Since the teams are only renters, they cannot renew or modernise the stadiums. And since the municipalities control the only available stadiums, they have no incentive to modernise because the teams are forced to play there whether they like it or not. This helps explain the sorry state of Italian stadiums, some completely dilapidated and barely functional. The Sant' Elia Stadium of Cagliari is a telling example: Built in 1970, the stadium received little upkeep work in the course of its existence until it was finally declared a risk hazard in 2012, and Cagliari Calcio were forced to migrate to Trieste for their home games.

The Stadio Sant'Elia of Cagliari: Not the finest example of Italian architecture

The Juventus case is an exception as it was only possible due to Torino hosting the 2006 Winter Olympics. The municipality granted Torino Fc the use of the newly renovated Stadio Comunale and gave sole ownership of the Stadio Delle Alpi (now Juventus Stadium) to Juve. Furthermore, indiscretions have it that Juve used its political influence to push the city council to sell them the stadium at a knock-down price (around 1 Million Euros). This case is therefore an exception because not every Italian city can host an international sporting event, and not every Italian team has the political and economic might of Juventus FC.

Lack of sustainable business plans. Italian teams dominated in the 80's and 90's because they were the richest teams. Berlusconi in his hayday could outspend just about anybody, and Moratti at Inter and the Agnelli at Juve were close behind. During these golden years, they should have focused on developing a sustainable business plan and investing heavily in merchandising to ensure the teams could finance themselves and not depend on their owners to cover the debts. Unfortunately, they proved to be shortsighted and spent minimal effort in doing this. At the same time, top European teams such as Bayern and Real were investing heavily in promoting their brand overseas and began to reap the benefits of this.
In 2011, Real recorded profits of € 480 million, up from € 192 million in 2002. AC Milan, in comparison, recorded profits of €240 in 2011, up from €200 million in 2002. Inter and Roma all show similar trends, with profits increasing only marginally during this time period. (Juve is a slightly different case as the Calciopoli scandal eroded their business attractiveness). The comparison is embarrassing, and shows how Milan and Italian teams in general have overlooked the business aspect, relying on wealthy owners to keep them competitive. Once the owners closed the faucets, the glory days ended.

High levels of corruption which discourage foreign investment into the Serie A. Italy is synonymous with corruption, and this effects the Serie A as well. Wealthy sheikhs and Russian petrol barons are unwilling to invest in a league riddled with corruption and has a reputation for match fixing and bribery. Instead, they have turned to "cleaner" pastures such as the Premier League, Liga, and even the Ligue 1.
The Serie A is also a hard league to invest in, as historic oweners such as Moratti and Berlusconi are unwilling to give up even a minority stake in their clubs to outsiders. This parochialism has made it so AC Milan is struggling to cvoer its debts, while teams with no history such as PSG and Man City can pull their weight on the transfer market fueled by petrodollars.

Little investment in youth systems Italy truly is a country for old men, and the Serie A is no different. Large clubs invest relatively little in their youth academies, and rarely promote players from the youth team to the senior squad. They have historically preferred to invest in big names or in foreigners (especially from Brazil and Argentina). The Inter lineup resembles that of the Argentinian national team, and AC Milan consistently snubs Italian youngsters in favour of burnt out Brazilian stars (Ronaldinho, Cafu and Ronaldo dicit).

I am, however, confident that there are signs that some change could occur in the near future. The aforementioned Stadium Law, after years of delay, finally seems to be on the verge of being approved in the Senate. Club owners finally seem to have realised the importance of privately owned stadiums and have themselves organised to lobby the government. People like Moratti, who years ago undermined the importance of a new stadium are now coming up with projects of their own.

Juve's brand new stadium inaugurated in September 2011

The crisis of Italian football is also forcing teams to invest in their youth academies and promote youngsters to the first team at a rate which was unknown in the last decade. Unable to sign big names, clubs must now rely on their youth academies to stay competitive. This has always been the strategy of the Bundesliga, and it has allowed the German national team to benefit from this wide array of homegrown talents and boast one of the consistently best national teams in the world. England, by comparison, relies heavily on importing top players from abroad which undoubtedly makes the Premier League the world's best, but leaves the national team lacking in talent and with a disappointing track record in international competitions.
The takeover of AS Roma by an American consortium is also a crucial step for the rebirth of the Serie A. They bring with them not only much needed cash, but also new ideas and a new take on how to run a sports club. Italian teams could do a lot worse than imitate the branding and commercial strategies of American sports teams.
The problems of the Serie A reflect the problems the country as a whole faces: overbureacratization, narrow special interests, corruption, and slow generational turnover. These are enormous challenges to overcome, but there are signs that something is changing, starting with Juventus. The Serie A is now fighting for its survival as a league. Either radical change occurs, or it will permanently fall into oblivion and be of no use to anyone.