This post is a guest post by Ennio Longo, an investment adviser and lifelong Juventino. As happens every mercato, the debate of the actions and intentions of management has collided with the economic reality that Juventus exists in, Ennio is here to clear some concepts up. You can follow him on Twitter: @JuveEnnio



In 2008 a friend of mine lost $750,000 in a Ponzi scheme, an irony which is not lost on me as I am an investment advisor. When he asked me what guarantees I could offer his portfolio I told him that I could not because I cannot guarantee something which I nor anyone else could control. However, the other “guy” offered him a 12% rate of return on his money, guaranteed. So I didn’t get to manage his account and now he is $750,000 poorer. He also didn’t tell me he was the victim of a scam artist, I just read about it in the local paper and so did millions of others. When I was discussing it with another of our friends, he said, “Well he has enough money to make these mistakes.” In football, there are a few teams which can afford to error financially and they are as follows; Real Madrid, Manchester United, Barcelona, Bayern Munich, Arsenal, Chelsea, and Liverpool. To a certain extent we shall include PSG and Manchester City in there but as recent events have shown, they are not immune to the rulings of financial fair play. I was reminded of this story when reading comments about Juventus. “Agnelli doesn’t care”. “Elkann doesn’t care”. “Why don’t they use FIAT money?” “Marotta doesn’t know what he is doing etc.”

So much of this has been brought to the forefront by a few events, Conte leaving, Iturbe being purchased by Roma and Roma spending more money than Juventus. So let’s address all these issues and more.

First off my personal opinion, you can admire what Sabatini is doing at Roma but calling Marotta incompetent is not justified, he only assembled a team which has won three consecutive titles. Sure Conte was the manager, but I doubt he could have accomplished what he had with Secco’s teams. I don’t think anyone should ever apologize for being successful.

First off let’s address what a team can spend. It’s only what they take in, Elkann and FIAT cannot give money to Juventus like Gianni used to in the old days. Also, if I am a FIAT shareholder, I want growth in my shares and a dividend in my pocket, do you think I care about a football team? Why do you think the Qataris set up the Qatari tourism board to try and funnel 200 million Euros a year to PSG only to then be leveled with Financial Fair Play sanctions? So forget about dipping into your own pockets anymore, Roman can’t do that with Chelsea either. So now we can leave John Elkann and FIAT and EXOR for that matter out of this.

What about the issue of Juventus “not wanting to spend money”. Frankly that’s absurd. You are welcome to go on their website and examine their latest audited annual financial statements from June of 2013. You will find that Net Income (net income is what you keep after your expenses) has been in the loss column for the past few fiscal years. They had losses of 48.7 million Euros in 2011/2012 and losses of 15.9 million Euros in 2012/2013. So, there is not as much money in the team as people tend to think. You cannot look at revenues alone, you must also examine expenses.

The next argument is that Roma is outspending Juventus and they don’t have a shirt sponsor and they don’t have a technical sponsor and Juventus earned more than they did. All that is 100% true. The main sources of revenue are TV, domestic and Champions’ League, marketing, gate revenue and player sales. So this is why Roma has more funds to spend. First off, Roma has sold more than Juventus has in the past few years especially last year with Borini, Lamela and Osavldo. Therefore they have cash from that source. Second, Juve has more legacy costs than Roma does, that means when the current management assumed control of the team they had to deal with huge money spent on failed transfers and large player salaries which were still on the books, still an expense to them yet they were not getting anything from these players. Thirdly, if you purchase a player you also have to pay that player.

You don’t win championships just spending big on transfers, you win championships paying the players who play for you. Seeing as Roma brought in 3 or 4 excellent players last year in Benatia, Pjanic, Gervinho and this year Iturbe, they are still on low wages, however, if Roma wins, then the players will want salary increases. As it is they probably do want them now. Building a team is one thing, keeping that team together is another thing. Essentially Roma’s revenues were lower than Juve’s but their expenses were also significantly lower. You must examine BOTH sides of the income statement and BOTH sides of the balance sheet as well when looking into those items. In essence, Roma had more net income.

I am very sensitive to managing risk as it is part of my job to do so. One of the biggest dangers is not being able to meet salary demands. Here is where looking at non-Champions’ League revenue is vital. You cannot build a sustainable model and include variable revenue because if you don’t have the variable revenue one year, the model falls apart. Then you are forced to liquidate your players much in the same way the club did during Calciopoli. Overall it’s a similar economic impact. The Adidas sponsorship, the new shirt sponsor and La Continassa project will all assist with these. If you examine Manchester United’s revenue they were able to spend large this transfer window because they have hundreds of millions in non-CL revenue. They can afford to make these errors, Juventus cannot.

So the next criticism levied by fans is “Why isn’t Juventus earning these same revenues as United?” Why is Adidas paying Juventus 30 million and United 100 million? Is that a management failure? That is square upon the league itself. Any Serie A team has a marketing ceiling as long as the league is run the way it is. Let me illustrate. I live in Toronto, a city of about 5 million people. Our Canadian Football Team is the Toronto Argonauts. In the United States there is a team in the National Football League called the Green Bay Packers from Green Bay Wisconsin with a population of just over 100,000. Now the city of Toronto has more people, more money, more revenue, more income, however, The Green Bay Packers probably have a market value in and around $1 billion but the Argos have a value of $20 million. Why? It’s the league. The NFL is the richest sports league in the world, largest TV contract, huge marketing exposure. A team can only do so much before it hits the glass ceiling imposed on it by its league. If you built a mansion in a middle class neighbourhood would it have the same value as if would if you built it in the richest part of town?

I can appreciate the frustration, I really can. But just because I and others see it differently doesn’t mean that I accept “mediocrity” or that I “don’t care for the team” or that I “don’t want to win” or that people like me are “responsible for the downfall of the team” (this last one being my personal favorite). Success is not necessarily immediate. You can’t just hit the refresh button and everything will be as it was. Long term sustainable success has to be built over time. This is not Juventus in 1994 nor is it Juventus in 2004 because this is not the Serie A of 10 or 20 years ago. There are certain realities which must be accepted and addressed regardless of how hardcore of a fan you are. You might really want a Ferrari but cannot afford one, does that make you less of a Ferrari fan? Perhaps you have taken steps to one day afford it.

I see team building as a multi-year process. This doesn’t mean that I or that management doesn’t want to win Champions’ League, they just realize that it cannot be done in Italy the same way it was done 10 or 20 years ago. In order, you must consider Constraints, Fact and then Objectives. Looking at Objectives without examining what the Constraints and Facts are just makes it a wish. If that is what you expect then it’s not so much help from FIAT that is required but from Doc Brown’s Delorean.